What is Consequences of violating lock-in periods for shares?

Shares issued to promoters or investors in certain situations (like an IPO or before a funding round) can be subject to a lock-in period, during which they cannot be sold. Violating this is a breach of contract and securities law, leading to penalties and legal action.

Startup Example: A founder sells some of their shares to an outside party during a lock-in period agreed upon in a shareholder agreement. This breach could trigger default clauses and legal action from their investors.

We advise on and draft SHAs with clear lock-in clauses.