12 Ways to Raise Funds for Startups in India

Feb 11, 2025
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Starting a business is exciting, but let’s be honest—one of the biggest challenges for any entrepreneur is getting the money to make it happen. You might have a great idea, a solid plan, and the passion to hustle, but it’s tough to get off the ground without capital.

In India, where the startup ecosystem is booming, funding opportunities are more accessible than ever. The Startup India initiative, launched by the Government of India, has played a crucial role in supporting entrepreneurs by providing policy reforms, funding opportunities, and incentives that encourage business growth.

But before you jump into fundraising, ask yourself:

  • Have I validated my idea?
  • Do I have a business model that can make money?
  • What stage is my startup at?

The answer to these questions will determine which funding option suits you best. Whether you’re just starting out, trying to scale, or looking for serious investors, there’s a way to get the capital you need. Let’s break down 12 different ways you can raise funds for your startup in India.

Table of Contents

1. Investments from Close Network

One of the first and most accessible ways to raise capital is borrowing from family, friends, or close associates. These people trust you and believe in your vision, making it easier to secure funding without complex documentation or lengthy approval processes.

Pros:

  • Easier access to funds with fewer formalities.
  • No high-interest rates or rigid repayment structures, unlike traditional bank loans.
  • Retain full control of your startup without external investor influence.

Cons:

  • Mixing personal and professional relationships can create tension if the business struggles.
  • Without a formal repayment plan, misunderstandings can arise, straining relationships.

While borrowing from your close network may seem convenient, it’s essential to treat it like a professional transaction. Clearly define the loan terms, repayment schedule, and expectations to maintain trust and avoid potential conflicts in the future.

2. Government Schemes

The Indian government has introduced several funding programs to nurture startups and encourage entrepreneurship across various sectors. These schemes provide financial assistance and offer mentorship, incubation support, and networking opportunities.

Some Notable Government Schemes:

  • Stand Up India Scheme – Offers financial support to women entrepreneurs and SC/ST business owners.
  • MUDRA Loan Scheme – Provides microloans for small businesses and startups.
  • Atal Innovation Mission (AIM) – Supports startups focused on innovation, research, and technology.
  • Startup India Seed Fund Scheme (SISFS) – Grants funding to early-stage startups for prototype development and product trials.

These government schemes are particularly beneficial for startups in underserved areas, ensuring that entrepreneurs from rural regions, women-led businesses, and SC/ST founders have access to the resources needed to thrive.

3. Find an Angel Investor

Angel investors are high-net-worth individuals who provide early-stage funding in exchange for equity. Unlike traditional loans, angel investors take a risk by investing in startups with high growth potential and usually play an active role in mentoring and guiding founders.

Pros:

  • Angel investors often invest at an early stage when other funding sources are unavailable.
  • They provide valuable industry insights, mentorship, and business connections.
  • No immediate repayment pressure, unlike bank loans.

Cons:

  • Startups must give up equity, which means losing a portion of ownership.
  • Investors may expect significant growth and returns, putting pressure on founders.

Prominent angel investors in India include Rajan Anandan, Sanjeev Bikhchandani, and Kunal Shah, who have backed several successful startups.

4. Venture Capitalists

Venture Capitalists (VCs) are investment firms that provide funding to startups in exchange for equity. Unlike angel investors, who invest personal wealth, VCs manage pooled funds from multiple investors and invest in startups that show high scalability and strong market potential.

Pros:

  • Provides substantial capital for expansion and scaling operations.
  • VCs bring strategic expertise, networking opportunities, and mentorship.
  • Helps in securing additional rounds of funding from institutional investors.

Cons:

  • Startups must give up a significant stake in their company.
  • Venture capitalists expect aggressive growth and high returns, which may alter the startup’s long-term vision.

Well-known VC firms in India include Sequoia Capital India, Accel Partners, and Matrix Partners, which have backed companies like Swiggy, Ola, and Zomato. To attract VC investment, startups must demonstrate strong traction, a proven market fit, and a scalable business model.

5. Bank Loans

Bank loans offer an alternative financing option for entrepreneurs who prefer to retain full ownership of their startup. Indian banks provide various loan programs for startups, such as working capital loans, MSME loans, and term loans.

Pros:

  • Retain 100% ownership without diluting equity.
  • Structured repayment terms allow businesses to plan their finances.
  • Government-backed loans for startups have lower interest rates.

Cons:

  • Requires collateral or personal guarantees, which can be risky.
  • Banks prefer businesses with a solid credit history and financial track record.

Programs like SBI’s Startup Loan, SIDBI’s Growth Capital Scheme, and the MUDRA loan program offer startups financial support to establish and expand their operations. However, securing a loan requires a strong business plan, revenue model, and repayment capability.

6. Startup Incubators and Accelerators

Startup incubators and accelerators provide mentorship, office space, networking opportunities, and early-stage funding to startups. These programs help founders refine their business model and gain access to investors.

Pros:

  • Provides structured mentorship and hands-on guidance.
  • Startups gain exposure to potential investors and industry experts.
  • Often includes seed funding and office space.

Cons:

  • Highly competitive selection process.
  • Some programs take equity in exchange for support.

Popular incubators and accelerators in India include T-Hub, NSRCEL (IIM Bangalore), Y Combinator, etc. These programs are particularly beneficial for first-time founders looking for structured support and networking opportunities.

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7. Crowdfunding

Crowdfunding is a modern way to raise funds by collecting small contributions from multiple investors via online platforms. This model works well for startups with innovative products or social impact initiatives.

Popular Crowdfunding Platforms in India:

  • Ketto – For social causes, healthcare, and creative projects.
  • Milaap – Focused on community-driven initiatives.
  • Wishberry – Best for creative and artistic ventures.

Crowdfunding is ideal for social impact startups, creative businesses, and consumer product innovations that resonate with a broad audience.

8. Bootstrapping (Self-Financing)

Bootstrapping involves funding your startup from personal savings or through revenue generated by the business. This approach ensures that the founders retain complete control over their business.

Pros:

  • No external interference or equity dilution.
  • Allows for full ownership and autonomy.

Cons:

  • Limited resources can restrict growth potential.
  • Financial risk is entirely borne by the founders.

Bootstrapping is ideal for early-stage startups with a small budget, but it requires careful financial management.

9. Freelancing

Freelancing is another option for entrepreneurs to fund their startups. By offering freelance services based on their skills, founders can generate immediate income while building their businesses.

Pros:

  • Provides immediate income to sustain the startup.
  • Flexible work schedules allow entrepreneurs to focus on both freelancing and business development.

Cons:

  • The income might be inconsistent and may not be enough to scale quickly.
  • Balancing freelancing and business growth can be time-consuming.

Freelancing can be a short-term solution to support the early phases of a startup.

10. Grants & Competitions

Grants and startup competitions are excellent non-dilutive funding options. Winning a competition or securing a grant can provide financial support and credibility.

Pros:

  • Grants don’t require equity in exchange for funding.
  • Competitions can help build a startup’s reputation.

Cons:

  • The application process can be highly competitive.
  • Winning doesn’t guarantee long-term success.

11. Strategic Partnerships

Strategic partnerships with larger companies or other startups can provide access to resources, expertise, and new markets. These partnerships often include joint ventures or co-marketing agreements.

Pros:

  • Access to new markets and business networks.
  • Potential to scale faster with shared resources.

Cons:

  • Potential loss of autonomy in decision-making.
  • Complex partnerships can lead to misalignment of goals.

Partnerships are a great way to leverage the expertise and resources of established businesses while growing your startup.

12. Revenue-Based Financing

Revenue-based financing is a funding model where startups receive capital in exchange for a percentage of their monthly revenue until the loan is repaid.

Pros:

  • No equity dilution, as you retain full ownership.
  • Flexible repayment terms based on your business’s revenue.

Cons:

  • Higher repayment amounts compared to traditional loans.
  • Not suitable for businesses with low or unpredictable revenues.

Platforms like Velocity and GetVantage offer revenue-based financing in India.

Choosing the Right Funding Option for Your Startup

Raising funds is not just about getting money—it’s about choosing the right type of money that fits your startup’s needs and long-term vision. Every funding option comes with its own benefits and trade-offs, and what works for one startup might not work for another.

Before you decide on a funding route, ask yourself these key questions:

  • What stage is my startup in? Are you in the idea stage, validating your product or scaling?
  • What is my business model? Does your startup require a heavy investment upfront (like manufacturing), or can it generate revenue early on (like freelancing or SaaS)?
  • How much capital do I need? Are you looking for a small boost to cover initial expenses, or do you need millions to scale operations?
  • Am I willing to give up equity? Some funding methods require you to dilute ownership, while others let you retain full control.
  • How soon do I need the money? Bank loans and government schemes take time, whereas crowdfunding or angel investors might be quicker.

Not all funding is created equal. Some financing options help with short-term needs, like covering operational costs, while others support long-term growth and scaling.

Stages of Startups to Raise Funds

After your startup registration is completed and as your startup grows, its funding needs evolve, and the strategies used to raise capital change accordingly. Each stage of your startup’s life cycle has different funding requirements.

Pre-Seed Stage

At this stage, entrepreneurs are still refining their ideas. Funding sources include family, friends, bootstrapping, and grants.

Seed Stage

In the seed stage, entrepreneurs validate their idea with proof of concept (POC). Incubators, government schemes, angel investors, and crowdfunding are common sources of funding.

Series A Stage

Series A funding is for startups that have proven their concept and need capital to scale operations. Venture capitalists are key investors during this phase.

Series B, C, D, and E

At these stages, startups have demonstrated growth, and funding is used to expand further, hire new teams, and enter new markets.

Exit Stage

The exit stage involves selling the startup, merging with a larger company, or launching an IPO, marking the transition to an established business.

Case Studies: Success Stories of Fundraising by Indian Startups

  • Paytm raised funds from investors like One97 Communications and SoftBank to become India’s leading payment platform.
  • Zomato used venture capital and strategic partnerships to expand globally.
  • Ola secured funding from SoftBank and others to become a leader in the ride-sharing market.

Frequently Asked Questions

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Frequently Asked Questions

What are the different ways to fund a startup?

Here are some methods that can be suitable for young entrepreneurs:

  • Bootstrapping: Using your own savings or pocket money to fund your idea. This is ideal for early-stage ideas that don’t require a large investment.
  • Crowdfunding: Platforms like Kickstarter, GoFundMe, or Ketto allow individuals to raise money by pitching their ideas to the public and gaining small investments from many people.
  • Angel Investors: If you have a compelling business idea, you may seek angel investors who are willing to invest in exchange for equity.
  • Family and Friends: You can raise funds from your personal network, like parents, relatives, or friends who trust your vision.
  • Government Schemes: In India, various government schemes like Startup India offer support for entrepreneurs, including mentorship and grants.
  • Incubators & Accelerators: Some programs specifically support entrepreneurs by providing seed funding, mentorship, and resources.

Which funding is best for startups?

The "best" funding option depends on the stage of your startup, your business model, and what you want to achieve. Here’s a breakdown:

  • For Early-Stage Startups:
    • Angel Investors
    • Bootstrapping
    • Government Grants
    • Crowdfunding
  • For Growth Stage Startups:
    • Venture Capital (VC)
    • Bank Loans
  • For Scaling and Large Expansion:
    • Revenue-Based Financing
    • Strategic Partnerships

How to raise 100k?

Raising a specific amount like $100k requires a clear strategy and understanding of the most effective fundraising options:

  • Angel Investors: If you’re looking to raise around $100k, angel investors are a great option. You’ll need to have a strong business plan and traction and be prepared to offer equity in return.
  • Venture Capital: If your startup has the potential for significant growth and scalability, venture capital firms might be interested in investing $100k or more, typically at the Seed Stage.
  • Crowdfunding: For a product with widespread appeal, crowdfunding campaigns can help you raise $100k from multiple backers, especially if you have a compelling story and an innovative product.
  • Bank Loans: If you have a solid business plan and financial history, approaching a bank for a loan could be a viable option to raise $100k, especially if you don’t want to give up equity.

Each of these methods has its pros and cons, so it’s important to evaluate your business needs and choose the option that aligns with your goals.

Related Posts

Startup India Seed Fund Scheme for Startups | Razorpay Rize

Startup India Seed Fund Scheme for Startups | Razorpay Rize

As a part of the “Startup India” program, the Startup India Seed Fund Scheme was introduced in 2021 to facilitate the process of creating a robust startup ecosystem and providing financial assistance to startups for proof of concept, prototype development, product trials, market-entry, and commercialization.

Description Who is it for? Benefits
To provide monetary support for proof of concept, prototype development, product trials, market, and commercialization Startups using Technology as their core product or service Under this scheme, Financial assistance up to Rs. 50 lakh will be provided to startups at an early stage through incubators
Startup India Seed Fund Scheme

Table of Contents

Eligibility

  • Should be recognised by DPIIT.
  • Startups should not have received more than Rs 10 lakh of monetary support under other significant government schemes.
  • The Startup shall have been in existence for no more than two years at the time of application.
  • Should be using technology as its core product or service to create innovative solutions in different sectors.
  • Must have a business idea to develop the product with a scope of scaling
  • According to the Companies Act of 2013 and the SEBI (ICDR) Regulations of 2018, Indian promoters must own at least 51 percent of the company at the time of application to the incubator.
  • The seed support is generally available in grants and debt/convertible debentures.

Application procedure for Startups

The application procedure for availing the seed fund from the incubators by the startups under the StartUp India Seed Fund Scheme is as follows:

Startup India Registration

  • Go to https://seedfund.startupindia.gov.in/.
  • On the top right side of the homepage, click the 'Login' button, then the 'Create an Account' option at the bottom of the "Login" tab.
  • The ‘Startup India’ registration page will open.
  • After filling out the form, click the 'Register' button.
  • An OTP will be sent. Enter the OTP and click the ‘Submit’ button.

Startup India Seed Fund Application

  • Go to the website again and click on the ‘Apply Now’ button on the right-hand side of the homepage.
  • Click on the ‘Apply Now’ button under the ‘For Startups’ option and log in using the username and password registered.
  • The application form will open. Put in all the details, upload the documents, and click on the ‘Submit’ button.
  • The application will be submitted for the selection of the startup.

Selection of Startups for the Scheme

The Eligible Incubator will select startups for this scheme based on the following criteria:

  • Idea
  • Feasibility
  • Novelty
  • Fund Utilization Plan
  • Business Plan
  • Presentation
  • Potential Impact

Benefits

To register a company in the U.S., several essential criteria must be met.

  • Under this scheme, up to Rs 50 lakh in financial assistance will be provided to startups at an early stage through incubators.
  • The incubator will disburse the seed fund to an eligible startup:
    - As a grant for validation of “prototype development, proof of concept or product trials”-  
    Up to Rs. 20 Lakh        
    - Investment for commercialization, market-entry, or scaling up through debt-linked instruments -
    Up to Rs. 50 Lakh
  • Once incubated, physical infrastructure, testing support, mentoring for prototype or commercialization, human resources, and legal compliances are provided to the startups, all by the incubators.
  • For eligible startups, income tax and capital gains tax exemptions are available.

Post funding process

Each incubator must track specific criteria for each beneficiary startup. Every beneficiary startup must present the reports to its incubators periodically. The data is submitted to Startup India in real-time via their web dashboards and further to the EAC quarterly. Each Startup’s return on investment is also reported by the designated incubator.

  • Proof of concept
  • Prototype development
  • Progress of product development & field trials
  • Turnover of startup
  • Progress of market launch
  • Quantum of loan, angel, or VC funding raised
  • Jobs created by startup

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1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
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One Person Company
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1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
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1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
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1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
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  • Firms sharing resources with limited liability 

Frequently Asked Questions

Promoters of a Company: Meaning, Roles, and Legal Responsibilities

Promoters of a Company: Meaning, Roles, and Legal Responsibilities

Behind every successful company lies the vision and initiative of its promoters—the individuals or entities responsible for bringing the business into existence. Promoters play a pivotal role in the early stages of a company's lifecycle, from conceptualising the business idea to ensuring its legal incorporation and securing initial funding.

Their responsibilities extend beyond just setting up the business; they lay the foundation for the company’s structure, compliance, and future growth. However, with great influence comes great responsibility, as promoters are entrusted with legal and ethical obligations to act in the best interests of the company and its stakeholders.

This blog dives into the meaning, types, roles, duties, and liabilities of company promoters, offering insights into their critical role in shaping successful businesses.

Table of Contents

Definition of Company Promoter

A company promoter is a person or entity that undertakes the responsibility of forming a company. As per legal definitions, a promoter is someone who conceives the idea of the business, takes the necessary steps to incorporate the company, and facilitates its registration.

For instance, if an individual drafts the Memorandum of Association (MOA) and Articles of Association (AOA) for a business and secures initial funding, they qualify as a promoter. Promoters can be:

  • Individuals (e.g., founders of a startup)
  • Groups of people (e.g., a partnership forming a company)
  • Organisations (e.g., a holding company promoting a subsidiary)

Who Are the Promoters of a Company?

Promoters can be anyone involved in the process of establishing a company. This includes:

  1. Founders – Entrepreneurs or individuals initiating the business idea.
  2. Investors – Entities that fund the company’s formation and help in structuring.
  3. Professional Firms – Companies that specialise in managing incorporation and initial stages.

It is important to differentiate between named promoters, whose roles are mentioned in legal documents like the prospectus, and unofficial contributors, who may assist without formal recognition.

Types of Promoters of a Company

Promoters can be classified based on their involvement and expertise:

1. Professional Promoters

These are specialists with expertise in company formation. For example, consulting firms or legal advisors assisting in setting up a company.

2. Occasional Promoters

Individuals who promote companies sporadically, typically when they spot a business opportunity, such as a seasoned entrepreneur launching a startup.

3. Financial Promoters

Entities like venture capitalists or investment firms promote businesses by providing initial funding.

4. Entrepreneurial Promoters

Business owners or founders who initiate the company based on their vision and strategy. An example is a tech founder creating a software startup.

Functions of a Promoter

The role of a promoter is multifaceted. Their primary functions include:

  1. Identifying a Business Opportunity
    Promoters analyse market trends, identify viable opportunities, and decide on the scope of the business.
  2. Preparing Necessary Documentation
    Drafting the MOA, AOA, and other legal documents essential for company registration.
  3. Securing Capital and Initial Funding
    Approaching investors or institutions to raise funds for the company.
  4. Registering the Company
    Ensuring the company’s incorporation by meeting all legal requirements, such as filing with the Registrar of Companies (RoC).
  5. Establishing Operations
    Setting up offices, hiring the initial workforce, and laying out the operational roadmap.

Duties of a Company Promoter

Promoters have critical duties to uphold the integrity and governance of a company. These include:

  1. Acting in Good Faith
    They must prioritise the company’s interests over personal gain.
  2. Avoiding Conflicts of Interest
    Promoters are obligated to disclose any potential conflicts that may affect the company.
  3. Disclosure of Personal Interests
    Any benefits or transactions involving the promoter must be transparently disclosed.
  4. Providing Accurate Information
    Misrepresentation of facts during the company’s formation can lead to legal consequences.

Rights of a Promoter

Despite their duties, promoters are entitled to certain rights:

  1. Right to Indemnity
    They can claim indemnity for liabilities incurred during company formation.
  2. Right to Recover Preliminary Expenses
    Expenses made for incorporation can be reimbursed.
  3. Right to Remuneration
    Promoters can receive remuneration for their services, either as cash or shares.

Liability of a Promoter

Promoters may face liabilities in specific scenarios:

  • Civil Liability: Misrepresentation or breach of duties can result in compensation claims.
  • Criminal Liability: Fraud or deliberate misconduct can lead to prosecution.
  • Public Examination: Promoters may be publicly examined in cases of company insolvency.
  • Personal Liability: They can be personally held liable for contracts signed before incorporation if the company does not ratify them.

Difference Between Promoters and Directors

Parameters Promoters Directors
Role Initiates the idea and formation of the company. Manages and oversees the operations of the company post-incorporation.
Involvement Active during the pre-incorporation phase. Active throughout the life of the company.
Legal Appointment Not formally appointed; their role is based on their contribution to forming the company. Formally appointed by shareholders or the board of directors.
Legal Status Not considered an officer of the company. Considered an officer under company law with defined duties.
Remuneration Paid for services during company formation, often through shares or cash. Paid via salaries, commissions, or benefits as determined by the company.
Ownership of Shares May or may not hold shares in the company. Often hold shares as part of their involvement in the company, but not mandatory.
Examples Founders, early-stage investors, or consultants initiating the company. Board members or executives appointed to run the company.

Related Read - Who is a Director of a Private Limited Company?

Real-Life Examples of Famous Company Promoters

1. Dhirubhai Ambani (Reliance Industries)

Dhirubhai Ambani, the visionary founder of Reliance Industries, started the company in 1966 as a small polyester trading firm. Through his entrepreneurial spirit, he transformed it into a global conglomerate spanning petrochemicals, textiles, and telecommunications, making Reliance a household name in India.

2. Narayana Murthy (Infosys)

Narayana Murthy, the co-founder of Infosys, played a pivotal role in establishing one of India’s most successful IT companies in 1981. His commitment to transparency, innovation, and customer-centricity positioned Infosys as a global leader in software services and outsourcing.

3. Elon Musk (Tesla, SpaceX)

Elon Musk is a modern-day promoter known for revolutionising industries through Tesla and SpaceX. By promoting electric vehicles and renewable energy with Tesla and pioneering space exploration with SpaceX, Musk has demonstrated how visionary leadership can disrupt traditional industries and redefine the future.

Frequently Asked Questions

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Private Limited Company
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1,499 + Govt. Fee
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  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What are the promoters of a company?

Promoters are individuals, groups, or entities that take the initiative to establish a company. They are responsible for conceiving the business idea, arranging initial funding, completing legal formalities, and ensuring the company is incorporated. 

Can a promoter of a company be the independent director?

No, a promoter cannot serve as an independent director of the same company. According to Section 149(6) of the Companies Act of 2013, independent directors must not have any material or relationship with the company, its promoters, or its directors. 

How to become a promoter of a company?

To become a promoter of a company, you need to:

  1. Conceive a Business Idea: Identify a viable business concept or opportunity.
  2. Conduct Feasibility Studies: Evaluate the market potential, resources, and legal requirements.
  3. Prepare the Incorporation Process: Draft documents such as the Memorandum of Association (MOA) and Articles of Association (AOA).
  4. Arrange Capital: Secure the initial funds needed to start the business, either through personal investment, partnerships, or external sources.
  5. Register the Company: File for incorporation with the Registrar of Companies (ROC) as per the applicable laws in your jurisdiction.

How to find promoters of a company?

To identify the promoters of a company, you can:

  1. Check Company Filings: Promoters are often named in the incorporation documents, such as the MOA, AOA, or prospectus.
  2. Review Annual Reports: Public companies disclose promoter details in their annual reports under the shareholding pattern section.
  3. Visit MCA (Ministry of Corporate Affairs): In India, you can access promoter details on the MCA website by searching the company’s filings.
  4. Examine Stock Exchange Filings: For listed companies, stock exchanges (like NSE and BSE) provide shareholding data that identifies promoters.

What is the legal position of a promoter?

The legal position of a promoter is that of a fiduciary agent for the company. While they are not employees or directors, promoters owe a duty of good faith and fairness to the company. Their legal responsibilities include:

  • Acting in Good Faith: Avoiding conflicts of interest and prioritising the company’s interests.
  • Disclosing Personal Interests: Declaring any personal benefits or profits made during the promotion process.
  • Liability for Misrepresentation: Promoters can be held liable for false statements in the prospectus or incorporation documents.
  • Compliance with the Law: Ensuring all legal formalities are followed during company formation.

What is the difference between the promoter and the founder of the company?

Parameters Promoter Founder
Definition Individual or entity responsible for establishing the company. Person who starts the business idea.
Role Focuses on legal incorporation and securing capital. Often plays a visionary role in the business journey.
Involvement May step away after incorporation. Usually continues to manage and grow the company.
Legal Status Named in company incorporation documents as per law. Not necessarily defined legally.
Example Early-stage investors or professionals. Entrepreneurs or business visionaries.

In many cases, a founder can also act as a promoter, but not all promoters are founders.

Form DPT-3: Due Date, Purpose, Return Date

Form DPT-3: Due Date, Purpose, Return Date

Running a business in India comes with its fair share of challenges—managing finances, growing revenue, and keeping up with endless compliance requirements. One such crucial yet often overlooked filing is Form DPT-3.

This annual filing is mandatory for all companies in India—except government companies—to report details of deposits, loans, and non-deposit receipts. The Form DPT-3 due date is June 30th each year, making it essential for businesses to meet this deadline to avoid penalties and maintain good standing with regulatory authorities.

Table of Contents

What is Form DPT-3?

Form DPT-3 is an annual return form that companies must file to report deposits and outstanding loan details. It is a statutory requirement under the Companies Act 2013, ensuring that businesses remain compliant and transparent in their financial dealings. The form covers:

  • Deposits received by the company
  • Non-deposit loans taken from directors, shareholders, or other sources
  • Any other amounts that are classified as financial liabilities

The primary objective of this filing is to prevent malpractices related to undisclosed financial transactions and to strengthen corporate governance.

<H2> Applicability and Requirements for DPT-3 Form

Form DPT-3 filing applies to all companies except government companies. This includes:

Key requirements for DP3 include:

  • Annual Filing Deadline: Companies must submit Form DPT-3 by June 30 each year, covering financial transactions for the previous fiscal year.
  • Financial Year Coverage: The form includes details of financial liabilities up to March 31 of the relevant financial year.
  • Auditor Verification: Companies must ensure that the reported figures are verified by auditors to maintain accuracy and compliance.

Penalties for Non-Compliance with Form DPT-3 Filing

Failure to file Form DPT-3 on time can result in significant penalties under the Companies Act 2013. The penalties include:

  • A flat penalty of up to ₹5,000 for the company.
  • Additional daily fines of ₹500 per day for continued non-compliance.
  • Officers responsible for the filing may also be penalised with additional fines.

Ensuring timely submission is essential to avoid legal repercussions and unnecessary financial burdens.

Preparing for the DPT-3 Filing

To ensure a smooth DPT-3 filing process, companies should follow these steps:

  1. Review Financial Transactions: Examine all deposits, loans, and non-deposit receipts received during the financial year.
  2. Obtain Audit Reports: Work with auditors to verify and validate the data before submission.
  3. Gather Necessary Documentation: Collect supporting documents such as loan agreements, receipts, and auditor reports.
  4. Consult Experts: If there are complexities in reporting, seek advice from compliance professionals or legal experts.

Information Required to Fill DPT-3 Form

Companies need to provide the following details while filling out Form DPT-3:

Other financial liabilities as per the balance sheet-

  • Net Worth of the Company: The net worth is calculated as total assets minus total liabilities based on the most recent financial year-end.
  • Particulars of Charge (if any): Companies must disclose any charges or encumbrances on their assets. This includes mortgages, liens, or any other security interests held against company-owned properties or resources.
  • Total Amount Outstanding as of March 31st, 2020 including-  
  • Deposits received from individuals or entities.
  • Loans borrowed from banks, directors, or other companies.
  • Any other non-deposit receipts that need disclosure.
  • Particulars of Credit Rating (If Applicable): Companies with an assigned credit rating should provide: Name of the credit rating agency (e.g., CRISIL, ICRA, CARE, etc.) and the rating assigned

Form DPT-3 Due Date

The due date for filing Form DPT-3 is June 30th of every financial year. Companies should ensure timely submission to avoid penalties and maintain regulatory compliance.

Documents Required to File DPT-3 Form

To complete the Form DPT-3 filing, companies must submit:

  • List of Depositors
  • Deposit Insurance Contract
  • Copy of the Trust Deed
  • Copy of the Instrument Creating Charge
  • Details of Liquid Assets
  • Outstanding Receipts of Money or Loans
  • Auditor’s Certificate

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Conclusion

Form DPT-3 is a critical compliance requirement for companies in India. Filing this might feel like just another compliance task, but it’s actually a crucial step in keeping your business financially transparent and legally sound. Missing the deadline can lead to penalties, unnecessary stress, and last-minute scrambling. Instead of rushing at the last minute, take a proactive approach—review your records, coordinate with your auditors, and get your documents in order well in advance.

Frequently Asked Questions

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Frequently Asked Questions

Is Form DPT-3 mandatory?

Yes, Form DPT-3 is mandatory for all companies (except government companies) that have received deposits, loans, or other non-deposit receipts. It must be filed annually, as per the Companies Act of 2013, to ensure financial transparency and regulatory compliance.

What is the penalty for delay in DPT-3?

If a company fails to file Form DPT-3 on time, penalties may include:

  • A fine of ₹5,000 for the company.
  • An additional fine of ₹500 per day for continued non-compliance.
  • Officers in default may also face penalties, which can go up to ₹2 lakh.

What is the fee for DPT-3?

The filing fee for Form DPT-3 depends on the company’s authorised share capital:

  • ₹200 for companies with capital up to ₹1 lakh
  • ₹300 for ₹1-5 lakh
  • ₹400 for ₹5-25 lakh
  • ₹500 for ₹25 lakh-1 crore
  • ₹600 for ₹1 crore or more

Late filing attracts additional fees, increasing with the delay period.

Is DPT-3 applicable to LLPs?

No, Form DPT-3 is not applicable to LLPs (Limited Liability Partnerships). It applies only to private and public limited companies, as LLPs are governed by the LLP Act of 2008 and have different compliance requirements.

Can we file DPT-3 after the due date?

Yes, you can file DPT-3 after the due date, but it will attract late filing fees and penalties. To avoid unnecessary financial and legal consequences, it is advisable to file before the June 30 deadline.

Is DPT-3 mandatory every year?

Yes, DPT-3 is an annual compliance requirement that must be filed every year by June 30, reporting financial data from the previous fiscal year.

What is the purpose of filing DPT-3?

The purpose of Form DPT-3 is to:

  • Ensure financial transparency by reporting deposits, loans, and non-deposit transactions.
  • Help regulators track company borrowings and financial stability.

Ensure compliance with the Companies Act of 2013 and avoid penalties.

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