Lawsikho Blog

Complete your SHA drafting expertise with this final installment covering enforcement mechanisms and procedural provisions. Learn how to create lasting agreements that withstand challenges throughout a startup’s post-seed funding journey.

Introduction

“So the commercial terms are all settled—board composition, transfer restrictions, liquidation preferences…” Rahul ticked off the major sections we had drafted over our previous three meetings. “Are we finally done with this SHA?“

I kinda smiled at FoodSwift’s CEO. 

After weeks of painstaking negotiations and drafting sessions, his eagerness to wrap things up was understandable. The company had secured its ₹1 crore seed investment, and the founders were anxious to focus on growth rather than legal documentation.

“Not quite,” I replied, tapping the substantial draft agreement on the conference table. “Like I said before, we have built a beautiful house with all the rooms and features you need. But without proper plumbing, electrical wiring, and structural supports, you cannot actually live in it.“

Priya looked up from her laptop with a mixture of frustration and curiosity. “More clauses? What could possibly be left to cover?“

I replied, “The mechanics that make everything enforceable. Think about it—

• what would happen if you and your investor disagree about something three years from now? 
• Or what if circumstances change and you need to modify these carefully negotiated terms?

These are not theoretical concerns. They are inevitable realities for growing startups.“

The investment director from Altitude Ventures nodded in agreement. 

“He is right. I have seen multi-million dollar disputes derailed by poorly drafted dispute resolution clauses. The commercial terms only matter if they are enforceable when you need them most.“

This final session would focus on what many lawyers mistakenly dismiss as “boilerplate”. These provisions are critical legal infrastructure that would determine whether your SHA will function effectively in real-world scenarios. 

These provisions are not merely legal formalities; they are the difference between enforceable rights and expensive paper tigers.

“Remember that SHA we reviewed from your competitor a few months ago?” I asked Rahul. “The one with the messy cap table and confusing reserved matters?“

“Of course. You said it was a disaster waiting to happen.“

“What I did not mention was that its biggest problem was not actually the commercial terms—it was the dispute resolution clause that required arbitration in Singapore under English law for an entirely Indian company with Indian founders and investors. Even if they had perfect commercial terms, enforcing that agreement would be a nightmare.“

As young lawyers drafting your first SHA, you might be tempted to copy-paste these “standard” provisions from templates. That approach can sabotage everything else you’ve carefully negotiated. These clauses are not afterthoughts—they are the foundation that makes your SHA work in practice.

In this final installment of our SHA drafting series, I will walk you through how to craft these crucial mechanics for FoodSwift’s agreement, focusing on:

• Dispute resolution provisions that provide clear, efficient pathways for resolving conflicts
• Amendment and waiver procedures that protect against unilateral changes
• Termination triggers and surviving obligations that provide certainty about when the SHA ends and what continues
• Critical “boilerplate” provisions that can make or break enforceability

By mastering these elements, you will transform your SHA from a theoretical document into a practical governance tool that will serve your clients throughout their startup journey.

Let’s begin with the clause that becomes most crucial when relationships deteriorate—the dispute resolution provision.

No, that is just the beginning of the section on dispute resolution. I will continue with the full section now:

Dispute resolution clause: planning for disagreement

“Nobody likes to think about disputes when starting a relationship,” I told the FoodSwift team as we began discussing this critical section. “It is like asking for a prenuptial agreement on your wedding day. But just like a prenup, having clear dispute resolution mechanisms actually protects the relationship by providing certainty about what happens if things go wrong.“

The dispute resolution clause determines how disagreements will be handled, where they will be resolved, under what law, and through what process. These seemingly technical details can dramatically impact the speed, cost, and outcome of any future conflict.

Key components of an effective dispute resolution clause

For FoodSwift’s SHA, I recommended a comprehensive dispute resolution framework with four essential elements:

1. Governing law: Which legal system interprets the agreement
2. Negotiation period: Mandatory cooling-off and discussion period before formal proceedings
3. Arbitration vs. Litigation: The forum for resolving disputes that cannot be settled amicably
4. Procedural details: Rules, seat, language, and number of arbitrators if arbitration is chosen

“Wait—why not just go straight to court if there’s a problem?” Rahul asked, looking skeptical.

“Courts in India can take years, sometimes decades, to resolve commercial disputes,” I explained. “Arbitration is typically faster, more private, and can be customised to your specific needs. For startups, especially, the last thing you want is to be trapped in litigation while your business opportunities slip away.“

The dispute resolution clause I drafted for FoodSwift

Here’s the clause I ultimately included in FoodSwift’s SHA:

“Dispute Resolution.

(a) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of India, without regard to its conflict of law principles.

(b) Amicable Resolution. The Parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly by negotiation between executives with authority to settle the controversy. Any Party may give written notice to the other Parties of any dispute, and within fifteen (15) days after delivery of such notice, executives of all affected Parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute. All reasonable requests for information made by one Party to the others shall be honored.

(c) Arbitration. If the dispute has not been resolved by negotiation within thirty (30) days of the initial notice, or if any Party fails to participate in such negotiation, any Party may initiate binding arbitration by sending written notice to the other Parties. Any such dispute shall be finally settled by institutional arbitration administered by the Mumbai Centre for International Arbitration (MCIA) under its Arbitration Rules in force at the time of the dispute, in accordance with the Arbitration and Conciliation Act, 1996 (as amended from time to time).

(d) Arbitral Procedure. The arbitration shall be conducted by a panel of three (3) arbitrators. Within fifteen (15) days after the commencement of arbitration, each party shall select one independent arbitrator. The two arbitrators so selected shall together select a third arbitrator who shall serve as chairperson of the tribunal. If a party fails to appoint an arbitrator, or if the two arbitrators fail to appoint a third arbitrator within thirty (30) days, such appointment shall be made by the Mumbai Centre for International Arbitration upon request of any party.

(e) Seat and Place of Arbitration. The seat and place of arbitration shall both be Mumbai, India, and the arbitration proceedings shall be conducted in English. 

(f) Costs. Each party shall bear its own costs of arbitration, and the costs of the arbitral tribunal shall be divided equally among the parties, unless the arbitral tribunal determines otherwise in accordance with Section 31A of the Arbitration and Conciliation Act, 1996, which grants the tribunal discretion to determine costs based on the outcome of the dispute.

(g) Confidentiality. Except as may be required by law, neither a party nor an arbitrator may disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all parties.

(h) Interim Relief. Notwithstanding the foregoing, nothing in this Agreement shall prevent any Party from seeking interim or permanent equitable or injunctive relief, or both, from the courts of Mumbai, India having jurisdiction under Section 9 of the Arbitration and Conciliation Act, 1996, to prevent the violation of intellectual property rights or confidentiality obligations.”

Strategic considerations for dispute resolution

“What is the difference between ‘seat’ and ‘place’ of arbitration?” Priya asked, showing her eye for detail.

This question touches on a crucial legal distinction that many junior lawyers miss.

I explained, “The ‘seat’ determines which country’s arbitration law governs the proceedings and which courts supervise the arbitration. The ‘place’ is just the physical location where hearings happen. They can be different—you could have a London-seated arbitration with hearings in Dubai for convenience. But for startups like FoodSwift, keeping them the same simplifies things.“

For Indian startups, I generally recommend:

• Governing law: Indian law for purely domestic arrangements
• Arbitration seat: Mumbai or Delhi for domestic investors
• Institution vs. Ad hoc: Institutional arbitration (like under the Mumbai Centre for International Arbitration) provides structure and administrative support
• Number of arbitrators: Three for significant disputes, one for smaller companies or when speed/cost is paramount

Legal framework for dispute resolution in India

The dispute resolution clause must align with Indian legal requirements, particularly:

• The Arbitration and Conciliation Act, 1996 (as amended in 2015, 2019, and 2021), which governs arbitration proceedings
• Section 430 of the Companies Act, 2013, bars civil courts from jurisdiction over matters that the National Company Law Tribunal can decide
• Foreign Exchange Management Act, 1999 (FEMA) considerations for international investors

I advised the management that “For FoodSwift, with only Indian parties currently involved, keeping arbitration in India under Indian law is straightforward. If you later bring in international investors, we might need to revisit this to balance their expectations with practical enforceability.“

For FoodSwift, I ensured our dispute resolution clause avoided these pitfalls while remaining balanced between founder and investor interests.

“While it might seem tedious now,” I assured the founders, “having this carefully drafted clause could save you millions and years of headaches if a serious dispute arises.“

With the dispute mechanisms established, let me show you how to make SHA adapt to changing circumstances while protecting everyone’s interests.

Amendment & waiver provisions: controlled flexibility in a living document

Rahul drummed his fingers thoughtfully on the conference table. “Once we sign this SHA, are we locked into these exact terms forever?“

A valid concern. 

Startups evolve rapidly – what makes sense today might become impractical in six months. Yet allowing too much flexibility risks undermining the carefully negotiated protections we had spent weeks crafting.

I reached for my coffee, considering how to explain this critical balance.

After a sip of coffee, I said, “SHA is like the constitution of a small country. It needs enough stability to provide certainty, but enough adaptability to remain relevant as circumstances change.“

The amendment and waiver provisions establish this crucial balance, determining how (and how easily) the SHA can evolve over time.

Striking the right balance

The fundamental tension in amendment provisions is between:

• Flexibility: Allowing the SHA to adapt to changing business realities, new investors, or unexpected circumstances
• Protection: Ensuring that key rights can’t be unilaterally modified or accidentally waived

“For early-stage companies like FoodSwift, I typically structure amendments to require different approval thresholds depending on what’s being changed,” I explained.

Altitude’s investment director nodded in agreement. “From our perspective, we need certainty that our core investor protections won’t be amended away without our consent, even if we’re a minority shareholder.“

The amendment & waiver clause for FoodSwift

For FoodSwift, I crafted a tiered amendment provision with appropriate safeguards:

“Amendment and Waiver.

(a) General Amendments. This Agreement may be amended, modified, or supplemented only by a written instrument executed by 

(i) the Company, 

(ii) Shareholders holding at least 75% of the Shares, and 

(iii) to the extent such amendment adversely affects any specific class of Shares differently than other classes, the holders of a majority of such specifically affected class.

(b) Special Amendments. Notwithstanding the foregoing, any amendment or modification that would:

(i) Increase a Shareholder’s obligations or liabilities; 

(ii) Adversely affect the rights specifically granted to a particular Shareholder; or 

(iii) Amend this Amendment and Waiver clause

shall require the written consent of the affected Shareholder(s).

(c) Waivers. No waiver of any provision of this Agreement shall be effective unless set forth in a written instrument (including electronic communications compliant with the Information Technology Act, 2000) signed by the Party waiving such provision. No failure or delay by any Party in exercising any right, power, or remedy under this Agreement shall operate as a waiver, nor shall any single or partial exercise of the same preclude any further exercise or the exercise of any other right, power, or remedy. Any written waiver shall be limited to the specific instance specified in such writing.

(d) Technical Amendments. Notwithstanding anything contained herein, the Board may, without the consent of Shareholders, amend this Agreement to correct any typographical errors, formatting inconsistencies, or other non-substantive errors that do not affect the rights or obligations of any Party. Any dispute regarding whether an amendment qualifies as technical shall be resolved in accordance with the Dispute Resolution clause of this Agreement.

(e) Coordination with Articles of Association. Any amendment to this Agreement requiring a corresponding amendment to the Articles of Association shall comply with Section 14 of the Companies Act, 2013, and the Company shall procure the necessary special resolution for such amendment.”

Looking over the finalised language, Priya leaned forward. “So basically, most changes require 75% approval, but if a change specifically hurts someone’s rights, they need to consent?“

“Exactly,” I confirmed. “This structure protects minority investors from having their rights voted away, while still allowing the agreement to evolve with majority support for general matters.“

Strategic considerations in amendment provisions

The amendment provision directly impacts governance dynamics throughout a company’s lifecycle. When drafting this section, consider:

• Future funding rounds: Will new investors need to amend the SHA? How difficult should that process be?
• Voting thresholds: Higher thresholds (like our 75% requirement) protect minority investors but can create governance deadlocks
• Specificity of protection: Which rights deserve special protection requiring individual consent?
• Formalities: What constitutes a valid amendment? Must it be signed by all parties or just the affected ones?

“For FoodSwift, we implemented what I call the ‘three-layer defense,’” I explained. “General changes need 75% approval, class-specific changes need majority approval from that class, and individually targeted changes need specific consent from the affected party.“

Waiver provisions: preventing accidental surrender of rights

Separate from but related to amendments are waiver provisions – rules governing when parties can be deemed to have given up their rights under the SHA.

“The waiver language might seem like boilerplate, but it is actually critical protection,” I emphasised. “Without it, a party could argue that you waived your rights by not enforcing them in a previous situation.“

Our waiver provision established three key protections:

1. Written requirement: Waivers must be explicit and in writing
2. No implied waiver: Failure to enforce a right once doesn’t waive future enforcement
3. Specificity: Waivers apply only to the specific instance mentioned

“This protects you from accidentally waiving important rights through inaction or partial enforcement,” I told the founders. “For example, if you allow the investor to miss one reporting deadline without objecting, you’re not surrendering your right to enforce that deadline in the future.“

Practical drafting tips from experience

Based on disputes I have handled involving SHA amendments, here are the key principles to incorporate:

• Be explicit about who must sign amendments – all original parties, or just current shareholders?
• Address counterparts and electronic signatures for practical amendment execution
• Consider sunset provisions that automatically modify certain terms after specific milestones
• Include technical amendment carve-outs for non-substantive corrections
• Cross-reference with the Articles of Association amendment requirements

“Remember that SHA amendments often trigger corresponding changes to your Articles of Association,” I reminded FoodSwift’s team. “The processes need to be coordinated to maintain consistency between documents.“

With amendment and waiver provisions properly structured, we had established both stability and adaptability for FoodSwift’s governance framework. Next, we needed to address when and how this carefully crafted agreement would end.

Mountains do not need to explain their height. Similarly, well-crafted legal provisions speak for themselves through their comprehensive protection and practical utility.

When the agreement ends: termination provisions

You must make your client understand that knowing when the SHA ceases to operate is as crucial as understanding how it functions.

“How long does this agreement last?” Rahul asked me, glancing at his watch. We were drafting for hours, and I could sense the team’s eagerness to finalise the document.

The question was simpler than the answer. Unlike many contracts with fixed expiration dates, SHAs typically continue indefinitely until specific termination events occur.

“Your SHA is not time-bound,” I explained. “It terminates when certain key events happen in your company’s lifecycle—like an IPO, acquisition, or when all parties agree to end it.”

This triggered a flurry of follow-up questions from the founders:

• “What if someone exits completely? Are they still bound by these terms?”
• “If the SHA terminates, do all our obligations disappear overnight?”
• “Could one shareholder force early termination?”

These questions revealed the importance of clearly defining not just how the agreement operates, but when it stops operating, and which parts survive beyond termination.

Natural termination events

Most SHAs include several standard triggers for automatic termination:

1. Initial Public Offering (IPO): When a company goes public, securities regulations and listing requirements typically supersede private shareholder arrangements
2. Company acquisition: When the company is sold, and shareholders exit completely
3. Unanimous agreement: When all parties consent to terminate
4. Insolvency or Dissolution: When the company ceases to exist
5. Single shareholder: When all shares come to be owned by a single shareholder

For FoodSwift, we drafted a straightforward termination clause capturing these natural endpoints:

“Termination.

(a) Automatic Termination. This Agreement shall automatically terminate upon the earliest to occur of:

(i) The closing of an Initial Public Offering of the Company;

(ii) The acquisition of 100% of the Company’s shares by a third party;

(iii) The written agreement of all Parties to terminate this Agreement;

(iv) The insolvency, liquidation, or dissolution of the Company; or

(v) Any single Shareholder becoming the owner of all issued and outstanding Shares of the Company, provided such ownership is intended to be permanent and not part of a temporary transfer, restructuring, or transitional arrangement.

(b) Partial Termination. This Agreement shall terminate with respect to any Shareholder upon such Shareholder ceasing to hold any Shares in the Company, but shall remain in full force and effect with respect to all other Shareholders.

(c) Effect of Termination. Termination of this Agreement shall not relieve any Party from liability for any breach prior to termination. The provisions of Clause [Dispute Resolution], [Notices], and this Clause [Termination] shall survive the termination of this Agreement indefinitely. The provisions of Clause [Confidentiality] shall survive termination for a period of five (5) years for general confidential information and indefinitely for trade secrets and proprietary technical information, subject to applicable law.”

What survives termination?

Certain obligations logically extend beyond the agreement’s formal end. As I explained to the founders, these typically include:

• Confidentiality obligations: Protecting sensitive information doesn’t end when the relationship does
• Dispute resolution mechanisms: Governing how post-termination disputes are handled
• Accrued liabilities: Responsibility for breaches that occurred before termination
• Notice provisions: Establishing how communications continue after termination

“Think of these surviving provisions as the ‘afterlife’ of your SHA,” I suggested. “They continue to protect your interests even after the main agreement has ended.“

Termination mechanics for different shareholder classes

Altitude’s investment director raised an important point: “What happens if new preferred share classes are created in future rounds? Would the termination of rights for one class affect others?“

This highlighted the need for careful drafting around partial termination. For FoodSwift, I added:

“(d) Class-Specific Provisions. Termination of rights specific to a particular class of Shares shall not affect the rights of other classes of Shares. If additional classes of Preferred Shares are issued with rights senior to the Series Seed Preferred Shares, the holders of Series Seed Preferred Shares shall continue to have all rights provided under this Agreement unless explicitly modified by written consent in accordance with the Amendment provisions of this Agreement.”

Strategic considerations in termination provisions

The termination clause significantly impacts long-term strategic decisions. Our approach balanced several considerations:

1. IPO planning: We defined “IPO” precisely to avoid disputes about whether a small offering or direct listing qualifies as a termination event
2. M&A scenarios: We clarified that only a complete acquisition terminates the agreement, not partial acquisitions
3. Survival periods: For confidentiality, we specified a 5-year post-termination period rather than an indefinite obligation
4. New investor accommodation: We included language allowing the SHA to be superseded by a new agreement without technically “terminating”

Lawyer’s corner: avoiding termination pitfalls

Having seen numerous disputes arise from poorly drafted termination provisions, I advised FoodSwift on several best practices:

• Clearly define ambiguous termination triggers like “IPO” or “acquisition”
• Address survival rights explicitly rather than leaving them to interpretation
• Coordinate termination with other transaction documents to avoid conflicts
• Consider regulatory requirements that might affect termination (like SEBI regulations for IPOs)
• Create clear mechanisms for post-termination obligations

“Termination provisions might seem academic now,” I told the founders, “but they will become critically important during major transitions like acquisitions or IPOs—exactly when you’ll have the least time and patience for legal ambiguities.“

With termination addressed, we had established the entire lifecycle of FoodSwift’s SHA—from formation through operation to eventual conclusion. But several critical technical provisions remained to complete our comprehensive agreement.

The legal architecture supporting these provisions provides as much value as the commercial terms themselves. Without them, even the most favorable economic rights can become unenforceable when needed most.

The final pieces: Miscellaneous provisions that make or break enforceability

The conference room was growing dim as evening approached. After hours of discussing complex commercial terms and legal mechanics, fatigue was setting in. Rahul stifled a yawn as I turned to the final section of our draft SHA.

“These last provisions might seem routine,” I acknowledged, “but they are actually the connective tissue that holds the entire agreement together. Many lawyers call them ‘boilerplate,’ but that vastly understates their importance.“

Priya gave me a skeptical look. “More important than board composition or liquidation preferences?“

“In some ways, yes,” I replied. “Your liquidation preference is only valuable if you can prove you received proper notice under the agreement. Your board rights matter only if the entire agreement is legally valid. These miscellaneous provisions address fundamental questions: How do parties communicate officially? What happens if part of the agreement is invalid? Which document controls when conflicts arise?”

I’ve seen multi-million dollar disputes turn on these seemingly technical provisions. A missing notice clause or an ambiguous integration provision can undermine everything else you’ve negotiated.

The essential miscellaneous provisions

For FoodSwift’s SHA, we included these critical components:

1. Notices clause

This provision establishes the official channels for formal communication under the SHA:

“Notices.

(a) Form and Delivery. All notices, requests, demands, and other communications required or permitted under this Agreement shall be in writing and shall be deemed duly given when actually received if delivered:

(i) Personally with a receipt acknowledged; 

(ii) By registered or certified mail, return receipt requested, postage prepaid; 

(iii) By recognized courier service providing evidence of delivery; or 

(iv) By email with confirmation of receipt, which shall be deemed sufficient unless the receiving Party requests, within one (1) business day of receipt, that a copy also be sent by one of the methods in subclauses (i), (ii), or (iii).

(b) Addresses. Notices shall be directed to the Parties at their respective addresses set forth in Schedule [X], or to such other address as a Party may notify the other Parties in accordance with this clause.

(c) Effective Date. Notices shall be deemed given on the date of receipt (or refusal of receipt).“

“The notice provision is not just an administrative detail,” I explained. “It determines whether shareholders received proper notice of meetings, whether termination notices were valid, and how time periods for responses are calculated.“

2. Severability clause

This provision keeps the agreement functioning even if certain parts are found invalid:

“Severability. If any provision of this Agreement is held invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not be affected or impaired. The Parties shall replace such invalid, illegal, or unenforceable provision with a valid, legal, and enforceable provision that achieves, to the extent possible, the original intent of the Parties.“

“This is your agreement’s immune system,” I told the founders. “If one part gets sick, this prevents the infection from spreading to the entire document.“

3. Entire agreement clause

This provision establishes which documents control and prevent parties from claiming reliance on outside promises:

“Entire Agreement. This Agreement, together with the Transaction Documents listed in Schedule [X], constitutes the entire understanding among the Parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, whether written or oral, relating to such subject matter. No representation, promise, inducement, or statement of intention has been made by any Party that is not embodied in this Agreement, and no Party shall be bound by or liable for any alleged representation, promise, inducement, or statement of intention not embodied herein.“

“Without this,” I cautioned, “someone could claim they relied on an email or conversation that contradicts your SHA. This clause establishes that only what’s written in the agreement itself matters.“

4. Counterparts clause

This provision facilitates practical execution when parties can’t physically sign together:

“Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. Execution and delivery of this Agreement by electronic means (including DocuSign, Adobe Sign, or email of PDF signatures) shall be legal, valid, and binding execution and delivery for all purposes.“

“With founders, investors, and the company potentially in different locations, this clause ensures the agreement can be validly executed without everyone signing the same physical copy,” I explained.

5. Governing Law (Revisited)

While we addressed governing law in our dispute resolution clause, I added a standalone provision for clarity:

“Governing Law. This Agreement shall be governed by and construed in accordance with the laws of India, without giving effect to any choice or conflict of law provision or rule. The courts of Mumbai, India shall have jurisdiction exclusively to grant interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, or to enforce arbitral awards under Section 36, to the extent permitted under the arbitration provisions in Clause [X].”

“This reaffirms the legal framework for interpreting the agreement and addresses matters that might fall outside arbitration,” I noted.

The often-overlooked but critical provisions

Beyond these standard provisions, I included several others that are frequently neglected but can be crucial in specific circumstances:

1. Further assurances clause

“Further Assurances. Each Party shall execute and deliver such additional instruments and documents, and take such additional actions, as may be reasonably requested by another Party to effect, perfect, or confirm the rights and obligations created by this Agreement and to achieve the intended purposes of this Agreement.”

“This creates an ongoing obligation to help implement the agreement’s terms, particularly useful for matters like share transfers or corporate actions,” I explained.

2. No third-party beneficiaries clause

“No Third-Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the Parties hereto, their respective successors, permitted assigns, and affiliates (to the extent permitted under the transfer restrictions in this Agreement), any rights, benefits, or obligations under or by reason of this Agreement.”

“This prevents outside parties from claiming rights under your SHA, which could otherwise complicate enforcement,” I told the founders.

3. Assignment clause

“Assignment. No Party may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the other Parties, except that Shareholders may assign rights in connection with a permitted transfer of Shares under Clause [X]. Any attempted assignment in violation of this provision shall be void.“

“This works in tandem with your transfer restrictions, ensuring that SHA rights can’t be separated from share ownership,” I noted.

Common drafting mistakes to avoid

As a young lawyer drafting your first SHA, you are likely to encounter the same pitfalls I have seen derail countless agreements. Let me share the most dangerous mistakes you must avoid to protect your clients.

1. Vague or unenforceable arbitration clauses

This is perhaps the costliest error you can make. 

I once worked with a startup whose SHA simply stated, “disputes will be resolved by arbitration in accordance with law.” When a serious board deadlock occurred, they wasted eight months and nearly ₹40 lakhs just fighting about how to start the arbitration process.

To avoid this mistake in your drafting:

• Specify the exact number of arbitrators and their selection process
• Clearly distinguish between the legal “seat” and physical “venue”
• Use consistent institutional rules and administration
• Set realistic timelines for arbitrator appointment and awards

For FoodSwift, I specified every procedural element—three arbitrators, selection process, institutional rules, seat, and language. This eliminated ambiguity when they could least afford it. You must do the same.

2. Failing to align the SHA with the Articles of Association

Remember this fundamental principle: your SHA is a private contract, but your client’s AoA is a public document filed with the Registrar of Companies. If they conflict, you’ve created an enforceability problem.

The Indian Companies Act creates specific challenges you must address:

• courts may not enforce SHA provisions that contradict the AoA
• some rights only have a practical effect if included in the AoA
• amending the AoA requires special resolutions under Section 14

Always include a provision like the one I drafted for FoodSwift:

“Articles of Association. The Company and all Shareholders shall take all necessary steps to amend the Articles of Association to reflect the provisions of this Agreement. In case of any conflict or inconsistency between this Agreement and the Articles of Association, the Parties shall promptly take all necessary steps to amend the Articles of Association under Section 14 of the Companies Act, 2013, to remove such conflict or inconsistency. Until such amendment, the provisions of this Agreement shall govern the rights and obligations of the Parties to the extent permissible under applicable law, recognizing that the Articles of Association as a public document filed with the Registrar of Companies may take precedence in certain circumstances.”

This doesn’t resolve the legal tension entirely, but it creates a contractual obligation to maintain alignment and establishes the SHA’s priority between the parties.

3. Conflicting provisions across transaction documents

You will rarely draft an SHA in isolation. It typically forms part of a suite of transaction documents that must work together coherently. Ensure consistency across:

• Share Subscription Agreement
• Articles of Association amendments
• Employment Agreements with founders
• Intellectual Property assignments
• Corporate authorising resolutions

Draft your entire agreement clause to specifically reference these related documents and establish priority rules to prevent conflicts. Remember: inconsistency between documents can render carefully negotiated rights meaningless.

4. Forgetting practical implementation mechanisms

One of the most common mistakes inexperienced lawyers make is drafting legally sound provisions that fail in practice because they lack implementation mechanisms. I’ve seen countless SHAs with beautifully drafted information rights that never functioned because they didn’t specify who was responsible for preparing reports or when they were due.

To avoid this mistake, ensure each major right includes corresponding procedural details:

• For information rights: Specify formats, timelines, and responsible parties
• For board nomination rights, include procedures for nominating or replacing directors
• For reserved matters: Create clear notification and approval processes
• For exit rights: Provide step-by-step implementation procedures

The implementation details might seem tedious to draft, but they transform theoretical rights into practical tools your clients can actually use.

Key takeaways you must apply

As a junior lawyer drafting your first SHA, internalise these essential lessons:

1. Balance commercial and legal considerations: A technically perfect SHA that hamstrings the business serves no one. Understand your client’s business model and growth trajectory.
2. Anticipate future scenarios: Draft for tomorrow’s growth, not just today’s situation. Consider how provisions will operate during future funding rounds and eventual exits.
3. Consider practical implementation: Provide mechanisms, not just rights. Rights without implementation processes are merely theoretical.
4. Maintain consistency: Ensure alignment across all transaction documents. Contradictions create exploitable weaknesses.
5. Prioritise enforceability: Focus on making rights meaningful when they matter most—during disputes or exits.

Most importantly, recognise that SHA drafting is not just a legal exercise—it is about creating a governance architecture that balances founder autonomy, investor protection, and company growth potential.

Final thoughts: bringing it all together

With this comprehensive guide across four detailed parts, you now have the blueprint for creating shareholders’ agreements that will serve both founders and investors throughout the startup lifecycle. Let’s recap what we’ve covered in this journey:

The complete SHA roadmap

Part 1: Laying the legal foundation

• Establishing precise definitions that shape rights and obligations
• Documenting shareholding patterns and capital structure
• Designing balanced board composition and governance rights
• Creating a framework for voting and reserved matters

Part 2: Keeping everyone aligned

• Crafting information rights that balance transparency with efficiency
• Implementing transfer restrictions that prevent harmful share sales
• Securing founder commitment through well-designed lock-in provisions
• Protecting intellectual property and confidential information

Part 3: Protecting the Payoff

• Designing anti-dilution mechanisms that balance investor protection with flexibility
• Creating clear pathways to liquidity through exit provisions
• Establishing fair distribution of proceeds through liquidation preferences
• Addressing both successful and disappointing exit scenarios

Part 4: Ensuring Enforceability

• Building robust dispute resolution mechanisms
• Creating controlled flexibility through amendment provisions
• Defining clear termination events and surviving obligations
• Implementing critical “boilerplate” provisions that determine enforceability

For reference, you can access the complete SHA drafted for FoodSwift here. This document incorporates all the principles and practices discussed throughout this series, providing a comprehensive template you can adapt for your clients’ specific needs.

Though we have completed our exploration of shareholders’ agreements, FoodSwift’s journey to completing its seed funding is still not complete. The SHA is just one piece of the larger funding puzzle.

In the next part of this series, I will address the practical implementation of everything we’ve negotiated, including the allotment of 13.04% of shares to the investor and all regulatory filings required to give effect to the fundraising. From board resolutions to form filings with the Registrar of Companies, we’ll cover the final steps that transform paper agreements into legally binding capital investments.

Stay tuned as we complete FoodSwift’s seed funding journey and prepare them for their growth phase with solid legal foundations in place.