Fund Raising for Companies

Companies in India can raise funds through several routes under the Companies Act, 2013 and SEBI regulations. The primary methods are: (1) Rights Issue under Section 62(1)(a) — offering shares to existing shareholders in proportion to their holding; (2) Preferential Allotment under Section 42/62(1)(c) — issuing shares to a select group of persons at a price fixed per SEBI valuation norms; (3) Private Placement under Section 42 — offering shares to up to 200 persons per year through a Private Placement Offer Letter (Form PAS-4); (4) ESOP (Employee Stock Option Plan) under Section 62(1)(b) — incentivizing employees with options to purchase shares at a future date. For startups, angel investment under DPIIT-recognised angel networks and venture capital investment through SEBI-registered AIFs are common routes. Each route has specific compliance requirements including board/shareholder approvals, valuation, offer documents, and post-allotment ROC filings.