This note provides a succinct analysis of the law in undertaking equity financing by incubation facilities or investing entities (“Investing Entity”) for investing in early stage companies in India. The analysis below is equally applicable for, and relevant to, setting up investment vehicles in India, for investments in larger companies, but the relevant monetary thresholds below will need to be kept in mind. The analysis is separated into two stages of raising capital by the entity planning to undertake the investments: (a) investment of its own funds through the Investing Entity (“Phase 1”); and (b) raising money through the Investing Entity from other investors and investing such pooled capital through the Investing Entity (“Phase 2”).
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