VCFO Lite
Term sheet and SHA/SSA review
What this means, checked by a CA
We read the term sheet and the investment agreements with you and explain, in plain numbers, what each clause costs you: dilution, liquidation preference, anti-dilution, vesting, board seats, vetoes and exits. We flag clauses that clash with the Companies Act or FEMA and coordinate with your lawyer on changes.
Quote
Per round, fixed after a quick look
- Delivered in Term sheet note in 3 working days; SSA and SHA comments in 5 to 7 working days per draft
- Due: Before signing the term sheet, and again before signing SSA and SHA and passing allotment resolutions
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 · 7 items
Term sheet draft
Captures price, rights and conditions
SSA and SHA drafts
Final binding terms
Current fully diluted cap table
Dilution and waterfall maths
Existing AoA and earlier investor agreements
Conflicts and consent rights
Valuation report
Price floor for issue
Investor residency and nationality
FEMA and land-border checks
Outstanding notes, CCDs or SAFEsOptional
Conversion changes the cap table
DiscussionWhat we discuss · 6 items
Pre-money or post-money valuation, and is the ESOP pool inside the pre-money?
Changes real founder dilution
Liquidation preference: 1x non-participating or more?
Decides payout in a modest exit
Anti-dilution: broad-based weighted average or full ratchet?
Cost of a future down round
Founder vesting, lock-in and good or bad leaver terms?
What founders lose if they leave
Board seats, reserved matters and veto list?
Day-to-day control
Any put option, buyback promise or fixed return to a foreign investor?
Not permitted under FEMA
FormsForms we file · 6 items
Clause map of the term sheet: price and valuation basis, instrument (equity or CCPS), option pool, liquidation preference, anti-dilution, conversion, board, reserved matters, information rights, pre-emption, ROFR, tag and drag, exit and buyback, founder vesting and non-compete, exclusivity and confidentiality, conditions precedent, costs
Where: Review note. Due: Before signing the term sheet
Dilution and waterfall model: founder stake after round and pool; payouts at 3 to 4 exit values under the proposed preference
Post-money = pre-money + new money; investor % = new money / post-money; with pool in pre-money, founder % falls by the pool top-up as well; waterfall: preference paid first (1x = amount invested) then remaining proceeds per conversion terms
Where: Spreadsheet. Due: With the clause map
Anti-dilution illustration for a down round
Broad-based weighted average: new conversion price = old price x (A + B) / (A + C), where A = shares before issue, B = shares the new money would buy at old price, C = new shares actually issued
Where: Spreadsheet. Due: With the clause map
Regulatory check: instrument fully convertible for foreign investors, conversion price or formula fixed upfront and not below fair value, no assured return or guaranteed exit, land-border approval, Sec 42 timelines in closing mechanics
Where: Review note. Due: Before SSA and SHA sign-off
SSA and SHA comments: conditions precedent and long-stop date, reps and warranties, indemnity caps, use of proceeds, closing deliverables; align SHA rights with AoA (amend AoA if needed)
Where: Marked-up drafts with the company's lawyer. Due: Before signing
Closing checklist handed to allotment process (STU-POS-01) and FEMA reporting
Where: Checklist. Due: At signing
DeliverablesWhat you get · 4 items
Term sheet review note with red, amber, green clauses
When: 3 working days
Dilution and exit waterfall model
When: With the note
SSA and SHA comment sheet
When: 5 to 7 working days per draft
Closing and compliance checklist
When: At signing
Questions people ask
Can we promise our foreign investor a buyback at a fixed price after 5 years?
No. FEMA does not allow an assured exit price for a non-resident.
Should the investor get CCPS or equity shares?
Either can count as foreign equity if the preference shares are fully and mandatorily convertible; optionally convertible ones are treated as debt.
Does the conversion price have to be fixed now?
The price or formula is fixed upfront, or later using a valuation not older than 60 days; for foreign investors it cannot be below fair value at issue.
What if closing slips after the investor has paid?
Allot within 60 days of receipt or refund within 15 days after that, else pay 12% interest.
What should a CN agreement cover?
Investment amount, valuation cap, interest, conversion timing and qualified round, redemption, termination and confidentiality.
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