Startup ecosystem · Cap Table
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SAFE (Simple Agreement for Future Equity) is not legally recognised in India the way it is in the US. Indian startups must use Compulsorily Convertible Debentures (CCD) or Optionally Convertible Debentures (OCD) as the closest equivalent for pre-priced angel rounds.
FEMA RDB Rules 2000 | RBI ECB Guidelines | Compulsory Convertible Debenture rules
CCD: Debt instrument that mandatorily converts to equity at the next priced round or a defined event. Has a valuation cap and discount (like a SAFE). Does not require a fixed valuation at issuance. RBI allows CCDs under the FEMA framework for foreign investors. Tax on conversion: Conversion of CCD to shares is not treated as a transfer for capital gains purposes, no tax event at conversion. Tax event occurs only at sale of resulting shares.
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