India: Shareholders

As discussed in our previous article, the Consultation Paper addressed a structural gap in the existing aircraft leasing ecosystem in GIFT City. While aircraft leasing entities could already be established in the IFSC, aircraft ownership, primary financing, transaction structuring and related professional services could continue to remain outside the IFSC.

One of the most basic tenets of corporate law is the doctrine of separate legal personality. It acknowledges that a company is a legal person that is separate and independent of shareholders and directors. Although this principle promotes investment and prevents excessive liability, it may be also abused to avoid personal responsibility. In response to this abuse, the courts came up with the concept of piercing the corporate veil, which permits the court to lift the veil of incorporation to examine the fraudulent and criminal actions of the company in which the veil is incorporated.

For all intents and purposes, signing a term sheet is often confused with the end of a transaction in the Indian startup community - the world's third-largest in terms of recognised startups. Actually, the term sheet is just a non-binding ‘statement of intent’. The legal framework that influences the relationship between a startup and its investors is finalized during the weeks and months to come and is far more important and far more intricate than the terms of the investment.