India Corporate Playbook for M&A - A guide to M&A in India, Startup Bridge India initiative.

1. 1
India Corporate Playbook
A Guide to M&A in India
Dec 2016

2. Disclaimer
This Playbook is focused on highlighting the key differences
and common pitfalls in acquiring a company in the technology
industry in India and sharing key learnings and best practices
in engaging in transactions in India
This Playbook is not intended to be a comprehensive guide on
M&A or meant to constitute legal advice.
Please consult a legal professional.

3. Executive Summary | Huge potential in India
M & A Process
Similar to other cross-
border M&A, except
longer time to close,
lower deal value
Regulation
Regulatory framework
aligned w/ common
law; however, local
advisory support
recommended
Landscape
2nd largest internet
economy
($150B 2018F),
growing rapidly
3rd in global tech
investment
destination list (E&Y)
Visible benefits when
target is US /
Singapore entity
Constant trade-off
between time & legal
conservatism
2nd
LARGEST INTERNET
MARKET
$13.5
B
VC/PE INVESTMENT
SINCE 2014
309
M&A DEALS
SINCE 2014
Funding, M&A numbers as of 2016Q3

4. Indian Startup Landscape| Strong ecosystem in India to support bustling startup activity
Robust VC/PE Investments
Unicorns in multiple sectors including
e-commerce, consumer internet, digital
marketing & enterprise SW
6K
2015 est
20K
(2020F)
Active product startups in India
Supported by
2.5K+ VCs/angels
120+ incubators
$801M
$1.02B
$4.88B
$6.25B
2012 2013 2014 2015
$2.42B
2016
Source: Signal Hill - iSPIRT Product Monitor Report (Nov 2016)
Note: Funding, M&A numbers are Q1-Q3 2016 only
$13.5B invested across 729
deals since 2014

5. Uptick in M&A Deals However, valuations lag US
10.5x
2.0x
Avg. M&A
Deal Size
M&A Landscape in India| Strong uptick in activity but valuations lag
$8.4M$80.7M
$205M
$308M
$792M
$1.35B
2012 2013 2014 2015
$1.34B
2016
M&A :
VC/PE
Ratio
309 deals worth $3.48B since 2014

6. Tech & Talent deals very popular;
process for team to move to the US on a
visa is well understood
Market entry less common
High user base but low financial traction
TYPE OF DEALS
TIME TO CLOSE
40-50% longer than US
acquisitions
Visible benefits when the
target is a US/Singapore
entity (vs. Indian entity)
VALUE OF ACQUISITION
Can expect a 30-40%
discount on India-based
acquisitions vs equivalent
US acquisitions
Indian M&A Process | Similar to other cross-border M&As, with some key differences

7. Regulatory Framework | Aligned with common law, but local advisory support recommended
Common law country, like most states in the US, but far more
aligned to the English legal system
Important to engage a well-versed lawyer early on in the
process to manage nuances
Foreign Investment being liberalized, but continues to be regulated
Litigation in India runs in years
Closing down companies takes time, so prefer full stock purchase
Constant tradeoff between TIME and LEVEL OF LEGAL
CONSERVATISM that needs to be managed

8. 1. Indian Technology Landscape Overview

9. 20K
product
startups
(2020F)
India is a hotbed for tech product startups
India-for-India
Startups
B2C Consumer & Internet
Often domiciled in
India/Singapore
India-for-Global
startups
B2B startups with global
customers
Often domiciled in US
Bangalore
Mumbai
NCR
HyderabadPune
Kolkata
Chennai
5%
40%
10%
5%
13%
12%
25%
Source: Lit search, iSPIRT Product Industry Monitor

10. Healthy funding ecosystem in India
$13.5B funds invested in Indian startups since 2014
Crunch in VC/PE Investments after
strong 2014-15
Costs are lower in India, so startups raise a lower
absolute amount vs equivalent rounds in the US
Incu
bators
Angel &
Seed
Series A
Series B+
Investments upto $100K
Invest in ideas / biz plans
Investments $100k - $1M
Beta version of product
Mentorship, guidance
Investments $2-10M with
follow-on participation
Investments $15M+ with
follow-on participation
$801M
$1.02B
$4.88B
$6.25B
2012 2013 2014 2015
$2.42B
2016
147 123 176 330 223Deal
Vol.
$13.5B invested across 729
deals since 2014

11. Strong uptick in deal value &
volume since 2014
However, long-tail distribution of deals,
driven by acqui-hires and restructuring
$205M
$308M
$792M
$1.35B
2012 2013 2014 2015
$1.34B
2016
309 deals since 2014 worth $3.48B
M&A Deal Value and Volume Trends
43 39 59 137 113Deal
Vol.
70%
volume
Small
deals
(<$5M)
Large
deals
(>100M) 71.5%
value
2.2%
vol
2.7%
vol

12. Beginning of M&A/IPO
uptick
2-5 years to see the fruits
of the 2014 & 2015 funding
boom play out in M&A and
IPO activity
Early signs are positive
with both 2015 & 2016
being record years for
India Technology Product
M&A
Startups back-to-basics
Mature management and
great execution is required at
companies which have taken
in substantial amounts of
capital during the 2014 &
2015 funding boom
Current private funding
environment is likely to
persist with focus on unit
economics, cash burn and
path to profitability
VC/PE boom has
provided strong impetus
Indian Tech Product future is bright
Recent VC/PE funding
boom has filled up the tanks
of many companies and
created several unicorns
India on the map of global
tech product investors
Continued innovation and
strong macro tailwinds will
further enhance India’s
attraction

13. 2. Mechanics of an M&A: Key differences

14. Tech Due
Diligence
Valuation/
Termsheet
Legal /
Financial DD
SPA
1-8 Weeks
Tech & Talent deals
popular; process for team
integration well
understood
Market-Entry opportunities
require detailed analysis –
high user, but low
financial, traction
1-2 Weeks
Valuations at 30-
40% discount
Common to have
45-60 days of
exclusivity/ no-show
in the termsheet
~2 months
Visible time benefits
when target is US
(Delaware C Corp) or
Singapore entity
Increasingly common
1-2 months
Indian law requires
ALL owners on the
cap-table to
physically sign the
SPA agreement
1-2 Months
Team pedigree
important factor
Key differences in M&A by Stages
Timelines for transactions can be ~50% longer (3-5 mos)
Discovery

15. Discovery
Deals for TECH and TALENT very popular; process well understood
Talent (Acqui-hire)
Strong mobile, back-end, systems
expertise among Indian engineers
Acquired team is first integrated into
Indian arm of US company, and moves
to the US (if necessary) at a later stage
High number of ex-Google/Yahoo
engineers as founders/CXOs
Hot areas: iOS, Android, Machine
learning & Data Science
Market/Customer
Companies with sizeable India
market penetration
Require detailed analysis;
common to see high users but
lower financial traction
India market success can be
rapidly replicated in other
emerging markets (Indonesia,
Brazil, Africa etc)
Technology
High quality Tech & IP across multiple
domains including:
● Mobile & Consumer Internet
● Big Data/Analytics
● SaaS & Cloud SW
● SW Infrastructure
● Digital Marketing
Process for team to move to the US on
a visa is well understood
iSPIRT M&A Connect Program is a good resource to help in discovery.

16. Pedigree important, pre-screened for by VCs
Top Engg. Colleges: IITs (all cities), BITS
(Pilani), IIIT (Hyderabad), Institute of Tech
(Varanasi), Vellore Institute of Tech (Vellore)
Top MBA programs: IIMs, ISB
Consider non-CS majors from T1 schools
Be cautious of undocumented colleges
Team Pedigree
Indian education strong in back-
end/systems; limited focus on
UI/UX & product management
Look out for heavy use of open-
source code
Product Technology
Star engineers quickly become
managers / team leads
Common to see large teams
with good engineers but few
product designers
Technical Skills Other
Interview all employees; Leadership
team not always representative of 2nd
tier employees
Candidates’ geographical exposure is a
good indicator of cultural fit, adaptability
Tech Due Diligence
Criteria to evaluate Indian teams & product should range from source code to team pedigree

17. Valuation & Termsheet
Valuations commonly at 30-40% discount vs. US counterparts, all else equal
Cash
Investor payout + Founder
Payout + Employee bonus
[Paid out on Day 0]
Retention Pkg (Cash+ Stock)
Usually vested over 3-4 years, same
as regular options/RSUs
Not based on Cap Table
Salary
Stock
Usually mirrors vesting schedule in
Silicon Valley companies
Industry Startup
Entry level $10K $6-8K
Experienced $20-30K $12-15K
I. Acquisition
II. Employee Salary &
Stock
NOTE: Strong preference in India for cash over equity: Cultural preference of stable income over uncertain future

18. Indian job
market
High attrition in talent
because of large and
aggressively hiring Indian
Unicorns and global
MNCs
Structure deals with
emphasis on the
retention/earnout
package to retain
employees
Group decision-
making
Indians make decisions
communally, ‘by
committee’. Investors,
BoD, etc often play a
very active role in
valuations
Actively manage CEO-
Investor relationship;
should be more of an
‘informing rather than
advising relationship
Salary
Conversations
Salary is openly
discussed; expect
everyone knows what
everyone else makes in
India
Have clear
conversations about job
titles and hierarchy/
relevance in the new
company.
Indians are title conscious
and it’s much easier to talk
salary when new hires
understand their title/level
at the new company
Valuation & Termsheet
Other important comments
Other
Lower value placed on
stock if acquiring
company is not public
Common to have 45-60
days of exclusivity/ no-
show in the termsheet
In case of an acquihire,
important to have team
member names in the
Termsheet

19. Lead Counsels
Family-owned
businesses
Indemnification
Common for Investors to
seek indemnification
from the target co. and
promoters for breach of
the SPA
Effective enforcement of
indemnity remains a
challenge given the
restriction on deferred
consideration
Cross-border M&A can
have 2 counsels on
each side (i.e. Indian/US
counsel each for
buyer/seller)
Language differences,
legal nuances etc can
result in a lot of
miscommunication
Identify lead counsel for
the entire process early
on
Match the lead counsel
with the buyer i.e. if it’s a
US buyer, the lead
counsel should be US for
both buyer and seller
Inter-company or
related party
transactions are
common in family-
owned businesses.
Although not a common
structure for product
startups, worth being
aware that these require
additional scrutiny
Tax Clearance
Certificate
Financial Diligence
Startup companies often
are not most organized
in record keeping;
expect delay in financial
diligence
Takes away risk of
ownership of shares.
Usually done for
property deals in India,
not share deals, but
becoming increasingly
common to avoid
liability on the shares
Takes 2-3 weeks
Legal & Financial DD

20. Specific assets of company (eg.
Tech/IP, team etc)
Acquihire: common to acquire
team, license IP perpetually, &
shut down product
Share Purchase Agreement
Share Purchase Asset Purchase
All shares of
startup
Shell company remains which
owns non-acquired assets
Eventually shuts down
Ceases to exist
Need to analyze the tax
efficiency of transferring assets
piecemeal v. slump sale
Min. 2 members/
stockholders
required
WATCHOUT: Shutting down a company in India is time consuming and slow; hence, most startups prefer a full stock purchase
IT - Income Tax; CA - Chartered Accountants; HNWI - High Net Worth Individuals
Acquirer
buys
Differences
from US
Startups of
Startup
Transfer of Funds
● Shares transferred to the acquirer only post the
receipt of funds in the Indian bank
● Funds will come in tranches but in India can’t pay
partial shares – have to buy in one shot
shareholder’s bank to RBI; only then transfer shares
Relocation of team
● L1 visas are commonly used to ‘move’ a team to
the US post acquisition
● Employees need to meet the “One year in last 3
years” rule for eligibility
● Asset purchases reset the L1 visa clock: ie
employee will need to be at the acquirer for 1 year
post-acquisition for L1 eligibility. hence, share
purchase is strongly recommended

21. SPA Key Terms
Share Purchase
Agreements
Contract forms are similar to UK style documents
Holdbacks and
Escrows
Once money has been transferred into India, it cannot be repatriated back without lots of paperwork.
This is an issue with Escrow
Representations
and Warranties
Usual for Investors to seek extensive representations and warranties from the target co. and promoters
Breach of representations and warranties can be treated as a ground for rescission of contract
General
Covenants
List of covenants are relatively shorter than those found in US form contracts
Enforceability of certain covenants (e.g. – non-compete restrictions on Promoters)
is uncertain though but it is commonplace to include them for deterrent effect.
Conditions
Precedent (CO)
List of CPs are similar to those found in US form contracts
ESOPs Employee stock option scheme of a company must be approved by shareholders by passing a special
resolution (i.e. <75% consent)
ESOPs are not transferable and must have a min. vesting period of 1 year. Unvested ESOPs must
compulsorily vest upon death or permanent incapacitation of employee.
Prohibited Recipients: (i) promoters (ii) independent directors (iii) directors with more than 10%
shareholding
An Indian company may provide ESOPs to its own employees and to employees or its JV or WOS
abroad*. Pricing of shares issued under such ESOPs is separately regulated by the exchange control
laws.
Liquidation
preferences
Separate ‘liquidation preference’ into 2 strands: one what happens in case of winding up under Indian
Company Law (‘liquidation’) and the other in case of an exit event (‘liquidity’)
WATCHOUT: Multiple
documents at various
stages will need to be
physically signed by
potentially geographically-
dispersed investors
RECOMMENDATION:
Allow for time to get
signatures. Ensure shares
are dematerialized (not in
physical format) or ask to
have them converted

22. 3. Indian Statutory and Regulatory Framework

23. Cultural differences
Communal decision-making (with family
members, investors etc.).
Non-punctual culture often can result in delays;
be explicit and open about timelines, disclosures
etc
Grooming, personal appearances low priority
Cultural sensitivities
Family (immediate, extended, in-laws) is
important, decisions made given their consent
Religion/spirituality is very important to the
older generation
Men and women tend to socialize
independently
Large English speaking market
English commonly spoken,
almost everyone is multilingual
Technical talent is abundant,
relatively inexpensive;
Large middle class huge internal
market for Indian startups
Unreliable infrastructure
Weak, unreliable infrastructure (electricity,
roads) cause delays; budget extra time
Internet connectivity can be poor
Test bandwidth before day of conversation,
schedule calls around times of reduced
bandwidth demands (early am, late pm)
India landscape| Huge opportunity but must account for key differences

24. WEF’s Global Competitiveness Index - 39th position out of 138 nations
Biggest leap in ranking for any country in 2015
Developing market – regulators playing ‘catch up’
like in most countries, especially with disruptive
business models
Government and regulators committed to
facilitating innovation and disruption - Startup India
Action Plan, Niti Ayog, RBI’s Payment Bank
Licences
Common law country with rule of law like the US –
Contract law principles same as in the US
– Nationality blind enforcement by Judiciary
Like in most countries, must know ‘how to do
business’ in India for India strategy to be effective
Doing Business in India|Huge opportunity but must account for key differences

25. Key Legal Frameworks & Differences vs. US
Companies
Act, 2013
Regulates the way a company is structured and sets out the rules
regarding ownership
Uniform law across all states
Prohibition on issuing convertible notes
Foreign
Exchange
Regulations
Regulates the rules regarding payments in, and repatriation of, foreign
currencies, which is very regulated
Foreign investment into India is primarily regulated by (i) industrial policy
(ii) regulations issued by RBI (iii) FEMA (iv) FDI Policy
In & out-flow of foreign exchange not as heavily
regulated
Competitions
Act, 2002
Provisions relating to anticompetitive agreements and abuse of dominant
position
Similar to US- prohibition on horizontal, vertical
combinations, dominant use of position
Income Tax
Act, 1961
Tax compliance requirements for an Indian company Similar to US - Indian companies taxable in India
on their worldwide income
Employment
Laws
Legal framework that governs and Indian employer’s relationship with it’s
employees
The construct of employment at will is not
recognized
IP Laws Legal protection available to IP created in India, incl. copyright, patent,
trademark, design, trade secret
Software programs are not patentable in India’
protection is available by way of copyright
Other Stamp Duty - all agreements must be stamped
Dispute Resolution - In-court litigation can run into several years
Closing down a Pvt. Ltd. Co. - Time consuming and expensive
No equivalent duty in US
Disputes resolved more easily
Not difficult at all
Key call outs vs . US

26. India Companies Act, 2013
Ownership & Mgmt
Ownership represented by shares:
Equity share: ~common stock
Preference shares: preferential right for
dividend and redemption but reduced
voting rights
Board of Directors
Manage day to day affairs; one resident
director in India mandatory (182
days/year)
Directors fall under the purview of
“officer in default” - liable for
contravention of the provisions of law
even if did not even participate in the
concerned meetings of the Board
Access to capital
Access to capital is regulated
Convertible notes cannot be used as
a mode of investment under the
extant RBI regulations.
Companies are not allowed to secure
loans or collect deposits from any
person other than an institutional
lender, who is not a director or a
shareholder
Venture debt in India is currently
regulated under the stringent regime
applicable to non-banking financial
companies.
Structure
Typically organized as “Private Limited
Companies” due to ease of operation
and fewer disclosure requirements
Other business entity structures:
Sole Proprietorship: No business
registration required
Partnerships: Regulated under
Partnership Act
Ltd. Liability Partnership: Hybrid
between a LLCo. and Partnership
Step-down Subsidiary: A company
cannot have more than two layers of
subsidiary entities that engage solely in
investment activities
New Companies Act to tighten regulatory framework post certain
corporate scandals (Satyam etc) – is work in progress

27. List of Company Documents
Amendments:
Alteration to the Memorandum
requires a prior approval from either
the Govt. or Company Law Board
depending upon which clause requires
alteration
Articles may be altered by a special
resolution passed by the members of
the company
Watchouts:
Stringent compliance requirements
particularly in relation to registers,
record keeping and filings including
penal sanctions for some non-
compliances
Memorandum of Association
Provides the characteristics (name, division of shares etc) and objects (activities) of
the Company; the company cannot engage in business that falls outside the scope of
these objects
Must be filed with the Registrar of Companies
Articles of Association
Provides for the manner in which the Company is managed
Register of Members (CapTable)
Lists the current shareholders of the Company
Register of loans, guarantee, security
Shows the debt owed by a Company
Register of related parties contracts
List the contracts with related parties and entities in which directors are interested
Register of directors & key managerial personnel
Provides a list of the persons in charge of the overall operation of the company

28. Foreign Exchange Regulations: FEMA
Investment Routes
A non-resident entity (NR) can acquire shares of an Indian company through (a) a primary issue (b) a
secondary sale of shares by a resident, NR or NRI shareholder. NR can also acquire ownership interests
in LLPs for which separate guidelines are set out.
Non-cash consideration such as share swap are also permitted.
Approvals
Generally, transfer of shares from R to NR and NR to NR, is permitted without prior approval from RBI for
all sectors where automatic FDI is allowed.
Compulsory RBI approval for (i) transfer of shares by way of gift; (ii) transfer of shares from NRI to NR.
In some sectors such as multi-brand retail and defence, specific foreign investment restrictions and pre-
approvals apply; FDI in e-commerce is prohibited [See slide on FDI for further details]
Pricing
Share transfer to NR is subject to pricing guidelines, that must be complied with.
Reporting
The primary obligation of reporting transfer of shares to NR is on the investee company or the
transferee resident in India. The investor is required to submit its KYC details.
Indian entities have to file FCTRS/other documents during an M&A process for foreign exchange
compliance
SELECT DOCUMENTS
KYC: Know-Your-Customer
information to be sent from
banks
FIRC: For foreign funds to
Indian accounts – each person
needs a certificate from bank
with purpose specified - eg.
purchase of equity
FC-TRS: Declaration regarding
transfer of shares; to be filed
by banks after original FIRC
filed by each
FEMA: Foreign Exchange Management Act 199, NR: Non-resident entity, NRI: Non-resident Indian, R: Resident entity, RBI: Reserve Bank of India, KYC:
Know Your Customer; FIRC: Foreign Inward Remittance Certificate, a document that acts as a testimonial for all the inward remittances entering India

29. Foreign Exchange Regulations: FEMA
INDEMNITY PAYMENTS
Similar to deferred
consideration, payment of
indemnity amounts in relation to
M&A transactions between
residents and non-residents is
not permitted without the prior
approval of the RBI
REPATRIATION
Remittance of sale proceeds of
securities by a NR seller is
permitted (i) when securities are
held on repatriation basis (ii) sale
is made in accordance with
prescribed guidelines and (iii)
NOC is obtained from Income
Tax dept.
However, repatriation of foreign
exchange from India requires a
lot of paperwork!
Escrow
Creation of non-interest-bearing escrow accounts for the purposes of keeping shares or purchase or
subscription money/consideration in an escrow is allowed for a maximum period of 6 months (vs. 3
years in global M&A escrow arrangements)
Additionally, the funds in the escrow account may not be used by the bank-escrow agent for providing
any form of financing to a third party, nor for providing any non-fund based facilities such as letters of
credits or guarantees against the balances in the escrow account
Deferred Consideration
FEMA does not permit payment of ‘deferred consideration’ by foreign investors/acquirers
(staggered payments structured usually as ‘earn-outs’ based on milestones achieved) unless RBI
approval is obtained
Foreign acquirers are forced to stagger their acquisition over a period of a few years
Price of each tranche to be determined in accordance with the existing pricing guidelines at the
time of completion of the relevant tranche
In cases of a staggered acquisition by a foreign investor / acquirer, seller promoters have,
typically, insisted on a floor price or a base valuation for the next tranche of the acquisition to
shield them from factors that could affect the valuation of their shares

30. Foreign Exchange Regulations: FDI
Indian Commerce Ministry’s directives about foreign ownership of Indian company
AUTOMATIC ROUTE
The “software product” sector
falls under the automatic route
for purpose of FDI.
Foreign investment is prohibited
in e-commerce but permitted in
marketplace-models that facilitate
e-commerce
KEY INDIAN
STAKEHOLDERS
● Dept. of Industrial Policy &
Promotion (DIPP)
● Foreign Investment
Promotion Board (FIPB)
Entry Routes and Sectoral caps for FDI
Automatic Route - Government approval is not required for certain sectors for FDI upto
100%. Foreign investors in such activities only need to adhere to certain post-FDI
reporting requirements to RBI.
● 100% FDI allowed in ‘marketplace’ models – B2C or B2B
● FDI not permitted in inventory-based e-commerce models
Approval Route - Approval of Government is required and proposals are considered by
FIPB
Sectoral Caps - FDI in a company is permitted up till the sector-specific percentage of
the total capital
● Extent of FDI depend on activity engaged
● In most activities, FDI permitted upto 100% - includes most tech startups
● Prohibited Sectors – Lottery, Gambling, Chit funds, Trading in Transferable
Development Rights, Real Estate Business etc

31. Competition Act, 2002 regulates:
● Anti-competitive Agreements
○ Horizontal Agreements
(eg. cartels)
○ Vertical Agreements
(eg. tie-in/bundling
agreements)
● Abuse of Dominant Position
○ Eg. predatory pricing,
denying market access,
limiting or restricting
production of goods
● Combinations
○ Mergers & Acquisitions
○ Amalgamations
Competitions Act, 2002
* Ref: Section 5 & 6 of the Competition Act, 2002
Combination Regulations, 2011
All ‘Combinations’ falling within certain thresholds*, require prior
approval of the Competition Commission of India (CCI)
Acquisition of Control / Merger and Amalgamation Competition
Commission is required to be notified within 30 days of (a) the
execution of any agreement or other binding document for acquiring
control, shares, voting rights or assets; or (b) in the case of a merger
and amalgamation, the board of directors’ approval of the proposed
merger or amalgamation
Public Financial Institution, Foreign Institutional Investor, Bank or
Venture Capital Fund
Whilst merger control provisions under the Competition Act do not
apply to investments, financing facilities or any acquisition by a public
financial institution, foreign institutional investor, bank or venture capital
fund, the Competition Commission is, nevertheless, required to be
notified of details of the transaction within 7 days from the date of the
investment, financing or acquisition
Transactions found to have an “appreciable adverse effect” on competition
in India will be rendered void in accordance with the Combination
Regulations

32. Income Tax Act, 1961
Income Tax
● Indian companies are taxable in India on their worldwide income,
irrespective of source and origin
● Before any share transaction, must get IT clearance, without which,
govt can ‘void’ the transaction; HNWIs also need clearance
● Recently, the Government has mandated that barring a few exceptions,
private limited companies must now include premium they receive from
resident investors who subscribe to their shares as ‘Income from Other
Sources,’ and pay tax on such investment at the applicable rates.
Tax Treaties:
Agreements for Avoidance of Double Taxation signed by India with various
countries provide a favourable alternative mode for determining taxable business
profits; the treaties also provide specifically the mode of taxability of incomes in the
nature of dividends, interest, royalty and fees for technical services
WATCHOUT!
Situation: US Acquirer X buys
Indian Startup Y and begins to
use Y’s IP as it’s own
Watchout: Acquirer will have
to pay Indian taxes on the
Indian IP being used
Recommendation: Value the
IP from a merchant banker (eg.
Morgan Stanley, EY, PWC),
sell the IP to the US Acquirer
X, pay taxes on the sale to the
Indian govt. and then use the
IP wherever

33. Excise
Duty
Customs
Duty
Sales
Tax
Central Excise
Rules, 1944
Requires all
manufacturers of
excisable goods to
register themselves.
Registration valid for
as long as production
activity continues; no
renewals needed.
Customs Act, 1962
& Customs Tariff
Act, 1975
Tax levied on all
goods which are
freely importable.
Central or the State
Sales Tax Acts
Tax levied on sale of
a commodity (not
services or exports)
which is
manufactured or
imported, and sold
for the first time.
Service
Tax
GST
Finance Act
Tax levied by Central
Government of India
on certain “covered
services” that is
collected from the
service recipient
Proposed
Comprehensive
single national-level
tax on goods and
services
Other Taxes

34. Employment Laws
Indian Contracts Act
Lays down the general principles
relating to the formation and
enforceability of contracts.
Agreements in restraint of trade
are void
Agreements restraining an employee
from carrying on the activities similar
to that of his/her employer upon the
termination of such employment
would be void and unenforceable,
as opposed to agreements that
impose a restraint during the course
of employment
Concessions for tech focus
Special concessions offered by
various state governments to IT-
enabled enterprises and employers
situated in special economic zones
(SEZs), tech parks etc
Employers have to follow
certain procedures /
restrictions before
separating employees
Separate terms for
female workers
No non-discrimination /
diversity laws
No “Employment at
will”
E.g. prohibition of work
during night hours,
protection against sexual
harassment etc.
No specific laws that
enforce diversity, non-
harassment and non-
discrimination.
Overview
Central legislations govern employer-employee relationships. However each state has the
power to make changes to the same in so far as it concerns employees in their state.
Broadly, key labour legislations in India can be grouped under select Acts including Indian
Contracts Act, Factories Act, Industrial Disputes Act, Payment of Gratuities Act, Indian
Contracts Act, State laws
Primary employment benefits are Provident Fund (PF) (payable after 20 employees
threshold) and gratuity (applicable after 10+ employees). These are structured as defined
contribution schemes.
Other key points:

35. Act Description Duration Registration
The Copyright
Act, 1957
Protects specific creative expression of an idea (eg: articles,
sketches, code).
Recognizes and protects computer programs, tables and
compilations including computer databases as ‘literary works’
under the Copyright Act.
Employer is first owner of copyright of the work created by an
employee or contractor during course of employment or term of
service unless decided otherwise by the parties. (S.17 of the
Copyright Act, 1957)
Term of protection extends to
60 years
OPTIONAL (to prove
time and identity of
author) – copyright vests
in the author
automatically upon
creation
The
Trademarks
Act, 1999
Protects any symbol, word or slogan indicating origin of goods/
services or distinguishing it from another good/service
Distinctive marks/ slogans have
10 years trademark protection
subject to renewal, which may
go on indefinitely.
REQUIRED by filing
trademark application in
order to obtain
trademark rights
The Patents
Act, 1970
Protects functional expression of an idea (eg: machine,
method/process, business strategy)
Provides protection for computer- implemented inventions;
however, prohibits patentability of “computer programs per
se”
Novel, nonobvious and useful
ideas have patent protection for
20 years in India, if they are
patentable under Indian law
REQUIRED
Trade Secrets No legislation – Agreements under Section 27, Indian
Contract Act, 1956
Protects any information (usually technical), that is secret and is of
economic value and advantageous to the business because of its
secrecy (eg: business strategy, algorithm)
No registration for
trade secrets in India;
Protection through
confidentiality
agreements
Intellectual Property Laws|Indian IP laws are largely TRIPS compliant

36. Other
Dispute Resolution
● Federal court system similar to
US that allows multiple appeals
● In-court litigation is time
consuming and can run into
several years
● Arbitration and Mediation are
effective alternate resolution
mechanisms that afford secrecy
and provide greater procedural
control to the disputing parties
● Arbitral/Mediation awards are
open to review by the courts in
certain circumstances
Closing Down a Private
Co.
● Time consuming,
expensive and difficult
process
● By shareholders’ consent
● Involves seeking approval
from various government
departments
Stamp Duty
[No equivalent In US]
● A government levy that is charged on
instruments executed in India or that are
brought to India for enforcement
● Determined by a central law (Indian
Stamp Act) but most states have specific
rules which override the central law
● Charged on all written instruments
(including electronic records), contracts
etc.
● Non-payment makes a document
unenforceable
● Non-payment or underpayment may be a
rectifiable defect, subject to discretionary
approval of the relevant regulator and
payment of penalties
● Note: SPAs, SHAs, Employment and IP
assignment agreements must be
stamped

37. This document has been prepared by iSPIRT in consultation with several partners including Mani Chengappa and Mathur (‘MCM’), Nishith Desai
Associates for discussion purposes only. The information contained in this document is intended for information purposes only. They are derived
from public and private sources which we believe to be reliable and accurate but which, without further investigation cannot be warranted as to
their accuracy, completeness or correctness. This information does not in any manner constitute, and should not be construed to be, legal advice
or a legal opinion. Note that any information you provide during the course of this presentation will not be subject to legal privilege. This information
is supplied on the condition that iSPIRT, MCM and any partner, employee or affiliate are not liable for any error or inaccuracy contained herein,
whether negligently caused or otherwise, or for loss or damage suffered by any person due to such error, omission or inaccuracy as a result of
such a supply. iSPIRT, MCM and its affiliates are also not liable for any loss or damage howsoever caused by relying on the information provided
in this document.
For any legal advice you require, please seek advice from a qualified lawyer in the relevant jurisdiction.
M. Thiyagarajan (Rajan)
Fellow, M&A Connect, iSPIRT
rajan@ispirt.in
For Questions Please Contact
Thank You
iSPIRT Foundation is an industry think-tank founded by key participants and proponents of the Indian software product industry. iSPIRT enables a strong
ecosystem, connects and guides software product entrepreneurs and helps catalyse business growth. It encourages buyers to improve performance by
leveraging software products effectively. iSPIRT advises policymakers on interventions that can set the industry on a higher growth trajectory.
Mani Chengappa & Mathur is a Bangalore-based boutique law firm that is driven by the belief that information technology is the profoundest change agent
of our times. Our lawyers specialize in advising domestic and international businesses of all sizes on technology and outsourcing transactions, early stage
capital, corporate, privacy and data protection, employment law, intellectual property protection and commercialisation, and dispute resolution. With years
of experience advising stakeholders ranging from the board of directors and executive management through corporate development, sales, human
resources, research and development to the CIO organisation, we make legal advice accessible and useable.