India

Companies Act, 2013 Private Placement Securities Law StartupsIssue of Securities on Private Placement Basis - Per the latest Amendment to Section 42 of the Companies Act, 2013

October 17, 2018by GLC & Partners

A company shall require more capital for the growth apart from the founders or promoters’ contribution. In order to raise sufficient capital, the company may make a private offer to a select group of persons to subscribe to the securities of the company. The board of directors of the company shall identify such persons (‘identified...

Companies Act, 2013 Company Directors Compliance Corporate LoansSection 185 of the Companies Act, 2013 - Loans to Directors

October 16, 2018by GLC & Partners

Can a company give loan to a person who is a director of the company? A company shall advance loan to its director, directly or indirectly, subject to approval by a special resolution of the shareholders. The compliance restriction of shareholder’s approval shall be applicable even in case the loan is given to the director...

Agreements Contracts Due Dilignce M&ARepresentations and Warranties in M&A and PE transactions, an Indian Context

October 15, 2018by GLC & Partners

The exchange of relevant business information between parties plays a crucial role for the success or failure of any Mergers and Acquisition (“M&A”) or Private Equity (“PE”) deal. Both parties, especially the buyer, rely on the authenticity of such information for closing the deal. In this context, the role of representations and warranties is critical...

Agreements Contracts FEMA Funding Investment Startups Venture CapitalAnti-Dilution Rights - How to Work Around the FEMA (TISPRO) Regulations, 2017 for Non-Residents (Part 5 of the five-part series)

October 13, 2018by GLC & Partners

In order to avoid the ‘Pricing Guidelines’ [discussed previously in Part 4 of this story], the additional shares to be allotted to the original investor of the Indian startup company to comply with the Anti-Dilution Rights must be issued under the ‘rights issue’ mechanism under Section 62 (1) (a) of the Companies Act, 2013 instead...

Agreements Contracts FEMA Funding Investment Startups Venture CapitalAnti-Dilution Rights – Exception for Non-Residents (Part 4 of the five-part series)

October 12, 2018by GLC & Partners

Contravention of FEMA (TISPRO) Regulations, 2017 It is clear from the ‘Introduction’ [Part 1 of this story] that, if the Anti-Dilution Rights gets triggered, a startup company must issue additional shares to the investor exercising such Anti-Dilution Rights at no price or at a price lower than the value at which the fresh subscription has...

Agreements Contracts Funding Investment Startups Venture CapitalAnti-Dilution Rights — Weighted Average Method (Part 3 of the five-part series)

October 11, 2018by GLC & Partners

In Part 1 of the Anti-Dilution Rights story, we discussed the Anti-Dilution Rights in general, and identified that there are two mechanisms for Anti-Dilution Rights protection: i. Full Ratchet Method; and ii. Weighted Average Method. In this Part 3, we will dig deeper into the Weighted Average Method. The Weighted Average Method of calculation is...

Agreements Contracts Funding Investment Startups Venture CapitalAnti-Dilution Rights — Full Ratchet Method (Part 2 of the five-part series)

October 10, 2018by GLC & Partners

In Part 1 of the Anti-Dilution Rights story, we discussed the Anti-Dilution Rights in general, and identified that there are two mechanisms for Anti-Dilution Rights protection: i. Full Ratchet Method; and ii. Weighted Average Method. In this Part 2, we will dig deeper into the Full Ratchet Method. The Full Ratchet Method is a simpler...

Agreements Contracts Funding Investment Startups Venture CapitalAnti-Dilution Rights — Introduction (Part 1 of the five-part series)

October 9, 2018by GLC & Partners

In India, the inclusion of ‘Anti-Dilution Rights’ in definitive agreements governing a startup or venture capital deal is quite common. These Anti-Dilution Rights provide protection to the investors against the dip in value of their newly purchased shares in the future event of subsequent investments in the startup company. This is actually quite fair in...

IBC Insolvency & Bankruptcy CodeInsolvency Resolution Process When There Exist Only Operational Creditors

October 8, 2018by GLC & Partners

Section 6 of the Insolvency and Bankruptcy Code, 2016 (the “Code”) provides for “Persons who may initiate corporate insolvency resolution process” wherein the financial creditor, operational creditor or the corporate debtor itself, may “initiate the insolvency resolution process”. An application for insolvency of a corporate debtor or corporate person may be filed under Sections 7, 8 and...

IBC Insolvency & Bankruptcy CodeInitiation of Insolvency Resolution Process by Operational Creditors

October 7, 2018by GLC & Partners

The Insolvency and Bankruptcy Code, 2016 (the “Code”) allows initiation of an insolvency process, under Section 6 in the prescribed manner, by financial creditors, operational creditors or the corporate debtor itself. Section 5(20) has defined an ‘operational creditor’ as “a person to whom an operational debt is owed and includes any person to whom such debt...

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