Overview of Fundraising Compliance
Fundraising is the process of acquiring financial or non-financial support to achieve specific organisational goals. This includes reaching out to investors, donors, or sponsors for capital infusion.
Start-ups and companies must comply with regulatory requirements under the Companies Act, 2013, RBI guidelines, and other legal frameworks to ensure lawful and transparent fundraising.
Proper compliance ensures:
- Legitimacy of capital raised
- Investor confidence and transparency
- Smooth audit and due diligence processes
- Eligibility for future funding rounds and government schemes
CapEasy offers end-to-end compliance support to ensure your fundraising efforts meet all legal and regulatory standards.
Objectives of Fundraising
Start-ups raise funds to accelerate growth, ensure sustainability, and build a competitive edge.
- Secure Initial Capital
To cover product development, setup costs, and early-stage operations. - Scale Business Operations
To expand teams, increase production, and enter new markets. - Attract Top Talent
To offer competitive compensation and retain skilled professionals. - Invest in R&D
To innovate, refine offerings, and stay ahead of market trends. - Enhance Marketing & Customer Acquisition
To build brand visibility and grow the customer base. - Upgrade Infrastructure & Technology
To ensure operational efficiency and long-term scalability. - Explore Business Expansion
To launch new products, enter new geographies, or open additional units. - Form Strategic Partnerships
To gain mentorship, industry connections, and business opportunities.
Basic Fundraising Checklist for Start-ups
Before approaching investors, start-ups must ensure strategic, legal, and operational readiness. A structured approach improves credibility and fundraising outcomes.
Key Checklist Items
- Define Funding Objectives
Clearly outline capital requirements, usage plans, and fundraising targets. - Prepare a Business Plan
Include vision, market size, competition, financials, and growth roadmap. - Build a Committed Core Team
Ensure founders and key personnel have relevant experience and roles. - Identify Suitable Investors
Research and shortlist VCs or angel investors aligned with your sector and stage. - Ensure Financial Documentation is Ready
Maintain updated P&L statements, cash flow projections, and cap tables. - Establish Online Presence
Set up a professional website and maintain active, credible social profiles. - Practice Pitching
Refine your pitch deck and rehearse with mentors or advisors. - Seek Expert Guidance
Engage advisors for mentorship and legal due diligence. - Attend Networking Events
Participate in demo days, pitch events, and investor forums. - Follow Up with Investors
Send personalised updates post-meeting and maintain engagement.
Pre-Funding Compliances for Startups in India
Before raising capital, startups must comply with regulatory procedures to ensure legal validity and investor confidence. Key pre-funding compliances include:
Key Requirements
- Compliance with RoC Norms
Ensure the company is compliant with the Companies Act, 2013 and all Registrar of Companies (RoC) filings are up to date. - Board Meeting Resolution
Issue notice at least 7 days in advance. Approve key items such as:- Valuation report
- Offer period and number of allottees
- Opening of a separate bank account for funds
- Draft offer letter for private placement
- Date and agenda for the Extraordinary General Meeting (EGM)
- Extraordinary General Meeting (EGM)
Conduct an EGM to pass a Special Resolution for preferential allotment.- File Form MGT-14 with RoC
- Distribute Form PAS-4 with the offer details and certified true copy of the resolution
- Issuance of Offer Letters
Share the offer letter (Form PAS-4) within 30 days of approval to the identified investors via physical or electronic mode. - Maintain Allotment Records
Keep a complete record of allotments and file it with the RoC before accepting funds.
Post-Funding Compliances for Startups in India
Once funding is received, startups must comply with statutory procedures to maintain transparency and meet legal obligations under corporate and foreign investment laws.
Key Post-Funding Compliance Requirements
- Allotment of Shares & Filing Return
Allot shares to investors within 60 days of receiving funds.
File Form PAS-3 (Return of Allotment) with the Registrar of Companies (RoC) within 30 days of allotment. - Issuance of Share Certificates
Issue share certificates to the new shareholders within 60 days from the date of allotment.
Funds received cannot be utilized until share certificates are issued. - Compliance with Banking Norms
Share application money must be received via banking channels only from the investor's account, ensuring traceability and legal compliance. - Reporting to RBI (For Foreign Investments)
Submit Advance Reporting Form within 30 days of receiving funds from foreign investors.
File Form FC-GPR within 30 days of share issuance, along with:- Certificate from Company Secretary (compliance with FDI policy)
- Certificate from a professional (valuation justification)
- Companies Act Compliance
Maintain statutory registers, file necessary forms, and adhere to all relevant procedures under the Companies Act, 2013.
Other Compliances for Foreign Investors in India
India's startup ecosystem continues to attract foreign investment. Startups engaging with foreign investors must comply with guidelines issued under the Foreign Exchange Management Act (FEMA), RBI regulations, and the Companies Act, 2013.
Key Compliance Requirements
- RBI Regulations for Foreign Investments
All foreign investments are governed by the Reserve Bank of India (RBI). Startups must follow applicable FEMA and RBI guidelines to ensure legal compliance. - Advance Reporting to RBI
File an Advance Reporting Form within 30 days of receiving foreign funds. Include:- Investor details (name, address, nationality)
- Amount and date of remittance
- Bank or authorised dealer details
- Government approvals (if applicable)
- KYC documents of non-resident investors
- Share Issuance Timeline
Shares must be allotted to foreign investors within 180 days of receiving the funds. Non-compliance may lead to FEMA violations. - Filing of FC-GPR
Submit Form FC-GPR within 30 days of share issuance. Attach:- Certificate from a Company Secretary (FDI compliance)
- Valuation certificate from a practising professional
- Board resolution and relevant supporting documents
- Companies Act Compliance
Follow procedures for share allotment, file necessary RoC forms, and maintain statutory registers as per the Companies Act.
Services Offered by CapEasy for Fundraising Compliance
Compliance plays a critical role in protecting both startups and their investors. Regulatory lapses can lead to penalties and loss of investor confidence. Once funding is secured, it becomes the founder's responsibility to ensure funds are handled with transparency and in compliance with legal frameworks.
CapEasy provides end-to-end services to help startups manage all fundraising-related compliances efficiently and lawfully.
Our Services Include
- Expert guidance on fundraising regulations under RBI and RoC
- Legal and financial due diligence to ensure full regulatory compliance
- Preparation and filing of compliance documents such as:
- Share allotment forms
- Reporting forms (PAS-3, FC-GPR)
- Certification and supporting documentation
- Investor reporting support, including regular updates and compliance records
- Advisory on corporate governance practices and internal control frameworks
- Compliance support for foreign investments, including FDI norms and RBI reporting