INDIA Law and Practice Contributed by: Raj Ramachandran and Krutamana Pisipati, JSA
involving high net worth individuals as well as family offices, who provide venture capital, and these are fairly easily available to start-ups. Funding through foreign venture capital firms is also quite a common source of funding available to start-ups in India beyond the angel funding and family and friends round. 2.5 Venture Capital Documentation Documents pertaining to venture capital invest- ments have become quite standardised over the years. 2.6 Change of Corporate Form or Migration Start-ups are often incorporated as private com- panies. To give effect to exit mechanisms where the proposal is to list on an exchange, these private limited companies convert into public companies. In terms of jurisdiction, companies do tend to domicile or redomicile in a jurisdiction based on the key target and operating market, access to funds, business valuations as well as opportu- nities to list as discussed in 2.1 Establishing a New Company . 3. Initial Public Offering (IPO) as a Liquidity Event 3.1 IPO v Sale As per various reports, India has provided a strong IPO market with an increase in the num- ber of deals (to 262) by 32.3% year-on-year during the first nine months of 2024. Certain examples of recent IPOs are Ola Electric, Digit Insurance, and Swiggy. IPOs are considered one of the key exit options as they provide liquidity to all stakeholders. Stra-
tegic or secondary sale as an exit option is also explored, and the nature of exit also depends on the business of the entity, market interest and growth prospects. Investment documentation would typically include all exit options (ie, IPO, secondary or strategic sale), and the stakeholders take a final decision based on various factors including these ones. 3.2 Choice of Listing On 24 January 2024, the Ministry of Corporate Affairs released the Companies (Listing of equity shares in permissible jurisdictions) Rules, 2024. These rules permit certain unlisted and listed public companies to list in permissible foreign jurisdictions at the Gujarat International Finance Tec-City – International Financial Services Cen- tre (the “GIFT-IFSC”) in India where they satisfy the prescribed conditions. Currently, the only permitted exchanges are the India International Exchange and the NSE Inter- national Exchange in the GIFT-IFSC. Trading in these exchanges can only be undertaken by “permissible holders”, which is defined to mean “not a person resident in India”. Certain companies have been seen to primarily list on the Indian stock exchanges on the main board, while others take the route for small and medium-sized enterprises (SMEs) IPOs. SMEs proposing an initial public offer should ensure that their post-issue paid-up capital is not in excess of INR100 million (approximately USD1.18 million) or their post issue face value capital if in excess of INR100 million (approxi- mately USD1.18 million) should not be in excess of INR250 million (approximately USD2.9 mil- lion).
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