Overview
From the first ESOP grant to a Series A with a foreign VC, technology and software companies generate a continuous stream of corporate events that require precise secretarial execution. DPIIT recognition must be in place before Angel Tax exposure becomes a risk. FC-GPR must be filed within 30 days of allotting shares to a non-resident investor. The AoA must permit ESOPs before the first grant letter is signed. These are not optional compliance tasks — they are prerequisites to a clean cap table and a defensible due diligence record.
Key Compliance Obligations
ESOP Structuring (Section 62(1)(b))
Before any ESOP grant, the Articles of Association must contain an enabling clause, the Board must pass a resolution, and a special resolution must be approved by shareholders at an EGM. Grant letters must be executed individually with each employee. Every exercise triggers a PAS-3 allotment filing within 15 days.
FC-GPR — Foreign Investment Reporting
When shares are allotted to a non-resident investor (foreign VC, overseas angel), FC-GPR must be filed on the FIRMS portal within 30 days of allotment. The filing requires valuation certificate, board resolution, and foreign inward remittance certificate. Late filing attracts compounding under FEMA.
DPIIT Start-up Recognition
Recognition must be obtained before the first equity round from an Indian angel investor to avail the Section 56(2)(viib) Angel Tax exemption. The recognition application must be filed on the Start-up India portal and renewed if necessary. Certificate of Incorporation, MOA/AOA, and a brief business description are required.
Annual MCA Compliance
MGT-7 (Annual Return within 60 days of AGM), AOC-4 (Financial Statements within 30 days of AGM), DIR-3 KYC for all directors by 30 September, and minimum 4 board meetings per year with no 120-day gap.
Shareholder Agreements & AoA Alignment
SHA provisions relating to ROFR, anti-dilution, information rights, and board nomination must be mirrored in the AoA to be enforceable against third parties. Post-SHA execution, the AoA amendment requires a special resolution and MGT-14 filing within 30 days.
Common Compliance Failures
These are the gaps we most frequently encounter when onboarding technology & software clients — situations that require remediation before the company can present a clean compliance record to investors, lenders, or acquirers.
- ESOP granted to employees before AoA clause or special resolution — entire scheme legally defective
- Foreign investor allotment completed without FC-GPR — FEMA violation requiring compounding
- Series A SHA signed but AoA not updated — investor rights unenforceable against transferees
- DPIIT recognition obtained after angel round — Angel Tax exemption unavailable retrospectively
- Cap table reconstruction required for due diligence because allotment filings were missed
Key Risk
ESOPs granted without the mandatory AoA clause and special resolution are legally void — a finding that surfaces in every serious investor due diligence and can block a funding round.
How We Help
We provide end-to-end governance and compliance support for technology & software companies — from maintaining the annual compliance calendar to managing FEMA filings, structuring equity events, and preparing for investor due diligence. Every engagement is handled by a qualified governance and advisory professional with direct client access.