This Playbook is focused on guiding entrepreneurs in fund-raising and M&A conversations and sharing key learnings and directional insights about the process. This Playbook is not intended to be a comprehensive guide on running, funding or selling a business or constitute any form of legal advice. Please consult a lawyer for formal advice relevant to your specific situation while raising funds or going through an acquisitio

1. 1
India Startup Playbook
A Guide to Potential Strategic
Partnership
Leading to Investments & M&A
Jan 2017

2. Disclaimer
This Playbook is focused on guiding entrepreneurs in fund-raising and M&A
conversations and sharing key learnings and directional insights about the
process.
This Playbook is not intended to be a comprehensive guide on running, funding
or selling a business or constitute any form of legal advice. Please consult a
lawyer for formal advice relevant to your specific situation while raising funds or
going through an acquisition

3. 1. Structuring a Company

4. In case of conflict,
● Mediation
(mediator is a
known party and
an unknown 3rd
party)
● Recapitalization of
the cap table
Early on, have a CA /
secretary to keep track of all
docs
Ignorance of law is no
excuse for non-compliance
Keep house in
order
Compliance starts from day
1 of company’s
incorporation, so don’t
incorporate unless needed
Shutting down a company
extremely tough
Incorporate a Co.
only when necessary
Building & selling product
(core)
Fundraising
Building partnerships
(leads to M&A)
Run multiple aspects
of Co. in parallel
Try various conflict
resolution methods
KEY DOCUMENTS
Minutes of board meetings
● Avoid backdating as
far as possible
● Instead have another
meeting where you
cover minutes of
previous meeting
Share certificates
● Refer to Co.
Standard
● Usually perforated
(Co. needs one copy
and owner keeps
one copy)
● Register of Members
/ Cap table imp when
raise family & friends
round
Key hard copies of all docs
● Compliances,
contracts, registers,
licenses
Key tips
Fundamentals for running a business

5. Memorandum of
Association
● Provides the characteristics (name, division of shares etc) and
objects (activities) of the Company; the company cannot engage
in business that falls outside the scope of these objects
● Must be filed with the Registrar of Companies
Articles of
Association
● Provides for the manner in which the Company is managed
Register of
Members
● “Captable”
● Lists the current shareholders of the Company
Register of loans,
guarantee, security
● Shows the debt owed by a Company
Register of related
parties contracts
● List the contracts with related parties and entities in which
directors are interested
Register of
directors & key
managerial
personnel
● Provides a list of the persons in charge of the overall operation
of the company
Key documents
Will be examined for any transaction AMENDMENTS
MEMORANDUM requires
a prior approval from either
the Govt. or Company Law
Board depending upon
which clause requires
alteration
ARTICLES may be altered
by a special resolution
passed by the members of
the company
WATCHOUT
Stringent compliance
requirements particularly in
relation to registers, record
keeping and filings
including penal sanctions
for some non-compliances

6. Structuring a Company
Impacts process of fund raising, customers, IP valuation etc
● Recommended - US Holding Company
(Delaware C Corp)
● IP and revenue are held in the US
● Indian entity can be a fully owned subsidiary
of the US company
OR
2 different cos. with same ownership
structure
● Optimizes for valuation and makes
acquisitions by US companies easier and
quicker
B2CB2B
● Recommended to register in
Singapore
● Optimizes for fund-raising, tax
purposes
TIP: Significant cost and time benefits if entity is a US (Delaware-C Corp) or Singaporean entity.
However, must be able to justify structure chosen
vs

7. US-India Holding Structure
US - INDIA HOLDING STRUCTURE
Founder
Stock
• Smells like, and walks like Google, Facebook, Apple,
etc. from Day 1.
• IP: Owned by the U.S. Company so that it can get better
traction from global customers
• OPERATIONS: It’s very easy to set up, manage and
operate the Business; easier to scale globally
• INVESTMENTS: Much easier and faster to raise initial
and subsequent financings, and at much higher
valuations.
• M&A: In the event of an Exit, much easier to sell the
Business to a U.S. technology company, and at much
higher valuations. Most times, U.S based buyers will
insist on buying shares of a U.S. Company.
• TAXATION: India – U.S. have a comprehensive tax
treaty pursuant to which there should not be any
“double taxation” if structured properly.
Global
Option
Plan
Advisors /
Employees
US Delaware ‘C’
Corporation
IP
India Pvt. Ltd
Customers
BENEFITS OF US HOLDING STRUCTURE
Investors
including India
employees
Via Service
Agreement,
IP assigned
to US Co.
Owns
100%
stock
Via Service
Agreement,
India Co.
gets paid
Employed by India
Pvt. Ltd; their IP
assigned to Pvt. Ltd.
India
Employees
StockPay-
ment

8. SETTING UP a company with US-India operations
Step 1: Incorporate Delaware “C” Corporation
● File Certificate of Incorporation
○ Can hire law firms to incorporate, pay initial filing fees ~$340
● Elect Board and Officers
○ India based directors can be on the board; however, needs to be
structured carefully due to Indian tax regulation
○ India based individuals can be Officers; however, subject to personal
counseling due to immigration, other employment and Indian tax
regulatory issues
● Apply for an Employer Identification Number (EIN)
● Open a U.S. Company Bank Account (with Certificate of Incorporation & EIN)
● Discuss India regulations, Place Of Effective Management [POEM] (Need to
structure properly.)
Step 2: Issue Founder Stock
● Assign all IP created by Founders to U.S. Co. as part of initial formation.
● If Founders resident in India, then:
○ Need to structure founder stock purchase carefully around RBI
restrictions and India’s FEMA
○ Need to assign IP to India Subsidiary
○ Consider filing 83(b) tax elections
Step 3: Set Up Global Option/Incentive Plan
● Issue options to employees, consultants and advisors, including to India
Employees, as part of Global Option Plan.
● Indian residents need to be employees of the India Subsidiary in order to get
options in the U.S. parent company.
Step 1: Incorporate an India Pvt. Ltd Company
● Incorporate as a direct Subsidiary of U.S. Company from Day 1; or
● Incorporate the India entity with Indian residents and subsequently
transfer shares to the U.S. Company.
Step 2: 100% share ownership to be held by U.S. Parent
1 nominee share to be held by Indian resident to comply with Indian
Companies Act requirement of having at least 2 shareholders
Step 3: Structure Transfer Pricing Agreement between U.S.
& India Subsidiary
● U.S. and Indian Pvt. Ltd. to enter into a Service Agreement
whereby:
○ U.S. Company hires the Indian company to provide
services in exchange for service fees
○ Indian Pvt. Ltd. assigns all IP to the U.S. Company.
● Note: It is important to structure the Service Agreement and the
service fees properly in order to comply with the transfer pricing
regulations in India and the U.S.
Step 4: Enter into employment contracts
Employment contracts with India employees, including Founders
Step 5: Structure a license of IP from U.S. Company to
India Subsidiary for sales in the India market (where
needed)
SET UP US OPERATIONS SET UP INDIA
OPERATIONS

9. FLIPPING an Indian company to US structure
SET UP US OPERATIONS INDIA OPERATIONS
Step 1: Incorporate Delaware “C” Corporation
Step 2: Issue Founder Stock
Step 3: Set Up Global Option Plan
Step 4: Issue Seed Stock replicating current India
capital structure
● Plan for nominal investment amount by Seed
Investors
Step 5: Close Next Round of Financing directly in
the U.S Company
● Highly recommended to flip your company at a
financing round
Step 6: Incorporate new India Subsidiary
● Form a Subsidiary Relationship with a Pvt. Ltd.
○ Option 1: Newly created Pvt. Ltd.
○ Option 2: Existing Pvt. Ltd.
● India employees to be employed
by the Pvt. Ltd. and assign their IP to the Pvt. Ltd.
● Set up Services Agreement
Step 7: New India Subsidiary
● Transfer Employees to the New India Subsidiary.
● Consider whether contracts need to be transferred over to the
New India entity; preferably, enter into new contracts directly
with the U.S. Company
● Consider whether any pre-existing intangible assets like
software, copyrights, trademarks, patents need to be assigned
to the Business.
● Need to structure assignment of assets from Old India Company
to the US Company or New India Subsidiary very carefully in
order to comply with India regulations.
Similar to
Steps 1-3 in
setting up US
Operations
(prev. slide)
Explanation on
both options on
next slide
TIP: Sooner you flip, the less complicated the process are! Recommended to flip at a financing round.

10. Creating a subsidiary in India
OPTION 1: NEWLY CREATED PVT. LTD. OPTION 2: EXISTING INDIAN PVT. LTD.
Step 1: Company to approve creation of the Indian subsidiary
Board of Directors of the Company will authorize the incorporation of a new Pvt. Ltd.
Co. in India, as a wholly owned subsidiary of the US Co.
The Company will work with a Chartered Accountant or legal counsel in India to
complete the formalities in India; name registration with the Registrar of
Companies and preparation of the incorporation documents for the Pvt. Ltd. as
per Indian regulations.
Under the Indian Companies Act, 2 shareholders are required. The Company
will be 1st shareholder and 2nd shareholder can be an affiliate of the
Company & hold nominal shares in the Indian subsid.
Step 2: Apostille Certification
After completion of the name registration of the Pvt. Ltd., the Company will receive the
prepared incorporation documents from the Chartered Accountant or legal
counsel in India that are required to be notarized and then sent to the Secretary of
State for apostille certification
State to where the documents are sent for apostille certification vary
depending on where notarization takes place or type of document
Step 1: Obtain a Valuation Certificate
The Pvt. Ltd. company will work with an Chartered Accountant
in India to obtain a valuation certificate that will determine
the price per share for the purchase of the shares of the
India Pvt. Ltd. by the Company.
Step 2: India Subsidiary Acquisition
Board of Directors of the Company will authorize the India Pvt.
Ltd. acquisition through purchase of stock equivalent to
not less than 99.99% of the capital stock of the Pvt. Ltd
and enter into a Stock Purchase Agreement with the Pvt.
Ltd.
Under the Indian Companies Act, 2 shareholders are
required. The Company will be the first
shareholder and the second shareholder can be
an affiliate of the Company and hold nominal
shares in the Indian subsidiary.
Step 3: Service Agreement
● Should have “arms length” relationship between the Company and Indian subsidiary, including a cost-plus arrangement between the two entities.
● IP developed by Indian subsidiary should be properly assigned to the Company.
Step 4: License Agreement (if applicable)
● A License Agreement granting a license to the Pvt. Ltd. may be necessary where the Pvt. Ltd. is also selling the product or service in India and that product or
service is based on IP owned by the Company

11. 2. Mechanics of Investments

12. Choosing your investors
Be strategic with your investors - taking money from one restricts capital from competitors
Stages of raising capital
Incu
bators
Angel &
Seed
Series A
Series B+
Investments upto $100K
Invest in ideas / biz plans
Investments $100k - $1M
Beta version of product
Mentorship, guidance
Investments $2-10M with
follow-on participation
Investments $15M+ with
follow-on participation
Most VCs are foreign investors (usually
incorporated in Mauritius)
Raising funds from FOREIGN vs. DOMESTIC entities
Foreign investors can’t ‘lend’ to Indian
companies i.e. debt funding is RBI regulated
(restrictions on interest rates, end use etc)**
Having a foreign investor AND Indian investor
complicates things; try and avoid that as much
as possible
** EQUITY: Anything compulsorily convertible to equity is equity, not a
loan; equity funding (FDI) ok; CCPS, CCDS, pure equity shares,
preferential shares
DEBT: Non-convertible preference shares, optionally convertible
preference shares, etc
TIP: Don’t get too many investors on your cap-table – work is multiplier effect. Instead, think about investing through a fund/LLC

13. 2-3%
Friends & family, Angels
Understanding equity and dilution
Dilution of Stake*
WATCHOUT: Raising at too high a valuation in early stages may create funding issues in future rounds and may result in a
‘down-round’ (pre-money valuation in future funding round lower than previous round), a big red flag
Conversion Rights: Right to convert Preferred Stock into Common Stock
Pre-
seed
Seed
Series A
Series B+
ESOP Pool
12-20%
Angels, Funds
25-30%
VC/Strategic investors
20-25% (B)
VC/PE/Strategic investors
10%
15% (C+)
VC/PE/Hedge funds
*Directional only
Common
stock, ESOPs
Owners, employees
Up until recently founders can’t dip into the ESOP pool, recent
changes make it is possible.
Convertible
notes
Angels, Seed
Loan now, can convert to stock at slight discount to Series A
valuation
● Inherently, no valuation of the company; just deferring
valuation analysis to next round
● discount - at next liquidity event (eg Series A), will get a
15% discount on the valuation
● cap - beyond the cap, the discount doesn't apply;
protection for the startup
Preferred
Stock
Series A+
Get priority over all other stock for payouts, Last in first out
because most expensive valuation
Warrants
Debt equity

14. Venture financing
Main items of a termsheet (1/2)
MANAGEMENT /
CONTROLS
Voting / Board
Rights*:
Board gets to make
decisions for the Co.
VCs like nominee
director on board, but
don’t always use the
seat; can push for
observer seat (not
able to vote)
Protective
Provisions*:
Veto rights over
certain material
actions / events
Covenants
LIQUIDITY RIGHTS
Co-Sale/Right of First
Refusal*:
OK, but understand
how it works
Registration Rights &
Information Rights*:
Standard registration
rights OK, nothing to
fight over. Limit to
“Major Investors”.
Draft-Along Rights
Redemption Rights*:
Watch out, not a good
sign; right should be
at least 5 years out
PRICING / VALUATION
Percent of Company to be Sold: Pre and Post Money Valuation
Liquidation Prefs*:
● Terms to decide who gets paid first, and what amount
● ‘Liquidation’ – dissolution/winding up, M&A, IPO, strategic
sale, trade sale, buy back, ‘put’ option on promoters
● 1x non-participating is OK; anything else needs to be reviewed
carefully (eg. 1.5x → investor gets 1.5x money out before other
shareholders dip into the pool)
● If nothing written - first tax man, then salaries, then liq. prefs,
then remaining distributed EQUALLY among shareholders
Dividends*: Should be structured as non-cumulative
Anti-Dilution Protections*:
● Right to adjust price in event of a subsequent lower price
financing
● Full Ratchet is bad, Broad-based weighted average is
standard.
*Rights of Preferred Stock

15. Venture financing
Main items of a termsheet (2/2)
TIME, PROCESS & EXPENSE
Time:
2-3 months from start to finish
Process:
IP diligence, Legal diligence,
Schedule of Exceptions;
Financing Documents
Expenses:
Legal fees (both sides), Investor
expenses
OTHER KEY TERMS
Double-dipping / Participatory preference:
Clause that allows investor to participate again in the remaining amount, after
liquidation preferences are exercised
In multiple funding rounds, explicitly state priority of liq. prefs. (eg. last in first out
or equally distributed in ratio of shares)
Lock-in provisions:
Lock in founder team until investor exits; if want to exit, right of first refusal to
investor etc
Founder Indemnification:
Very important issue. Need to be careful!
Right of First Offer:
Maintain their pro rata ownership, right to “gobble up”; limit to “Major Investors”
Board Observer Rights:
OK, but need to be careful as VCs don’t like the distraction of too many observers

16. LEGAL
Help in structuring fundraise, terms
of deals etc
Will point out red flags
ESCROW
If upfront deal, don’t need escrow; else
common at 15-20%
Good agents: HSBC, Deutsche Bank
(India)
ADVISORY (I-BANKS)
Highly recommended for large deals
(investments $10M+, M&A $50M+)
‘Interview’ iBankers to gauge quality
● Tell me deals you have done in my
space in the past few years
● How many offers did you bring to the
table for each of the companies?
● Can I chat with your customers?
AUDIT/ACCOUNTING/TAX
Financial diligence and tax diligence
(withholding, assessments etc)
Good audit firms: PWC, E&Y, KPMG
Key transaction enablers and fees
TIP: Get all parties, including investors/acquirers to sign an NDA till the buy-out is complete
ESTIMATE: 0.5-1% of the deal value in transaction-enabler fees; can negotiate for buyer to pick up the
fees

17. 2. Mechanics of M&A

18. Corp. Dev. team plans joint integration plan
BU/Product teams outline product integrations, value
creation
Corp. Dev. team goes through:
● Deal structuring & negotiations
● Due diligence
Corp. Dev. team conducts a discovery and selection process
from list of partners, suppliers, competitors
Business Unit (BU)/Product teams think through
● BU strategy
● Gap analysis / Competitive overview
● Make vs. Partner vs. Buy analysis
How the buy-side approaches M&A
KEEP BUSINESS ON TRACK
If the deal fall through at the last
minute, your business should not
have been put on hold, else raising
funds will be difficult!
Discovery
Implementation
Diligence
Analysis
PARTNERSHIPS ARE CRITICAL
Without a BU / Product sponsor,
M&A probability lower
● Salesforce has never
acquired a company not on
force.com (which takes 8
months to get onto)
● Whatspp - Facebook
relationship started in Feb
2012; eventual acquisition 2
years later

19. Tech Due
Diligence
Valuation/
Termsheet
Legal /
Financial DD
SPA
1-8 Weeks
Tech & Talent deals
popular
Show M&A interest
Clearly state you are open
to M&A but also expect
strong growth, so open to
investments as well
1-2 Weeks
Common to have
45-60 days of
exclusivity/ no-show
in the termsheet
~2 months
Visible time benefits
when target is US
(Delaware C Corp) or
Singapore entity
Increasingly common
1-2 months
Indian law requires
ALL owners on the
cap-table to
physically sign the SPA
agreement
Common for team to
move to US on an L1
visa (company should
have been around for
min. 1 year)
1-2 Months
Team pedigree
important factor
Be cautious
about what docs
you share with
the potential
acquirer; have
NDA in place
Key stages in M&A process
“Best time to sell is when you don’t need to”
Discovery

20. Discovery
Deals for TECH and TALENT very popular; process well understood
Talent (Acqui-hire)
Relatively early-stage startups
with limited revenue traction
Acquired team is first integrated
into Indian arm of US company,
and moves to the US (if necessary)
at a later stage
Hot areas: iOS, Android, Machine
learning & Data Science
Market/Customer
Acquisition of the startup’s
customers
Interesting for companies
with sizeable market
penetration
Technology
Acquisition of the product and
code built; lot of open-source
code will be treated as a red
flag
UI/UX/design is important
Growing area of interest
Process for team to move to the
US on a visa is well
understood iSPIRT M&A Connect Program is a good resource to help with M&A

21. Engage with convos only with companies that are a cultural fit
The deal will implode if there's a misfire on cultural alignment
Bring your team on board before the deal
Keep communication lines open and honest with your team. Figure out early-on what kind of
contract terms, opportunities they’d like and keep that in mind while negotiating the terms
Understand the structure of the deal
Negotiate titles, reporting hierarchy, roles and responsibilities, decision-making hierarchy,
compensation/exit packages etc. upfront, for everyone, including employees included and not
included in the deal.
Ensure ROI for your early investors, advisors
It is your responsibility to return money you take (if you make money). Burning bridges with
your investors will make it much harder to raise money for your next venture
REMEMBER: It’s all a relationship game - with employees, with investors, with the acquirer.
Don’t be penny-wise pound-foolish.
Discovery
Key TIPS while entering a deal

22. Tech Due Diligence
FLIGHT COSTS FOR INTERVIEWS
Some acquirers request the startup to
buy tickets to fly out and reimburse
them later. This is a huge upfront
financial commitment that the startup
should be prepared to make.
SHARING INFORMATION
DOCUMENTS: High level docs ok
Make sure to have an NDA in place.
CUSTOMERS: Acquirers can’t talk to
your customers without your explicit
approval.
OTHER INFO: If a competitor shows
inbound interest, ask to speak to
someone higher up (to show actual
M&A interest vs. information phishing).
Be ready for the deal to fall through if
you don’t want to share the
information.
Initial formal gauge on M&A
interest; Corp Dev officially gets
involved
Initial screen via phone/telecon
Many deals die at Tech DD:
● too much open-source code
● teams not strong enough
IN-PERSON INTERVIEWSOVERVIEW
Be prepared to fly out / be
physically present on short notice
TECH INTERVIEW
Code should be well documented
Be prepared to discuss it in detail
with acquiring tech team
Prepare for coding interview ques
CORP DEV INTERVIEW
Acknowledge upfront that there is
competition in your space BUT
articulate local differentiation very
clearly

23. REMEMBER: Have clear
conversations about job titles and
hierarchy/relevance in the new company.
Valuation
Multiple components to valuing the acquisition
Structure the deal to ensure entrepreneur, investor, acquirer interests are optimized (cash vs equity)
Cash
Investor payout + Founder Payout +
Employee bonus
[Paid out on Day 0]
Retention Pkg (cash & stock)
Usually vested over 3-4 years
Same as regular options/RSUs but not
based on Cap Table
Often structured with an empharsis
here to retain employees
Salary
Stock
Usually mirrors vesting schedule in Silicon
Valley companies
Industry Startup
Entry level $10K $6-8K
Experienced $20-30K $12-15K
I. Acquisition
II. Employee Salary &
Stock
Payouts when team hits milestones
Common in larger rev./customer
acquisitions
Earnouts (optional)

24. Valuation
Valuing your company
EARLY STAGE COMPANIES
● Comps/multiples - recent investments/acquisitions on similar
deals in industry; valuation +/- 40% (buy vs. sell side)
● User Traction - Customers, MAUs, DAUs etc
LATE STAGE COMPANIES
● Market Comparables / Multiples: Multiples of
Revenues/Sales, Earnings
● Revenue Traction
Triangulate based on multiple criteria
ALL COMPANIES
● Negotiating power - no. of buyers on the table; getting multiple
term-sheets drives up value
● Other factors - Pedigree of team, Market size, Patent strategy,
Competition, Company status (distress vs. growth) etc
DON’T ANCHOR ON A
VALUATION TOO EARLY
When acquirer asks 'What
number do you have in
mind?", don’t give an answer
immediately; ask for time;
when you give an answer,
give a range
ENSURE ALL
STAKEHOLDERS
SATISFIED Bring
shareholders, investors into
discussion; make sure they
are comfortable with the
valuation proposed

25. Termsheet ● Roadmap to transaction ahead; also called non-binding letter of intent, MoU, letter of
intent: provisions
● Must always have a valuation amount and timeline for payout
● In case of an acquihire, important to have team member names in the Termsheet
Share
Purchase
Agreements
● Can be stock purchase (entire buyout) or asset purchase (shell company remains)
● Traditional asset purchase difficult, because it is hard to shutdown a company in
India
Holdbacks,
Escrows,
Indemnity
● Acquirer can hold 15-20% of valuation for 2 years as indemnity against the company’s
potential liabilities
● Amount and duration is negotiable; usually higher for companies with contracts
Representatio
ns and
Warranties
● Usual for Investors/Acquirers to seek extensive representations and warranties from
the target co. and promoters
● Breach of representations and warranties can be treated as a ground for rescission of
contract
ESOPs
(Employee
stock option
scheme)
● ESOPs must be approved by shareholders by passing a special resolution (i.e.
<75% consent)
● ESOPs are not transferable and must have a min. vesting period of 1 year.
Unvested ESOPs must compulsorily vest upon death or permanent incapacitation of
employee.
● Prohibited Recipients: (i) promoters (ii) independent directors (iii) directors with more
than 10% shareholding
Termsheet
Key provisions
Key pieces to negotiate
FINANCIAL TERMS
● Payout + retention
(& duration)
● Salaries of
employees
● Names and titles of
all employees being
hired
● Compensation
package for
employees not
being hired
OTHER TERMS
● Directors / Board
seats
● Lock-in provisions:
lock in founder team
for certain duration

26. Do your research and take your time
● Research what the acquirer has done in previous deals (usually disclosed in
10Qs, 10Ks filed with SEC)
● Don’t be eager to sign a termsheet without understanding the implications.
Until you sign, everything is verbal
Respect the potential acquirers in the process
● Don’t shop the offer around too much; acquirers often don’t like this and
may rescind their offer
● Once you get a termsheet, tell other bidding companies about the deals on
the table; some acquirers may not want to bid on the offer
Engage professionals as needed in the process
● Consult a lawyer early on in the process to make sure your interests are
covered, help negotiate terms
● Hire a banker for larger transactions to help negotiate on valuations, bring
connections; advantages having a US banker
● Don’t let investors negotiate for you. CEO-investor relationship should be
more of an ‘informing rather than advising relationship during negotiations
Termsheet
Key tips
GETTING SIGNATURES:
Multiple documents at
various stages will need to
be physically signed by
potentially geographically-
dispersed investors. Ensure
shares are dematerialized
(not in physical format) or
have them converted and
allow for time to get the
signatures
RED FLAG TERMS
Some termsheets carry
clauses that say if any of the
founders quit before a year,
no one gets any payout.
Watchout for red-flag terms
and always consult a lawyer
before you sign.

27. Legal & Fin. DD
Documents &
signatures
Secure documents:
Secure all imp documents (eg.
original employee hiring certificate,
bonuses)
Maintain hard copies of docs, if
available with at least 1 signed
Ensure employment contracts in
place (employees for at least a year
for processing of L1 visas / move
team to US)
Signatures needed (if US entity):
● Founders / preferred
stock holders to sign
● e-signature ok
● Drag Along rights
Counsels (cross-
border M&A)
Cross-border M&A can
have 2 counsels
(Indian/ US) on each
side
Language differences,
legal nuances can
result in
miscommunication
Identify lead counsel
for entire process early
on
Match the lead counsel
with the buyer i.e. if it’s
a US buyer, the lead
counsel should be US
for both buyer and
seller
Overview
Once termsheet has
been signed, 45-60
day ‘no-show’ - can’t
shop company around
● Allows
potential
acquirer time
for legal & fin.
DD on target
● Can be
outsourced or
done in-house
● Target
company must
be proactive
with providing
all needed info
Other
Escrow
15-20% of deal value
(for contingencies)
Valuing IP
If IP is held by Indian
entity, value IP from a
merchant banker (eg.
Morgan Stanley,
E&Y), sell IP to the
US entity, pay
relevant taxes on the
sale and then use the
IP wherever

28. Specific assets of company (eg.
Tech/IP, team etc)
Acquihire: common to acquire
team, license IP perpetually, &
shut down product
Share Purchase Agreement
Share Purchase Asset Purchase
All shares of
startup
Shell company remains which
owns non-acquired assets
Eventually shuts down
Ceases to exist
Need to analyze the tax
efficiency of transferring assets
piecemeal v. slump sale
Min. 2 members/
stockholders
required
WATCHOUT: Shutting down a company in India is time consuming and slow; hence, most startups prefer a full stock purchase
IT - Income Tax; CA - Chartered Accountants; HNWI - High Net Worth Individuals
Acquirer
buys
Differences
from US
Startups of
Startup
Transfer of Funds
● India first has to receive funds and only then are
shares transferred to the acquirer
● Multiple investor banks takes more time; minimize
no. of recipient bank accounts to reduce time and
complexity
● Funds will come in trenches but in India can’t pay
partial shares – have to buy in one shot
shareholder’s bank to RBI; only then transfer shares
Relocation of team
● L1 visas are commonly used to ‘move’ a team to the
US post acquisition
● Employees need to meet the “One year in last 3
years” rule for eligibility
● Asset purchases reset the L1 visa clock: ie
employee will need to be at the acquirer for 1 year
post-acquisition for L1 eligibility. hence, share
purchase is strongly recommended

29. IMP (but not show
stoppers)
Show Stoppers
Keep in mind potential make-or-break issues
SHOW STOPPERS
Allotments on cap-table,
ownership of shares to
be clean with relevant
stamps on original
documents etc.
Ownership on IP clean,
limited open source
Compliances (labor,
employment)
Hire good company
secretary/attorney early
on to ensure compliance
is clean
Ownership of
shares
Compliances
Ownership of IP
As long as funds are through
100% FDI route, RBI good about
getting all filed. May pay fine
later on, but want to regularize
transaction
Categories of RoC filings (eg.
Audit report filed late, board
meeting minutes not reflected)
can be rectified
Don’t need to compound even if
lawyers say you must
Usually done for property deals
in India, not share deals, but
increasingly common by
overseas buyers to avoid liability
on/risk of ownership of shares
Takes 2-3 weeks
RBI/FDI
Tax Clearance
Certificate
RoC Fiings

30. This document has been prepared by iSPIRT in consultation with several partners including Inventus Law for discussion purposes only. The
information contained in this document is intended for information purposes only. They are derived from public and private sources which we
believe to be reliable and accurate but which, without further investigation cannot be warranted as to their accuracy, completeness or correctness.
This information does not in any manner constitute, and should not be construed to be, legal advice or a legal opinion. Note that any information
you provide during the course of this presentation will not be subject to legal privilege. This information is supplied on the condition that iSPIRT,
Inventus Law and any partner, employee or affiliate are not liable for any error or inaccuracy contained herein, whether negligently caused or
otherwise, or for loss or damage suffered by any person due to such error, omission or inaccuracy as a result of such a supply. iSPIRT, Inventus
Law and its affiliates are also not liable for any loss or damage howsoever caused by relying on the information provided in this document.
For any legal advice you require, please seek advice from a qualified lawyer in the relevant jurisdiction.
M. Thiyagarajan (Rajan)
Fellow, M&A Connect, iSPIRT
rajan@ispirt.in
For Questions Please Contact
Thank You
iSPIRT Foundation is an industry think-tank founded by key participants and proponents of the Indian software product industry. iSPIRT enables a strong
ecosystem, connects and guides software product entrepreneurs and helps catalyse business growth. It encourages buyers to improve performance by
leveraging software products effectively. iSPIRT advises policymakers on interventions that can set the industry on a higher growth trajectory.
Inventus Law is a Silicon Valley based premier Global Technology law firm representing high growth startup companies of all stages, investors and
entrepreneurs from across the globe. With a client base of over 1,600 and growing, Inventus Law offers Silicon Valley expertise, vast cross-border
experience, quick response times for setting up operations in the U.S., setting up subsidiaries, a network of strategic partners, and flexible and
customizable fee structures. To learn more about their Corporate, Intellectual Property, and Commercial Law Practice, please visit inventuslaw.com.