Pre & Post Funding Compliance for Startup
The concept of PRE & POST FUNDING COMPLIANCE FOR STARTUP is considered as the most important factor for initiating any business in India. The things which we should know about pre and post funding compliance for start-up are with registrations, meetings, allotment of shares and issue various certificate etc.
As per the guidelines of the Companies Act, 2013, a private limited company can issue shares to raise money by making a preferential allotment of shares. The issuing of shares on a preferential basis should be authorized by article of association of the company. Allotment of shares should be authorized by a special resolution, and the price of such shares should be determined by the company valuation report.
The factor of investment and getting deals are the most important aspects, but sometimes it goes complicated too. Private limited company has too adhered to while receiving the funds from the investors. The allotment of shares should also be authorized by the special resolution, there are included the various steps with regard to the allotment of shares which are as following:-
1. Meeting(conducting a board meeting): meeting are considered as the important compliance under the company because, with the timely meetings only , the raising factors and the start-up base will increase. For making a proposal for a preferential allotment, a meeting of the board of directors of the company should be conducted.
2. Secondly, conducting an extra ordinary meeting. For the approving of the preferential allotment by passing a special resolution, an extra ordinary general meeting of the shareholders should be held. The validity period for this resolution is only for 12 months.
3. Thirdly, issue of the offer letter. The majority of the votes in the company is required for the approval of the various proposal. Once the proposal has been approved by the majority, the company go ahead and issue offer letter to the investors in the specific format.
Within the 30 days of issuing letters, a complete record of preferential allotment is to be filled with the registered company.
4. Fourthly and the important one is the allotment of the shares, because the company has to allot securities to the investors within the 60 days of receiving the funds, and for that too they have to pass a resolution in board meeting and filing a return of allotment with the registrar within 30 days of such allotments.
There should be the complete details which contain the list of all shareholders, their complete names, address, percentage of shareholders allotted and other relevant information.
5. And the final step is about the issuing of the certificate. On completion of the allotment, company can finally issue shares, certificate to the investors; later they will be the shareholders of the company.
These all are the above steps mentioned for the domestic and foreign investors both. It is very important for the companies raising capital t be aware and ensure compliance for a better and smooth business and to understand their business in a better way.
Author: This blog is written by Ms. Deepshikha Dabi, a passionate blogger & intern at Aapka Consultant.
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