Practical registration and licensing guidance for startups and growing businesses.
Each guide gives you practical steps, document lists, timelines, mistakes to avoid and direct answers before you start work.
Bootstrapping preserves ownership but uses founder resources; grants may be limited to a specific purpose and window; seed and angel rounds trade equity or convertible rights for risk capital. Later VC rounds demand stronger traction and governance, while debt creates repayment duties. The right startup funding route depends on stage, cash flow, dilution tolerance and the legal instrument used.
A seed round normally begins with a term sheet and due diligence, then moves through instrument choice, valuation, board and shareholder approvals, subscription and shareholder agreements, receipt of funds, allotment and MCA records. Private placement or preferential issue rules may apply. A non-resident investor also brings FDI entry-route, pricing, banking and FEMA reporting checks.
A startup convertible note begins as debt with agreed conversion or repayment features and has specific eligibility conditions. CCPS and CCD are compulsorily convertible instruments with different company-law rights and FEMA treatment. For non-resident investment, RBI’s direction includes a ₹25 lakh single-tranche condition and ten-year outer period for qualifying startup convertible notes. Confirm current rules and the whole transaction before signing.
Section 42 of the Companies Act governs private placement to identified persons and restricts public solicitation. The process generally involves approvals, a PAS-4 private-placement offer, a PAS-5 record, subscription through prescribed banking channels, timely allotment and PAS-3 return of allotment. Preferential-issue rules may also apply to the instrument. Check current MCA forms and timelines before sending the offer.
A rights issue offers securities to existing shareholders under section 62. Private placement under section 42 is an offer to identified persons with strict solicitation and banking rules. Preferential allotment under section 62 and related rules addresses issue to selected persons and may interact with private placement. Choose from the actual investor group, instrument and articles; check FEMA separately for non-residents.
Before an Indian startup accepts foreign investment, check the sectoral cap and automatic or government route, investor eligibility, instrument and FEMA pricing. Receive money through permitted banking channels, complete the Companies Act issue and report the equity issue in FC-GPR within the current RBI deadline, generally 30 days from issue. Annual FLA and downstream-investment duties may also arise.
Before fundraising, model the commercial pre-money and fully diluted price, then identify each legal valuation requirement separately. A preferential issue can require a registered valuer under company-law rules. A non-resident investor triggers FEMA pricing and certification standards. Tax consequences require a current-year review, especially after the Income-tax Act, 2025 transition. One report is not automatically sufficient for all purposes.
Before creating an ESOP pool, model the fully diluted cap table and agree whether the pool is included in the pre-money or post-money valuation. Indian companies must follow the Companies Act and Share Capital and Debentures Rules for scheme approval, eligible employees, grants, vesting and exercise. Tax and FEMA questions may arise, particularly for non-resident employees or foreign-owned startups.
Before seed or VC diligence, build a controlled data room covering incorporation, ownership, statutory filings, finance, tax, intellectual property, people, contracts, licences, privacy, disputes and foreign investment. Reconcile the cap table with MCA filings and actual money receipts. The 50-document checklist below is a starting point; the investor and sector may request more or fewer records.
Talk to an experienced company secretary about your next step.