Underwriting Agreement

What is an Underwriting Agreement?

An Underwriting Agreement is a legal contract signed between a company issuing new securities and an underwriter who agrees to purchase or guarantee the unsold shares. It defines the rights and responsibilities of both parties, the size of the issue, the commission or fee for the underwriter, and the terms of sale to the public. Such agreements protect the company by ensuring minimum subscription, while the underwriter takes on the risk of selling the securities in the market.

Why is an Underwriting Agreement Needed?

An Underwriting Agreement provides financial security to companies raising capital through public issues. It assures the issuer that a certain number of securities will be subscribed, even if public response is low.

This agreement also helps in clearly defining the obligations of the underwriter, the pricing of securities, and timelines for payment. For investors and regulators, it shows transparency and professional handling of the issue, thereby building trust and credibility in the capital market.

Types of Underwriting Agreements:

• A Firm Commitment Underwriting is when the underwriter agrees to purchase the entire issue, taking full risk of any unsold securities.
• In a Best Efforts Underwriting, the underwriter only promises to sell as many securities as possible without guaranteeing full subscription.
• An All-or-None Underwriting requires that the entire issue be sold; otherwise, the agreement stands cancelled.
• Under a Syndicate Underwriting, multiple underwriters join together to share the risk and responsibility of the issue.
• A Standby Underwriting is used in rights issues where the underwriter agrees to purchase the portion left unsubscribed by existing shareholders.

Why Tax Intelligence?

Tax Intelligence offers expert legal drafting of Underwriting Agreements tailored to your business needs. Our team of advocates ensures that all important clauses such as underwriter obligations, commission, pricing, and settlement dates are carefully included to protect your interest. With clear pricing and professional support, we make the agreement drafting process smooth and reliable. We have expertise in Share Transfer & Transmission and MOA/AOA Printing Services.

What Tax Intelligence do in Underwriting Agreement?

• Understands your business needs and issue requirements.
• Drafts a customized Underwriting Agreement with accurate clauses.
• Ensures compliance with Indian securities and corporate laws.
• Defines underwriter’s obligations, commission, and payment terms.
• Reviews the draft legally to safeguard your company’s interest.
• Provides end-to-end support until the agreement is executed.
• Offers transparent pricing and quick turnaround time.