CCPS Issuance Support

Overview

CCPS (Compulsorily Convertible Preference Shares) are one of the most common instruments used in startup and growth-stage funding rounds. Instead of issuing simple equity straight away, companies raise capital through CCPS, which convert into equity shares at a later date or on a specific event such as a future funding round.

For investors, CCPS offer priority rights and clarity on exit, while for founders, they allow flexible structuring of valuation and control. However, CCPS are not just a “format” in a document – they are governed by the Companies Act, FEMA (for foreign investors), tax regulations and sometimes sector-specific rules. This is why handling CCPS Issues in a professional and compliant manner is critical.

Lawcify helps companies design, document and execute CCPS rounds from end to end – making sure that the instrument, conversion terms, investor rights, and compliance requirements are all aligned with Indian law and with the long-term vision of the business.

Benefits of Issuing CCPS

• Flexible Valuation: CCPS allow companies and investors to agree on conversion formulas and future triggers, which can make it easier to close funding rounds even when long-term valuation is still evolving.
• Investor Protection: Investors often get preference in dividends (if declared) and priority in case of liquidation. These rights, when clearly defined, give comfort to institutional and large investors.
• Clean Cap Table in Future: Once CCPS convert into equity, the company ends up with a clear cap table that reflects actual shareholding. Properly drafted CCPS terms ensure that this transition is smooth and transparent.
• Alignment with Future Rounds: Many VC/PE investors prefer CCPS because they can be aligned with future funding rounds, anti-dilution protections, ESOPs and exit scenarios.
• Compliance-Friendly: When managed with correct approvals and filings, CCPS are fully compliant with Indian company law and foreign investment regulations, making them a reliable tool for growth.

Lawcify ensures that every benefit is captured in clear language in your CCPS documentation, so that founders and investors share the same understanding and expectations from the very beginning.

Key Elements in a CCPS Issue

A well-structured CCPS issue is built on several important elements that must be carefully considered and drafted. Some of these include:

• Face Value and Issue Price: The nominal value of each share and the premium at which CCPS are issued, which together decide how much share capital is being created and how much money is being raised.
• Conversion Terms: The ratio or formula through which CCPS will convert into equity shares, the time or event when conversion will happen, and whether there are any adjustments for future round pricing.
• Dividend and Preference Rights: Whether CCPS carry any dividend, and what kind of priority they have in case of distribution, winding up or exit events.
• Investor Rights & Covenants: Board seats, information rights, veto matters, pre-emptive rights and other protections that are linked to the CCPS instrument.
• Regulatory & Tax Considerations: Ensuring that the structure respects pricing guidelines, capital account regulations, and does not create unexpected tax burdens for the company or investors.

Lawcify reviews each of these elements in the context of your current and future rounds so that your CCPS issue integrates well with your overall funding roadmap.

Important Details You Should Know Before Issuing CCPS

Issuing CCPS is more than just adding a clause in your share capital. Before you commit to a CCPS structure, it is important to think through dilution impact, control, voting arrangements after conversion, and how CCPS will interact with existing shareholders and ESOP pools.

For early-stage companies, CCPS terms agreed in the first funding rounds can directly influence how easy or difficult it becomes to raise later rounds. Unclear or overly aggressive terms can create friction with future investors or reduce flexibility for founders.

Lawcify spends time explaining these details in simple language, so that founders understand what each clause means in real scenarios – such as down-rounds, partial exits, or a strategic sale. We help you visualise how today’s CCPS issue will reflect on your cap table and control structure in the next three to five years.

Types of CCPS Structures

While all CCPS are compulsorily convertible preference shares, their structures can vary based on commercial needs and regulatory boundaries. Some common variations include:

1️⃣ Time-Based Conversion CCPS

In this structure, CCPS convert into equity after a fixed period (for example, three or five years) at a predetermined ratio. This gives both parties a clear timeline for conversion.

2️⃣ Event-Based Conversion CCPS

Here, CCPS convert upon a specific event like a qualified funding round, an IPO, or a strategic acquisition. The conversion formula may link to the price of the future round, subject to agreed floors and caps.

3️⃣ Performance-Linked Conversion CCPS

In some cases, a part of the conversion ratio may be linked to revenue, profitability or other performance milestones. These structures need to be drafted carefully to stay practical and enforceable.

4️⃣ Hybrid Structures

Companies and investors sometimes combine time-based and event-based triggers, or build anti-dilution protections into CCPS terms. These hybrid structures require precise language and clear modelling before they are finalised.

Lawcify helps evaluate which type of CCPS structure best suits your business stage, investor expectations and long-term funding strategy.

Process to Issue CCPS with Lawcify

1. Requirement & Round Planning: We start by understanding how much capital you want to raise, the investors involved, and how CCPS fits with your funding plan and existing shareholding.
2. Structuring & Term Discussion: Based on the inputs, Lawcify suggests appropriate CCPS structure, conversion terms, and rights to be captured in the term sheet and transaction documents.
3. Drafting Documents & Approvals: Our team drafts or reviews term sheets, share subscription agreements, shareholders’ agreements, and prepares Board and shareholder resolutions for the CCPS issue.
4. Execution & Allotment: Once funds are received, we help complete the allotment process, update statutory registers, and record CCPS correctly in your books and cap table.
5. ROC & Other Filings: Lawcify handles ROC filings (such as return of allotment and related forms) and, where relevant, helps coordinate RBI or other regulatory filings.

This step-by-step process ensures that your CCPS issue is not only legally valid but also clear, well-documented and easy to explain to future investors, auditors and regulators.

Why Lawcify for CCPS Issues?

Lawcify combines practical deal experience with deep understanding of company law and regulatory compliance. We regularly work with startups, growth companies and investors on funding rounds where CCPS is the primary instrument.

• Specialised in Funding Transactions: Our team works on VC/PE deals, ESOPs, private placements and CCPS structures on a regular basis, so we understand investor expectations and founder concerns on both sides.
• Clarity in Drafting: We write documents in a way that is legally strong but still readable, so that founders know exactly what rights and obligations are being created through CCPS.
• Compliance-Focused Approach: From board minutes to ROC forms and other filings, we ensure that your CCPS issue is fully aligned with Indian company law and other regulatory requirements.
• Future-Round Friendly: We keep an eye on how today’s CCPS terms will impact future funding rounds, exits and cap table structure, so that your company remains attractive to new investors.
• End-to-End Support: You get support at every stage – planning, drafting, negotiation, allotment and filings – so that you do not have to coordinate between multiple advisors.

With Lawcify as your partner, CCPS Issues become a structured and predictable exercise instead of a confusing legal process, allowing you to focus on building and scaling your business.