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Equity In Exchange For Services Agreement for India

Equity In Exchange For Services Agreement Template for India

A comprehensive legal agreement governed by Indian law that establishes the terms and conditions under which a company issues equity shares in exchange for professional services. The document complies with the Companies Act 2013, SEBI regulations, and other relevant Indian legislation, detailing the nature of services to be provided, the quantum and valuation of equity being issued, performance metrics, and associated rights and obligations. It includes necessary provisions for regulatory compliance, share transfer restrictions, and dispute resolution mechanisms specific to the Indian jurisdiction.

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What is a Equity In Exchange For Services Agreement?

The Equity In Exchange For Services Agreement is commonly used in the Indian business environment where companies, particularly startups and growing businesses, seek to acquire professional services while conserving cash resources. This document is essential when organizations want to compensate service providers through equity ownership instead of cash payment, particularly for high-value services such as technology development, consulting, or specialized professional services. The agreement must comply with Indian regulatory requirements, including the Companies Act 2013, SEBI regulations, and relevant tax laws. It typically includes detailed specifications of the services, equity valuation methodology, vesting schedules if applicable, and necessary corporate approvals. This arrangement is particularly valuable for companies in growth phases who want to align service providers' interests with long-term company success.

What sections should be included in a Equity In Exchange For Services Agreement?

1. Parties: Identification of the company and the service provider with complete details

2. Background: Context of the agreement, including company's need for services and intention to issue equity

3. Definitions: Key terms used throughout the agreement

4. Services: Detailed description of services to be provided, including scope, timeline, and deliverables

5. Equity Compensation: Details of equity to be issued, including number of shares, class, and valuation

6. Service Provider's Obligations: Specific responsibilities, performance standards, and commitments

7. Company's Obligations: Company's commitments regarding equity issuance and support for services

8. Representations and Warranties: Statements of fact and assurances from both parties

9. Compliance and Regulatory Requirements: Obligations regarding corporate, securities, and tax laws

10. Term and Termination: Duration of agreement and circumstances for termination

11. Confidentiality: Protection of sensitive information exchanged during the engagement

12. Dispute Resolution: Process for handling disagreements and jurisdiction details

13. General Provisions: Standard clauses including notices, amendments, and governing law

What sections are optional to include in a Equity In Exchange For Services Agreement?

1. Foreign Investment Compliance: Required when service provider is a foreign entity, addressing FEMA compliance

2. Intellectual Property Rights: Needed when services involve creation of IP or use of existing IP

3. Non-Competition: Relevant when protecting company's business interests is crucial

4. Lock-in Period: Optional restrictions on transfer of issued shares

5. Tag-Along Rights: Rights for minority shareholders in case of stake sale

6. Board Seat/Observer Rights: When service provider is to be given board representation

7. Performance Milestones: When equity issuance is tied to specific performance targets

8. Exit Rights: Mechanisms for service provider to sell shares in future

What schedules should be included in a Equity In Exchange For Services Agreement?

1. Schedule A - Service Description: Detailed scope of services, deliverables, and timelines

2. Schedule B - Equity Terms: Details of share class, rights, and valuation methodology

3. Schedule C - Performance Metrics: Specific KPIs and evaluation criteria for services

4. Schedule D - Compliance Checklist: Required corporate and regulatory approvals

5. Schedule E - Share Transfer Restrictions: Detailed terms of lock-in and transfer limitations

6. Appendix 1 - Board Resolution: Copy of board resolution approving equity issuance

7. Appendix 2 - Valuation Report: Independent valuation report for share pricing

8. Appendix 3 - Service Provider's Credentials: Documentation of service provider's qualifications and experience

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

India

Publisher

Genie AI

Document Type

Exchange Agreement

Cost

Free to use

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