💼 Behind the Scenes of a Funding Round: Insights for Founders & Investors

Dugain Advisors
Apr 22
3 min read

A funding round isn't just about closing a deal it’s about navigating a complex web of legal, financial, and compliance-related tasks. Founders are juggling investor expectations while ensuring internal readiness. Investors are safeguarding their interests by conducting thorough due diligence. At Dugain Advisors, we’ve been on both sides of the table and we understand how crucial it is to get the backend right.

🗂️ Key Considerations for Founders & Directors

📊 Cap Table Consistency
Ensure that all stakeholders legal, finance, founders, and investors are referring to the same cap table to prevent misalignment and last-minute delays.
📄 Disclosure Letters
These must be factual, dated, and carefully worded. Think of them as your legal safety net, not just a formality.
🧑‍💼 Employment & Consultant Agreements
Institutional investors scrutinize your team structure. Ensure all employment and consultancy agreements are up-to-date and ready to be shared.
📝 AOA and Resolutions
Any change in shareholding or structure should reflect in your Articles of Association and necessary board/shareholder resolutions must be passed in time.
🔄 Share Transfer Mechanics
All past share transfers should be accurately recorded mentioning date, parties, consideration, and how the transfer was effected.
🗃️ Data Room Hygiene
Maintain a clear, up-to-date, and well-labeled data room. Inconsistent documents or missing versions can erode investor trust.

🏦 Expectations from Institutional Investors

📑 Conditions Precedent Filings
Be ready with PAS-3, MGT-14, SH-7, share certificates, and board/shareholder resolutions as required by the deal.
📈 Valuation Report Matching Term Sheet
Ensure that the valuation report matches the deal’s commercial terms. A mismatch can trigger renegotiation or legal objections.
📨 Side Letters
These address items that are pending or in transition such as expired policies or delayed filings often backed with indemnities.
🧮 Updated Cap Table with Post-Money Holding
The revised cap table must reflect accurate post-investment shareholding, factoring in tranches, convertible instruments, or ESOPs.
🎯 ESOP/MSOP Structuring
Define your option pools well. Miscommunication about size, vesting schedules, or exercise prices can affect future rounds.
🛡️ Warranties and Representations
Institutional investors will insist on standard warranties. Negotiate these with full disclosure and proper carve-outs.
🔁 Conversion of Founder Loans
If founders have extended unsecured loans to the company, these often need to be converted into equity before or alongside the round.
🌐 Subsidiaries/Associate Companies
Investors may ask for key entities to be restructured into wholly owned subsidiaries or associate companies for better control and clarity.

🗂️ MCA Filing Procedures: What to Know

To alter authorised share capital and issue fresh shares, here’s what’s required:

Board Resolution to Increase Capital
General Meeting Notice and Agenda Circulation
Ordinary Resolution at Shareholder Meeting
MGT-14 Filing with RoC
Board Meeting for Issuance of Shares
Special Resolution for Allotment of Shares
Filing of Revised AOA, Valuation Report, Special Resolutions
Final Board Approval for Allotment
PAS-3 Filing with Share Certificates, List of Allottees
SH-7 Filing (if authorised capital was increased)

⚠️ Common Challenges & Pro Tips

Timelines Matter: Missed filings can delay funding. MCA approvals take time plan backward from your tranche date.
Follow Filing Order: Never jump ahead in sequence. For example, you can't allot shares unless AOA is updated and SH-7 is approved.
Backup Everything: Download receipts and maintain MCA tracking numbers.
Central Coordination: Assign one team or point of contact to track filings, due diligence documents, and data room versions.
Watch for Tranche Implications: Cap table and funding compliance needs to align for each phase of the investment.
Foundational Document Clarity: SSA, SHA, and ESOPs should align with board approvals and statutory filings.
Clear Communication: Ensure founders and investors agree on all CPs, timelines, and closing documents well in advance.

🤝 What Dugain Advisors Can Do for You

At Dugain Advisors, we bring startups and investors to the finish line with complete backend clarity and control. Whether you’re raising funds or investing, we ensure:

For Startups: