CCPS vs CCD vs iSAFE: how Indian startups raise early money
CCPS vs CCD vs iSAFE: how Indian startups raise early money
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CCPS vs CCD vs iSAFE comes down to one question: what does the investor hold until the company raises a priced round? With CCPS they hold preference shares that must turn into equity. With CCDs they hold debentures that must turn into equity. An iSAFE is an Indian take on the US SAFE, built as CCPS so it fits Indian company law. DPIIT-recognised startups have a fourth option, the convertible note.
Who this is for: founders raising a first cheque from angels, an accelerator or a seed fund in India, who keep hearing these terms and want to know what they are signing.
What each instrument is
Compulsorily convertible preference shares (CCPS)
CCPS are preference shares that must convert into equity shares at a set time or on set events. Until they convert, they are preference shares: they carry a small fixed dividend (often a token amount, paid only if you have profits) and get their money back ahead of equity holders if the company is wound up. Most priced seed and Series A rounds in India are done in CCPS. Under the Companies Act, preference shares must be redeemed or converted within 20 years.
Compulsorily convertible debentures (CCDs)
CCDs are debentures that must convert into equity. They begin as a debt instrument, can carry interest, and convert at maturity or on a trigger. Under Section 71 of the Companies Act, conversion has to happen within ten years. CCDs are used less at seed because debentures bring their own rules, and the interest has tax consequences for both sides.
iSAFE
The iSAFE (India Simple Agreement for Future Equity) was popularised by the angel platform 100X.VC in 2019. It keeps the SAFE idea, invest now and convert at the next priced round, but legally it is CCPS. Typical terms: a nominal issue price, a discount of 15 to 20% on the next round's price, sometimes a valuation cap, no interest and a token dividend. Because it is CCPS, it still goes through the full share allotment process.
Convertible notes (DPIIT startups only)
Startups recognised by DPIIT can issue convertible notes: money received now that converts into equity or is repaid later. The rules: at least ₹25 lakh from each investor in a single tranche, and conversion or repayment within ten years. The investor can choose equity or repayment, which makes it closer to debt in practice.
How they convert
| CCPS | CCD | iSAFE | Convertible note | |
|---|---|---|---|---|
| What the investor holds | Preference shares | Debentures | Preference shares (CCPS) | A note (debt until converted) |
| Valuation needed now | Usually yes, for a priced round | Usually yes | Often deferred to the next round | Deferred |
| Conversion trigger | Fixed date or events in the agreement | Fixed date or events | Next priced round, change of control, or a long-stop date | Agreed events or investor's choice |
| Outer time limit | 20 years | 10 years | 20 years (as CCPS), often 10 in practice | 10 years |
| Interest or dividend | Token dividend | Can carry interest | Token dividend | As agreed |
| Who can use it | Any company | Any company | Any company | DPIIT-recognised startups |
A worked example. An angel puts ₹50 lakh into your startup on an iSAFE with a 20% discount and no cap. A year later you raise a priced seed round at ₹100 a share. The angel's iSAFE converts at ₹80 a share, so their ₹50 lakh becomes 62,500 equity shares, while new investors paying the same amount get 50,000.
What founders give up
- Dilution you cannot see yet. With iSAFEs and notes, you do not know how much of the company you have sold until the next round. Stack several and the dilution at Series A can surprise you. Model it.
- Rights in the fine print. The label tells you little. Read the subscription agreement for information rights, a liquidation preference, anti-dilution and reserved matters. For more on these terms, see term sheet terms in plain English.
- Messy cap tables. Several rounds of CCPS with different conversion formulas can slow down your Series A while lawyers untangle them.
Compliance after the round
Whichever instrument you use, the money comes in through a private placement under Section 42 of the Companies Act. The usual steps, with the timelines commonly cited by practitioners:
- Board and shareholder approvals, including a special resolution, and filing MGT-14 where required.
- A private placement offer letter (PAS-4) to each named investor.
- Money received into a separate bank account.
- Allotment within 60 days of receiving the money. If you miss it, refund within the next 15 days or pay interest at 12% a year.
- Return of allotment (PAS-3) filed with the Registrar within 15 days of allotment for a private placement.
- Share certificates issued within two months, or shares credited to demat accounts if your company must hold shares in demat.
- If any investor is foreign: the price must be at least fair value under the FEMA non-debt instrument rules, backed by a valuation from a chartered accountant or SEBI-registered merchant banker, and Form FC-GPR must be filed through your bank within 30 days of allotment. Another FC-GPR follows when the instrument converts.
These rules change. Check every timeline with your company secretary before you close the round.
Which to pick when
| Situation | Usually works best |
|---|---|
| Small angel cheques before you can price the company | iSAFE |
| A priced seed or Series A with a lead investor | CCPS |
| A DPIIT startup raising ₹25 lakh or more per investor, quickly | Convertible note |
| An investor who wants interest until conversion | CCD, with tax advice |
Common mistakes
- Signing a template without reading it. Two "iSAFEs" can have very different rights.
- Not modelling conversion. Add every instrument to a cap table model before you sign the next one.
- Missing the PAS-3 or FC-GPR deadline. Late foreign investment filings can carry heavy penalties.
- Using money before allotment. Application money must sit in a separate account until shares are allotted.
Free download
One-page comparison table
CCPS, CCDs, iSAFEs and convertible notes.
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Questions people ask
What is the difference between CCPS and CCD?
CCPS are preference shares that must convert into equity, so they sit in your share capital. CCDs are debentures that must convert, so they start life as a kind of debt under the Companies Act. Most priced rounds use CCPS. CCDs are less common because of extra rules on debentures.
Is an iSAFE the same as a US SAFE?
No. A US SAFE is a contract, not a share. Indian company law does not recognise that, so an iSAFE is structured as compulsorily convertible preference shares. It borrows the SAFE idea of converting at a future round, but it goes through the full share allotment process.
Can any startup issue convertible notes in India?
Only startups recognised by DPIIT. The note must be for at least ₹25 lakh from each investor in a single tranche, and it must convert or be repaid within ten years. Other private companies cannot use this route and usually raise through CCPS instead.
Do I need a valuation report to issue CCPS?
For a private placement you generally need a registered valuer's report, and for foreign investors the price must be at least fair value under the FEMA rules. Even a domestic iSAFE at a nominal price needs advice. Ask your CA or company secretary before the board meeting, not after.
Sources
- Mondaq: Startup fundraising in India, demystifying CCDs, CCPS and SAFEs (Nov 2025) (opens in a new tab)
- Treelife: CCPS SAFE notes in India (opens in a new tab)
- Treelife: Allotment of shares in India (opens in a new tab)
- Ministry of Corporate Affairs: Companies Act, 2013 (opens in a new tab)
This is general information, not legal or tax advice. Check with your CA or lawyer for your company's situation.