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The exchange of relevant business information between parties plays a crucial role for the success or failure of any Mergers and Acquisition (“M&A”) or Private Equity (“PE”) deal. Both parties, especially the buyer, rely on the authenticity of such information for closing the deal. In this context, the role of representations and warranties is critical...

In order to avoid the ‘Pricing Guidelines’ [discussed previously in Part 4 of this story], the additional shares to be allotted to the original investor of the Indian startup company to comply with the Anti-Dilution Rights must be issued under the ‘rights issue’ mechanism under Section 62 (1) (a) of the Companies Act, 2013 instead...

Contravention of FEMA (TISPRO) Regulations, 2017 It is clear from the ‘Introduction’ [Part 1 of this story] that, if the Anti-Dilution Rights gets triggered, a startup company must issue additional shares to the investor exercising such Anti-Dilution Rights at no price or at a price lower than the value at which the fresh subscription has...

In Part 1 of the Anti-Dilution Rights story, we discussed the Anti-Dilution Rights in general, and identified that there are two mechanisms for Anti-Dilution Rights protection: i. Full Ratchet Method; and ii. Weighted Average Method. In this Part 3, we will dig deeper into the Weighted Average Method. The Weighted Average Method of calculation is...

In Part 1 of the Anti-Dilution Rights story, we discussed the Anti-Dilution Rights in general, and identified that there are two mechanisms for Anti-Dilution Rights protection: i. Full Ratchet Method; and ii. Weighted Average Method. In this Part 2, we will dig deeper into the Full Ratchet Method. The Full Ratchet Method is a simpler...

In India, the inclusion of ‘Anti-Dilution Rights’ in definitive agreements governing a startup or venture capital deal is quite common. These Anti-Dilution Rights provide protection to the investors against the dip in value of their newly purchased shares in the future event of subsequent investments in the startup company. This is actually quite fair in...