Explained with cases [2 of 3 part series]
Overview
In continuation of the earlier medium post, this one captures the essence of how legal and regulatory issues have been haunting startups operating in India, forcing them to move abroad.
First, there is a regulatory framework, which the investors fail to understand. Even if we leave the tax laws (which are going to be discussed in the next post), you have Company law (as part of Securities law) and FEMA (which is under Exchange control regulations) which creates a complex myriad for anyone to pierce into.
Second, we have courts or…
Explained with case studies [1 of 3 part series]
Background
There has been a recent spurt in the movement of holding structures of various startups, in the process of fund-raising from venture investors, outside of India. Singapore or US (that too Delaware) are the only jurisdictions attracting 99% movement.
The main focus has always been to gain more investor interest and seek global capital. Due to the nature of how the global economy has evolved and how it currently operates most often, the subject matter expertise, the wealth, and the patience/mindset required to invest and nurture a young business are…
a never-ending saga of tax and regulatory issues in both Indian Cos and Inversion structures — explained with case studies
Overview
Accelerators across the world like SOSV, YCombinator, Techsparks, and their likes work on program wherein they infusion “x” USD against “y”% of the equity in a startup and apart from that take equity for the program separately. Now, the challenge with an Indian startup is how to give equity in the Indian Company, considering regulatory issues which don’t factor the everchanging world.
In another case, an Indian startup got a celebrity from Australia to take equity and help build…
multi-jurisdictional parties in a fund mean tax leakages
The concept — parties in a fund located across the globe
there are multiple parties in a fund
(a) Limited Partners of the fund (“LPs”) across the globe who are willing to participate in a fund that is dedicated to startups emerging from a particular geography.
(b) the General Partners of the fund (“GPs”) set up the fund and pool in investor money. …
Concept demystified practically
CNs — the concept
CNs are an alternative to the priced rounds, wherein the funds being infused by the investors are converted at a valuation which is not pre-decided, but dependent on subsequent funding rounds.
CNs — when it is used
There are 2 use cases where CNs trigger (a) first when the funds are being raised by the startup at an early stage (b) second when there is a delay in an institutional round in later stages of startup and some investors are brought in (or maybe existing investors) to bridge the gap
How CNs help…
