Fundraising Advisory for Startups
Raising money from angels, VCs or lenders is part pitch, part paperwork. We get your numbers and documents investor-ready, then handle the filings every round triggers, from the PAS-4 offer letter to FC-GPR within 30 days for foreign money.
What it is
Fundraising advisory is help with the whole round, from the first financial model to the last ROC filing. We work out how much you need, which instrument fits (equity, compulsorily convertible preference shares, a convertible note or a loan) and what valuation you can defend.
The legal frame is mostly the Companies Act, 2013. A private company raising equity from outsiders uses a private placement under Section 42 and Rule 14, with an offer letter in Form PAS-4. Pricing follows a registered valuer’s report. If any investor is outside India, the Foreign Exchange Management Act, 1999 and the Non-Debt Instruments Rules, 2019 add a price floor and RBI reporting on the FIRMS portal.
We do not promise investors or guarantee a raise. We make your company fundable and keep the round legally clean.
Who it applies to
You are raising a seed or angel round
Founders taking their first outside money who need the paperwork to match the handshake.
You are getting ready for a VC
Businesses with traction that need a financial model, a clean cap table and a data room before a fund starts diligence.
You would rather borrow than sell a stake
Companies weighing bank loans, venture debt or a foreign lender, where charge registration and RBI rules apply.
Why it matters
Close old gaps before diligence finds them
Investors check your MCA filings, registers and past allotments. Picture a Faridabad food-processing company that took ₹40 lakh from relatives in 2023 and never filed PAS-3. Diligence will find it, and the fix comes before the money.
Keep the private placement inside Section 42
Breaking Section 42 can bring a penalty up to the amount raised or ₹2 crore, whichever is lower, under Section 42(10).
Price foreign money at fair value or above
Shares issued to a non-resident cannot be priced below fair value, and late RBI reporting carries a late submission fee or a FEMA penalty.
Angel, VC or debt: which route fits
| Angel / seed equity | Venture capital | Debt | |
|---|---|---|---|
| Typical instrument | Equity shares, CCPS or a convertible note | CCPS with detailed investor rights | Term loan, working capital, venture debt or ECB |
| What you give up | A stake and some rights | A larger stake, board seat and vetoes | No stake, but interest and often security |
| Main filings | PAS-4, PAS-5, PAS-3, MGT-14 | Same, plus articles amendment and often SH-7 | CHG-1 for secured loans; ECB reporting for foreign lenders |
| Foreign investor? | Fair-value pricing under Rule 21, FC-GPR within 30 days | ECB framework and AD bank reporting | |
In practice, DPIIT-recognised start-ups have a middle path: the convertible note. It converts into shares later, and needs at least ₹25 lakh in a single tranche. A non-resident can subscribe too, with Form CN filed within 30 days of issue.
What about a SAFE? The US-style SAFE has no place in Indian law, since Section 43 allows only equity and preference shares. Indian versions, often called iSAFE, are issued as CCPS, so private placement, valuation and, for a foreign investor, FC-GPR still apply. Compulsorily convertible debentures (CCDs) are the other option, and FEMA treats them as capital instruments too.
Documents required
For the investor
- Pitch deck and business plan
- Three to five years of financial projections
- Latest audited financials
- Cap table and ESOP details
Company records
- Certificate of incorporation, MoA and AoA
- Register of members and past allotment filings
- GST, TDS and income tax return status
- DPIIT recognition certificate, if held
For the round itself
- Signed term sheet
- Investor KYC and bank details
- Residency status of each investor
- Board and shareholder approvals (we draft them)
How it works
Clean up the company first
We review your MCA filings, registers and tax compliance, and fix the gaps.
Build the model and the valuation case
We prepare projections, use of funds and an indicative valuation you can defend.
Set up the data room
We organise statutory records, contracts and financials the way diligence teams read them.
Pass the approvals for the issue
We check authorised capital, draft the board resolution and the special resolution for the private placement, and file MGT-14.
Issue PAS-4 and allot the shares
The offer letter goes to named investors, money comes into a separate bank account, and shares are allotted within 60 days.
File PAS-3 and the RBI forms
We file the return of allotment in PAS-3 within 15 days and, for foreign investors, FC-GPR on FIRMS within 30 days.
Timelines
Allot within 60 days of the money
Under Section 42(6), shares must be allotted within 60 days of receiving the application money. Otherwise it is refunded within the next 15 days, with 12% interest a year from the 60th day if refunded late.
File PAS-3 within 15 days
A private placement’s return of allotment is due within 15 days of allotment. MGT-14 for the special resolution is due within 30 days of passing it.
Report foreign shares within 30 days
Shares issued to a non-resident must be reported on the RBI’s FIRMS portal within 30 days of allotment. Shares must be issued within 60 days of receiving foreign money.
What happens if the round is done wrong
The company pays a Section 42 penalty
The company, its promoters and directors face a penalty up to the amount raised or ₹2 crore, whichever is lower. Late return of allotment draws ₹1,000 a day, up to ₹25 lakh, under Section 42(9).
A late FC-GPR costs a fee
A late FC-GPR can be regularised by paying a late submission fee of ₹7,500 plus 0.025% of the amount for each year of delay, within three years. After that, the case goes to compounding.
A FEMA breach goes to adjudication
Section 13 of FEMA allows a penalty up to three times the amount involved, or up to ₹2 lakh where it cannot be quantified, plus up to ₹5,000 a day for a continuing breach.
Frequently asked questions
Can a private company take money from anyone who wants to invest?
No. A private placement under Section 42 can be offered only to identified persons named by the board, and to no more than 200 people in a financial year, not counting qualified institutional buyers and employees under an ESOP. Each offer needs a special resolution and a PAS-4 offer letter, and the money must come from the investor’s own bank account. Followed properly, this route covers almost every angel and VC round.
What is Form PAS-4?
PAS-4 is the private placement offer letter. It goes only to the persons the board has identified, and it sets out the company’s details, the issue price, the valuer’s name and basis of pricing, and the use of funds. The company keeps a record of these offers in Form PAS-5. Once the money arrives, allotment must follow within 60 days. We draft PAS-4 from your term sheet and board approvals.
Do we need a valuation report to raise funds?
Yes, in most cases. A preferential allotment is priced on a registered valuer’s report under the Share Capital Rules, and a foreign investor needs a fair-value certificate under FEMA from a chartered accountant, SEBI-registered merchant banker or practising cost accountant. Since FY 2024-25 the old angel tax under Section 56(2)(viib) no longer applies, so the income tax risk on a high valuation has eased. We arrange the right report for each investor.
What changes if one of our investors lives abroad?
Here is the catch: three rules change. The price per share cannot be below fair value under Rule 21 of the Non-Debt Instruments Rules. The money must come through banking channels or the investor’s NRE or FCNR account. And the company must issue shares within 60 days and report them in FC-GPR within 30 days of allotment. Even a founder’s uncle in Singapore putting in ₹15 lakh triggers all three, plus the sector cap check. Handled early, foreign money closes as smoothly as Indian money.
Is a convertible note a good option for an early round?
It can be, if your start-up is DPIIT-recognised. A convertible note funds you now and converts into shares later, usually at the next priced round, so you avoid fixing a valuation too early. It must be at least ₹25 lakh in a single tranche. Non-resident subscriptions are reported in Form CN within 30 days. For a quick early cheque, it saves time.
Can we raise money from an investor in China or another neighbouring country?
Only with government approval in most cases. Investment from an entity or citizen of a country sharing a land border with India needs prior approval. Since 1 May 2026, a non-controlling investor whose beneficial owners from such countries hold 10% or less, with no governance rights, can use the automatic route. Any control or a higher stake still needs approval. We check the full ownership chain before you sign.
How long does a funding round take to close?
It depends mostly on diligence, not on the law. The legal steps are short: board and shareholder approvals, PAS-4, receipt of money, allotment within 60 days and PAS-3 within 15 days. The time goes into diligence and the shareholders’ agreement. A company with clean records and a ready data room closes at the faster end.
Will Taxhint introduce us to investors?
We do not act as a broker or promise a raise. We prepare your company and numbers, advise on structure and valuation, and handle every Companies Act and FEMA filing in the round. Prepared founders face fewer surprises in diligence. If an investor is already talking to you, we can join the conversation on the numbers and compliance.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Typical government fees: PAS-3, MGT-14 and CHG-1 each cost ₹200 to ₹600 depending on authorised capital. If authorised capital must go up, SH-7 carries a fee based on the increase.
Ready to begin?
Tell us how much you want to raise and from whom. We will map the valuation, documents and filings.