Business Entity

Equity investment would include the issuance of company shares in the favour of the investors in lieu of the equity or the shares. This transaction could be supported by a limited company or private limited company only, due to their capability to do so. The first step towards raising  capital will be to form a business entity (such as a company or LLP), in case such process has not been followed through. It is required to be done, no matter the age of the company, in order to confirm that Memorandum and Articles of Association of the company will be drafted so that the equity investments mentioned, could be followed through without having to amend the MOA or AOA.

ROC Compliance

It is important the company to be invested must be in compliance with the provisions of Companies Act, 2013. It is necessary for a company to maintain its statutory register. Appointment of the auditor, filing statutory annual returns, conducting the board meetings and maintaining the statutory registers are some of necessary procedures to be followed through after the incorporation of  a company. Hence, during the process of investment, due diligence process for the ROC compliance as mentioned above shall be verified.

Tax Compliance

Different types of taxes would be imposed for businesses of different nature, for instance,   businesses dealing with the trading of goods and products would have to comply with state VAT regulations, such as sales tax registration, sales tax payments as well as filing of sales tax returns. In a similar manner the businesses dealing with rendering services have to apply for service tax registration, file service tax returns as well as making service tax payments. Also, income tax compliance could be verified during investment due diligence process which shall include TDS payments as well as TDS return filing.

Labour Law Compliance

For an investee company having an employee workforce of more than 20, such business will have to follow the ESI and PF regulations. Therefore, documents including the ESI registration documents, ESI return filing, PF return filing, ESI payments and PF payments will be checked. In case the company is related to the development of intellectual property, then an examination would also be performed so as to ensure that the respective business has the required employee non-disclosure agreements in place.

Intellectual Property

• A protection of the intellectual property owned by a business in the form of trademark, copyright, patent or design is the most critical assets of the company. Thus, Investors Compliance Checklist would always verify if the necessary trademark registration, copyright registration, patent registration or design registration of the company has been completed in order to protect the intellectual property of the company. Thus, the investors would verify if the the intellectual property registration certificate has been issued or not, by asking for documents such as the proof of trademark application filing, patent application filing, copyright application filing or design application filing, etc.

Conclusion

Raising capital is one of the major function for a business and equity funding has garnered enormous popularity over the last decade due to the success of e-commerce companies such as the Flipkart, Snapdeal, etc. This increased interest in the startups has led to development of a strong angel investor community, venture capital investors and private equity firms as has already been discussed above. 

Why Sharks of Law ?

• Single Platform- Sharks of Law provide you with a single platform with affordable and easily accessible legal services dealing with the company matters, which could be required during the investors due diligence.

• Expert advice- A client would require expert guidance and advice for issues related to the various company procedures, especially if it is a startup and the client is new to the field. Sharks of law offers experienced advocates who offer best guidance for proper procedure required.  

• Specialised advice- We offer you required guidance and advice for your legal issues.

• Highly qualified advocates- Sharks of Law offers you a team of brightest and most driven lawyers who have years long experience in their field.

• Easily accessible legal services- Sharks of Law believes that legal assistance should be easily accessible as one may need it at any time of the day, hence you may contact us through any medium you are comfortable with.