Did You Know? · Corporate & Commercial Contracts
Do you know CCPS are the default VC instrument in India for a regulatory reason, not just habit?
Only fully and compulsorily convertible instruments count as equity under FEMA; anything else is treated as debt and attracts ECB conditions.
Under FEMA's pricing and reporting rules, only fully and compulsorily convertible instruments - compulsorily convertible preference shares or compulsorily convertible debentures - are treated as equity for foreign investment purposes. Optionally convertible or redeemable preference shares are treated as debt, attracting External Commercial Borrowing (ECB) conditions. That single distinction is why almost every foreign VC round in India is structured on CCPS.