Most Bengaluru founders arrive with one of three things in hand. A term sheet an investor emailed. A note the founders wrote in a shared document. Or nothing at all. A term sheet settles a round and then expires. A founders note settles feelings and settles nothing else. A shareholders agreement is the one of the three that a Karnataka court or an arbitrator can act on. It is stamped, signed and specific about who may sell, who may block, and who buys whom out. With one holder on the register, skip it. From two holders up, it is the cheapest document you will sign this year.
Does your Bengaluru company need one, or will the articles carry you?
The test is not turnover and it is not funding stage. It is how many names sit on the share register, and whether any of them could one day want out.
- Two or more holders, whatever the split. An even split is the worst case, because nothing breaks a tie.
- An outside investor coming in, angel or fund. Their counsel hands you their draft if you do not have yours.
- A family company where shares moved by inheritance and nobody ever agreed terms.
- A company about to carve out an option pool for its team.
A single member company does not need one. Neither does a wholly owned subsidiary, where one holder controls every vote. Nor does an LLP: its partners are bound by the LLP agreement, stamped under its own article of the Karnataka schedule.
The articles of association still matter. They bind every holder, present and future, and they sit on the public file, while the agreement binds only the people who sign it. Most Bengaluru companies end up wanting both, read against each other.
What has to be settled before drafting starts?
Nothing slows a drafting job like an unsettled register. Before we write a line we ask for the certificate of incorporation, the current shareholding pattern, the articles as filed, any term sheet already signed, and identity and address proof for every holder. Where a company signs rather than an individual, we also want the board resolution naming the signatory.
Then come the commercial decisions, which are yours and not ours. This is the checklist we work through on the first call.
| Clause | What it has to settle | Where Bengaluru drafts go wrong |
|---|---|---|
| Transfer restrictions | Who may buy shares, and on what notice | Silent on transfers inside a family, which is the transfer that actually happens |
| Right of first refusal | The order in which existing holders may buy | No valuation method, so the clause stalls the day someone uses it |
| Tag along and drag along | What a minority holder may do when the majority sells | A drag threshold fixed without reading the articles it has to work with |
| Reserved matters | Which decisions need investor or founder consent | Lifted from a term sheet and never reconciled with the board's own powers |
| Deadlock and exit | What happens when the vote is tied | No buyout mechanic, so the only way out is a court |
| Governing law and seat | Which forum hears a dispute, and where it sits | The seat is left blank, so the first fight is about forum rather than money |
Settle those six and the draft almost writes itself. Leave them open and you get a document that reads well and decides nothing.
How does the drafting actually run?
- A call to map the register: who holds what, who joined when, and what was promised out loud.
- A short clause brief naming the matters you want reserved and the ones you can live without.
- A senior lawyer drafts the agreement. Not a template with your company name pasted into it.
- You mark it up. We explain each clause in plain words and revise until you are satisfied.
- We compute the stamp duty, tell you which copies carry it, and hand you a file ready for signature.
Turnaround on a clean brief is 3 to 5 days. Several share classes, or a holder sitting outside India, will add a little to that.
Which Karnataka authority ends up holding this document?
Nobody holds it, which is the part that surprises people. This document is not filed with the registrar, not uploaded to MCA V3, and not entered on any public register.
What does attach is stamp duty. Agreements are charged under Article 5 of the Karnataka Stamp Act, 1957, and Article 5(j) is the entry for an agreement not otherwise provided for. A shareholders agreement lands there, at ₹500, a rate raised with effect from 3 February 2024. The executant pays, and the paper has to carry its duty before or at the time of signature. Stamping after the event is not a cure. An unstamped agreement can be impounded by a public officer who is shown it, and it becomes usable only on paying the shortfall together with a penalty of ten times that shortfall.
Registration is a separate question, and a short one. This document does not affect immovable property, so no sub registrar office is involved in it. That changes the moment the deal drags in something that does, such as a Peenya shed contributed to the company or a Whitefield office taken on a long lease. Then the jurisdictional sub registrar office matters, and Kaveri 2.0 gives you the duty calculation and the office locator before a slot is booked.
One consequence follows the agreement rather than sitting inside it. When shares actually move, duty on the transfer is central rather than state, at 0.015 percent on a delivery basis, and an off market sale puts it on the transferor.
Then the forum, which is the clause people leave for last and regret first. Bengaluru has dedicated commercial courts at the district judge level that hear commercial disputes above the statutory threshold, in both Bengaluru Urban and Bengaluru Rural. Whether your dispute reaches one of them turns on value. The Commercial Courts Act sets the floor at three lakh rupees, and a state can notify a higher figure, so we confirm the current Karnataka position before advising on forum. Most shareholder documents we draft name something narrower anyway: an arbitration seated at Bengaluru, or the Karnataka High Court, which sits at Bengaluru. Oppression and mismanagement is different again, and goes to the NCLT Bengaluru Bench.
What does drafting cost, and when do you reopen the document?
Drafting starts at ₹9,999 and the first draft lands in 3 to 5 days. Stamp duty is separate and modest next to the fee. Stamp duty in Karnataka is paid electronically through the Department of Stamps and Registration's authorised collection centres, and e-stamping certificates are also issued through the national e-stamping system; we use the right channel for your instrument.
The fee moves for a reason, never by default. Several share classes, a holder resident abroad, or an investor insisting on their own precedent each add scope, and we quote it before we begin.
There is no renewal and no annual filing, and the agreement carries no expiry date. What brings it back is the register changing. A seed round, a fresh option pool, a holder leaving, or a proprietary concern that has just become a company with four names where there used to be one. Each of those is a reason to reopen the document properly rather than staple on an addendum nobody reads.
Who in Bengaluru is signing one right now?
- In Peenya, a precision engineering and machine tools unit taking a minority investor to fund a second line, which wants transfer restrictions settled before the money lands.
- A family trading business in Chickpet that became a company, where shares now sit with four members of one family.
- A software company in Koramangala closing a seed round, whose investor's counsel asked for the agreement first.
- A product and design studio in Indiranagar bringing in a third partner after two years on trust.
None of them is in a dispute yet. That is exactly why the document is cheap today.
Which two clauses go wrong on a Bengaluru shareholder agreement?
The two things that go wrong on this document are local. The duty article gets picked wrong, and the seat clause gets left generic or pointed at a court in another state. We compute the Karnataka duty before execution and write a Bengaluru seat into the dispute clause, and jurisdiction follows your own registered office, never our address.
Drafting runs entirely online, handled by CS and CA professionals under senior lawyer review, and every enquiry gets a callback within 30 minutes. LegalX India has handled corporate documentation for more than 15,000 clients. For clause types, enforceability and the wider picture, read the full shareholder agreement process nationwide.