VCFO Lite
Convertible notes, CCPS and CCDs for startups (Companies Act and FEMA)
What this means, checked by a CA
We help you pick the right instrument for the round: a convertible note to delay valuation, CCPS for a priced round, or CCDs for structured funding. We check that it will not be treated as a public deposit or as foreign debt, fix the conversion terms and valuation, and file the company and RBI reports on time.
Quote
Per issue, plus conversion event, fixed after a quick look
- Delivered in Structuring note in 3 working days; issue paperwork 7 to 10 working days after documents
- Due: Before money is received; Form CN within 30 days of issuing a note to a non-resident; FC-GPR within 30 days of allotment on conversion or issue of CCPS or CCDs to non-residents
How we do it: IDFD
Every case runs through the same four steps: Information, Discussion, Forms, Deliverables. You see each one ticked as it happens.
InformationWhat we need from you · 8 items
DPIIT recognition certificate
Only startups can issue notes
Investor list with amount per investor
₹25 lakh single tranche test
Investor residency, nationality and KYC
FEMA route and land-border check
Sector of business
Automatic or approval route
Draft note, CCPS or CCD terms
Cap, discount, interest, conversion
Valuation report
Conversion price floor
Current AoA and authorised capital
Room for conversion shares
Bank remittance proof (FIRC) for foreign moneyOptional
Needed for RBI reporting
DiscussionWhat we discuss · 6 items
Is the startup DPIIT-recognised today?
Notes are only for recognised startups
Is every investor putting ₹25 lakh or more in one go?
Below that, use CCPS instead
Any foreign investor, and is the sector 100% automatic route?
Approval route sectors need clearance
Do you want to fix valuation now or at the next round?
Note defers it, CCPS prices it now
Any promise of repayment with a fixed return?
Can make it debt, not equity
Combined dilution of all outstanding notes?
Stacked notes surprise founders
FormsForms we file · 8 items
Instrument choice note: convertible note vs CCPS vs CCD, with eligibility, valuation timing, dilution and FEMA effect
Where: Advisory note. Due: Before term sheet sign-off
Valuation: registered valuer report for the Companies Act; fair value certificate by CA, SEBI merchant banker or cost accountant for non-residents
Conversion shares = (principal plus accrued interest if agreed) / conversion price; conversion price = lower of (valuation cap / pre-money shares) and (next round price x (1 minus discount)), but not below fair value for non-residents
Where: Valuer. Due: Before board and shareholder approval (for notes, at conversion if price is set later)
Board resolution and special resolution (Sec 62(3) and Rule 13); file MGT-14 within 30 days
Where: https://www.mca.gov.in. Due: Within 30 days of each resolution
Raise authorised capital if needed for conversion (SH-7)
Where: https://www.mca.gov.in. Due: Within 30 days of the resolution
For CCPS and CCDs offered privately: PAS-4 offer, money from investor's own bank account, allotment and PAS-3 within 15 days (STU-POS-01)
Where: https://www.mca.gov.in. Due: Allot within 60 days of receipt
Form CN for notes issued to non-residents; FC-GPR for CCPS or CCDs issued to non-residents and for shares on conversion
Where: RBI FIRMS portal through the AD bank. Due: Within 30 days of issue or allotment
Track conversion: trigger event or 10-year limit for notes; conversion board resolution, PAS-3 and FC-GPR
Where: https://www.mca.gov.in and RBI FIRMS. Due: At conversion
Annual FLA return if foreign investment received
Where: RBI FLAIR portal. Due: By 15 July each year
DeliverablesWhat you get · 4 items
Instrument recommendation and term summary
When: 3 working days
Resolutions, filed MGT-14 and SH-7 SRNs
When: Within 30 days of resolutions
Form CN or FC-GPR acknowledgement
When: Within 30 days of issue or allotment
Conversion tracker
When: At issue
Questions people ask
Can two investors put ₹12.5 lakh each in one note?
No. The ₹25 lakh minimum is per investor in a single tranche.
How long can a note stay unconverted?
Up to 10 years from issue, after which it must convert or be repaid.
Do we need a valuation to issue a note?
Not at issue, but FDI rules need a valuation when shares are issued on conversion.
Is conversion taxed?
Conversion into shares is not treated as a transfer, so no capital gains at that point.
Can NRIs invest in our note?
Yes; NRIs and OCIs can also invest on a non-repatriation basis; check Form CN needs with the AD bank.
Does DPIIT recognition matter after the note is issued?
It matters at issue; a validly issued note does not become a deposit later, but convert on schedule.
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