Pre Post Funding Compliance For Startups

Pre Post Funding Compliance For Startups

Startups are referred to as companies looking to make innovative products or provide useful services on a public platform. Modern startups use a modern form of technology in the production of their products or services. 

Startup funding helps the business owners attain fast growth and reach their pre-defined benchmark with the help of required funding at various stages of development. You have to fulfill the compliance of pre funding for startups and post funding for startups to get additional capital investment from external sources

A start-up is defined as any entity-

  • registered under private limited company (Companies Act, 2013), Partnership Firm (Partnership Act, 1932), Limited Liability Partnership (Limited Liability Partnership Act, 2008), and One person Company ( Companies act, 2013).
  •  Not exceed 10 years of its incorporation.
  • With a turnover not exceeding INR 100 crores in any financial year.
  • Working towards innovation/ development of a new product or improvement of an existing product or service
  • Working on a scalable business model high in the potential of employment generation and creation.

Investors essentially put down capital in exchange for equity i.e. they acquire a portion of your ownership rights in the startup and in the future profits as well.

Read Also: Raise Seed Capital for your Startup and Grow

Startup funding compliances

The Startups looking for funding from external sources have to fulfill the compliances of pre funding for startups and post funding for startups. This showcases the legitimacy of your operations to ensure the safety of investors.

Pre-funding compliances

Following is the list of funding compliances required by the startups before they get funding from external sources-

Registration Compliance

You have to complete your registration process as per the Companies Act, 2013. This gives you a legitimate stand at the time of funding.

Call for a board Meeting

You have to conduct a board meeting to fulfill the remaining compliance formalities before funding. The investors go through a proper check at the time of pre funding for startups to make sure that their investment does not land in the wrong hands. The board meeting discusses the following-

  • Prepare the valuation report to present at the time of startup funding
  • Prepare the list of new shareholders for pre funding of startups
  • Finalize the duration of the offer period
  • Open a fresh bank account in scheduled banks
  • Finalize the draft of the offer letter
  • Finalize the date, time, and venue for the extraordinary general meeting (EGM)

Conduct the Extraordinary General Meeting

The resolution passed by the EGM shall be valid for a period of 12 months.

Issue offer letter

You are ready to receive startup funding from external sources once you have completed all your compliances with the Registrar of Companies.

Read Also: Difference between Angel investor and Seed funding

Post Funding Compliances-

Once you complete the process of compliances of pre funding for startups, you have to start the compliances for post funding for startups. The post funding compliances are as follows -

Share allotment

The second meeting is held to allot and issue shares after receiving the application money. The shares must be allotted to the investors within 60 days of receiving investment. A return of allotment must be filed with the registrar of companies within 30 days of allotment.

Issue Share Certificate

Startups cannot use the investment received until they issue the share certificate within 60 days of allotment of shares. If the certificate delays for more than 60 days, the cash received at the time of startup funding returns to the investors.

Why do startups need money?

Startups operate with a hyper-growth mindset leading to the requirement of additional capital and other resources to achieve their growth prospects. They get this additional capital support through pre funding for startups and post funding for startups. The external sources provided the required funds to help the business owners complete their pre-defined tasks on time and get the desired growth without any monetary hinderances.   

The investors show their interest in the business idea and lend capital assistance in the form of startup funding to the business owners to realize their efforts through fruitful actions. The business owners, in return, offer them ownership of the company (in the form of stocks) or interest in lieu of the capital assistance extended towards them. 

A defined introduction of the company demonstrates your portfolio to the investors and they catch hold of what you are and what you do. An investor is always interested in knowing more about your team members and their operational roles.

Startup funding is a significant aspect of meeting the vision of any business. Fundraising is a modern business scenario that supports the growth of Startups. Timely funding helps you take advantage of the emerging and existing market opportunities.

Contact Us for Pre & Post Funding Compliance For Startups. in Delhi, Noida, Gurgaon, and all across India: write to us at accounts@especia.co.in. Or Call On :(+91)-9711021268 +91-9310165114

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