Corporate Law — Fundraising Advisory & Documentation
Fundraising Documentation That Inspires Investor Confidence
A fundraising transaction gets challenging because of the investor’s and founder’s expectation alignment, especially through the various fundraising stages. We assist businesses in understanding the legal implications of investment terms while protecting operational flexibility and governance interests. We also assist founders and investors by negotiating such agreements to ensure operational viability whilst protecting the rights of our clients.
In short
From angel investment through to Series C fundraising from a major PE investor, we work on structuring deals and preparing all the required documentation. Term sheets. Shareholders’ agreement. Share Subscription agreement. SPAs. Convertible notes. Board approval. Shareholder approval. We negotiate those terms that matter in such transactions: anti-dilution clause, liquidation preference clause, tag along and drag along clause, reserved matters and exit strategy. We have worked for both founders and investors and know very well what the important terms are for each party.
Most founders raise funds for their business more than once, and rarely do they limit the costs of their fundraising mistakes to just the initial round. A founder who accepted a term sheet for the first round without asking too many questions regarding what the liquidation preferences truly implied in case of a windup would come to regret the costs which in most cases, only reveal themselves at the point of the second fundraise or exit. An early investor who was given broad veto rights to help close the seed round quickly can, two years later, end up blocking a Series B the founder urgently needs. The messy cap table that the founders kept on Excel spreadsheets and email threads during the initial rounds of fundraising would cause the Series B investor’s counsel to waste three extra weeks of due diligence trying to parse the true equity distribution of any given stake.
Fundraising is not an isolated activity, and it rarely constitutes a single closed deal. It is instead a process comprising multiple decisions which set the conditions for future activity and the choices made in succession to it. The dilution consequences of the instrument picked at the seed stage impact negotiations at Series A, the design choices for investor governance at the founding stage dictate the founder’s flexibility at the time of institutional financing, and the initial design choices for ESOPs affect the founders’ subsequent ability to attract or retain talent at critical stages of a startup’s growth.
Corrida Legal works with founders and their investors on fundraising processes at all stages with a view to facilitating these subsequent steps. We assist investors and founders to think through strategic questions that must be asked before actually engaging with the investor, such as what instrument ought to be picked for the fundraise, how the cap table ought to be designed and who must control what fraction of the founder’s equity at various stages, and what regulatory constraints such as FEMA or sectoral FDI caps ought to be taken into account for a particular business.
After negotiations on the term sheet have begun, we assist both sides in drafting and negotiating the actual terms that go into the term sheet, and then structuring the transactional document itself for the chosen instrument in a manner that accounts for the protections expected by the investor without altogether undermining the flexibility needs of the founder. We also conduct legal due diligence on behalf of founders or investors that are looking to raise or deploy capital, so that we might identify and address any gaps in readiness on either side that could impede the fundraising process.
Where required, and wbased on the circumstances of the client, we also work with the clients to structure the fundraise in a manner that facilitates benefits available to eligible startups under Startup India, DPIIT recognition, or angel tax exemptions under section 80-IAC.
Most of the value that we provide to our clients in the long run, however, is determined by the care taken in structuring the rights and responsibilities of the parties involved at the first round. We negotiate the terms of governance, anti-dilution protection, and liquidation preferences at the first round with an eye to how these will operate several years later when dilution is materially higher, and the burdens these initial terms impose on the founder’s subsequent flexibility, particularly at the Series A, Series B, or exit.
Our practice is fundamentally one of structuring and advisory: most of the difficulties between founders and investors actually originate from rights or obligations that were poorly negotiated or implemented at an early stage. As part of our end to end fundraising support to reinforce long term advisory rols, we also assist in post investment compliances like FEMA filings or any other governance obligations. We prefer to spend the time on getting these aspects right at the start, or at least understanding their long-term implications for our clients, rather than spending time on dispute resolution downstream.
What We Handle
What our fundraising advisory work covers
From angel investment through to Series C fundraising from a major PE investor, we work on structuring deals and preparing all the required documentation. Term sheets. Shareholders’ agreement. Share Subscription agreement. SPAs. Convertible notes. Board approval. Shareholder approval. We negotiate those terms that matter in such transactions: anti-dilution clause, liquidation preference clause, tag along and drag along clause, reserved matters and exit strategy. We have worked for both founders and investors and know very well what the important terms are for each party. The opportunity to work with both sides has enabled us to ensure that whilst advising on the fundraising, we focus on protecting the interests of the parties whilst ensuring that the document focuses on long term growth and is executed in a timely manner.
A. Pre-Fundraising Strategy & Structuring
- Preliminary laying down of the strategic and operational framework before actively reaching out to investors.
- Assessment of fundraising goals, business valuation, and growth projections, strategic advisory on the best funding instruments, namely equity, debt, or hybrid.
- Structuring of cap tables, founder equity, and ESOPs, while tailoring strategies for seed, series A, B, C, and others.
- Regulatory assessment, including compliance with FEMA, Companies Act, SEBI, and RBI regulations.
- Legal advisory on sectoral caps and restrictions on foreign investments, for instance, FDI in e-commerce or the FinTech industry.
B. Term Sheets & Investment Agreements
- Drafting and negotiating preliminary term sheets with investors.
- Structuring of investment agreements, including equity, convertible instruments, safe notes, venture debt, while ensuring investor protection clauses, exit strategy provisions and governance rights are part of these instruments.
C. Due Diligence & Regulatory Compliance
- Comprehensive conduct of preliminary pre-investment legal due diligence for companies, including startups.
- End-to-end assistance for investors with legal and financial due diligence.
- Proactive compliance with corporate laws, SEBI regulations, FEMA, RBI and tax laws.
- Strategic advisory on compliance benefits under Startup India, DPIIT certification, and tax exemptions as per section 80-IAC angel tax exemptions.
D. Fundraising Documentation & Contracts
- Drafting and reviewing of fundraising documentation to formalise the investment process, crucial for securing capital and developing legal framework between start-ups and investors.
- Drafting of the following agreements, including shareholders agreements, share, subscription agreements, convertible debenture agreements, notes, term sheets, and letters.
- Advisory on the structuring of stock option plans, RSU and found investing agreements.
- Absolute compliance with the ODI i.e. overseas direct investment norms for outbound investments.
E. Investor & Founder Rights Negotiation
- Strategic focus on balancing operational flexibility for founders with investment protection for investors by negotiating board control, veto rights, and liquidation preferences.
- Structuring of key investor protection clauses such as anti-dilution clauses, liquidation preferences, and voting rights.
- Advisory on founder lock-in periods, restrictions, and governance mechanisms.
F. Legal Structuring for Fundraising & Exits
- Effective legal structuring and advisory on exit strategies via IPO, secondary sales or mergers and acquisitions.
- Drafting of respective exit provisions, including drag-along and tag-along rights.
- Structuring of waterfall mechanisms, revenue sharing and liquidation rights.
G. Post-Investment Compliance & Ongoing Obligations
- Management of post-investment compliances, including ongoing statutory filings, FDI reporting, governance, disclosure requirements, managing cap table updates, dilution tracking, and share transfers.
- Operation of ongoing corporate governance and compliance with the investor agreements.
Why Corrida Legal
Partner with Corrida Legal for Investment-Ready Deals
The veto right that an early investor negotiated during a small seed round rarely feels like a problem while the company is young. It comes one year later, when the company has grown considerably and the same investor, who only wanted to secure a small, controlling stake at the time, now finds themselves able to block a new round of financing unless they relinquish some of those rights. This is the typical shape of a founder-investor conflict: not a disagreement that erupts suddenly, but a right granted casually in an early round that quietly becomes an obstacle once the company has outgrown the assumptions under which that right was first negotiated.
The same dynamic can often be seen elsewhere in a company’s fundraising lifecycle: the conversion terms of a convertible note often serve as a point of contention between the noteholder and the founder at the moment of the next priced round, as neither party wishes to bear the dilution burden of the conversion. A founder lock-in period can often render a founder unable to pursue a new round of financing at better terms if the lock-in period was not properly negotiated in the first place. An ESOP pool that was never designed with sufficient modelling can often see early employees demanding a larger pool at a later date when their shares have massively appreciated in value over the course of several rounds of fundraising, dilution, and share transfers.
That is why our involvement in a company’s fundraising process rarely ends at due diligence or signing of the term sheet or even the closure of a given round. The FEMA filings and FDI requirements involved in a single round of fundraising will need to be updated as a company’s shareholding changes from round to round, with subsequent rounds of fundraising introducing even more changes. The cap table we helped organise after the seed round will need to be actively managed as shares are transferred and additional rounds of dilution take place at later stages. The governance terms negotiated at the Series A round might need to be rethought as the company reaches an exit horizon. We remain involved as long as our involvement is necessary or beneficial to our clients, because while a company’s fundraising process seldom consists of a single round, most founders who only receive help at the moment of a fundraise are unprepared for later stages of their company’s growth.
Our practice is one of structuring and advisory, and we believe that most of the conflicts between founders and investors at later stages of a company’s development can be averted by spending the time and effort to negotiate sensible terms at the time of fundraise, particularly with regard to anti-dilution, liquidation preferences, and control rights. Where disputes do arise, we provide assistance in navigating the disputes, but our preference, as well as the preference of our clients, is to avoid them in the first place.
If you are a founder preparing for your own next round, an early-stage investor reviewing a term sheet, or a company that needs to get its fundraising documentation and ongoing reporting requirements in order, our corporate legal advisory team at Corrida Legal can help you structure a fundraising deal that will get you to the next stage of your company’s growth.
Where We Advise
Fundraising Advisory & Documentation advice across India
Our lawyers work with businesses from our Gurgaon, Delhi and Mumbai offices and advise clients across India, supported by partner firms in Dubai, Singapore, the UK and the USA.
Discover Frequently Asked Questions from Our Support
Fundraising is a multi-stage process wherein, prior to any formal understanding between the parties, it is suggested that the parties execute a Non-Disclosure Agreement, a Term Sheet, and a Letter of Intent depending on the requirements of the transaction. Subsequent to an understanding and completion of the due diligence, investment agreements such as Share Subscription Agreement, Share Purchase Agreement, and Shareholders’ Agreement should be executed between the parties.
Corrida Legal provides the services with respect to drafting of the Investment Agreement including investor rights and term sheet negotiation. Furthermore, Corrida Legal assists with legal due diligence and fundraising support.
Prior to any formal understanding between the parties, the investor is advised to conduct due diligence on the investee entity to ensure that the organisation is legally, operationally, and financially sound, and to determine the investee entity’s valuation.
Corrida Legal provides legal due diligence services to ensure that the investee entity is compliant with the corporate, employment, and intellectual property regulations thereby minimising the investment risk.
We at Corrida Legal provide the services of assisting investors in strategising their control of board, protect their financial interest, and exit options. We achieve this by implementing clauses pertaining to anti-dilution, voting rights, drag-along and tag-along provisions, and exit events.
Corrida Legal provides the services of startup due diligence and fundraising support to the investor and the investee. We further assist with the registration and compliance obligation under the FEMA and DPIIT regulations. Corrida Legal also assists with the negotiation of investment documents to ensure that the startup’s rights are protected for any potential subsequent fundraising rounds.
To ensure that a startup is Investor-ready, the entity’s operations must be internally reviewed to ensure that its legally, operationally, and financially sound and that its operations are well documented. Furthermore, the entity must ensure that documents such as the incorporation documents, shareholder documents, labour law compliance and other similar documents are well maintained and compliant with the applicable laws.
At Corrida Legal, we assist you by ensuring that the entity is legally compliant by way of conducting compliance audits, legal due diligence support, and preparation of shareholder or employment documentation to ensure you are investor-ready.
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