Engagement
Startup fundraising compliance in Bengaluru
Last reviewed 27 October 2026
CCPS, CCD, convertible note and equity rounds, from special resolution to PAS-3 and FEMA reporting.
In short
When a private company raises money by issuing CCPS, CCDs, convertible notes or equity shares to an investor, the Companies Act sets the order of every step. It needs a special resolution, a serially numbered offer letter in Form PAS-4, and money from the investor's own bank account into a separate account. Allotment must follow within 60 days, and Form PAS-3 within 15 days. A non-resident investor adds a FEMA report within 30 days. We prepare the documents and make the filings for each round.
Who this is for
- Startups closing an angel, pre-seed, seed or pre-Series A round.
- Companies issuing a convertible note to a fund or an individual investor.
- Companies bringing in a foreign investor or a foreign holding company.
- Founders topping up capital through a rights issue.
Key Deliverables
- 1.Reading the term sheet, SHA and SSA from a company-law angle: what the articles must say, what needs a special resolution, and which instrument fits.
- 2.Increasing authorised capital where needed (Form SH-7).
- 3.Altering the articles to carry the investor's rights (special resolution, Form MGT-14).
- 4.Board meeting, notice and explanatory statement for the general meeting, and the special resolution approving the offer.
- 5.Coordinating the registered valuer's report on the issue price and, for convertibles, the conversion price.
- 6.The PAS-4 offer letter and the PAS-5 record of private placement.
- 7.Form MGT-14 for the special resolutions.
- 8.Allotment resolution, Form PAS-3, the register of members and share certificates.
- 9.FEMA reporting through the RBI's FIRMS portal: Form FC-GPR for shares and CCPS, Form CN for convertible notes.
Valuation is done by a registered valuer and tax questions by your chartered accountant; we work alongside both.
Documents & E-Forms
- PAS-4
- PAS-3
- MGT-14
- FC-GPR
- SH-7
- Form CN
- Sec. 42
- Sec. 62
When to Engage
As soon as the term sheet is agreed, because the articles, the authorised capital and the valuation report must be in place before the offer letter goes out.
Typical turnaround: Scoped in the engagement letter
The routes
Most startup rounds in a private company run as a preferential offer on a private placement basis, so sections 42 and 62(1)(c) apply together. The instrument then decides the extra rules.
| Route | When it fits | Rules that apply | MCA filings |
|---|---|---|---|
| Private placement (section 42, rule 14) | When it fits: Shares, CCPS or CCDs offered to named investors | Rules that apply: Special resolution for each offer; at most 200 persons in a financial year per kind of security, not counting QIBs or ESOP employees; Form PAS-4 serially numbered and addressed to the investor; money from the investor's own bank account into a separate bank account; allotment within 60 days of receipt, otherwise refund within 15 days with 12% interest from day 60 | MCA filings: MGT-14 for the special resolution; PAS-3 within 15 days of allotment |
| Preferential offer (section 62(1)(c), rule 13) | When it fits: Issue to select persons other than by rights | Rules that apply: Special resolution in general meeting; price based on a registered valuer's report; must also meet section 42. Offers only to existing members skip some of rule 14 | MCA filings: MGT-14; PAS-3 |
| CCPS (section 55, rule 13(2)(h)) | When it fits: The usual instrument for angel and fund rounds | Rules that apply: Articles must authorise preference shares; redeemable within 20 years, so they are made compulsorily convertible; conversion price fixed at the offer, or later on a valuation report dated within 60 days before conversion, and the choice is disclosed in the offer | MCA filings: As for a preferential private placement, then PAS-3 again on conversion |
| Convertible note (Deposit Rules, rule 2(1)(c)(xvii)) | When it fits: DPIIT-recognised startups bridging to a priced round | Rules that apply: ₹25 lakh or more, in a single tranche, from one person, convertible into equity or repayable within 10 years; inside these limits it is not a deposit | MCA filings: MGT-14 for the special resolution, where the note is issued as a private placement |
| Rights issue (section 62(1)(a)) | When it fits: Founders and existing shareholders adding capital pro rata | Rules that apply: Offer open 15 to 30 days; a private company not in default in filing its financial statements or annual returns can shorten it with consent of 90% of members; no valuation report needed | MCA filings: PAS-3 within 30 days of allotment |
Penalties. A late or missing PAS-3 for a private placement costs ₹1,000 a day, up to ₹25 lakh, on the company, its promoters and directors (section 42(9)). An offer that breaks section 42 can cost up to the amount raised or ₹2 crore, whichever is lower, with a refund within 30 days (section 42(10)).
Increase authorised capital first. If the round takes the paid-up capital above the authorised capital, the increase and Form SH-7 come before the allotment.
When the investor is outside India
The round also falls under FEMA. The company reports on the RBI's FIRMS portal:
- Form FC-GPR: within 30 days of issuing equity shares or CCPS to a person resident outside India.
- Form CN: within 30 days of issuing convertible notes to a non-resident. A later transfer of the notes between a resident and a non-resident is reported within 30 days of the transfer.
- Form FC-TRS: within 60 days when existing shares move between a resident and a non-resident.
An investor from a country sharing a land border with India needs Government approval first, and that approval is attached to Form PAS-4.
Frequently Asked
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