Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Why a US SAFE doesn't work as-is in India
Indian company law recognises shares and debentures, not an open-ended ‘agreement for future equity’. A bare SAFE is neither, so the company cannot simply issue one and book the money as capital. For foreign money the problem is sharper: FEMA allows investment only through listed capital instruments — equity shares, CCPS and CCDs — and a SAFE is not on that list, so taking foreign funds on a plain SAFE is not permitted.
The Indian equivalents
The usual substitutes are CCPS (compulsorily convertible preference shares), which convert to equity at the next priced round on agreed terms, or a convertible note, which only DPIIT-recognised startups can issue and only above a minimum amount. Some Indian funds offer an ‘iSAFE’ that delivers SAFE-style economics but is legally structured as CCPS, precisely so it fits Indian law.
A worked example
Say an angel offers you ‘a SAFE’ with a valuation cap. In India you would document this as CCPS with the same cap and discount, converting at your next round. If the angel is a non-resident, it must be CCPS or CCDs, issued at or above fair value, with an FC-GPR filed within 30 days. Instrument rules under the Companies Act and FEMA change — confirm the current position before you sign a term sheet. Our startup service can structure it correctly.