Every term, explained like a friend.

The filing of your company's balance sheet, profit & loss account, and cash flow statement with the Registrar of Companies every year. Must be certified by your statutory auditor.

RelatedMGT-7AGMROC

A yearly report every Private Limited Company must file with the Registrar of Companies. Covers shareholders, directors, share capital, meetings held, and any changes during the year.

RelatedAOC-4AGMROCCIN

Identity and contact verification that every person holding a DIN must complete with the MCA. Done online via the MCA portal.

RelatedDINROC

A declaration confirming that shareholders have paid for their shares and the company has actually started business.

RelatedCINSPICe+

A yearly return, due 30 June, of deposits the company has accepted and of money it has received that the Companies Act does not count as a deposit, such as a loan from a director.

RelatedROC

A yearly meeting of shareholders to approve the financial statements, declare dividends, and appoint or re-appoint directors and auditors.

The AOC-4 and MGT-7 deadlines are both counted from the AGM date.

RelatedAOC-4MGT-7

The government authority under the Ministry of Corporate Affairs (MCA) responsible for registering companies and ensuring they comply with the Companies Act. All annual filings go to the ROC.

The ROC can strike off your company from the register if you fail to file returns for two consecutive years.

RelatedCINMGT-7AOC-4

A unique 21-character identification number assigned to every registered company in India. Issued by the MCA at the time of incorporation. Must appear on all company letterheads, invoices, and official documents.

You need your CIN to open a bank account, make any ROC filings, and for many government registrations. Keep your incorporation certificate safe — the CIN is on it.

RelatedROC

A unique 8-digit identification number assigned to any person who wants to be a director of an Indian company. Applied for through the MCA portal; auto-generated via SPICe+ for up to 3 directors.

Every director must have a DIN. Without it you cannot be appointed as director. A deactivated DIN (from missed DIR-3 KYC) prevents you from signing any company document.

RelatedDIR-3 KYCDSC

An electronic signature used to sign MCA filings, income tax returns, and other government documents. Required for all directors and authorised signatories. Issued by licensed certifying authorities.

Get your DSC before you meet your CA — it takes 2–3 days to process and will delay your incorporation if you don't have it ready. Class 3 DSC is needed for most company filings.

RelatedDINSPICe+

Your company's constitution that defines its relationship with the outside world. The most important part is the Objects Clause — the list of business activities your company is legally allowed to carry out.

Keep your Objects Clause broad — cover where you might go, not just where you are today. Amending the MOA later requires shareholder approval, ROC filing, and costs time and money.

RelatedAOACIN

Your company's internal rulebook governing how decisions are made, how shares are transferred, how directors are appointed and removed, and what happens if a co-founder leaves.

Always include ROFR (Right of First Refusal) and vesting clauses in your AOA. Don't use the default template — customise it with a lawyer before incorporation.

RelatedMOA

Simplified Proforma for Incorporating Company Electronically Plus — the integrated MCA form used to incorporate a company in India. One form covers name reservation, company registration, DIN allotment, PAN, and TAN.

SPICe+ auto-generates PAN and TAN for your company, saving separate applications. Have all documents ready before your CA starts filling it — any error causes delays.

RelatedCINDINDSC

India's unified indirect tax system replacing VAT, service tax, and excise duty. Applies to supply of goods and services. Registration becomes compulsory once turnover crosses a limit that depends on what you sell and where — your CA can tell you which one applies.

Register for GST as soon as you cross the threshold — or even before if you have B2B clients, as they need your GST number to claim input credit. Unregistered businesses cannot collect GST.

RelatedITCGSTIN

A 15-digit unique identification number assigned to every GST-registered business. The first 2 digits are the state code, next 10 are the PAN, followed by entity code and check digit.

Your GSTIN must appear on all tax invoices. B2B clients will ask for this before they pay you — without it they cannot claim input credit.

RelatedGST

The GST you paid on your business purchases and expenses that you can offset against the GST you collect from customers. Reduces your net GST liability.

You can only claim input credit if your supplier has filed their GSTR-1. If your vendors don't file on time, you lose credit — which is why good vendors matter.

RelatedGST

The income tax return form specific to companies. Must be filed electronically with a Digital Signature Certificate. Due October 31 every year for the previous financial year. Companies must file even if they have zero revenue or are making a loss.

Loss returns must be filed on time — if you miss the deadline, you lose the ability to carry forward losses to offset future profits (which can cost you significantly in tax later).

RelatedTDS

Paying income tax in instalments during the year, instead of all at once when the return is filed.

RelatedITR-6TDS

A mechanism where the payer deducts tax at the time of payment and deposits it directly with the government. If you pay a contractor, freelancer, or professional above certain thresholds, you must deduct TDS.

Failing to deduct or deposit TDS makes your company liable for the full TDS amount plus interest. Quarterly TDS returns must be filed even if you had no deductions that quarter.

RelatedITR-6

A mandatory annual audit of your company's financial statements by an independent Chartered Accountant, required under the Companies Act. Different from the tax audit under the Income Tax Act.

You cannot file AOC-4 or hold your AGM without a completed statutory audit, so it has to be budgeted for every year.

RelatedAOC-4

A separate legal entity with limited liability for shareholders, where shares cannot be publicly traded. The most common structure for funded startups in India. Governed by the Companies Act 2013.

Required for VC/angel funding, ESOPs, and building institutional credibility. Higher compliance cost than other structures, but essential if you plan to raise investment.

RelatedLLPOPCESOP

A hybrid structure combining the flexibility of a partnership with limited liability protection. Lower compliance cost than Pvt Ltd. Cannot issue equity to investors.

Good for service businesses, consultancies, and professional firms that don't plan to raise VC funding. Cannot give ESOPs or issue equity — a major limitation for growth companies.

RelatedPvt LtdOPC

A Private Limited Company with a single shareholder and director. Designed for solo entrepreneurs. Files MGT-7A (simplified return) instead of MGT-7.

Good for freelancers or solo founders who want limited liability without a co-founder. But you'll need to convert to Pvt Ltd if you plan to raise funding or hire significantly.

RelatedPvt Ltd

The maximum amount of share capital your company is legally allowed to issue, as stated in your MOA. For example, ₹10,00,000 authorised capital at ₹10 face value = 1,00,000 authorised shares.

Set your authorised capital at 5–10× your initial paid-up capital. Increasing it later costs money and time. A common mistake is setting it too low, which requires an expensive amendment before you can issue shares to investors.

RelatedMOA

The amount of share capital that has actually been issued to shareholders and paid for. For example, if founders put in ₹1,00,000 and received 10,000 shares at ₹10 each, the paid-up capital is ₹1,00,000.

There is no legal minimum paid-up capital for a Private Limited company. Most founders use ₹1,00,000 to ₹10,00,000 as a starting point.

Related

A programme giving employees the right to buy company shares at a predetermined price (the "exercise price") in the future, after a vesting period. Used to attract and retain talent when cash salaries are limited.

Create an ESOP pool (10–15%) before investor negotiations — not after. If you create it post-investment, only founders get diluted, not the investors. Standard vesting: 4 years with 1-year cliff.

RelatedCap Table

The process by which a co-founder or employee earns their equity over time. Standard vesting for founders: 25% vests after year 1 (the cliff), then 1/48th vests each month for the next 3 years.

Always have vesting agreements with co-founders. If a co-founder leaves after 6 months without vesting, they walk away with nothing — protecting the company and other founders.

RelatedESOP

The minimum time a founder or employee must stay before any equity vests. Standard cliff is 1 year — meaning if they leave before 12 months, they receive 0% of their equity.

A 1-year cliff protects all parties. Without it, a co-founder could leave after 3 months with a significant equity stake but no real contribution.

RelatedESOP

A spreadsheet or record showing who owns what percentage of your company, including founders, employees (via ESOPs), and investors. Updated every time new shares are issued.

Investors will ask to see your cap table in the first meeting. Keep it updated from Day 1. A messy cap table is a major red flag that can kill a funding round.

RelatedESOP

The reduction in existing shareholders' ownership percentage when new shares are issued — whether to investors, employees (ESOP), or for any other reason. Your percentage goes down, but the absolute value may go up.

Dilution is inevitable and not inherently bad. A smaller slice of a bigger pie is worth more. Typical seed dilution: 10–25%. Series A: 15–25%. Always negotiate on valuation, not just percentage.

RelatedCap TableESOP

What your company is worth before an investor's money goes in. If an investor puts in ₹2 Cr at a ₹8 Cr pre-money valuation, the post-money valuation is ₹10 Cr and they own 20%.

Always agree on pre-money valuation first — not post-money. "I'm giving you 20% for ₹2 Cr" is ambiguous; "₹8 Cr pre-money" is precise.

Related

The company's value immediately after an investment is made. Post-money = Pre-money + Investment. The investor's ownership percentage = Investment ÷ Post-money valuation.

This is what determines exactly how much the investor owns. Make sure you're clear on whether a valuation number is pre- or post-money before signing anything.

Related

Simple Agreement for Future Equity — a document where an investor gives you money now in exchange for the right to convert it into equity at your next funding round, usually at a discount or with a valuation cap.

Common in early-stage Indian startups for angel rounds. Cheaper to issue than a priced round. Make sure you understand the valuation cap and discount rate before signing — they determine how much the investor gets.

Related

A loan from an investor that converts to equity at a future funding round, usually at a discount to the next round's price. Accrues interest until conversion.

Unlike a SAFE, a convertible note is debt until conversion — so the company technically owes this money. If you don't raise a next round, you may need to repay it.

RelatedSAFE

A non-binding document outlining the key terms of an investment deal — valuation, equity percentage, investor rights, and governance provisions. Becomes binding once both parties sign the final investment agreements.

The term sheet is just the starting point. The actual legal documents (SHA, SSA) are what you're legally bound by. Always have a startup lawyer review the term sheet before you negotiate.

Related

The right of investors to receive their money back (or a multiple of it) before founders get anything when the company is sold or wound up.

1× non-participating liquidation preference is standard and fair. Be wary of participating or 2×/3× liquidation preferences — they can leave founders with nothing in a moderate exit.

RelatedCap Table

An investor's right to invest additional money in future funding rounds to maintain their percentage ownership as the company grows.

Standard in most Indian term sheets. Means your early investors can keep their percentage in later rounds — you can't fully dilute them out even if you want to.

RelatedCap Table

A provision that taxed startup funding from Indian investors as "income from other sources" when the valuation exceeded fair market value. Abolished — Section 56(2)(viib) was removed by the Finance (No. 2) Act 2024, with effect from assessment year 2025-26.

It does not apply to money you raise now. The term is still in older articles, term sheets and advice, which is why it is here. It is no longer a reason to get DPIIT recognition either — the section itself is gone, for recognised and unrecognised startups alike.

RelatedDPIITSAFE

Recognition from the Department for Promotion of Industry and Internal Trade under the Startup India initiative. Unlocks significant tax benefits and government scheme access for eligible startups.

What it opens up: a 3-year income tax holiday (approved separately by the Inter-Ministerial Board), reduced patent and trademark fees, and Startup India Seed Fund support through approved incubators. Apply immediately after incorporation — it's free.

Related80-IAC

A provision allowing DPIIT-recognised startups to claim 100% deduction on profits for any 3 consecutive years out of the first 10 years of existence. Applied for separately after DPIIT recognition.

This could save lakhs in income tax in your growth years. Apply for DPIIT recognition first, then apply separately to the Inter-Ministerial Board (IMB) for 80-IAC certification.

RelatedDPIITITR-6

The predictable, recurring revenue your business generates every month from subscriptions or ongoing contracts. Does not include one-time payments. The most important metric for any SaaS business.

Every investor will ask for your MRR in the first 5 minutes of a pitch. ₹1L MRR = ₹12L ARR. Track MRR from the first paying customer.

RelatedARRLTV

Your total annualised recurring revenue. For most SaaS companies: ARR = MRR × 12. The primary valuation metric for growth-stage companies. Does not include one-time or variable revenue.

Indian VCs typically value early-stage SaaS at 5–15× ARR. Knowing your ARR is non-negotiable before any funding conversation.

RelatedMRR

The percentage of customers or revenue lost in a given period. Monthly churn of 2% means you lose 2% of your customer base or revenue every month.

High churn destroys growth. At 5% monthly churn, you lose over half your customers in a year. Investors look at churn before almost anything else in a SaaS business.

RelatedMRRLTVCAC

The total revenue you expect to generate from a single customer over their entire relationship with your company. LTV = Average Revenue Per Customer ÷ Monthly Churn Rate.

LTV must be significantly higher than CAC for a sustainable business. Most investors want LTV:CAC ratio of at least 3:1.

RelatedCACMRR

The total cost of acquiring a single paying customer, including all sales and marketing expenses. CAC = Total Sales + Marketing Spend ÷ New Customers Acquired in that period.

If your CAC is ₹10,000 and your LTV is ₹8,000, you're losing money on every customer. Know your CAC before scaling any marketing spend.

RelatedLTVMRR

The rate at which your company spends its cash reserves. Net burn = total cash spent minus revenue. If you spend ₹15L/month and earn ₹5L, your net burn is ₹10L/month.

Divide your cash in bank by your net burn rate to get your runway. Always know how many months of runway you have. Raise the next round when you have 9–12 months of runway remaining.

RelatedCACMRR

How many months your company can operate at the current burn rate before running out of cash. Runway = Cash in Bank ÷ Net Monthly Burn Rate.

Running out of runway = company dies. Fundraise when you have 9–12 months left — not 3. Investors can smell desperation.

RelatedMRR

The ratio of company valuation to annual revenue (ARR). Used by investors to value growth-stage companies. Example: ₹50L ARR at 10× revenue multiple = ₹5 Cr valuation.

Know your revenue multiple before any investor meeting. Indian SaaS at seed: 5–15×. At Series A: 8–20×. Depends heavily on growth rate and market size.

RelatedARR

Legal protection for your brand name, logo, or tagline that prevents others from using the same or confusingly similar marks. Registered with the Office of the Controller General of Patents, Designs and Trade Marks.

File for trademark registration early. DPIIT-recognised startups pay a reduced filing fee. Once registered, you can use the ® symbol and take legal action against infringers.

RelatedDPIIT