Corporate Law Questions and Answers in India

Corporate law in India is anchored in the Companies Act, 2013, the Limited Liability Partnership Act, 2008, the Indian Contract Act, 1872 and, for distressed companies, the Insolvency and Bankruptcy Code, 2016.

Businesses ask most often about choosing between a private limited company and an LLP, director duties and liability, shareholder and founder agreements, share transfers and ESOPs, annual compliance and the consequences of missing it, and commercial contract terms — indemnity, limitation of liability, termination and arbitration clauses.

The structure choice is mostly about who you intend to raise money from. Institutional investors invest in private limited companies, not LLPs, because share capital, preference rights and ESOPs are straightforward there. An LLP carries lighter compliance and no dividend distribution friction, which suits a professional services or bootstrapped business that will not raise equity.

Compliance for a private limited company is continuous rather than annual: board meetings at prescribed intervals, an annual general meeting, filing of financial statements and the annual return, maintenance of statutory registers, and disclosure of director interests. Directors carry personal liability for certain defaults, and repeated non-filing can lead to disqualification.

Founder arrangements deserve documentation before there is anything to argue about. Vesting schedules, reverse vesting on departure, roles and reserved matters, transfer restrictions and what happens on a deadlock are cheap to agree at the start and extremely expensive to negotiate once a co-founder wants out.

For an early-stage company, the highest-value legal conversations happen at incorporation, when the founding team is finalised, before the first large customer contract, and before a funding round.