How long after a term sheet to close a round in India

A signed term sheet feels like the finish line. It isn't. The commercial terms are usually non-binding, and money moves only after diligence, two long agreements, two sets of approvals and a filing sequence the Companies Act fixes by the day.

This guide walks from signature to money in the bank for an Indian private company issuing equity or preference shares, with each legal clock and where it comes from. It explains the process; your lawyer and chartered accountant run the actual round.

How long does it take to close after a term sheet in India?

No Indian benchmark is published. In a global survey of 885 VCs, a deal took 83 days on average from pitch to close, and 73 for early-stage firms, with the term sheet coming late in that run. After signing, the length depends on what diligence finds and how fast the company clears the statutory steps.

The survey of 885 VCs also shows why signing isn't closing. The paper reports firms offered 1.7 term sheets for each deal they closed, a close rate of roughly 60%, and notes that legal documents and warranties can sink a deal after the term sheet. The data is mostly American, so read it as a direction, not an Indian number.

For the stretch before the term sheet, see what happens after a first investor meeting. For the whole raise, see how long a seed round takes in India.

What are the steps from term sheet to money in the bank?

There are nine steps, roughly in this order: confirmatory diligence, definitive agreements, conditions precedent, a board meeting, a shareholders' special resolution, the PAS-4 offer letter, money into a separate bank account, allotment, then filings, including PAS-3 and, for foreign money, FC-GPR.

Step	Who acts	Legal clock
1. Confirmatory diligence	Investor's lawyers and CA	None set by law
2. SSA and SHA signed	Company, founders, investor	None set by law
3. Conditions precedent met	Company	Long-stop date in the SSA
4. Board approves the issue and calls the shareholders' meeting	Board	7 days' notice for a board meeting
5. Special resolution	Shareholders	Filed in MGT-14 within 30 days
6. PAS-4 offer letter	Company	Only after the resolution is filed
7. Money received	Investor	Into a separate bank account
8. Allotment	Board	Within 60 days of receiving money
9. PAS-3, and FC-GPR for foreign money	Company	15 days; 30 days

Diligence and the definitive agreements

Confirmatory diligence checks what the term sheet assumed: the cap table against filings, IP ownership, compliance, material contracts and tax. The findings feed two documents. The share subscription agreement (SSA) covers price, conditions precedent, warranties and closing mechanics; the shareholders' agreement (SHA) covers governance after the money lands.

The term sheet clauses angels should read carry straight into these documents. Anything diligence finds broken usually becomes a condition precedent; see conditions precedent in startup deals for the usual list and how a long-stop date works.

Board and shareholder approvals

Shares issued to a new investor are a preferential allotment under section 62(1)(c) of the Companies Act, which needs a special resolution, a price backed by a registered valuer's report, and compliance with the private placement rules in section 42.

Under rule 14 of the prospectus and allotment rules, shareholders approve each offer by special resolution, and the offer letter goes out only after that resolution is filed with the Registrar. Section 117 allows 30 days to file Form MGT-14, but every day you wait holds up the offer.

A special resolution passes only if votes in favour are at least three times the votes against, under section 114(2). The Articles usually change at the same meeting to carry the investor's rights, also by special resolution under section 14.

Offer, money and allotment

The company sends each investor a serially numbered offer letter in Form PAS-4 and keeps a record of offers in Form PAS-5. Rule 14 caps a private placement at 200 persons in a financial year, leaving out qualified institutional buyers and employees under an ESOP.

The investor pays through a bank, never in cash, and section 42 says the money sits in a separate bank account in a scheduled bank. The company can't touch it until it has allotted the shares and filed the return of allotment.

Allotment must happen within 60 days of receiving the money. Miss that and the company must refund within 15 days after the 60 days end, failing which it owes interest at 12% a year from the 60th day.

Filings after allotment

Section 42(8) gives 15 days from allotment to file the return of allotment in Form PAS-3, with a penalty of Rs 1,000 a day, up to Rs 25 lakh, for delay. If the investor is foreign, RBI's reporting regulations add Form FC-GPR within 30 days of issue.

The RBI master direction on foreign investment also requires shares to be issued within 60 days of receiving foreign money, or the money refunded. Foreign investment rules for Indian startups cover pricing and the rest.

What usually delays a closing?

Closings slip on gaps that diligence finds and the company must fix first: a cap table that doesn't reconcile with filings, IP nobody assigned, overdue returns, a late valuation report, or a foreign investor's banking steps. Each becomes a condition precedent, and each one adds days you can't recover.

• Cap table gaps: an old allotment with no PAS-3 or no board minute behind it.
• IP ownership: code written by founders before incorporation, or by contractors, without a signed assignment.
• Overdue filings: late annual returns the investor wants cleared before the money moves.
• Valuation: the registered valuer's report arrives after the board meeting it was meant for.
• Sequencing: section 42(5) bars a fresh offer until earlier allotments are complete, withdrawn or abandoned, so a stalled tranche can block the next.

The term sheet sets the price. The filings set the date.

How can founders shorten the time to close?

Do the slow work before you sign: reconcile the cap table, collect IP assignments, clear overdue filings, line up a registered valuer and keep the data room current. Then agree a closing checklist with the investor's counsel on day one, with an owner and a date against every item.

Ask for the investor's diligence request list and the first draft of the SSA early. Book the board meeting and shareholders' meeting dates in advance, and file MGT-14 the day the resolution passes rather than at the deadline.

Finally, set a realistic long-stop date. Too short and you renegotiate under pressure; too long and the investor can sit on the deal. Your lawyer should set it from the checklist, not from optimism.

Questions

Is a term sheet legally binding in India?

Usually only in part. Most term sheets state that the commercial terms are non-binding, while clauses on confidentiality, exclusivity and costs bind both sides. The binding promise to invest comes from the share subscription agreement signed after diligence. Read your term sheet's own wording with a lawyer before relying on it.

When can a startup use money raised from investors?

Only after it allots the shares and files the return of allotment. Section 42(4) of the Companies Act bars use of private placement money until allotment is made and Form PAS-3 is filed; until then the money must sit in a separate bank account in a scheduled bank.

What happens if shares aren't allotted within 60 days?

Section 42(6) requires allotment within 60 days of receiving the application money. If the company can't allot, it must refund the money within 15 days after that period ends, and if it misses that too, it owes interest at 12% a year from the 60th day.

What is the difference between an SSA and an SHA?

The share subscription agreement covers the investment itself: price, number of shares, conditions precedent, warranties and closing steps. The shareholders' agreement governs the relationship afterwards: board seats, reserved matters, information rights, transfer limits and exit. Both are usually signed together, and the Articles are amended to mirror the SHA.

Sources: Companies Act, 2013, sections 14, 42, 62, 114 and 117, India Code · Companies (Prospectus and Allotment of Securities) Rules, 2014, rule 14, as reproduced by CA B.K. Goyal and Co · RBI, FEMA 395 reporting regulations, regulation 4(1), amended up to 13 June 2026 · RBI, Master Direction on Foreign Investment in India, Annex 1 para 2.3, updated 15 June 2026 · Gompers, Gornall, Kaplan and Strebulaev, How Do Venture Capitalists Make Decisions?, NBER Working Paper 22587, 2016

For more on how startup funding works in India, read the MyStartupValley blog or visit mystartupvalley.com.