Incorporation and structuring, term sheets to closing, ESOPs, DPIIT recognition, FEMA reporting, convertible notes, down rounds and founder disputes.
8 regulators, 9 key statutes and 16 compliance obligations, plus 10 common dispute types and 21 due-diligence checks. 5 entries are marked for verification because the rule is state-specific, recently amended, or commenced in stages — those say what to check rather than stating a date we cannot stand behind.
| Regulator | What it decides |
|---|---|
| Ministry of Corporate Affairs and the Registrar of Companies (MCA / RoC) | Incorporation, allotments, charges, annual filings and the dematerialisation requirement for private companies. |
| Department for Promotion of Industry and Internal Trade (DPIIT) | Startup recognition, the Inter-Ministerial Board certificate for the section 80-IAC deduction, and the FDI policy. |
| Reserve Bank of India (RBI) | FEMA reporting through the FIRMS portal, pricing guidelines, convertible notes and external commercial borrowing. |
| Securities and Exchange Board of India (SEBI) | Alternative Investment Fund registration and the rules a domestic venture fund must follow. |
| Central Board of Direct Taxes (CBDT) | Startup tax incentives, ESOP perquisite taxation and the deferral available to eligible startups. |
| Competition Commission of India (CCI) | Combination notification, including the deal value threshold introduced by the 2023 amendment. |
| International Financial Services Centres Authority (IFSCA) | Fund and holding structures set up in GIFT City. |
| National Company Law Tribunal (NCLT) | Oppression and mismanagement petitions, mergers and, occasionally, insolvency of a portfolio company. |
| Statute | Year | Why it matters |
|---|---|---|
| Companies Act | 2013 | Incorporation, share capital, private placement under section 42, ESOPs under section 62(1)(b), related party transactions and directors' duties under section 166. |
| Limited Liability Partnership Act | 2008 | Still the right vehicle for services and holding structures, but not for a company that intends to raise priced equity rounds. |
| Foreign Exchange Management Act | 1999 | With the Non-Debt Instruments Rules, 2019, decides who can invest, at what price and with what reporting; the pricing floor and the prohibition on assured returns shape every foreign round. |
| Securities and Exchange Board of India (Alternative Investment Funds) Regulations | 2012 | Category I, II and III AIFs, the contribution agreement framework, and the tenure and diversification limits a fund's LPs rely on. |
| Income-tax Act | 1961 | Section 80-IAC for eligible startups, section 79 for carry-forward of losses despite a shareholding change, and section 17(2) for ESOP perquisite on exercise. — verify: The eligibility window for section 80-IAC has been extended more than once and the angel tax provision in section 56(2)(viib) was withdrawn. Confirm the position for the relevant assessment year. |
| Indian Contract Act | 1872 | Section 27 voids restraint of trade, which is why founder non-competes work during employment and rarely after it. |
| Specific Relief Act | 1963 | After the 2018 amendment specific performance is the rule, which materially strengthens drag-along and transfer obligations in a shareholders' agreement. |
| Competition Act | 2002 | The 2023 amendment added a deal value threshold with a substantial-business-operations test, which brings some large private rounds and acquihires into notification. |
| Depositories Act | 1996 | Dematerialisation of securities of private companies other than small companies, which changes how transfers and ESOP exercises are executed. — verify: The compliance date for private companies has been extended. Confirm the current date under Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014. |
| Obligation | Form | When | If missed | Authority |
|---|---|---|---|---|
| Declaration of commencement of business | INC-20A | On the trigger event. Within 180 days of incorporation, after the subscribers have paid in the subscription money. | The company cannot commence business or borrow, and the RoC can strike it off. | Companies Act, 2013 section 10A |
| Return of allotment | PAS-3 | On the trigger event. Within 30 days of allotment; for a private placement under section 42, within 15 days, and the subscription money cannot be used until it is filed. | Penalty on the company and every officer in default, and a defective allotment in the cap table forever. | Companies Act, 2013 sections 39 and 42 |
| Report an issue of securities to a non-resident | FC-GPR on the FIRMS portal | On the trigger event. Within 30 days of allotment. | Late Submission Fee, and an unreported round is a diligence exception in every future transaction. | FEM (Non-debt Instruments) Rules, 2019 |
| Report a transfer of shares involving a non-resident | FC-TRS on the FIRMS portal | On the trigger event. Within 60 days of the transfer of shares or the receipt or remittance of consideration, whichever is earlier. | Late Submission Fee; secondaries in founder liquidity rounds are the ones most often missed. | FEM (Non-debt Instruments) Rules, 2019 |
| Report the issue of a convertible note to a non-resident (verify: The minimum amount of Rs 25 lakh in a single tranche is settled; confirm the current reporting window and the permitted conversion period, both of which have been amended.) | Form CN | On the trigger event. Report within the period prescribed under the Non-Debt Instruments Rules after issue. | An unreported convertible note is a FEMA contravention that has to be compounded before the next round can close cleanly. | FEM (Non-debt Instruments) Rules, 2019 |
| File special resolutions | MGT-14 | On the trigger event. Within 30 days of passing, including for ESOP approval, alteration of articles and preferential allotment. | The corporate action rests on an unfiled resolution; the RoC also treats late filing as a continuing default. | Companies Act, 2013 section 117 |
| Hold the annual general meeting | — | Annual. Within six months of the end of the financial year, and not more than 15 months after the last AGM; the first AGM within nine months of the first financial year end. | Penalty under section 99, and every downstream filing date is calculated from the AGM. | Companies Act, 2013 section 96 |
| File the financial statements | AOC-4 | On the trigger event. Within 30 days of the AGM. | Rs 100 per day per form with no ceiling. | Companies Act, 2013 section 137 |
| File the annual return | MGT-7 or MGT-7A for a small company or OPC | On the trigger event. Within 60 days of the AGM. | Rs 100 per day per form, and disqualification of directors on three consecutive defaults under section 164(2). | Companies Act, 2013 section 92 |
| Intimate the appointment of the auditor | ADT-1 | On the trigger event. Within 15 days of the meeting at which the auditor is appointed. | Penalty; and an unfiled appointment is queried in every diligence. | Companies Act, 2013 section 139 |
| Return of deposits and of money not treated as deposits | DPT-3 | Annual. By 30 June each year for the position as on 31 March. | Penalty under the deposit rules; founder loans and advances are exactly what this return is meant to capture. | Companies (Acceptance of Deposits) Rules, 2014 Rule 16 |
| Director KYC | DIR-3 KYC | Annual. By 30 September each year for every DIN holder as on 31 March. | The DIN is deactivated, which blocks every other filing until a Rs 5,000 fee is paid. | Companies (Appointment and Qualification of Directors) Rules, 2014 Rule 12A |
| Foreign Liabilities and Assets return | FLA | Annual. By 15 July each year where foreign investment has been received or made. | A FEMA contravention requiring compounding. | FEMA, 1999 |
| Annual Performance Report for overseas investment (verify: Applies only where there is an overseas subsidiary or a flip structure. Confirm the current filing route.) | APR | Annual. By 31 December each year for every overseas entity in which the Indian entity holds a stake. | Further remittances to the overseas entity are blocked until the APR is filed. | FEM (Overseas Investment) Rules and Regulations, 2022 |
| Hold the minimum number of board meetings | — | Quarterly. Four meetings a year with not more than 120 days between two, relaxed to two meetings a year for a startup private company, one in each half with a gap of at least 90 days. | Penalty on every officer in default, and a governance gap that investors' counsel picks up immediately. | Companies Act, 2013 section 173 |
| Withhold tax on ESOP perquisite at exercise (verify: The deferral is available only to startups eligible under section 80-IAC and runs to the earliest of a fixed period, sale of the shares or the employee leaving. Confirm the current period.) | — | On the trigger event. Tax is due at exercise on the difference between fair market value and exercise price; an eligible startup may defer the deposit under the special provision. | The company is an assessee in default for the shortfall, and the employee gets a demand for a gain never realised in cash. | Income-tax Act, 1961 sections 17(2)(vi) and 192 |
| Dispute | Forum | Note |
|---|---|---|
| Oppression and mismanagement | National Company Law Tribunal under sections 241 and 242, appeal to NCLAT | The route a minority founder or investor uses when the shareholders' agreement alone will not deliver relief. |
| Enforcement of shareholders' agreement rights | Arbitration, with interim relief under section 9 before a court | Drag, tag and transfer restrictions are enforceable against the company only if they are in the articles. |
| Founder separation and equity clawback | Arbitration or civil court | Turns on whether vesting and leaver provisions were properly documented and implemented. |
| Investor claims for breach of warranty | Arbitration under the SSA | The disclosure letter, the cap and the survival period decide the exposure. |
| ESOP disputes with departed employees | Civil court, and increasingly arbitration under the scheme | Usually about the exercise window and the leaver classification. |
| Vendor insolvency demands against the startup | NCLT under section 9 of the IBC | A Rs 1 crore default threshold, but the reputational effect starts with the demand notice. |
| Employment claims from senior hires | Civil court, or the labour authorities for non-managerial roles | Deferred compensation and equity promises made informally are the usual subject. |
| FEMA compounding proceedings | Reserve Bank of India compounding authority | Voluntary, and materially cheaper than the same contravention being found in a diligence. |
| Tax disputes on valuation and characterisation | Commissioner (Appeals), then the Income Tax Appellate Tribunal | Valuation methodology and ESOP perquisite are the recurring themes. |
| Trade mark and brand disputes | Commercial Court; INDRP for .in domains | Founders often discover the mark is unavailable only after the brand has traction. |
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