On March 30, 2015, SEBI issued a discussion paper on a proposed
alternative capital raising platform (
specially catering to start-ups/"new-age" companies. This
is definitely a positive step by SEBI as it potentially offers a
regulatory regime where start-ups can realize better valuations
like in jurisdictions such as USA or Singapore,which have a head
start in terms of a more conducive regulatory framework for
start-ups to raise risk capital.
This write-up summarizes the entire thought process under two
Suggestions/recommendations for the possible a) Eligibility
Criteria b) The Platform c) The Process d) Objects of raising
capital e) Lock in of shares &f) Issue Price for an Alternative
Capital Raising Platform; and
Review of other regulatory requirements.
While SEBI's discussion paper has definitely caught the
fancy of several start-ups, one of the queries topmost on the minds
of entrepreneurs is whether their start-ups can raise capital
through this proposed "alternative platform". If you
happen to be one of them, you may want to take this brief test to
find out the answer.
If you are NOT a software product development company or
e-commerce company or NOT considered as a "new-age
company"*having an "innovative business model"* that
creates "new business opportunities"* or which serves
"important efficiency enhancements in business
* The paper does not define these terms.
Is your company planning to raise equity capital from retail
Is your company planning to raise less than Rs. 10 Lakhs from a
Is your company planning to raise funds from less than 500
Is your company's fund-raising target less than Rs. 50
Do you, along with other co-founders/relatives, hold more than
25% of the paid-up share capital in the company?
Answer the above questions in a simple "YES" or
"NO" (without any caveats such as "I would like
to raise 50 Cr. but even Rs. 25 Cr. would meet
company's present growth needs..."or We don't have any
preference towards retail or institutional investors..."
Done? If you have answered any of the above questions with a
"YES", then your company is
NOTELIGIBLE to utilize this alternative platform
to raise capital. Don't get discouraged since this is only a
discussion paper and not the final guidelines!
The discussion paper is aimed to elicit responses from public
and entrepreneurs should individually / collectively give their
suggestions / recommendations which will go in long way in
improving the regulatory framework for fund raising by
start-ups.Comments/suggestions are sought in the format specified
on page 9 of the discussion paper and need to be sent on or before
April 20, 2015 by email to email@example.com.
You can also email me your suggestions at
firstname.lastname@example.org. I will compile them and send them to
SEBI for its consideration.
The second part of this write-up will focus on additional
conditions/requirements that you may need to consider if your
company is prima facie eligible to utilize this
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Ministry of Corporate Affairs notified on June 5, 2015 that certain provisions of the Companies Act, 2013 shall not apply to private limited companies or shall apply with such exceptions or modifications as directed in the notification.
Whilst trade and barter have existed since early times, the modern practice of forming business relationships through the means of contract has come into existence only since the industrial revolution in the West.
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