India-origin startups flip to a Delaware parent because US venture investors strongly prefer to invest in US entities, and Delaware corporate law provides the standard governance framework for VC-backed companies. The flip creates a US holding company that owns the Indian operating subsidiary, allowing founders to raise US venture capital while keeping their engineering operations in India.
The standard cross-border structure for a Silicon Valley startup with India operations is a Delaware C corporation parent with a wholly-owned Indian private limited company subsidiary. This structure is straightforward in concept but introduces compliance obligations under FEMA and the NDI Rules that compound over time. Pricing of inter-company transactions, transfer pricing documentation, and the treatment of intellectual property developed by the Indian subsidiary all require ongoing attention. Gurpreet Bal advises founders to set up the Delaware-India structure correctly at formation because the cost of retroactive compliance is significantly higher than getting it right from the start.
The Foreign Exchange Management Act (FEMA) and the Non-Debt Instruments Rules require Indian companies receiving foreign investment to comply with sectoral caps, pricing guidelines, and reporting obligations to the Reserve Bank of India. Companies must report foreign equity issuances within specified timelines, and failure to comply can result in penalties and restrictions on future foreign investment.
India's NDI Rules govern how foreign investment flows into Indian entities, specifying permissible instruments, pricing guidelines, and reporting requirements. When an Indian subsidiary issues shares even to its own Delaware parent company, the pricing must comply with FEMA/NDI guidelines. Gurpreet Bal has seen startups discover at Series B diligence that their Indian subsidiary share issuances to the parent company were never properly priced under FEMA, requiring expensive and time-consuming remediation.
Press Note 3 of 2020 requires government approval for any foreign direct investment from countries sharing a land border with India, including China. This means Chinese investors — including funds with Chinese limited partners or portfolio companies — cannot invest in Indian startups through the automatic FDI route, and require separate government approval that is rarely granted for technology companies.
India's Press Note 3 (2020) imposed additional government approval requirements for FDI from entities in countries sharing a land border with India, primarily targeting Chinese investment. For Silicon Valley startups raising from venture funds with Chinese LP commitments, this creates a diligence obligation. Gurpreet S. Bal advises on the investor-side analysis required to determine whether Press Note 3 government approval is needed for investment into a startup's Indian subsidiary.
Indian companies are required to identify and disclose significant beneficial owners — individuals who ultimately own or control 10% or more of the shares or voting rights. In a flip structure where a US holding company owns the Indian subsidiary, the look-through analysis can require disclosing the beneficial owners of the US parent, which may include venture fund LPs depending on their ownership percentages.
India's Companies Act Section 90 and the Significant Beneficial Ownership framework require disclosure of individuals who hold significant beneficial ownership in Indian companies, including ownership flowing through multiple layers of entities. For a typical Silicon Valley structure with a Delaware parent and Indian subsidiary, the individual founders who own the Delaware parent may need to file SBO declarations with the Indian subsidiary. Gurpreet Bal notes this is routinely overlooked and routinely flagged during acquisition diligence.
The biggest issue Gurpreet sees in cross-border India structures is practitioner inconsistency. The quality of advice varies significantly — not just between firms but between individual lawyers within the same firm. Use US counsel who has worked with multiple Indian practitioners across multiple transactions, not someone who has a single preferred referral and routes everything through them. And if your US or Indian counsel does not seem to understand your specific situation — the structure, the investor base, the regulatory exposure — switch quickly. The cost of staying with the wrong advisor in a cross-border structure compounds in ways that are expensive and slow to unwind.
Gurpreet S. Bal is a Partner at Foley and Lardner LLP in Silicon Valley, where he advises startups, founders, and investors on SAFE financings, venture capital rounds, mergers and acquisitions, acquihires, and IPOs. He has represented clients in hundreds of transactions with aggregate deal value exceeding $60 billion across AI, semiconductors, fintech, and emerging technology. Prior to his career as a corporate lawyer and transaction advisor, he served with the U.S. Department of Justice and as an international and cross-border tax advisor at a Big 4 accounting firm.