git_config(git_default_config);
 
+       /*
+        * We would have created the above under user's umask -- under
+        * shared-repository settings, we would need to fix them up.
+        */
+       if (shared_repository) {
+               path[len] = 0;
+               adjust_shared_perm(path);
+               strcpy(path + len, "refs");
+               adjust_shared_perm(path);
+               strcpy(path + len, "refs/heads");
+               adjust_shared_perm(path);
+               strcpy(path + len, "refs/tags");
+               adjust_shared_perm(path);
+       }
+
        /*
         * Create the default symlink from ".git/HEAD" to the "master"
         * branch, if it does not exist yet.
 
         * contents of .git/config will be written into it.
         */
        fd = open(lock_file, O_WRONLY | O_CREAT | O_EXCL, 0666);
-       if (fd < 0) {
+       if (fd < 0 || adjust_shared_perm(lock_file)) {
                fprintf(stderr, "could not lock config file\n");
                free(store.key);
                ret = -1;
 
        int fd;
        sprintf(lk->filename, "%s.lock", path);
        fd = open(lk->filename, O_RDWR | O_CREAT | O_EXCL, 0666);
-       if (fd >=0 && !lk->next) {
-               lk->next = lock_file_list;
-               lock_file_list = lk;
-               signal(SIGINT, remove_lock_file_on_signal);
-               atexit(remove_lock_file);
+       if (0 <= fd) {
+               if (!lk->next) {
+                       lk->next = lock_file_list;
+                       lock_file_list = lk;
+                       signal(SIGINT, remove_lock_file_on_signal);
+                       atexit(remove_lock_file);
+               }
+               if (adjust_shared_perm(lk->filename))
+                       return error("cannot fix permission bits on %s",
+                                    lk->filename);
        }
        return fd;
 }
 
 
        return NULL;
 }
+
+int adjust_shared_perm(const char *path)
+{
+       struct stat st;
+       int mode;
+
+       if (!shared_repository)
+               return 0;
+       if (lstat(path, &st) < 0)
+               return -1;
+       mode = st.st_mode;
+       if (mode & S_IRUSR)
+               mode |= S_IRGRP;
+       if (mode & S_IWUSR)
+               mode |= S_IWGRP;
+       if (mode & S_IXUSR)
+               mode |= S_IXGRP;
+       if (S_ISDIR(mode))
+               mode |= S_ISGID;
+       if (chmod(path, mode) < 0)
+               return -2;
+       return 0;
+}
 
                error("Unable to create %s", git_HEAD);
                return -3;
        }
+       if (adjust_shared_perm(git_HEAD)) {
+               unlink(lockpath);
+               error("Unable to fix permissions on %s", lockpath);
+               return -4;
+       }
        return 0;
 }
 
 
        return 0;
 }
 
-int adjust_shared_perm(const char *path)
-{
-       struct stat st;
-       int mode;
-
-       if (!shared_repository)
-               return 0;
-       if (lstat(path, &st) < 0)
-               return -1;
-       mode = st.st_mode;
-       if (mode & S_IRUSR)
-               mode |= S_IRGRP;
-       if (mode & S_IWUSR)
-               mode |= S_IWGRP;
-       if (mode & S_IXUSR)
-               mode |= S_IXGRP;
-       if (S_ISDIR(mode))
-               mode |= S_ISGID;
-       if (chmod(path, mode) < 0)
-               return -2;
-       return 0;
-}
-
 int safe_create_leading_directories(char *path)
 {
        char *pos = path;