Compulsorily Convertible Debentures for founders who can't fix a valuation yet.
When you're raising funds but can't agree on a fixed valuation today, CCDs are a strong option — technically a loan that must convert into equity later, usually at your next big funding round.
A CCD is debt that must convert into equity — with no DPIIT status or minimum ticket size required, unlike a Convertible Note. The key advantage is the "discount" — early investors get shares at a lower price than new investors when conversion happens, rewarding them for taking the risk before your valuation was established.
CCD or CCPS — which one is better?
Both eventually turn into equity, but they're treated differently by law and for tax purposes.
| Feature | CCPS | CCD |
|---|---|---|
| What is it? | A type of share (preference share) | A type of debt (unsecured loan) |
| Valuation | Price is usually fixed at the time of issue | Can be issued at a discount to the future valuation |
| Interest | You pay a "dividend" (only if you make a profit) | You can pay interest (even if not profitable yet) |
| FDI rules | Treated as equity from day one | Treated as equity for FDI, but debt for some tax rules |
| Conversion | Usually a 1:1 ratio based on today's price | Often converts at a discount to future valuation |
The "discount" advantage.
One of the biggest reasons to use CCDs is the valuation discount built into the conversion mechanism.
Instead of fixing a price today, you agree that when the investor's money converts to shares in the future — like your Series A — they get those shares at a lower price (e.g., a 20% discount) compared to new investors.
This rewards early investors for taking a risk before your valuation was officially established — without forcing you to negotiate a hard number at the earliest, most uncertain stage of the business.
Three things before we begin.
Registered Valuer report
Even though conversion happens later, a CA must provide a valuation report upfront to set the "cap" or floor price.
Separate bank account
Just like shares, the money must come into a dedicated account set up for this specific investment.
Debt-to-equity limits
We check your company's borrowing limits to ensure you are legally allowed to take on the CCD.
Approximately 3 to 4 weeks, start to finish.
| Preparation & drafting | 10 days Structuring, conversion formula, agreement drafting |
| Approvals & offer | 10–12 days Board and shareholder resolutions, offer letter |
| Allotment & filings | 5 days PAS-3 and ROC filings once funds are received |
| Total time | 3–4 weeks From engagement to funds received |
From debt to equity, managed end to end.
We manage the transition from "Debt" to "Equity" documentation so you don't have to hire separate teams.
Structuring
We help you decide the interest rate and the conversion formula — including the discount and valuation cap.
Agreements
Our lawyers draft the Debenture Subscription Agreement to ensure the conversion terms are airtight.
Approvals
We pass the board and shareholder resolutions to authorise the issuance of unsecured debentures.
Issue & filing
We issue the Offer Letter and file the necessary forms (PAS-3) with the ROC once the money is received.
Conversion management
When it's time to convert the CCD into equity, we handle the valuation update and the final allotment of shares.
CCD not quite the right fit?
Common questions about CCDs.
Do we need DPIIT recognition to issue a CCD?
+Can a CCD pay interest even if the company isn't profitable?
+Do we need a valuation report even though conversion happens later?
+Is a CCD treated as debt or equity for tax purposes?
+What happens if the company never raises a future round?
+Ready to structure a CCD round?
Schedule a no-obligation discovery call. We'll help you decide the conversion formula and get the paperwork moving.
Schedule a consultation Write to rohit@krprassociates.com