Investment Memo & CIM Writing

Yes. Where shares are issued to resident investors, the price must be at or above FMV computed under Rule 11UA of the Income-tax Rules 1962 (DCF or NAV method). For foreign investors, the price floor is FMV determined under the FEM (Non-Debt Instruments) Rules 2019, Schedule I — the memo must document the valuation basis and the CA certificate supporting it.

Section 56(2)(viib) of ITA 1961 was abolished with effect from April 1, 2025 (applicable from TY 2025-26 onward). Investor memos for rounds closing on or after that date no longer need to address the angel tax risk for resident investors. For earlier rounds (AY 2026-27 and prior), the section still applied and any existing demand or scrutiny must be disclosed.

The memo must confirm whether the sector falls under the Automatic Route or Government Route per FEM (Non-Debt Instruments) Rules 2019, Schedule I (for equity) or Schedule II (for convertible instruments). Pricing compliance under Rule 21 of those Rules, the FC-GPR filing timeline (within 30 days of share allotment per FEMA 20(R)), and any sectoral cap or conditionality under the FDI Policy must be stated explicitly.

The memo typically references audited financials under Companies Act 2013, Section 137 (mandatory filing of audited accounts with MCA). If the company is not yet liable to audit under Sec 44AB, IT Act 1961 (≡ §63, IT Act 2025) of ITA 1961 (turnover below threshold), the memo should state that and use management accounts with a caveat. Any projections included must be clearly labelled as unaudited and prepared by management.

Yes. Where promoter entities are LLPs, the investor memo should disclose LLP Act 2008 Section 31 (restrictions on transfer of partner interest) and confirm no lock-in or charge exists. For discretionary trusts holding shares, the beneficial ownership and trustee powers under the Indian Trusts Act 1882 and any compliance with PMLA 2002 beneficial ownership rules (PMLA Rule 9 and the Companies Act 2013 Section 89/90 significant beneficial owner filings) must be addressed.