SAFE Note, CCD & CCPS Structuring

SAFE, CCD and CCPS advisory covers the instruments through which startups raise their early capital — the SAFE (Simple Agreement for Future Equity) that converts at the next priced round, the compulsorily convertible debentures (CCDs) that carry the interest and convert into the equity, and the compulsorily convertible preference shares (CCPS) that convert at the prescribed terms. The instruments are structured under the Companies Act 2013 — the CCPS and the CCD under Section 62 and the relevant provisions, with the conversion terms, the valuation and the filings — and their tax treatment follows the Income-tax Act 1961. The choice between the instruments decides the investors' rights, the conversion economics and the cap table.

The early-stage instruments are the bridge between the founder and the investor before the priced round — the SAFE with its valuation cap and the discount, the CCD with its interest and the conversion, the CCPS with its preference and the conversion — and each shapes the future cap table and the rights. The structuring is the alignment of the investor's protection with the company's flexibility, within the Companies Act and the tax treatment of the conversion.

The cost of a badly structured instrument is the misaligned cap table and the tax surprise: the conversion terms that the next round fights over, the CCD interest that accumulates, the valuation questions under the angel tax provisions that the structure should have addressed.

This service is for startups raising early capital and the investors in them. We structure the SAFE, the CCD and the CCPS under the Companies Act 2013 — the terms, the conversion, the valuation and the filings — plan the tax positions under the Income-tax Act, document the instruments and the resolutions, and review the structures at the next round so the cap table and the conversions work as planned.