INDIA Law and Practice Contributed by: Lalit Kumar, JSA Advocates and Solicitors
• limited liability partnership – Limited Liability Partnership Act, 2008. As mentioned in 2.1 Fund Structure , investment by the fund is governed by the FDI policy read with the Foreign Exchange Management (Non- Debt Instruments) Rules, 2019, FPI Regulations, FVCI Regulations and AIF Regulations depend - ing upon the nature of the investment. 2.4 Particularities There are several kinds of funds in India, such • infrastructure investment trusts (InvITs); • real estate investment trusts (ReITs); • SME funds (which invest in small and medi - um-sized enterprises); • social impact funds (which invest primarily in social ventures or in social enterprises that satisfy the social performance norms laid down by the fund); • angel funds (funds that raise funds from angel investors and invest); • special situation funds (which invest in special situation assets in the insolvency of compa - nies); • debt funds; and • fund of funds. as the following: • impact funds; • sovereign funds; • endowment and pension funds; • family offices; 3. Investments in Venture Capital Portfolio Companies 3.1 Due Diligence Before investing, VC funds conduct a detailed due diligence covering aspects such as:
• legal and regulatory; • financial; • business; • commercial; • tax; and • environmental, social and governance. Generally, the due diligence is detailed, and advisers/consultants are appointed to under - take the diligence exercise. A detailed question - naire/checklist is sent to the target entity and the responses provided are examined and analysed. Due diligence findings are generally provided in the form of an executive summary (ie, a short form report and not a lengthy and detailed report) highlighting red flags/critical issues identified in the diligence. Typically, the diligence findings also provide for ways to mitigate the concerns/ risks identified in the diligence. The diligence findings are resolved by seeking relevant repre - sentations, warranties and related indemnities from the investee company and its founders. Further, certain critical items are also provided as conditions precedent to making investment in the company, such as seeking regulatory approval and/or lenders’ consent, if applicable. Some procedural aspects are provided as con - ditions subsequent (ie, to be completed within a certain agreed timeline after the closing of the investment transaction). 3.2 Process The timeline of a new financing/funding round depends on several factors, such as the follow - ing: • size of the transaction and the investee com - pany; • complexities and parties involved in the trans - action; • level of findings in the due diligence and their resolution;
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