SEBI PUTS SELLING SHAREHOLDERS ON SILENT MODE: DO SHAREHOLDERS’ AGREEMENTS NEED A RELOOK?

While making an investment in the company, investors negotiate significant governance and exit related rights which enable material participation in the IPO process. However, SEBI has been issuing observations to IPO bound companies to refrain from involving selling shareholders in taking certain decisions pertaining to the IPO, notably the determination of issue price. It is believed that such observations are made due to the underperformance of some PE backed IPOs, where the selling shareholders were perceived to have influenced the pricing of the IPO to get maximum return on their investment. INDUSLAW's Avimukt Dar, Manshoor Nazki, Nikita Goyal, Deepansh Goyal and Sarthak Sangwai discuss and analyse the potential impact of these observations on the key governance document of a private company: The Shareholders’ Agreement.