Fund Raising Advisory India — Seed, Angel & VC: After Approval: What Continues
Fund Raising Advisory India — Seed, Angel & VC does not end at approval — a set of obligations continues afterwards. The questions below are the ones raised most often in practice; the full scope of the service is on the Fund Raising Advisory India — Seed, Angel & VC page.
What exactly does PNPC do in a fundraising engagement — are you a broker, an investment banker, or something else?
We are a practising Chartered Accountancy firm, not a broker or registered investment banker. Our role in fundraising is advisory, not intermediation for commission. We advise on strategy, structure, valuation, regulatory compliance, and documentation — the CA and financial advisory layer that sits alongside (or in place of) legal counsel and investment bankers. We do not charge a success fee as a percentage of funds raised. We charge professional fees for advisory and compliance work. This distinction matters: our interests are aligned with your long-term compliance health, not with closing a particular deal at any cost.
In practice: A 'fundraising consultant' who charges a percentage success fee may have no understanding of FC-GPR, FEMA pricing guidelines, or CCPS mechanics. Such deals can close — but with FEMA violations discovered later that cost more than the consulting fee saved.
What is the difference between a pre-money valuation and post-money valuation?
Pre-money valuation is the company's value before the new investment is added. Post-money valuation is the pre-money valuation plus the new investment. The investor's ownership percentage after the round equals the investment amount divided by the post-money valuation. For example, an investment equal to one fifth of the post-money valuation gives the investor 20% (1 divided by 5). Your dilution as founder depends on the pre-money valuation agreed — not the post-money figure. When negotiating, always verify which figure is being stated when an investor mentions 'valuation'.
In practice: A common founder mistake is to focus only on the headline valuation without modelling the fully-diluted cap table post-round, including ESOP pool expansion that many term sheets require as a condition of closing. The ESOP pool expansion typically comes from the pre-money valuation — meaning founders bear the dilution, not the investor. We model this for every client before they sign a term sheet.
Can a startup raise money through a convertible note in India?
The Companies Act 2013 does not have a specific provision for convertible notes as a general instrument — unlike the US, where convertible notes are a well-defined instrument. India recognises convertible notes only for DPIIT-recognised startups: under the FEMA Non-debt Instruments Rules, 2019, a startup may issue a convertible note to a person resident outside India for at least the prescribed minimum amount in a single tranche, convertible into equity or repayable within ten years of issue, and the Companies (Acceptance of Deposits) Rules, 2014 exempt such a note received by a startup from deposit treatment. Other companies typically structure the instrument as Optionally or Compulsorily Convertible Debentures with appropriate conversion triggers. For foreign investors, the FEMA treatment of optionally convertible instruments (where conversion is at investor's option) is that they may be treated as External Commercial Borrowings (ECB) rather than FDI — which triggers different compliance requirements including minimum maturity period, all-in cost ceiling, and ECB reporting. Compulsorily Convertible Debentures (CCDs) are generally treated as equity for FDI purposes. PNPC strongly recommends using CCPS rather than convertible notes for most Indian startup funding rounds, particularly with foreign investors.
In practice: 'SAFE' documents borrowed from US templates should be used with care: SAFEs have no specific legal standing in India and can create significant FEMA and Companies Act complications. We help founders adapt the economic intent of a SAFE into a legally compliant Indian instrument.
Do we need a separate legal firm or does PNPC handle all the legal work?
PNPC is a CA firm — we handle all financial advisory, valuation, regulatory filings (FC-GPR, FC-TRS, PAS-3, MGT-14), tax advisory, and Companies Act compliance work. For the drafting and negotiation of the Subscription Agreement, Shareholders' Agreement, and AoA amendments, you will require a qualified company law attorney (advocate) or a Company Secretary firm. We work alongside legal counsel and act as the CA anchor on the engagement — coordinating with your lawyers on the financial and regulatory dimensions of each document. In some straightforward rounds, CA firms with strong corporate law affiliates handle the documentation and the CA compliance work within a single engagement — we can facilitate introductions to legal counsel in our network where needed.
What is the role of a SEBI-registered merchant banker in a fundraising round?
In the context of private company fundraising, a SEBI-registered Category I Merchant Banker plays a specific statutory role: issuing the valuation certificate under Rule 11UA of the Income Tax Rules 1962 (for income up to FY 2025-26; the Income-tax Rules 2026 apply from tax year 2026-27) for FEMA pricing-guideline compliance on foreign allotments and for defensibility under Section 50CA/56(2)(x) (Income-tax Act 1961, for income up to FY 2025-26; Sections 79 and 92(2)(m) of the Income-tax Act 2025 respectively, from tax year 2026-27) on share transfers, and in some cases certifying compliance with SEBI (Issue of Capital and Disclosure Requirements) Regulations for larger structured private placements. The merchant banker's valuation report is a statutory document — it carries the banker's SEBI registration liability and provides the best available protection against the Income Tax Department or RBI challenging the share issue price. Not every valuation report from any professional qualifies for every purpose — for FEMA pricing-guideline compliance and Rule 11UA computations, it specifically must be from a SEBI Category I Merchant Banker or a registered valuer as prescribed. PNPC coordinates this engagement with our network of registered merchant bankers.
How does PNPC help UAE-based founders raising capital for an Indian company?
UAE-based founders raising capital for an Indian company face a specific cross-border complexity: the investment from UAE constitutes FDI under FEMA; any management fees, royalties, or intercompany payments between the UAE entity and the Indian company are subject to transfer pricing rules and withholding taxes; and the founders' own tax residency status (UAE resident or Indian resident) affects how their India-sourced income is taxed under the India-UAE DTAA. PNPC's Dubai office works alongside our Chennai/Bangalore/Hyderabad offices to provide integrated advisory — FEMA compliance, India-UAE DTAA planning, UAE entity structuring if needed, and coordination of Indian regulatory filings. You deal with one firm across both jurisdictions.
What compliance is required after we receive investment — what forms must be filed and by when?
Post-investment compliance checklist: (1) FC-GPR on RBI FIRMS portal within 30 days of allotment (foreign investors only); (2) PAS-3 with Registrar of Companies within 30 days of allotment (all investors); (3) MGT-14 with Registrar of Companies within 30 days of special resolution for preferential allotment (if applicable); (4) Share certificates issued to all new investors within 60 days of allotment (private companies other than small companies must instead issue securities only in dematerialised form under Rule 9B of the Companies (Prospectus and Allotment of Securities) Rules, 2014, so the shares are credited to the investor's demat account); (5) Updated Register of Members; (6) Updated cap table reconciled with all filings; (7) If AoA was amended: certified copy of new AoA available on MCA within 30 days of special resolution; (8) Form ADT-1 if a new auditor was appointed or reappointed as part of the round; (9) Annual Foreign Liabilities and Assets (FLA) return on the RBI FLAIR portal by 15 July each year, for companies that have received foreign investment. PNPC tracks all these and initiates filings before deadlines.
In practice: The 30-day deadlines for FC-GPR and PAS-3 run from allotment date simultaneously. In a complex multi-investor round, coordinating all allotment documentation to ensure a single allotment date (so both deadlines run together, not sequentially) is a process point we manage carefully.
What is the Foreign Liabilities and Assets (FLA) return and when is it due?
The Foreign Liabilities and Assets (FLA) return is an annual reporting obligation under FEMA for Indian companies that have received foreign direct investment. It must be filed on the RBI FLAIR portal by 15 July each year, reporting the company's position as at the preceding 31 March. The RBI occasionally extends the due date for a particular year, so PNPC confirms the current deadline each year. It reports the company's foreign liabilities and assets, including the shareholding of foreign investors and related financial data. Failure to file the FLA return is treated as a FEMA non-compliance and can result in RBI action, including compounding proceedings. Many companies that successfully file FC-GPR at the time of investment then miss the FLA return in subsequent years — PNPC adds it to your annual compliance calendar from the date of your first FC-GPR filing.
In practice: The FLA return is often missed by companies that change their CA firm after the funding round — the new firm is unaware of the FEMA obligation if they were not involved in the round. We explicitly include FLA return tracking in our engagement scope for any company that has or plans to have foreign investors.
Where this sits in the wider engagement
Fund Raising Advisory India — Seed, Angel & VC rarely arrives on its own. The statutory basis and the current requirements are set out on the Fund Raising Advisory India — Seed, Angel & VC service page, and the related services are grouped under Business Setup.
What PNPC does
PNPC Global has practised since 1986 across India and the UAE. On Fund Raising Advisory India — Seed, Angel & VC we take the work end to end — reviewing the facts, preparing and filing what is required, and dealing with the authority through to closure.