SAFE Agreement (India)
SIMPLE AGREEMENT FOR FUTURE EQUITY (SAFE)
Indian Contract Act 1872 | Companies Act 2013 | SEBI Regulations
This Simple Agreement for Future Equity ("SAFE") is entered into on [Agreement Date] at [City], India, by and between:
(1) [Company Name] (CIN: [Company CIN]), a company incorporated under the Companies Act 2013, having its registered office at [Company Address], represented herein by [Company Rep Name], [Company Rep Designation], duly authorised by a resolution of the Board of Directors (hereinafter referred to as the "Company"); and
(2) [Investor Name] (PAN: [Investor PAN]), residing/having its principal office at [Investor Address] (hereinafter referred to as the "Investor").
1. INVESTMENT
1.1 The Investor agrees to pay the Company an aggregate amount of [Investment Amount] (the "Purchase Amount") as consideration for this SAFE. The Company shall issue a receipt of the Purchase Amount to the Investor upon receipt of funds.
1.2 The Purchase Amount shall not carry any interest, shall not be treated as a debt or loan, and shall not be subject to repayment except as expressly provided in Clause 4 (Dissolution) and Clause 5 (Liquidity Event) of this SAFE.
2. CONVERSION ON EQUITY FINANCING
2.1 Qualifying Financing: If, prior to the expiry or termination of this SAFE, the Company closes a round of equity financing in which it receives aggregate gross proceeds of at least [Qualifying Round Threshold] from investors in exchange for equity shares or compulsorily convertible instruments (a "Qualifying Financing"), then the Purchase Amount shall automatically convert into fully paid-up equity shares (or Compulsorily Convertible Preference Shares, CCPS) of the Company.
2.2 Conversion Price: The shares shall be issued to the Investor at the lower of: (a) the price per share paid by investors in the Qualifying Financing multiplied by (1 minus the Discount Rate of [Discount Rate]); or (b) the price per share derived by dividing the Valuation Cap of [Valuation Cap] by the Company's fully diluted share capital immediately prior to the Qualifying Financing (the "Cap Price").
2.3 Allotment Procedure: Upon conversion, the Company shall: (a) pass the requisite board and shareholders' resolutions; (b) obtain a valuation report from a registered valuer under Section 247 of the Companies Act 2013 if required; (c) file Form PAS-3 with MCA within 30 days of allotment; and (d) issue a share certificate or credit the shares to the Investor's demat account.
3. LIQUIDITY EVENT
3.1 If, prior to a Qualifying Financing, the Company undergoes a Liquidity Event (defined as: any acquisition, merger, scheme of arrangement, or sale of all or substantially all of the Company's assets), the Investor shall, at its election, either: (a) receive a cash payment equal to the Purchase Amount (the "Cash-Out Option"); or (b) convert the Purchase Amount into equity shares at the Cap Price immediately prior to the Liquidity Event.
3.2 The Company shall give the Investor not less than 10 days' prior written notice of any anticipated Liquidity Event, enabling the Investor to exercise its election under Clause 3.1.
4. DISSOLUTION / WINDING UP
4.1 If the Company winds up, is struck off, or undergoes voluntary or court-ordered dissolution prior to a Qualifying Financing or Liquidity Event, the Investor shall be entitled to receive, in priority to any distribution to shareholders but after payment of creditors, the Purchase Amount or, if insufficient assets exist, a pro-rata share of available assets.
5. REPRESENTATIONS AND WARRANTIES
5.1 The Company represents and warrants that: (a) it is duly incorporated and validly existing under the Companies Act 2013; (b) it has full corporate power and authority to enter into this SAFE; (c) the execution of this SAFE has been duly authorised by the Board of Directors; (d) this SAFE does not violate any law, regulation, or the Company's Memorandum or Articles of Association; and (e) the Company is a DPIIT-recognised startup (or, if not, it has taken appropriate tax advice regarding Section 56(2)(viib) of the Income Tax Act 1961).
5.2 The Investor represents and warrants that: (a) the Investor has full legal capacity to enter into this SAFE; (b) the Purchase Amount constitutes the Investor's own funds; and (c) if the Investor is a non-resident, the investment complies with applicable FEMA regulations and RBI guidelines.
6. GOVERNING LAW AND DISPUTE RESOLUTION
6.1 This SAFE shall be governed by and construed in accordance with the laws of India, including the Indian Contract Act 1872 and the Companies Act 2013.
6.2 Any dispute arising out of or in connection with this SAFE shall be resolved by arbitration under the Arbitration and Conciliation Act 1996, with the seat of arbitration at [City], and the award shall be final and binding on the parties.
Company (Authorised Signatory)
________________
Signature
Investor
________________
Signature
What Is a SAFE Agreement (India)?
A SAFE Agreement in India defines what each party must do under the deal and the consequences of failing to perform.
In India, SAFE agreements are governed as contracts under the Indian Contract Act 1872 and must comply with the Companies Act 2013 regarding the eventual issuance of shares upon conversion. SEBI Regulations and RBI/FEMA guidelines apply where the investor is a foreign national, NRI, or SEBI-registered fund. Unlike a convertible note, a SAFE is not a debt instrument — it does not carry interest or a fixed repayment date, making it balance-sheet-friendly for the startup.
SAFEs in India typically include a valuation cap (the maximum pre-money valuation at which the SAFE converts), a discount rate (a percentage discount on the qualifying round price), and clearly defined conversion and liquidity event provisions. The SAFE has become increasingly popular among DPIIT-recognised startups, angel networks, and accelerators in India's growing startup ecosystem.
The legal framework governing the SAFE Agreement (India) in India draws on several key statutes and regulatory bodies. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Parties executing a SAFE Agreement (India) in India should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Indian Contract Act, 1872 sets the foundational requirements.
When Do You Need a SAFE Agreement (India)?
You need a SAFE Agreement when an early-stage Indian startup seeks investment from an angel investor, seed fund, or accelerator before it is ready to conduct a formal equity round with a full term sheet and shareholder agreement. A SAFE allows the startup to receive funding quickly with minimal legal documentation and defer the complex valuation and equity structure discussions to a later, more appropriate time.
You need this document if you are a founder who wants to raise a pre-seed or seed round without incurring the cost and time of a full priced round, or if you are an investor who wants to support an early-stage startup and receive equity at a later date on investor-friendly terms.
A SAFE is also appropriate when multiple investors are participating in a seed round — each investor signs their own SAFE with the company, avoiding the complexity of bringing all investors to the table simultaneously for a shareholders' agreement. The SAFE is particularly useful in India's DPIIT-recognised startup ecosystem, where regulatory compliance is simplified and angel tax exemptions may apply.
Parties in India should prepare a SAFE Agreement (India) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your SAFE Agreement (India)
A valid India SAFE Agreement should contain the following key elements.
Parties: Full legal names, addresses, and PAN/CIN of both the company and the investor.
Investment Amount: The exact amount in Indian Rupees (₹) being paid by the investor under the SAFE.
Valuation Cap: The maximum pre-money valuation at which the SAFE will convert, protecting the investor from dilution in a high-valuation round.
Discount Rate: The percentage discount on the qualifying round share price available to the SAFE investor.
Conversion Mechanics: Detailed provisions for conversion upon a qualifying equity financing round, including the type of shares to be issued (typically CCPS), the conversion price formula, and the procedure for allotment under the Companies Act 2013.
Liquidity Event Provisions: What happens if the company is acquired, merges, or winds up before a qualifying round.
Dissolution Proceeds: The priority of the investor's return in a dissolution scenario.
Representations and Warranties: Basic representations by the company regarding its incorporation, authorisation, and compliance.
Governing Law and Dispute Resolution: Indian law and jurisdiction, typically the city of incorporation.
Additional compliance elements for a SAFE Agreement (India) used in India include: Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Forms-legal.com provides this template as a starting point for India-compliant documentation.
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Reference this free template in an article, syllabus, or research note:
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"SAFE Agreement (India) (India)." Forms Legal, 2026, https://forms-legal.com/india/business/contracts/safe-agreement-india.
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howpublished = {\url{https://forms-legal.com/india/business/contracts/safe-agreement-india}},
note = {Free legal document template. Based on Indian Contract Act, 1872}
}Also available for these jurisdictions:
Frequently Asked Questions
A SAFE (Simple Agreement for Future Equity) is a relatively recent instrument in India's startup ecosystem, originally developed by Y Combinator in the United States. While Indian law does not have a statute specifically called the 'SAFE Act,' SAFE agreements are enforceable as contracts under the Indian Contract Act 1872, provided they satisfy the essential conditions of a valid contract: offer, acceptance, lawful consideration, capacity of parties, free consent, and lawful object. The SAFE operates as a warrant or option agreement — the investor pays a sum of money now and receives the right to convert that sum into equity shares at a future event (a qualifying financing round, acquisition, or dissolution). Under the Companies Act 2013, the issuance of shares upon conversion of a SAFE must comply with the relevant provisions on issue of shares, including board and shareholder resolutions, proper valuation by a registered valuer, and filing of Form PAS-3 with the Ministry of Corporate Affairs (MCA) upon allotment. For startups registered as private limited companies, SAFE agreements must also comply with Section 42 of the Companies Act 2013 (private placement rules) if the investment is treated as a private placement. The Foreign Exchange Management Act 1999 (FEMA) and Reserve Bank of India (RBI) regulations apply if the investor is a non-resident — in such cases, the SAFE may be treated as a foreign investment instrument, and the startup must comply with the Foreign Direct Investment (FDI) Policy, including pricing guidelines under FEMA.
In an India SAFE Agreement, conversion of the investor's payment into equity shares is typically triggered by specific events defined in the agreement. The most common conversion triggers are:
1. Equity Financing Round (Qualifying Round): The primary trigger. When the company raises a 'Qualifying Financing' — usually defined as an equity round above a specified threshold (e.g., ₹5 crore or $1 million) — the SAFE converts into preference shares (typically Series A or compulsorily convertible preference shares, CCPS) at a valuation determined by the round price, subject to any discount or valuation cap agreed in the SAFE. 2. Valuation Cap: The SAFE may specify a maximum pre-money valuation at which conversion occurs, protecting the early investor from excessive dilution if the company's valuation grows dramatically before the qualifying round. 3. Discount Rate: The investor may receive a discount (e.g., 15%–20%) on the per-share price of the qualifying round, rewarding early risk-taking. 4. Liquidity Event (Acquisition or Merger): If the company is acquired or merges before a qualifying round, the SAFE typically converts to equity immediately before the liquidity event, or the investor receives a cash payout equal to the SAFE amount plus any applicable premium. 5. Dissolution / Winding Up: If the company winds up without a qualifying event or liquidity event, the investor is entitled to a return of the SAFE amount (if sufficient assets are available) before any distribution to shareholders.
Both SAFEs and Convertible Notes are instruments used by early-stage Indian startups to raise capital before a formal equity round, but they differ significantly in legal structure, tax treatment, and regulatory implications. A Convertible Note is explicitly recognised under Section 2(27A) of the Companies Act 2013 (as amended by the Finance Act 2017) for DPIIT-recognised startups. A convertible note is defined as an instrument evidencing receipt of money by a startup company, which is initially treated as a debt (repayable with interest) and later convertible into equity shares at the option of the holder. For SEBI-registered startups, convertible notes up to ₹25 lakh per investor are exempt from the complex private placement rules under Section 42. They are a form of debt — meaning the startup must repay the principal with interest if conversion does not occur. A SAFE, by contrast, is not a debt instrument — there is no repayment obligation, no interest accrual, and no maturity date. The investor simply has a right to receive equity at a future event. This makes SAFEs simpler to draft, cheaper to execute, and less burdensome on the startup's balance sheet (it does not appear as debt). However, because SAFEs are not explicitly recognised in Indian company law the way convertible notes are, their regulatory treatment is less clear, and they may require more careful structuring — particularly for foreign investment scenarios under FEMA.
A SAFE Agreement (India) does not legally require a lawyer in India, and individuals and businesses may draft and execute the document independently. The Indian Contract Act, 1872 does not mandate legal representation for the creation or signing of this type of document. However, seeking independent legal advice from a qualified India lawyer is recommended for transactions involving substantial financial value, complex regulatory requirements, or cross-border elements where multiple legal jurisdictions may apply. A lawyer can verify that the document complies with all applicable statutory requirements, identify potential risks specific to the transaction, and confirm that the terms adequately protect the interests of all parties involved. The Supreme Court of India has jurisdiction over disputes arising from this type of document, and Registrar of Companies (ROC) may impose additional compliance obligations depending on the nature of the underlying transaction. Professional legal review is particularly advisable where the document will be submitted to government agencies or used as evidence in legal proceedings.
A SAFE Agreement (India) does not legally require a lawyer in India, though legal advice is recommended. Under Indian law, the Indian Contract Act 1872 governs agreements. The Companies Act 2013 and Registrar of Companies (ROC) regulate corporate documents. The Information Technology Act 2000 governs electronic contracts and data protection. The Consumer Protection Act 2019 provides consumer rights. The Income Tax Act 1961 requires tax compliance. Forms-legal.com provides this template as a starting point — always review with a qualified Indian advocate for significant transactions. Under India law, Indian Contract Act, 1872, parties should seek independent legal advice from a qualified lawyer to confirm compliance with all applicable requirements. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). Forms-legal.com provides this template as a starting point for India-compliant documentation.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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