Term Sheet and SAFE Note Review · India
Lawyer-led review of term sheets, SAFE notes, iSAFE notes, CCPS, and convertible notes for Indian startups. Flag the clause you’d have missed, before you sign, not after. Handled entirely online by Bar Council-enrolled advocates.
Tell us what stage you’re at and what document you’ve been sent. A corporate lawyer will review it and call you back with a plain-language breakdown of what’s investor-friendly, what’s market-standard, and what you should push back on. No obligation.
A term sheet looks like a two-page formality. It isn’t. In Zostel Hospitality Pvt Ltd vs Oravel Stays Pvt Ltd (OYO) (2022), the Delhi High Court held that even though the term sheet in that case carried a “non-binding” preamble, the detailed conditions inside it, combined with how the parties actually conducted themselves afterward, created a de facto binding arrangement. The label on the document did not decide the outcome. The clauses, and the conduct, did.
Most founders read a term sheet once, focus on the valuation number, and sign. The clauses that actually determine what happens at exit, at a down round, or if the company runs into trouble sit further down the page: liquidation preference, anti-dilution, board composition, drag-along rights, and exclusivity. Getting a corporate lawyer to review the document before signature, not after, is the only point where you still have negotiating leverage.
This page covers term sheets, SAFE notes, iSAFE notes, CCPS, CCDs, and convertible notes issued by Indian startups, and what a proper legal review actually checks for. It sits alongside our wider work as a corporate law firm for startups in India, including our startup legal retainer service for ongoing counsel after the round closes.
This is the single most common mistake we see: a founder is sent a US-style SAFE (Simple Agreement for Future Equity) template and told to sign it as is. Section 43 of the Companies Act, 2013 recognises only two classes of share capital for an Indian company: equity shares and preference shares. A SAFE, which is neither debt nor equity under US law, has no direct legal basis on its own in India. It has to be housed inside a recognised instrument, almost always Compulsorily Convertible Preference Shares (CCPS).
iSAFE note. A standardised CCPS template launched by 100X.VC in July 2019, built for individual angels and accelerators. It typically carries minimal investor rights, no anti-dilution protection, no reserved-matters consent, and a nominal dividend, usually 1 to 2 percent a year, with conversion backstopped by the 20-year limit under Section 55.
CCPS SAFE note. The same base CCPS structure, but with institutional rights layered on top by a seed VC or angel fund, typically a liquidation preference (often 1x non-participating), broad-based weighted average anti-dilution, reserved-matters consent rights, and sometimes a board observer seat.
The difference between these two is not cosmetic. Signing an iSAFE thinking you got a CCPS SAFE’s protections, or the reverse, is exactly the kind of gap a term sheet review lawyer is meant to catch before signature.
CCPS (Compulsorily Convertible Preference Shares): an equity instrument, the legal backbone of SAFE-style investing in India. Converts on a priced round, a liquidity event, or the 20-year cap under Section 55. Typical rights include liquidation preference, anti-dilution, and reserved matters.
CCD (Compulsorily Convertible Debenture): a debt instrument that must convert to equity, converting on an agreed trigger event or maturity, carrying a coupon or interest and a conversion price in the meantime.
iSAFE (100X.VC template): a stripped-down, standardised CCPS built for speed, converting on the next priced round or the 20-year cap, with minimal to no investor rights attached.
US-style SAFE: not directly usable in India. It must be re-papered as CCPS before it has any legal effect under Indian company law.
The checklist changes by instrument. Here’s what each one gets checked against.
Valuation basis, liquidation preference, anti-dilution formula, ESOP pool timing, board composition and reserved matters, drag-along and tag-along, ROFR/ROFO, founder lock-in, information rights, and the exclusivity period, plus which clauses are binding.
Whether it’s a genuine iSAFE or a custom variant, what investor rights it does or doesn’t carry, the valuation cap and discount mechanics, the conversion trigger, and whether it’s structured to survive Indian company law.
Coupon or dividend rate, liquidation preference stacking against earlier rounds, anti-dilution protection, reserved matters requiring investor consent, and conversion mechanics against Section 55’s 20-year limit.
Coupon rate and whether it’s cumulative, conversion price and trigger event, redemption rights if conversion doesn’t happen, security attached to the debenture, and tax treatment on conversion vs redemption.
Whether the issue price meets the Fair Market Value floor, whether a SEBI-registered Merchant Banker or CA valuation is in place, whether the sectoral FDI cap is respected, and whether Form FC-GPR is ready to file within 30 days.
Real patterns we see in term sheets sent to Indian founders, and what they should say instead.
A clause requiring the option pool to be created before closing, sized as a percentage of post-money capitalisation, shifts the entire dilution cost of the pool onto the founders alone, before the investor’s own shares are counted. The fix: negotiate the pool’s size and timing explicitly, ideally calculated on a pre-money basis so the dilution is shared.
A full ratchet clause repricing the conversion price to match a down round’s price per share punishes founders disproportionately. Broad-based weighted average anti-dilution is the market-standard alternative, accounting for both the size of the down round and how many new shares are actually issued.
A drag-along right that lets a bare majority force a sale with no minimum price or founder consent threshold attached leaves founders exposed to a forced exit on bad terms. The fix is a minimum sale price or valuation floor, and often a higher consent threshold once founders and investors are both accounted for.
A 90-day no-shop clause with no fallback if the investor misses its own diligence milestones locks up the company for longer than necessary. Market standard is a 45 to 60 day exclusivity window that lapses automatically if the investor doesn’t meet agreed milestones on time.
No single statute defines the legal status of a term sheet in India, so enforceability comes down to how it is drafted and how the parties behave afterward, as Zostel vs OYO showed. Most well-drafted term sheets state plainly which clauses are binding and which are not.
Confidentiality, exclusivity or no-shop, governing law and jurisdiction, and cost allocation between the parties.
Valuation and investment amount, share structure and liquidation preference, board rights, anti-dilution provisions, and exit mechanics, until captured in the definitive Share Subscription Agreement and Shareholders Agreement.
The safest term sheets say this explicitly: “This term sheet is non-binding except for Clauses [X, Y, Z].” If yours doesn’t say that, the ambiguity itself is something a lawyer should flag before you sign, not after a dispute arises.
Any equity instrument issued to a non-resident investor triggers pricing and reporting requirements under the Foreign Exchange Management Act (FEMA) and the Non-Debt Instruments Rules, 2019. These sit on top of, not instead of, the Companies Act requirements.
The issue price cannot be below Fair Market Value, certified by a SEBI-registered Merchant Banker or a Chartered Accountant. A valuation cap set too low on a SAFE or CCPS note can put the entire structure in breach once a foreign investor is involved.
Must be filed via the RBI’s FIRMS portal within 30 days of allotment. Non-compliance can attract a penalty of up to three times the transaction value under FEMA.
CCPS is treated as already converted to equity for the purpose of computing foreign ownership limits under the Non-Debt Instruments Rules, so the cap has to be checked at issuance, not just at conversion.
Under Section 42 of the Companies Act, a private placement offer (Form PAS-4) must be issued before the offer, capped at 200 persons per financial year excluding qualified institutional buyers, with the return of allotment (Form PAS-3) filed within 30 days.
Under Section 247, a formal valuation report is required for the private placement, dated no more than 90 days before the board meeting approving the issue.
Four steps, usually turned around inside a few business days.
Share the term sheet, SAFE, iSAFE, CCPS, or CCD draft, along with the cap table and any prior round documents, through the form above or WhatsApp.
A corporate lawyer reviews every clause against current market standard and against the specific compliance requirements for your instrument and investor mix.
We walk you through the document on a call: what’s standard, what’s investor-favourable, what should be pushed back on, and which clauses are binding.
If you want us to negotiate directly with the investor’s counsel, or redline the document for signature, we do that as a next step under the same engagement.
Term sheet and note review is priced per document, based on complexity and whether foreign investors are involved, rather than as a flat fee, because a two-page iSAFE and a 20-page Series A term sheet with FEMA exposure are not the same job. Tell us what you have and we’ll quote a fixed fee before we start, so there are no surprises.
Full clause-by-clause review against current market standard, a written summary of binding vs non-binding clauses, a FEMA and Companies Act compliance check where a foreign investor or CCPS/CCD instrument is involved, and a call to walk through the findings.
Direct negotiation with the investor’s counsel, drafting the definitive Share Subscription Agreement or Shareholders Agreement, and FC-GPR or PAS-3 filing support after the round closes.
For startups expecting more than one round of documents this year, our startup legal retainer service covers this kind of review on an ongoing basis alongside contract and compliance work.
My Legal Pal is a corporate law firm built for founders, not a generalist practice that occasionally sees a term sheet. Review work is led by Prakhar Rai, an Advocate enrolled with the Bar Council of India and an alumnus of NLSIU Bangalore.
We know the difference between an iSAFE and a CCPS SAFE note before we open the document, so the review is fast and precise, not a first-principles education.
Foreign-funded rounds get checked against FEMA pricing and reporting rules as standard, not as an afterthought once something goes wrong.
You get a call and a written summary in plain English, not a memo full of citations you have to decode yourself.
If you need a lawyer on retainer for the rounds that follow, our corporate lawyers in India service picks up where this review leaves off.
More of what we do for founders raising capital in India.
Understand the instrument before you review the document.
Compare the two structures side by side.
Fractional general counsel for the rounds that follow.
Ongoing corporate counsel, retainers from ₹10,000/mo.
Which model fits your stage.
This page is written and reviewed by Prakhar Rai, an advocate enrolled with the Bar Council of India and the founder of My Legal Pal. An alumnus of the National Law School of India University (NLSIU), Bangalore, with a Master of Business Laws, Prakhar has over a decade of experience in contract and commercial law, advising startups, technology companies, SMEs, and enterprises across India on fundraising documentation, from term sheets and SAFE notes to CCPS and Series A definitive agreements.
Reviewed for legal accuracy by Prakhar Rai, Advocate (Bar Council of India). Last updated: September 2026.
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