Legal Glossary: Common Indian Business & Legal Terms

Agreement for Sale (AFS)
An Agreement for Sale records the terms under which a seller will transfer property or assets to a buyer at a future date. It sets the price, conditions, and timeline but does not itself transfer ownership. The actual transfer happens later through a sale deed.

Angel Tax
Angel Tax was a tax under Section 56(2)(viib) on the share premium a company received above the fair market value of its shares. It mainly affected startups raising equity from investors. Angel Tax stands abolished for all classes of investors.

Annual General Meeting (AGM)
An Annual General Meeting is the yearly meeting a company holds with its shareholders. Shareholders approve financial statements, declare dividends, and appoint auditors and directors at the AGM. The Companies Act, 2013 makes the AGM mandatory for most companies.

Articles of Association (AoA)
The Articles of Association is the internal rulebook of a company. It sets out how the company runs its affairs – share transfers, director powers, and meeting procedures. The AoA binds the company and its members.

Board Resolution
A Board Resolution is a formal decision passed by a company’s board of directors. It authorizes specific actions, such as opening a bank account or approving a contract. Banks, regulators, and counterparties often ask for a certified copy as proof of authority.

Cap Table
A Cap Table, short for capitalization table, lists who owns what in a company. It records shareholders, share classes, ownership percentages, and options. Investors review the Cap Table closely before funding a startup.

Compliance Officer
A Compliance Officer is the person responsible for making sure a company follows the laws and regulations that apply to it. Listed companies and regulated entities must appoint one. The role covers disclosures, filings, and internal controls.

Compulsorily Convertible Preference Shares (CCPS)
CCPS are preference shares that must convert into equity shares at a set point, such as a future funding round or a fixed date. Investors favor CCPS because they offer downside protection before conversion. They are a common instrument in Indian startup funding.

Corporate Insolvency Resolution Process (CIRP)
CIRP is the process under the Insolvency and Bankruptcy Code, 2016 for resolving a company that cannot pay its debts. A resolution professional takes control, and creditors decide whether to revive or liquidate the company. The process runs on strict statutory timelines.

DIN (Director Identification Number)
A Director Identification Number is a unique number the Ministry of Corporate Affairs issues to any person who wants to become a company director. One person holds one DIN for life, across all companies. No one can be appointed a director without a valid DIN.

Due Diligence
Due Diligence is the investigation a buyer or investor runs on a company before a deal. It reviews finances, contracts, litigation, compliance, and intellectual property to find risks. The findings shape the price, terms, and whether the deal proceeds.

ESOP (Employee Stock Option Plan)
An ESOP gives employees the right to buy company shares at a fixed price after a vesting period. Companies use ESOPs to attract and retain talent, especially startups short on cash. Employees benefit if the share value rises above their exercise price.

FDI (Foreign Direct Investment)
Foreign Direct Investment is investment by a foreign entity or person into an Indian business. India regulates FDI through the FEMA (Non-Debt Instruments) Rules, with limits and conditions that vary by sector. Some sectors allow FDI automatically; others need government approval.

JDA (Joint Development Agreement)
A Joint Development Agreement is a contract between a landowner and a developer to build on the owner’s land. The developer funds and executes construction, and the two share the built property or the revenue. JDAs are common in Indian real estate development.

LLP (Limited Liability Partnership)
An LLP is a business structure that combines the flexibility of a partnership with limited liability for its partners. Partners are not personally liable for the LLP’s debts beyond their agreed contribution. The Limited Liability Partnership Act, 2008 governs LLPs in India.

NBFC (Non-Banking Financial Company)
An NBFC is a company that provides financial services – loans, leasing, and investments without holding a banking license. The Reserve Bank of India registers and regulates NBFCs. They cannot accept demand deposits the way banks do.

OPC (One Person Company)
A One Person Company is a company with a single shareholder, introduced by the Companies Act, 2013. It gives solo entrepreneurs the limited liability of a company without needing a second member. The single owner must nominate a successor.

Registered Office
The Registered Office is the official address of a company, recorded with the Registrar of Companies. All legal notices and official communications go to this address. A company must maintain a registered office from the day it incorporates.

Reserved Matters
Reserved Matters are the key decisions a company cannot take without the consent of specified shareholders, usually investors. They typically cover issuing new shares, changing the business, or taking on major debt. Shareholders Agreements list Reserved Matters to protect minority investors.

RSU (Restricted Stock Unit)
An RSU is a promise to give an employee company shares once conditions usually time or performance are met. Unlike an ESOP, the employee pays nothing to receive the shares. RSUs vest over a schedule and convert to actual shares on vesting.

SARFAESI
SARFAESI refers to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. It lets banks and financial institutions seize and sell a defaulting borrower’s secured assets without going to court. Lenders use it to recover bad loans faster.

Shareholders Agreement (SHA)
A Shareholders Agreement is a contract among a company’s shareholders that sets out their rights and obligations. It covers voting, share transfers, exit rights, and Reserved Matters. The SHA governs the relationship between founders and investors.

Statement of Working (Form 27)
The Statement of Working, filed as Form 27, is the annual statement a patent holder submits on how the patent is being worked in India. It reports whether and how the invention is used commercially. The Patents Act, 1970 requires this filing.

Term Sheet
A Term Sheet is a short document that sets out the key terms of a proposed investment. It covers valuation, investment amount, share type, and investor rights. Most terms are non-binding, but they frame the definitive agreements that follow.

Vesting Schedule
A Vesting Schedule sets the timeline over which an employee or founder earns full ownership of shares or options. A common schedule runs four years with a one-year cliff. Unvested shares are usually forfeited if the person leaves early.