What are the fund raising compliances necessary for a startup?

Funds are the lifeline for every business venture. In fact they are to the business just like fuel is for the car. In other words they help the business to carry out and move smoothly. Every business organization; small or big requires funds for their smooth functioning and survival. Shortage of funds hampers the movement of the business and might eventually lead to losses and even closure.

Similarly, startups also require funds to kick-start and fuel up their business venture towards success. Professional advisor for startups provides expert guidance to raise the funds for their successful business venture. The experienced advisors not only help the startups in raising funds but also provide expert guidance and financial viability for the successful conduct of their business operations:

Below is the detailed procedure with regards to fund raising compliance; once you have finalized the funds needed to raise funds for your startup business. Generally preferential shares are to be issued to the investors so that they have preferential right over the equity shareholders.


A.    Investors documents: Shareholder agreement and subscription agreement:

a. Shareholder agreement: This document defines an agreement among the shareholders of the     company. It regulates management of the corporation like size, composition of its directors in the board and other related procedural matters including frequency of board meetings and quorum, provisions for resolution of any disputes between shareholders.

b. Subscription agreement: It provides the details of the purchase price for the security. Also it includes representations and warranties that each party will make between them in tune with the agreement.

c. Term sheet: It is a document that outlines the terms by which an investor will make a financial investment in your firm. This sheet tend to consist of the following:

1. Company valuation
2. Amount of investment
3. Profile of the investor
4. Kind of security to be issued
5. Board’s decision making powers
6. Strategy of exit and rights at the time of redemption or liquidation

B.    ROC compliance: 

• Conducting of board meeting for making a proposal of raising funds
• An extra ordinary general meeting should be required to be called for approval of preferential allotment of shares by passing a special resolution
• When the funds are received; the startup firms has to allot shares to the investors within a period of 60 days of receiving the funds via private placement procedure. This return of allotment contains list of shareholders with their full names, addresses, percentage of shareholding that is allotted and other such relevant information.

C.    RBI Compliance:

• For Domestic investment: When domestic investment is involves RBI compliance; as notified by the RBI are not applicable.
• For foreign investment, some kind of document need to be

submitted to the RBI.

• Advance reporting form is to be filled within 30 days of receiving funds. This contains all the information pertaining to funds as KYC of investors.
• FC- GPR form needs to be filled within 30 days from the date of issue of the shares. This form needs to be certified by Chartered Accountants or Company Secretary.

AnBac Advisors is one of India’s premier fundraising platforms for startups that has managed 100+ such deals. Our team has an important contribution in the startup and SME ecosystem by enabling initial funds for a commercially viable business idea.