‘SAFE’ Agreements in India: What Founders and Investors Must Know | Doing Business in India | Episode 29

The SAFE (Simple Agreement for Future Equity) transformed early-stage fundraising in the United States by allowing founders to raise capital quickly without negotiating a valuation upfront. While the instrument has been the choice for many start-ups and investors globally, it cannot be replicated in India in the same form. Indian company law and exchange control regulations impose a number of requirements that prevent a SAFE from operating as it does in the United States.

In this episode of the Veyrah Law series, Ajay Joseph (Partner at Veyrah Law) explains why the SAFE is not recognised under Indian law and examines the alternatives available to founders and investors when structuring early-stage investments in India.

The episode examines the two instruments that have evolved to achieve many of the commercial objectives of a SAFE: the Compulsorily Convertible Preference Share (CCPS) and the Compulsorily Convertible Debenture (CCD). While both are recognised under Indian company law and exchange control regulations, they differ from a SAFE in one fundamental respect: the conversion price must be fixed or determinable at the time of issuance, typically by reference to a Fair Market Value (FMV) floor.