In this paper, an internal model control (IMC)-based universal droop controller is proposed in order to improve the accuracy of the small signal model and subsequently the transient behaviour of the system. The universal droop control technique utilized for power sharing among the parallel operated inverters is based upon the droop phenomenon of voltage and frequency. An IMC-based controller is designed to maintain the system frequency and voltage within permissible limits. The non-linear differential and algebraic equations of the system are derived by including network, load, phase locked loop (PLL) and filter dynamics along with the proposed controller. These equations are linearised around operating points to form a state-space model of the microgrid system. An eigenvalue analysis is carried out using the linearised model to ascertain the small-signal stability of the system. The critical values of the controller gains are identified and the effectiveness of the proposed model is validated with time domain simulations. Also, the improvement in power sharing of the inverters is observed with the proposed model.