Investment Agreement (India)
Companies Act 2013 & SEBI Regulations
INVESTMENT AGREEMENT
Under the Companies Act 2013 and Indian Contract Act 1872
This Investment Agreement (“Agreement”) is entered into on [Agreement Date] at [Place] by and among:
(1) [Company Name], a company incorporated under the Companies Act 2013, bearing CIN [CIN], PAN [Company PAN], having its registered office at [Company Address] (“the Company”);
(2) [Founder Name] of [Founder Address], PAN [Founder PAN] (“the Founder”); and
(3) [Investor Name] of [Investor Address], PAN/Registration No. [Investor PAN] (“the Investor”).
The Company, the Founder, and the Investor are hereinafter collectively referred to as “the Parties” and individually as a “Party”.
RECITALS
A. The Company is engaged in the business of [describe business] and requires capital for its growth and expansion.
B. The Investor desires to invest in the Company on the terms and conditions set out in this Agreement.
C. The Founder holds shares in the Company and is party to this Agreement to provide warranties and undertakings.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Parties agree as follows:
1. INVESTMENT TERMS
1.1 Subject to the terms and conditions of this Agreement, the Investor agrees to invest a sum of [Investment Amount] (“Investment Amount”) in the Company.
1.2 The pre-money valuation of the Company is agreed at [Pre-Money Valuation] on a fully diluted basis.
1.3 In consideration of the Investment Amount, the Company shall issue and allot [Number of Shares] of [Security Type] to the Investor at a price of [Price Per Share] per instrument, representing [Investor Percentage] of the fully diluted post-investment share capital of the Company.
1.4 The issuance of securities shall comply with Section 42 (private placement) or Section 62 of the Companies Act 2013, as applicable, and any rules made thereunder.
1.5 The Company shall file Form PAS-3 (Return of Allotment) with the Registrar of Companies within 30 (thirty) days of allotment, as required under Section 75 of the Companies Act 2013.
2. CONDITIONS PRECEDENT
2.1 The obligation of the Investor to fund the Investment Amount is conditional upon the satisfactory fulfilment of the following conditions precedent on or before the Closing Date of [Closing Date]:
(a) The Company’s board of directors having passed a resolution approving the investment and the issuance of securities at a duly convened board meeting;
(b) The shareholders of the Company having passed necessary resolutions under Sections 42 and/or 62 of the Companies Act 2013 approving the private placement / issue of securities to the Investor;
(c) The Articles of Association of the Company having been amended to incorporate the investor rights set out in Clause 5 of this Agreement, and such amended Articles having been filed with the Registrar of Companies;
(d) No Material Adverse Change having occurred in the business, financial condition, or prospects of the Company between the date of this Agreement and the Closing Date;
(e) All representations and warranties of the Company and the Founder remaining true and accurate as at the Closing Date.
3. REPRESENTATIONS AND WARRANTIES
3.1 The Company and the Founder jointly and severally represent and warrant to the Investor as follows:
(a) Corporate Existence: The Company is duly incorporated and validly existing under the Companies Act 2013 with full power to conduct its business.
(b) Authority: The execution and performance of this Agreement has been duly authorised by all necessary corporate actions.
(c) Capitalisation: The current paid-up share capital of the Company, the details of all issued shares, and the complete cap table have been disclosed accurately to the Investor.
(d) Intellectual Property: The Company owns or has valid licences to all intellectual property material to its business; there are no pending IP disputes or infringement claims.
(e) Financial Statements: The financial statements provided to the Investor present a true and fair view of the Company’s financial position and have been prepared in accordance with applicable accounting standards.
(f) Litigation: There is no pending or threatened litigation, arbitration, or regulatory action that could have a material adverse effect on the Company.
(g) Compliance: The Company is in material compliance with all applicable laws, including the Companies Act 2013, Income Tax Act 1961, GST laws, and applicable labour laws.
(h) No Undisclosed Liabilities: The Company has no material liabilities other than those disclosed in the financial statements.
4. INVESTOR RIGHTS
4.1 Anti-Dilution: The Investor shall have [Anti-Dilution] anti-dilution protection on any future issue of shares at a price lower than the price paid by the Investor under this Agreement, adjustable in accordance with the formula to be set out in the amended Articles of Association.
4.2 Pre-Emption Rights: The Investor shall have the right to subscribe for its pro-rata share of any new securities issued by the Company in future funding rounds (excluding ESOP issuances and issuances pursuant to anti-dilution adjustments).
4.3 Tag-Along Rights: In the event any Founder proposes to transfer shares representing more than [threshold]% of the Company’s share capital to a third party, the Investor shall have the right to sell its pro-rata shareholding to such third party on the same terms and conditions.
4.4 Information Rights: The Company shall provide the Investor with: (a) unaudited quarterly financial statements within 45 days of each quarter end; (b) audited annual financial statements within 120 days of each financial year end; (c) an annual business plan and budget before the commencement of each financial year; and (d) notice of all board meetings.
4.5 Liquidation Preference: On any liquidation, dissolution, winding up, or deemed liquidation event, the Investor shall be entitled to receive [Liquidation Preference] liquidation preference before any distribution is made to other shareholders.
5. RESERVED MATTERS
5.1 The following actions shall require the prior written consent of the Investor: (a) amendment of the Memorandum or Articles of Association; (b) issuance of any new shares, warrants, or convertible instruments; (c) declaration or payment of any dividend; (d) incurring debt in excess of ₹[threshold]; (e) any merger, amalgamation, acquisition, or disposal of material assets; (f) any change in the principal business of the Company; (g) any related-party transaction; (h) any increase or reduction of the authorised or paid-up share capital; and (i) appointment or removal of key managerial personnel.
6. EXIT PROVISIONS
6.1 The Company and the Founder shall use their best endeavours to achieve a Qualified Exit (IPO or strategic sale) within [number] years of the date of this Agreement.
6.2 Drag-Along Rights: If shareholders holding more than 75% of the fully diluted share capital agree to a sale of the Company to a bona fide third-party acquirer, the Investor shall, upon receipt of written notice, be required to sell its shares on the same terms and at the same per-share price.
6.3 Right of First Refusal: Before transferring any shares, the Founder shall first offer such shares to the Company and then to the Investor at the same price and on the same terms as proposed to be offered to the third party.
7. INDEMNIFICATION
7.1 The Company and the Founder shall jointly and severally indemnify and hold harmless the Investor from and against all losses, damages, costs, and expenses (including reasonable legal fees) suffered by the Investor arising from any breach of the representations, warranties, or covenants given by the Company or the Founder under this Agreement.
7.2 The indemnification obligations shall survive Closing for a period of [number] years, except for tax-related warranties which shall survive for [number] years.
8. GOVERNING LAW AND DISPUTE RESOLUTION
8.1 This Agreement shall be governed by and construed in accordance with the laws of India.
8.2 Any dispute arising out of or in connection with this Agreement shall be referred to and finally resolved by arbitration at [Arbitration Seat] in accordance with the Arbitration and Conciliation Act 1996. The arbitral tribunal shall consist of a sole arbitrator mutually appointed by the Parties. The language of arbitration shall be English.
8.3 The courts at [Place] shall have exclusive jurisdiction over any matters not subject to arbitration.
9. GENERAL PROVISIONS
9.1 This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior negotiations, representations, and understandings.
9.2 This Agreement shall be executed on stamp paper of appropriate value as required under the Indian Stamp Act 1899 and the applicable State Stamp Act.
9.3 Any amendment or modification to this Agreement shall be in writing and signed by all Parties.
9.4 If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall continue to be valid and enforceable.
IN WITNESS WHEREOF, the Parties have executed this Investment Agreement as of the date first written above.
For and on behalf of the Company
________________
Signature
Founder
________________
Signature
Investor
________________
Signature
What Is a Investment Agreement (India)?
An Investment Agreement in India sets out the mutual obligations the parties accept and the terms that govern their dealings.
The legal framework governing the Investment Agreement (India) in India draws on several key statutes and regulatory bodies. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Parties executing a Investment Agreement (India) in India should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Negotiable Instruments Act, 1881 sets the foundational requirements.
When Do You Need a Investment Agreement (India)?
You need an Investment Agreement whenever a company is raising external capital from a third-party investor in India. This is required at the seed stage when angel investors or angel networks are providing the first institutional capital; at Series A, B, and subsequent venture capital rounds when venture capital funds are participating; during private equity investments in growth-stage or mature companies; when a strategic investor (such as a corporate or group company) is making an investment as part of a commercial partnership; when a foreign investor is investing under the FDI route and needs a documented agreement to comply with FEMA reporting requirements; and when a financial institution or NBFC is making a structured equity or quasi-equity investment. The Investment Agreement is also essential when multiple investors are co-investing in the same round, as it aligns all investors on the same economic terms and confirms parity. The document provides legal protection to the investor by confirming that all commercial understandings are captured in writing and are enforceable under Indian law. Without a formal Investment Agreement, investors risk disputes over shareholding, valuation, and governance rights, and the company risks non-compliance with the Companies Act 2013's private placement provisions under Section 42.
Parties in India should prepare a Investment Agreement (India) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Investment Agreement (India)
A thorough Investment Agreement for India should contain the following key elements: (1) Parties and recitals — full legal names, CIN, registered addresses of the company and details of all investing parties; (2) Investment terms — investment amount in INR, pre-money valuation, number of shares/instruments being issued, price per share, and post-investment capitalisation table; (3) Conditions precedent — board and shareholder resolutions, amendments to Articles of Association, statutory filings under the Companies Act 2013, and regulatory approvals such as RBI reporting under FEMA; (4) Representations and warranties — thorough statements by the company and founders regarding incorporation, capitalisation, title to assets, intellectual property ownership, absence of litigation, tax compliance, financial statements accuracy, and compliance with all applicable laws; (5) Covenants — affirmative obligations (such as maintaining books and records, obtaining insurance) and negative obligations (restrictions on the company without investor consent); (6) Investor rights — pre-emptive rights, anti-dilution protection, tag-along and drag-along rights, ROFR/ROFO, board representation, and information rights; (7) Indemnification — obligations to indemnify the investor against losses arising from warranty breaches; (8) Exit provisions — IPO obligations, drag-along mechanics, and liquidity preference on exits; (9) Governing law and dispute resolution — Indian law with arbitration under the Arbitration and Conciliation Act 1996; and (10) Confidentiality and non-compete obligations on founders.
Additional compliance elements for a Investment Agreement (India) used in India include: Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Forms-legal.com provides this template as a starting point for India-compliant documentation.
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"Investment Agreement (India) (India)." Forms Legal, 2026, https://forms-legal.com/india/financial/agreements/investment-agreement-india.
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note = {Free legal document template. Based on Negotiable Instruments Act, 1881}
}Also available for these jurisdictions:
Frequently Asked Questions
An Investment Agreement in India is primarily governed by the Companies Act 2013, the Indian Contract Act 1872, and — where the investor is a foreign entity — the Foreign Exchange Management Act 1999 (FEMA) along with the Foreign Direct Investment (FDI) Policy notified by the Department for Promotion of Industry and Internal Trade (DPIIT). For listed companies or transactions involving securities, the Securities and Exchange Board of India (SEBI) (Substantial Acquisition of Shares and Takeovers) Regulations 2011 and SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 may also apply. Section 2(68) of the Companies Act 2013 defines a private company as one with a minimum paid-up share capital and restrictions on the right to transfer shares, which directly affects how investment agreements are structured. The agreement must also comply with the Reserve Bank of India (RBI) pricing guidelines for equity shares issued to non-residents. Where the investment is structured as a Compulsorily Convertible Debenture (CCD) or Optionally Convertible Debenture (OCD), the SEBI (Issue and Listing of Non-Convertible Securities) Regulations 2021 may apply. Key provisions typically include representations and warranties (backed by indemnities), conditions precedent, investor protective rights, anti-dilution provisions, and drag-along/tag-along rights, all of which derive their enforceability from the Indian Contract Act 1872 and the Companies Act 2013.
Indian investment agreements typically include a robust set of investor protective rights negotiated in line with international market practice but adapted to the Indian legal framework. The most common protective rights include: (1) Anti-dilution protection — either broad-based weighted average or full-ratchet anti-dilution adjustment mechanisms under Section 62 of the Companies Act 2013 which governs further issue of share capital; (2) Pre-emptive rights — the right to participate pro-rata in future share issuances to maintain percentage shareholding; (3) Tag-along rights — the right to co-sell shares alongside a promoter in the event of a third-party acquisition; (4) Drag-along rights — the right to compel other shareholders to sell in a qualifying exit event; (5) Right of first refusal (ROFR) and right of first offer (ROFO) — triggered when any shareholder proposes to transfer shares; (6) Board representation rights — typically one board seat per agreed ownership threshold; (7) Affirmative vote rights — a list of reserved matters requiring investor consent, such as changes to the memorandum or articles of association, approval of annual budgets, and related-party transactions; and (8) Information rights — including the right to receive quarterly financial statements, audited annual accounts, and board meeting minutes.
An equity investment under an Investment Agreement in India involves the direct subscription of shares — typically equity shares or Compulsorily Convertible Preference Shares (CCPS) — by the investor in exchange for capital contribution. The investor immediately becomes a shareholder with rights under the Companies Act 2013 and the company's Articles of Association. The valuation of the company is fixed at the time of investment, and SEBI/RBI pricing guidelines must be complied with for foreign investments under FEMA. A convertible note (or convertible instrument), by contrast, is an instrument that begins as a debt obligation and converts into equity at a future date upon the occurrence of a trigger event such as a subsequent qualifying financing round. The Startup India Initiative provides for convertible notes under Rule 2(1)(xiii) of the Companies (Acceptance of Deposits) Rules 2014 and Section 42 of the Companies Act 2013 (private placement), allowing Indian startups that are recognised by DPIIT to issue convertible notes to foreign investors in amounts of Rs 25 lakh or more per investor. Unlike pure equity, convertible notes offer the investor downside protection (as debt) while providing upside through equity conversion. The key difference lies in the timing of valuation — equity investments require a pre-agreed valuation, while convertible notes often defer valuation to the next priced round using a discount or valuation cap mechanism. FEMA regulations treat inbound convertible note proceeds as foreign investment for reporting purposes.
A Investment Agreement (India) does not legally require a lawyer in India, and individuals and businesses may draft and execute the document independently. The Negotiable Instruments Act, 1881 does not mandate legal representation for the creation or signing of this type of document. However, seeking independent legal advice from a qualified India lawyer is recommended for transactions involving substantial financial value, complex regulatory requirements, or cross-border elements where multiple legal jurisdictions may apply. A lawyer can verify that the document complies with all applicable statutory requirements, identify potential risks specific to the transaction, and confirm that the terms adequately protect the interests of all parties involved. The Supreme Court of India has jurisdiction over disputes arising from this type of document, and Registrar of Companies (ROC) may impose additional compliance obligations depending on the nature of the underlying transaction. Professional legal review is particularly advisable where the document will be submitted to government agencies or used as evidence in legal proceedings.
A Investment Agreement (India) does not legally require a lawyer in India, though legal advice is recommended. Under Indian law, the Indian Contract Act 1872 governs agreements. The Companies Act 2013 and Registrar of Companies (ROC) regulate corporate documents. The Information Technology Act 2000 governs electronic contracts and data protection. The Consumer Protection Act 2019 provides consumer rights. The Income Tax Act 1961 requires tax compliance. Forms-legal.com provides this template as a starting point — always review with a qualified Indian advocate for significant transactions. Under India law, Negotiable Instruments Act, 1881, parties should seek independent legal advice from a qualified lawyer to confirm compliance with all applicable requirements. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). Forms-legal.com provides this template as a starting point for India-compliant documentation.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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