Company basics for humansIn plain words A company is a separate legal person. Directors and shareholders are not the same thing as the company's bank account.
When it matters: Unpaid invoices, founder fights, share dilution, or a firm that shuts and leaves salaries hanging.
In India, people say 'company' for everything from a kirana GST registration to a funded startup. Legally, a company under the Companies Act is different from a sole prop, a partnership, or an LLP. The company has its own CIN, its own PAN, and its own ability to own assets and owe money.
Shareholders own shares. Directors run (or oversee) the company. Employees work for wages. One person can wear two or three hats, which is why early startups feel informal until money or ego arrives. Then the hats matter.
Limited liability means, in honest cases, your personal house is not automatically sold to pay company suppliers. That shield is weaker if people mix personal and company money, forge papers, or run clear fraud. Courts can look through the 'corporate veil' in serious abuse, but that is a fight, not a slogan.
Day-to-day India: banks, landlords, and big vendors often prefer a Pvt Ltd or LLP because paper trails exist. That does not make the business honest. It only means there is a filing history you can check on the MCA portal.
How it usually works
- Promoters decide a structure and name, get DIN/DSC where needed, and file incorporation with MCA (or register LLP / partnership under other laws).
- After incorporation, the company opens a bank account, gets GST if required, and starts contracting in its own name.
- Board or designated partners approve big decisions. Ordinary ops often run on authorised signatories.
- Annual returns, financial statements, and event-based filings keep the company 'alive' on MCA records.
- If the company owes money, creditors chase the company first. Personal guarantees and fraud claims are separate tracks.
- Winding up, strike-off, or insolvency are formal exits. Ghosting vendors is not a legal exit.
Remember
- Ask for CIN / LLPIN and verify on the MCA portal before large deals.
- Who signs the contract matters. Match the signatory to a board resolution or LLP agreement authority.
- Shareholding percentage is not the same as salary rights or founder 'feelings'.
- Mixing personal UPI and company revenue destroys both tax peace and dispute evidence.
- Oppression and mismanagement remedies exist for minority shareholders in serious cases, but they are court-heavy.
- Employees should still keep appointment letters even in a 'flat culture' startup.
- Always separate: company debt, personal guarantee, and criminal cheating allegations.
Examples
Vendor paid to 'founder UPI'Situation: A Pune packaging supplier delivers cartons to a D2C brand. The founder says pay to his personal UPI 'for speed'. Three invoices later, the company disputes the debt and claims it never received official invoices.
Wrong move: Keep supplying on WhatsApp trust and accept only personal UPI without a company PO or GST invoice.
Better move: Insist on a company purchase order, GST invoice to the company name, and bank credit to the company account. If they force personal UPI, treat it as a red flag and get written confirmation that it is company payment.
Why: Your recovery story is stronger when the paper trail names the company. Personal UPI fights become 'he said / she said' plus tax mess.
Co-founder thinks salary equals ownershipSituation: Two friends incorporate in Bengaluru. One owns 60% shares but takes no salary. The other owns 40%, draws salary, and tells the team 'I am the boss'. When funding talk starts, the 40% founder demands equal shares 'because I worked more hours'.
Wrong move: Fight only on WhatsApp and threaten to lock the other out of email without reading the Articles and SHA.
Better move: Open the incorporation docs, cap table, and any shareholders' agreement. Separate unpaid founder compensation talks from share transfer talks. Document both.
Why: Sweat does not automatically mint equity. Equity moves by allotment or transfer under company rules, not by late-night anger.
Office lease in personal nameSituation: A Delhi SaaS Pvt Ltd grows fast. The director signs the co-working lease in his personal name 'to save time'. Later the company stalls rent. The landlord sues the director personally.
Wrong move: Assume limited liability covers every paper you sign with your own name.
Better move: Put major leases and loans in the company name, or understand clearly when you are giving a personal guarantee.
Why: The company shield does not protect signatures you made as yourself. Read the party name on page one.
Client checks CIN after ghostingSituation: A Hyderabad agency is owed ₹4.8 lakh. The 'company' stops answering. The agency finally checks MCA and finds the entity was never incorporated. It was only a trade name on Instagram.
Wrong move: Sue 'the brand name' without confirming the legal entity.
Better move: Verify CIN/GSTIN before work starts. If there is no company, your claim is against the individuals who contracted with you.
Why: You cannot attach a CIN that does not exist. Early verification saves months of chasing air.
First steps
- Before you invest or partner: read the share agreement, cap table, and who can sign cheques.
- As a vendor: get purchase orders, GST invoices, and written payment terms.
- As an employee: keep appointment letter, salary slips, and PF / ESI proofs.
- Search the company on the MCA portal. Note status: active, strike-off, or defaulting.
- Write one page: who owns what, who directs, who signs money, who holds IP.
Papers to keep
- Certificate of Incorporation / LLP registration proof
- PAN and GST certificate of the entity
- Articles of Association / LLP agreement (as applicable)
- Cap table or register of members summary
- Board resolution for authorised signatories
- Purchase orders, invoices, bank statements
Myths
- Myth: 'Pvt Ltd means nobody can touch directors.' Reality: limited liability is real for honest ops, not a licence for fraud or personal guarantees.
- Myth: 'WhatsApp yes is a shareholders' agreement.' Reality: equity and IP need proper allotment and written terms.
- Myth: 'If the company shuts, all dues vanish.' Reality: creditors, labour, and tax trails can still follow process. Personal guarantees survive.
Warnings
- Do not sign blank share transfer forms or blank board resolutions.
- Do not use company money for personal holidays without books. That becomes both tax and partner ammunition.
- This is not advice on which entity to register. Speak to a CA/CS and, for disputes, a lawyer.
Words used here
- CIN
- Corporate Identity Number. Unique ID of a company on MCA records.
- Limited liability
- In normal cases, owners are not personally liable for all company debts beyond what they invested or guaranteed.
- Corporate veil
- The legal separation between company and people. Courts may look through it in fraud or serious misuse.
- Cap table
- Who owns how many shares, and on what terms.
Related: Private Ltd vs LLP · Startup hygiene · Bank / money guides
Private Ltd vs LLP (plain choice map)In plain words Private Limited and LLP are both popular for small businesses, but ownership, fundraising, and compliance feel different.
When it matters: You are incorporating with friends, a consultant says 'just do Pvt Ltd', or an investor asks why you are still an LLP.
A Private Limited company has shares. Ownership is divided into share percentages. Investors, ESOPs, and future funding rounds usually prefer this shape because share mechanics are familiar.
An LLP (Limited Liability Partnership) has partners and an LLP agreement. It can be lighter for professional firms and some bootstrapped businesses. Raising classic venture equity is often harder because investors want shares, not partnership units.
Compliance load is not zero for either. MCA filings, tax, and GST still exist. 'LLP has no compliance' is café folklore.
Liability is limited in both, with the usual fraud and guarantee exceptions. The real difference for most founders is fundraising path, ESOP culture, and how exits are documented.
How it usually works
- Map your next 3 years: only client work, or outside investment and ESOPs?
- If investment and ESOPs are likely, many founders lean Pvt Ltd after talking to a CA/CS.
- If it is a small professional practice with stable partners, LLP often gets discussed.
- Draft the SHA (for company) or LLP agreement before money and IP move.
- Register, open bank account, align GST and invoicing with the chosen entity.
- Revisit structure before a priced round. Converting later costs time and fees.
Remember
- Investors usually understand Pvt Ltd share math faster than LLP partnership math.
- ESOPs are a company culture tool. LLP employee 'skin in the game' needs careful drafting.
- Partner dispute rules live in the LLP agreement. Shareholder fights live in AoA + SHA + Companies Act remedies.
- Bank loans and vendor KYC accept both, but each bank has its own comfort list.
- Tax outcomes differ by case. Do not copy a Twitter thread. Ask a CA with your numbers.
- One-person company and partnership still exist as other options. Do not pretend only two doors exist.
- Changing structure later is possible in some paths, but messy if IP and contracts are sloppy.
Examples
Agency stuck as LLP before seedSituation: A Mumbai content agency registers as LLP. A seed investor loves the traction but stalls because their fund term sheet assumes preference shares in a Pvt Ltd.
Wrong move: Promise 'we will convert next week' without understanding timelines, tax, and contract novation.
Better move: Ask counsel/CA for a conversion or new-company plan with dates. Pause big IP transfers until the structure matches the money.
Why: Fundraising friction is often structure friction. Surprise conversions burn runway.
Two doctors choose LLP on purposeSituation: Two clinic partners in Jaipur want shared liability protection, clear profit split, and no ESOP plans. Their CA suggests LLP with a tight agreement.
Wrong move: Copy a Pvt Ltd template from a startup WhatsApp group and force it.
Better move: Match entity to actual goals: profit share, admission/retirement of partners, and non-compete limits that are lawful and practical.
Why: The 'best' entity is the one that fits your money path, not the one that sounds premium on LinkedIn.
ESOP promise on an LLPSituation: A Noida product team promises '1% ESOP' to an early engineer while still an LLP. Offer letters wave at equity that does not legally exist as shares.
Wrong move: Use the word ESOP loosely to retain talent.
Better move: Either incorporate a company path for real options, or write a clear bonus / phantom plan with a lawyer so nobody is misled.
Why: Misleading equity talk becomes employment and contract trouble later.
First steps
- Write goals: funding, hiring equity, partner exits, and compliance budget.
- Meet a CA/CS with that one-pager. Ask costs for year one and year three.
- Read a sample SHA vs LLP agreement side by side for dispute clauses.
- Do not incorporate on name availability alone.
Papers to keep
- Draft business plan / funding timeline
- Proposed ownership split
- IP list (code, brand, content) and who created it
- Sample SHA or LLP agreement checklist
- Name reservation and DSC/DIN readiness notes
Myths
- Myth: 'LLP means zero ROC headache.' Reality: LLP still has filings and partner responsibilities.
- Myth: 'Pvt Ltd automatically gets funding.' Reality: traction and governance matter more than the certificate.
- Myth: 'We can fix structure after the cheque clears.' Reality: sometimes, but often the cheque waits for structure.
Warnings
- Do not register in a friend's DSC login culture. Control your own DIN/DSC.
- Stamp paper and templates from random Telegram channels create invalid or dangerous clauses.
- Entity choice has tax and labour side effects. Get professional numbers for your case.
Words used here
- Pvt Ltd
- Private Limited company with share capital, limited by shares under company law.
- LLP
- Limited Liability Partnership. Partners run it under an LLP agreement with limited liability features.
- ESOP
- Employee stock option plan. Usually a company-share concept, not a casual promise.
- SHA
- Shareholders' agreement. Private contract among shareholders about control, exits, and transfers.
Related: Company basics · Startup hygiene
Founder fights without burning the companyIn plain words When co-founders clash over equity, roles, money, or credit, paper and process beat public drama.
When it matters: One founder freezes the bank login, another claims 50% forever, or someone is locked out of GitHub after a fight.
Most Indian early teams start on friendship. Friendship is not a dispute resolution clause. When revenue or funding appears, unspoken expectations explode: who is CEO, who owns IP, who can dilute whom, who gets salary first.
Company law and your SHA/AoA decide share transfers, board seats, and deadlock tools. Criminal complaints for 'cheating' between founders are sometimes filed in anger. Mixing civil company disputes with criminal pressure can backfire and needs careful counsel.
Practical survival: keep the company operable, protect customer data, and stop unilateral asset grabs while you negotiate. Destroying the product to punish a partner often destroys both of your recoveries.
Minority shareholders in companies have remedies against oppression and mismanagement in serious cases. That is not a magic wand for every quarrel about tone in Slack.
How it usually works
- Freeze impulsive moves: no mass customer emails blaming the co-founder, no wiping servers.
- Collect docs: incorporation, SHA, vesting, IP assignment, bank authorisations, cap table.
- List concrete disputes: money taken, equity claim, role claim, IP ownership, hiring authority.
- Try structured negotiation or mediation with a written agenda.
- If talks fail, counsel maps company petition routes, contract claims, and any genuine criminal angle separately.
- Update banks, hosting, and domain locks only through lawful authorised process, not revenge.
- Document every interim agreement with dates and signatures.
Remember
- Vesting and cliff exist so early exits do not permanently skew ownership.
- Board decisions need proper process. A café chat is not always a valid board meeting.
- IP built for the company should be assigned to the company in writing.
- Deadlock clauses (buy-sell, casting vote, mediation) are cheaper than war.
- Salary arrears among founders are separate from share claims. Track both.
- Do not recruit employees into faction wars. It creates POSH, labour, and defamation risks.
- Public LinkedIn callouts feel good for ten minutes and bad in discovery.
Examples
GitHub hostage in IndoreSituation: After a fight, Founder A changes all repo access and tells clients the product is 'under new ownership' though shareholding is still 50-50.
Wrong move: Founder B files police complaints the same night without paper, then deletes production backups in retaliation.
Better move: Preserve evidence of lockout, assert company ownership of IP in writing, demand restoration through counsel, and avoid destroying customer data.
Why: Courts and clients care about continuity and title. Mutual sabotage makes both founders look reckless.
Secret second companySituation: While still a director, one founder incorporates a rival firm in Surat and moves three paying clients over quietly.
Wrong move: Only post stories calling them a thief, with no contract trail.
Better move: Gather client migration proof, bank trails, and fiduciary duty facts. Speak to a company/commercial lawyer about civil remedies and any criminal angle based on facts, not vibes.
Why: Diverting opportunities can be a serious governance breach. Evidence beats insults.
Angel money without SHASituation: A Chennai duo takes ₹25 lakh from an uncle as 'angel'. No SHA. Uncle later demands 40% and operational veto because 'family'.
Wrong move: Treat family money as informal forever.
Better move: Document the instrument: loan vs equity, valuation, rights, and exit. Fix paperwork even if late, with everyone signing.
Why: Unclear capital is the number one family-business explosion kit.
First steps
- Export cap table, bank signatory list, and domain/hosting owner list today.
- Stop new equity promises until disputes are listed on one page.
- Propose a cooling-off written protocol: who approves spend above a limit.
- If safety is at risk (threats), prioritise personal safety and legal help over 'saving the startup story'.
Papers to keep
- SHA / AoA / LLP agreement
- Share certificates or allotment records
- IP assignment and employment contracts
- Bank board resolutions and net-banking authority
- Slack/email threads with dates (export, do not edit)
- Founder salary ledgers
Myths
- Myth: 'I built the code so I own the company.' Reality: employment/IP assignment and share register decide more than sweat narrative.
- Myth: 'Calling the police automatically freezes their shares.' Reality: share title does not vanish because of a complaint copy.
- Myth: 'Deadlock means the louder founder wins.' Reality: deadlock without a clause means paralysis and value death.
Warnings
- Do not forge signatures on share transfers. That is a crime path.
- Do not leak customer personal data in a founder war.
- Harassment of staff during a founder fight can trigger POSH and labour claims against the company and individuals.
Words used here
- Vesting
- Equity earned over time so early leavers do not keep a full forever stake by default.
- Deadlock
- When equal or blocking votes stop decisions. Needs a pre-agreed unlock method.
- Oppression remedy
- Company-law path for certain minority shareholder grievances against unfair conduct. Specialist counsel territory.
- Fiduciary duty
- Duty of directors to act in the company's interest, not secretly against it.
Related: Startup hygiene · Director liability basics
Unpaid vendor: chasing a company for moneyIn plain words When a company does not pay your invoice, you need paper, deadlines, and the right forum, not only voice notes.
When it matters: Your MSME invoice is 90 days late, a startup ghosts after delivery, or accounts says 'founder is travelling' forever.
Vendor claims are usually civil or commercial recovery: contract, invoice, delivery proof, and acknowledgement. Sometimes there is also a bounced cheque path under negotiable instruments law, or a cheating angle if induction was dishonest from day one. Do not invent crime to shortcut a pure credit delay. Get facts checked.
MSME suppliers may have interest and facilitation routes under MSME frameworks when correctly registered and documented. Registration status and Udyam details matter. Folklore about automatic 3x penalties needs verification for your invoice facts.
Against a company, send notices to the registered office and the email used in contracts. Soft reminders help relationships. Formal notice builds a court-ready timeline.
If the company is insolvent or in CIRP talk, individual chase strategy changes. Insolvency is a collective process. Ask counsel before you attach assets in your head.
How it usually works
- Assemble PO, invoice, delivery challan / acceptance mail, GST filings, and ledger.
- Send a clear demand with amount, due date history, and a short payment deadline.
- Escalate to a lawyer's notice if ignored. Keep postal / email proof.
- Evaluate forums: commercial suit, MSME facilitation (if eligible), summary routes where available, cheque bounce if a cheque exists.
- Check MCA status and registered address before filing.
- Consider settlement with written consent terms and payment schedule.
- Do not keep supplying large fresh stock on hope while old dues rot.
Remember
- Credit period should be written. 'Net 30' on invoice helps more than verbal 'don't worry'.
- Part payments and written acknowledgements can matter for limitation strategy. Ask a lawyer about dates.
- GST e-invoice and e-way bill trails help prove supply in goods cases.
- Personal guarantee from a director, if any, is a separate recovery lever.
- Holding goods or login access as ransom can create counterclaims. Use contract rights carefully.
- Startup 'runway problems' are not a legal defence to a clear debt.
- Keep emotion out of the notice. Numbers and dates win.
Examples
Printer in Tirupur unpaid by brandSituation: A garment printer completes a rush order for an Instagram brand's Pvt Ltd. Payment slips from 45 days to 5 months. The brand keeps ordering 'one last batch'.
Wrong move: Keep printing to protect the relationship while dues cross your working capital.
Better move: Pause new work, send a ledger with a deadline, and move to formal notice. Offer a written settlement schedule only against part payment upfront.
Why: Hope supplies are how small manufacturers fund someone else's inventory.
SaaS tools unpaid, access cutSituation: A B2B tool vendor in Bengaluru shuts the dashboard after non-payment. The customer claims 'illegal shutdown' and threatens consumer court even though it is a business licence.
Wrong move: Trade insults on Twitter Spaces.
Better move: Point to the contract's suspension clause, share invoice trail, and negotiate a restart against clearance. Keep suspension logs.
Why: Contractual suspension rights are stronger when the clause and notices exist.
Cheque bounce after 'good faith'Situation: A Nagpur dealer accepts a post-dated cheque. It bounces. The purchaser asks for more time and another cheque.
Wrong move: Return the bounce memo and wait endlessly without preserving the instrument trail.
Better move: Preserve bank memo, send the required notice within timelines under counsel guidance, and decide civil plus instrument strategy with a lawyer.
Why: Cheque bounce law is deadline-sensitive. Casual delay kills options.
First steps
- Export a clean ledger PDF with invoice numbers and due dates.
- Mail a polite but firm demand to accounts + director email + registered office.
- Stop additional credit exposure.
- Verify company CIN and address on MCA.
- If MSME-registered, check facilitation options with your documents ready.
Papers to keep
- Purchase orders / work orders
- Tax invoices and delivery proofs
- Email or WhatsApp acceptances (export with timestamps)
- Bank statements showing non-receipt or part payments
- MSME / Udyam certificate if claiming that route
- Any personal guarantee or security cheque papers
Myths
- Myth: 'WhatsApp threat of FIR guarantees next-day payment.' Reality: empty criminal threats can hurt your credibility.
- Myth: 'Director's home can always be attached on day one.' Reality: company debt and personal liability are different unless guarantee or veil-lifting facts exist.
- Myth: 'Limitation never starts if we keep chatting.' Reality: limitation rules are technical. Get dates checked.
Warnings
- Do not fabricate delivery challans. Fraudulent evidence destroys real claims.
- Be careful with public defamation posts naming individuals while a commercial dispute is unpaid.
- If insolvency proceedings have begun, unilateral recovery moves need specialist advice.
Words used here
- PO
- Purchase order. Buyer's written ask to supply on stated terms.
- Ledger confirmation
- Written acceptance of balance due. Useful evidence when obtained properly.
- MSME facilitation
- Routes that can help micro and small suppliers recover delayed payments when eligibility and process fit.
- Registered office
- Official address on MCA records for serving notices on a company.
Related: Company basics · Write a complaint
Director liability basicsIn plain words Directors are not automatically guilty of every company bill, but some failures and frauds can follow them personally.
When it matters: You are asked to become a 'sleeping director', a cheque bounces, GST notices arrive, or someone threatens to make directors personally liable.
Limited liability protects shareholders and, in many ordinary contract debts, keeps personal assets separate. Directors still owe duties: act honestly, avoid conflicted secret profits, and follow filing and statutory obligations that attach to their role.
Personal exposure often comes from: personal guarantees, cheque signatures, unpaid statutory dues in certain regimes, tax defaults with specific attachment rules, environmental or labour prosecutions where officers are named, and fraud findings. Exact exposure depends on the statute and facts.
A 'name lending' director who never attends meetings still may face questions if they stayed on the DIN rolls while misconduct happened. Sleeping is not a perfect shield.
Resigning properly with MCA filings matters. Oral 'I quit' in a WhatsApp group is weak if ROC still shows you as director.
How it usually works
- Before accepting directorship: read the company's filing history, debt, and who else signs money.
- Clarify role: executive vs non-executive, and what you actually control.
- Never sign blank cheques or blank resolution pages.
- If something smells wrong, demand board minutes and recorded dissent where appropriate.
- If exiting, file resignation/DIR forms through proper process and keep acknowledgements.
- If a notice names you personally, note the statute, due date, and get counsel early.
Remember
- Ordinary trade credit of the company is usually company debt first.
- Personal guarantee turns company debt into your debt for that loan or lease.
- GST, TDS, PF, and similar dues can create officer-level pain depending on role and law.
- Fraud, diversion of funds, and fake invoicing are not covered by 'but it was Pvt Ltd'.
- DIN KYC and director KYC lapses can disqualify or block you from other boards.
- Independent directors have a different risk story, not a zero-risk story.
- Insurance (D&O) exists for some boards. Startups often skip it until too late.
Examples
Cousin as sleeping directorSituation: A Kolkata trader puts his cousin as director to meet bank formalities. Cousin never sees books. Years later, GST fake-invoice allegations name both directors.
Wrong move: Cousin says 'I only lent my PAN, I am not involved' with no resignation trail.
Better move: Do not lend directorship casually. If already on board, resign formally, keep filings, and get independent legal advice on notices.
Why: DIN on MCA is public. Disclaimers in family chats do not rewrite the register.
Lease personal guaranteeSituation: A Jaipur director signs a warehouse lease guarantee to 'help the company'. Rent defaults. Landlord enforces against the director.
Wrong move: Argue limited liability as if the guarantee page did not exist.
Better move: Negotiate guarantee caps, tenure limits, and release conditions before signing. Track company rent so personal risk is not a surprise.
Why: Guarantees are how landlords and banks pierce the comfort of 'Pvt Ltd' with your consent.
Resignation not filedSituation: A Hyderabad CTO resigns by email after a fight. Finance never files the form. Two years later a labour prosecution notice still lists the CTO as director.
Wrong move: Ignore the notice assuming HR handled it.
Better move: Check MCA director signatory details yourself. Fix filings. Reply to notices with resignation evidence and counsel.
Why: Public records beat memory. Confirm exit on the portal.
First steps
- Pull your DIN details and list of companies where you are shown as director.
- Collect appointment letters, Form filings, and any personal guarantees you signed.
- For any personal notice: calendar the reply date before debating merits on WhatsApp.
- If you are only a name on paper, treat exit as urgent hygiene, not drama.
Papers to keep
- DIR appointment / resignation filings and challans
- Board minutes where you dissented or were absent
- Copies of personal guarantees and indemnity letters
- Cheque books / authorisation matrices
- Notices from tax, labour, or regulators naming you
Myths
- Myth: 'Non-executive means never liable.' Reality: depends on knowledge, duties, and the specific law.
- Myth: 'I can erase liability by deleting my LinkedIn title.' Reality: MCA and signed papers matter more.
- Myth: 'All directors go to jail if GST is late once.' Reality: Do not panic from forwards. Read the actual notice with a professional.
Warnings
- Never accept directorship for cash without diligence. It is a common trap.
- Do not backdate resignations. Fix process cleanly.
- This section cannot tell you your personal exposure in a live notice. That needs a lawyer with the papers.
Words used here
- DIN
- Director Identification Number. Required for company directors.
- Personal guarantee
- Your promise to pay if the company defaults on a specific obligation.
- D&O insurance
- Directors and officers liability cover. Policy wording decides what is actually covered.
- Disqualification
- Legal bar on acting as director in situations set out in company law (for example certain defaults). Check current status with a professional.
Related: MCA filings hygiene · Founder fights
Startup hygiene (so you do not die in year two)In plain words Clear ownership, clear roles, clear money trail. Friendship is not a shareholders' agreement.
When it matters: Two friends start a brand, one puts money, one puts 'ideas', then both claim 50%.
Hygiene means boring systems before drama: written equity, IP assignment, employment contracts, GST invoices, related-party honesty, and board minutes even when the board is three people and a French press.
India startups often die from co-founder ambiguity, not from competitors. The second death cause is mixing personal and company cash until nobody can explain the books to an investor or a tax officer.
Investor term sheets are negotiation drafts. Liquidation preference, participating vs non-participating, board seats, and information rights change who actually owns outcomes after a bad exit.
Customer contracts, privacy promises, and refund policies are also hygiene. Consumer and IT expectations do not vanish because you are 'pre-revenue'.
How it usually works
- Agree equity, vesting, roles, and IP on paper before public launch noise.
- Open a real company bank account. Stop personal UPI for business receipts.
- Issue offer letters and IP assignments to anyone writing code or content for the product.
- Keep a simple monthly close: revenue, burn, dues, GST, TDS.
- Minute big decisions: new debt, related-party deals, share allotments.
- Before raising: clean cap table myths, option pool math, and outstanding founder loans.
- Before fighting: re-read the SHA instead of drafting a LinkedIn essay.
Remember
- Write vesting, IP ownership, and exit terms early.
- Do not mix personal and company expenses without books.
- Investor term sheets are negotiation, not destiny. Read liquidation preference lines.
- Related-party vendor deals with a founder's cousin need disclosure and arm's-length sense.
- Domain, Play Store, and cloud accounts should sit under company ownership, not one founder's personal Gmail.
- Customer data needs basic security and lawful use. 'Growth hacking' is not a defence.
- Payroll compliance (PF/ESI where applicable) is cheaper than later labour fires.
Examples
Brand handle owned personallySituation: A Goa D2C brand's Instagram and domain sit on the growth founder's personal accounts. After a fight, followers and storefront vanish overnight.
Wrong move: Other founders only send angry texts.
Better move: From day one, register assets to the company and document access protocols. If already broken, pursue restoration with ownership proof and counsel.
Why: Digital assets are often the real company. Personal logins are single points of betrayal.
Idea person vs money personSituation: In Coimbatore, one founder puts ₹15 lakh, the other 'brings vision'. They shake hands on 50-50 with no vesting. Money founder later does all sales; vision founder travels.
Wrong move: Keep 50-50 forever out of politeness while resentment becomes sabotage.
Better move: Reset with vesting, role KPIs, and a buyout formula while the company still has value.
Why: Polite paralysis is how startups become permanent arguments.
Term sheet skimmingSituation: A Delhi team celebrates a 'standard' seed sheet. They miss a heavy liquidation preference that leaves common shareholders with almost nothing in a modest exit.
Wrong move: Sign because a WhatsApp advisor said 'everyone gets this'.
Better move: Model exit waterfalls on a spreadsheet with counsel before signing.
Why: Preference stack decides who gets paid first when the pie is small.
First steps
- Use a lawyer for the first real SHA / employment IP assignment.
- Keep board minutes even when the board is three people in a café.
- Move domains, cloud billing, and app store accounts to company control.
- Run a 30-day books cleanup with a CA if cash and invoices are mixed.
Papers to keep
- SHA and vesting schedules
- IP assignment and invention forms
- Employee/contractor offer letters
- Cap table spreadsheet with history
- Bank account and payment gateway ownership proofs
- Term sheets and SAFE/CCA instruments (as used)
Myths
- Myth: 'We are too early for paperwork.' Reality: early is when paperwork is cheapest.
- Myth: 'Culture means no employment contracts.' Reality: culture does not pay PF dues or win IP fights.
- Myth: 'Verbal ESOP is binding enough.' Reality: options need a real plan and grants.
Warnings
- Do not issue fake revenue invoices to chase valuation. That path ends in tax and fraud trouble.
- Do not hide outstanding founder loans when pitching.
- Hiring unpaid 'interns' who do core product work can create wage and IP claims.
Words used here
- Burn
- How fast the company spends cash net of incoming money.
- Liquidation preference
- Investor right to get money out first (on set terms) before common shareholders in an exit.
- Related party
- Deals with people or firms connected to directors/founders. Needs honesty and often formal approval.
- SAFE / CCA
- Instruments sometimes used in early fundraising. Exact rights depend on the document you signed, not the acronym.
Related: Founder fights · Private Ltd vs LLP · MCA filings hygiene
MCA filings hygieneIn plain words Ministry of Corporate Affairs filings keep your company visible and compliant. Skipping them creates penalties and blocked actions.
When it matters: Annual return is late, DIN KYC is pending, you cannot file because DSC expired, or a buyer asks why MCA shows 'defaulting'.
MCA is the public spine of company truth in India: incorporation, directors, charges, and many annual filings live there. Investors, vendors, and counterparties check it. So do regulators.
Common pain: AOC-4 / MGT-7 style annual filings (names and forms evolve; confirm current form codes with your CS), event filings for director changes, share allotments, and registered office changes. Late fees add up. Habitual non-filing can lead to worse outcomes including strike-off risk in some paths.
Using a fly-by-night 'ROC agent' who keeps your DSC password is how companies lose control. Your company secretary or CA should be accountable, but directors remain responsible for what is filed in their names.
Strike-off or dormancy strategies need advice. Ghosting filings while still trading is how you combine tax trouble with company-law trouble.
How it usually works
- Maintain a compliance calendar: annual filings, DIN KYC, AGM timing where applicable.
- Keep DSC and director KYC alive before deadlines, not after portal panic.
- File director appointments and resignations promptly so the public register matches reality.
- For share allotments and other capital events, file within required windows.
- Store challans, SRNs, and signed financials in a shared company drive.
- If marked defaulting, get a CS to map catch-up filings and fee exposure before big transactions.
Remember
- Active trading plus zero filings is a red flag for banks and investors.
- Director changes not filed = wrong people shown as liable on the portal.
- Registered office must be a place where notices can actually be served.
- Do not outsource your OTP and DSC password to strangers on Instagram ads.
- Financial statements should match what you tell tax and what you tell investors.
- Charges (loans secured on assets) filings matter for clean title in due diligence.
- Form names change. Follow current MCA instructions, not a 2018 PDF in your WA group.
Examples
DSC with the agentSituation: A Surat company's 'MCA consultant' holds all DSC tokens. The consultant disappears during annual filing season.
Wrong move: Wait until late fees become scary, then pay another stranger for emergency filing without verifying what was uploaded.
Better move: Re-issue DSC under director control, appoint a responsible CS/CA, and reconcile every SRN.
Why: Filings in your name are your responsibility even if an agent clicked submit.
Office address is a CA's virtual desk onlySituation: Notices go to an address nobody monitors. A creditor gets deemed service. The company claims it 'never knew'.
Wrong move: Ignore registered office hygiene because rent is expensive.
Better move: Keep a monitored registered office or lawful arrangement where mail is scanned to directors same week.
Why: Service rules can move cases forward even if you personally did not open the envelope.
Due diligence fails on old defaultsSituation: A buyer wants to acquire a Pune services company. MCA shows years of late filings and mismatched director data. Deal price drops.
Wrong move: Argue 'everyone files late in India' during the negotiation.
Better move: Clean filings before a process, with explanations ready for any remaining scars.
Why: Compliance dirt becomes valuation dirt.
First steps
- Login to MCA and download your company's master data and filing history.
- List open defaults and DSC expiry dates.
- Put AGM / annual filing dates on a shared calendar with owners.
- Recover any DSC or portal access held only by an external agent.
Papers to keep
- Incorporation certificate and AoA/MoA
- Last audited financials and board reports
- SRN challans for recent filings
- Director KYC proofs
- Registered office utility bill / ownership or lease proof as needed
- Register of members and share allotment papers
Myths
- Myth: 'Small companies need not file.' Reality: size may change some thresholds, but 'ignore MCA' is not a plan.
- Myth: 'CA filed something, so I am safe forever.' Reality: verify SRNs yourself periodically.
- Myth: 'Strike-off erases all dues.' Reality: tax and creditor issues can survive in ugly ways. Get advice.
Warnings
- Backdated or false filings are worse than late filings.
- Do not buy 'guaranteed strike-off with no questions' packages from spam ads.
- Directors should read what they digitally sign. Blind DSC signing is how fraud rides your name.
Words used here
- MCA
- Ministry of Corporate Affairs. Hosts company filings and public company data.
- SRN
- Service Request Number. Receipt identity for an MCA filing.
- DSC
- Digital Signature Certificate used to sign MCA and other filings.
- Strike-off
- Removing a company name from the register in defined processes. Not a casual delete button for debts.
Related: Director liability basics · Company basics
