The Lock-Up Clause: What It Means and How to Negotiate It (2026)

What is a lock-up clause? A lock-up clause is a promise by a shareholder not to sell, transfer, pledge or otherwise dispose of their shares for a fixed period. It stops insiders from dumping stock at a moment when that would damage the company or other investors. The clause names who is locked up, which shares are covered, how long the lock-up lasts, and the limited situations in which a transfer is still allowed. The term is used in two main settings, and the search intent is usually one of them: - Capital markets and IPOs. After a company lists, founders, employees and early investors agree not to sell their shares for a set period so the market is not flooded with stock right after listing. This is the most common meaning of "lock-up".

• Mergers and acquisitions. A lock-up can also be a deal-protection device: a target or its major shareholders agree to support an announced deal and not sell or shop their shares to a rival bidder before closing. This article is general guidance, not legal advice. Lock-ups engage securities law, exchange rules and contract law, which vary by jurisdiction, so have a qualified professional review any lock-up before you rely on it. ## Sample lock-up clause Copy the block below and fill the bracketed fields. This is a share lock-up undertaking of the IPO or investment type. ``` LOCK-UP UNDERTAKING 1. LOCK-UP The Shareholder agrees that, during the period from [START DATE] to the date [N] days after [the listing date / closing] (the "Lock-Up Period"), the Shareholder will not, without the prior written consent of [the Company / the underwriters / the Investor]: (a) offer, sell, pledge, or transfer any Shares or any interest in them; (b) enter into any swap or derivative that transfers the economic result of owning the Shares; or (c) publicly announce an intention to do any of the above. 2. COVERED SHARES This undertaking applies to all Shares the Shareholder holds now or acquires during the Lock-Up Period, including shares from options, warrants or convertible instruments. 3. PERMITTED TRANSFERS The restriction does not apply to [gifts to family or trusts, transfers to affiliates, or transfers required by law], provided the transferee signs a lock-up on the same terms for the remainder of the Lock-Up Period. 4. EARLY RELEASE [The Company / the underwriters] may release some or all Shares from this undertaking early, in writing. Any such release applies [pro rata to all locked-up Shareholders / at the discretion of the releasing party]. 5. ENFORCEMENT The Shareholder agrees that [the Company's transfer agent / the depository] may be instructed to refuse any transfer that would breach this undertaking. Signed: __________ Name / date: __________

- **Which shares.** A well-drafted clause captures shares held now and shares that vest or are issued later, so a holder cannot sidestep it.
- **How long.** In a market lock-up the period runs from listing; in an investment it runs from the funding date; in M&A it runs until the deal closes or is abandoned.
- **Carve-outs and early release.** Transfers to family, trusts or affiliates are commonly allowed if the transferee signs the same lock-up. The company or underwriters often keep the right to release holders early. ## Negotiating the lock-up clause: both sides **If you are the company or the underwriters.** You want a long, broad lock-up so the market stabilises and no large seller appears too soon. Push for all shares to be covered, keep early-release discretion with you, and require any permitted transferee to sign the same terms. **If you are a locked-up shareholder or investor.** You want certainty about when you can sell and fair treatment against others. Ask for a defined period rather than an open-ended one, a pro-rata early release so you are not disadvantaged if others are let out first, and clear permitted-transfer carve-outs for estate planning. If you are a fund with its own investors, you may need a carve-out to meet redemptions. ## Common mistakes and variations - Leaving future shares (from options or converts) outside the lock-up, which creates a gap.
- No permitted-transfer carve-out, which blocks ordinary estate planning.
- An early-release clause that lets insiders out quietly while others stay locked, which damages trust and, for listed companies, can raise disclosure issues.
- Confusing a contractual lock-up with a statutory lock-in. They can run at the same time and the longer one controls. ## Does it vary by jurisdiction? Yes. Lock-ups mix private contract with hard statutory rules, and the statutory part differs by country. - **India.** On top of any contractual lock-up with bankers, SEBI's Issue of Capital and Disclosure Requirements Regulations impose a statutory lock-in. Broadly, promoters must lock in a minimum share of the post-issue capital for a set period, with the excess locked for a shorter period, and other pre-issue shareholders face their own lock-in. The exact durations depend on the issue type and have been shortened in recent years, so confirm the current Regulation 16 to 17 framework for your specific issue. <!-- [VERIFY] exact lock-in durations by issue type under current SEBI ICDR --> Last verified October 2026.
- **United States.** Market lock-ups are contractual, agreed with the underwriters, and typically run around 90 to 180 days after an IPO; there is no single statutory period, though resale of restricted stock is governed separately.
- **UK, Ireland, Singapore and Australia.** Lock-ups are mainly contractual and set by the sponsors or underwriters, with listing-rule overlays, so periods and carve-outs vary. Treat the length as negotiable rather than fixed. Because the statutory layer differs so much, say "varies by jurisdiction" and check the local securities regulator rather than assume one period fits all. ## One workspace for the whole contract, not just the clause Getting the lock-up wording right is one task. The harder work is everything around it: keeping lock-up terms consistent across every shareholder undertaking, tracking the exact date each lock-up expires, remembering which holders got an early release, and keeping versions straight as the cap table grows. This is steadier when drafting, reviewing, tracking and governing your lock-up undertakings sit in one AI workspace tuned to your company, so the covered shares, release terms and expiry dates stay consistent as the cap table changes. A tool like [Adira](https://adiralaw.com) is built around this single-workspace approach for share undertakings. The sample above is enough to put a fair lock-up in place; a workspace makes drafting, review and date-tracking one connected job instead of several scattered ones.