Are you a startup gearing up for Series A funding? Have you completed all your legal paperwork and formalities? Arm yourself with the knowledge of the entire legal deal and ensure a smooth sailing for your startup. for insights and perspectives from Payal Chawla and Anurag Kapoor

1. Accelerator with a Difference

2. Incorporation Type
Entities at the outset need to decide their incorporation structure.
The structures that investors would invest in are companies or LLPs.
Before you decide which structure to follow, it is imperative to
understand the difference between Companies and LLPs, so you can
make a reasoned, well thought through choice
Company LLP
Investor gets shares Investor get a percentage of
the partnership
FDI is permitted as per the
sectoral caps
FDI is permitted only where
100% FDI is permitted.

3. Differences between Companies and LLPs
Company LLP
Companies Act, 1956 and various Rules made
thereunder
The Limited Liability Partnership Act, 2008
and various Rules made thereunder
Each Director is required to have a Director
identification Number before being
appointed as a Director of any Company
Each Designated partner required to have a
DPIN before being appointed as a Designated
Partner
Minimum 2 of Shareholders in a Pvt. Ltd.
Company and minimum seven for public
company as per the Companies Act, 2013
(can also have one member Company under
2013 Act)
Minimum 2 partners
Maximum 50 in case of Private company and
no cap of maximum number of Member in
public company as par the Companies Act,
1956
No cap of maximum number of its partner

4. Differences between Companies and LLPs
Company LLP
Minimum 2 Directors in case of Pvt. Company
and minimum 3 in case of Public Company.
Minimum 2 Designated Partners
Incase of death of members, shares are
transmitted to the legal heirs.
Incase of death of partner, the legal heir
has the right to refund of Capital
Contribution, if any. Legal heirs will not
become partners.
A member / shareholder can cease to be a
member by selling his shares.
Partner can cease to be a partner, by
removal, retirement or death. But that does
not automatically extinguish right.
A person can become a member by buying
shares of a company.
A person can be admitted as a partner with
consent of all the partners.
AOA do not require change in case
shareholders are inducted / leave
Normally LLP agreement requires change
on reconstitution. S

5. Similarities between Companies and LLPs
 Compulsory Registration.
 Created by Law
 Both has Perpetual Succession
 Can purchase movable/immovable property in its name
 Can sue and be sued in its name
 Atleast one director/ designated director of company/LLP should
have Digital signature. Digital signature is a pre-requisite for e-
filing.

6. Intellectual Property
The identification & protection of Intellectual Property requires
careful consideration.
IP can be of different types:
Trademarks
Copyrights
Patents
Designs
Trade secrets
If carefully strategized can drive value – it can be 3 to 4 times of the
Company’s turnover.
While budgeting, the monies required for the protection of IP
needs to be carefully considered – can be very expensive.

7. Compliances with Regulators
• Licenses under the Factories (for manufacturing set-ups) & Shops &
Establishment (for offices) should be in place;
• Compliances with regard to the labour legislations need careful
consideration, particularly if the entity is in the manufacturing
space.
• Even in the services space, you could have out sourced part of your
man-power (non-supervisor) to a 3rd party – this make you
“principal employer”.
• You need to ensure compliance with labour law legislation – eg.
Contract Labour, Maternity benefits etc.
• You need to have a sexual harassment policy in place.

8. Accountability Compliance with Regulators
• Ensuring Security Measures
• External Safety Audits
• Paperwork in place, in order to protect the company from any
safety / security breach event
• Insurance in place, as per applicability

9. Shareholding within Founding Team, Family &
Friends, SHA and Exits
Investors Expectation Return on Investment
Targets
Top Line
Bottom Line
Market Share
IPO
Strategic Sale
Exit
Minimum Guarantee
Reserved Matters

10. Employment Agreements, Vendors’
Agreements, Directors’ Compliance
Contracts with Vendors, employers, Work for Hire Contractors need
to be carefully drafted:
Pay particular attention to:
defining the services/products;
breach and how that must be rectified;
payments and delay in payment;
in what circumstances will contract be terminated;
consequences of termination;
jurisdiction in case of litigation;
arbitration as a means of dispute resolution.

11. Website: www.ghvaccelerator.com
Social Media Connects:
@GHVAccelerator