A and B are the two experienced professionals in the Information Technology (IT) industry. They have decided to start their own software development business. They aim to provide innovative software solutions to various

CS Executive · Setting Up of Business, Industrial and Labour Laws · PYQS · June 2024
A and B are the two experienced professionals in the Information Technology (IT) industry. They have decided to start their own software development business. They aim to provide innovative software solutions to various businesses while fostering a culture of creativity and collaboration within their organization. As they embark on their entrepreneurial journey, they encounter various challenges and opportunities along the way. A and B need to decide on the legal structure for their business. They are considering forming a Limited Liability Partnership (LLP) to protect their personal assets and enjoy tax benefits. They get the name, "Technical Solutions LLP" reserved by the jurisdictional Registrar. After filing the prescribed e-form, FiLLiP along with the required documents attached thereto, "Technical Solutions LLP" is registered. "Technical Solutions LLP" requires initial capital to cover the startup costs, such as office space, equipment, and hiring employees. By leveraging a combination of personal resources, support from friends and family, investments from angel investors, crowdfunding, and strategic partnerships, A and B secure the necessary startup funds for "Technical Solutions LLP." A and B gather the necessary documents for GST registration of "Technical Solutions LLP". After filling the GST registration application form on the GST portal and uploading the required documents as specified in the application form, the GST Registration Certificate of "Technical Solutions LLP" is received electronically through the GST portal. With a growing demand for its services, "Technical Solutions LLP" embarked on a phase of aggressive expansion, opening new offices in strategic locations and investing in infrastructure and technology upgrades. It introduced innovative solutions leveraging emerging technologies such as Artificial Intelligence (AI), blockchain, and cloud computing to stay ahead of the competition. Recognizing the need for additional capital to fuel its ambitious growth plans, A and B deliberated on the possibility of converting the LLP into a private limited company to raise capital, enhance visibility, and facilitate future expansion. After careful consideration and thorough preparation, "Technical Solutions LLP" has initiated the process of converting into a private limited company, adhering to regulatory requirements and compliance standards. The name approval for the company, "Technical Solutions Pvt. Ltd." has been received from the Registrar of Companies. After filing the required form along with the necessary documents, the company, Technical Solutions Pvt. Ltd. is incorporated under the Companies Act, 2013 by taking over the business of "Tech Solutions LLP". In view of the above, answer the following: What are the key considerations for "Technical Solutions LLP" when seeking investments from angel investors to finance its operations?

Answer & Explanation:

The key considerations for "Technical Solution LLP" when seeking investments from angel investors to finance its operations are as follows: Angel investors are usually individuals or a group of industry professionals who are willing to fund the venture in return for an equity stake. As regulation 19F of SEBI (Alternative Investment Funds) Regulations, 2012, SEBI has made the following restrictions applicable to angel funds investing in an Indian company: Angel funds shall invest in startups which: are not promoted or sponsored by or related to an industrial group whose group turnover exceeds ₹300 crore; and are not companies with family connection with any of the angel investors who are investing in the company. Investment by an angel fund in any venture capital undertaking shall not be less than ₹25 Lakhs and shall not exceed ₹10 Crores. Investment by an angel fund in the venture capital undertaking shall be locked-in for a period of one year. Angel funds shall not invest in associates. Angel funds shall not invest more than twenty-five per cent of the total investments under all its schemes in one venture capital undertaking: Provided that the compliance to this sub-regulation shall be ensured by the Angel Fund at the end of its tenure. An angel fund may also invest in the securities of companies incorporated outside India subject to such conditions or guidelines that may be stipulated or issued by the Reserve Bank of India and the Board from time to time.

Topics: Startup Funding

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