Startups & fund raising

Under the definition notified in February 2026, a company, LLP, registered partnership firm or cooperative can be recognised for up to 10 years from incorporation if its turnover has not exceeded ₹200 crore in any year, and it is working on innovation or a scalable business model. Deep tech startups have higher limits of 20 years and ₹300 crore.

Angel investors often take equity shares or convertible notes; institutional investors usually ask for compulsorily convertible preference shares (CCPS), which carry their preference and protective rights. Convertible notes are available only to DPIIT-recognised startup companies, for at least ₹25 lakh per investor in a single tranche, and must be converted or repaid within 10 years.

The offer can be made only after the special resolution is filed with the Registrar in MGT-14. Shares must be allotted within 60 days of receiving the money, or the money must be refunded within the next 15 days. The return of allotment (PAS-3) is due within 15 days of allotment.

For a preferential allotment, the price must be supported by a report from a registered valuer. Where the investor is outside India, the price must also be at least the fair value worked out under the FEMA pricing rules.

Shares or CCPS issued to a person outside India must be reported in Form FC-GPR on the RBI's FIRMS portal within 30 days of issue. Convertible notes are reported in Form CN within 30 days. Late reporting attracts a late submission fee.

Ideally before the term sheet is signed. Investors' lawyers review every allotment, filing and register since incorporation, and gaps found late can delay closing or lead to special conditions in the agreements.