India's Ministry of Corporate Affairs (MCA) on March 1 passed an order against the startup Deciwood (Anbronica Technologies Private Limited), for illegally raising funds through Tyke, an online fundraising platform. The Ministry ordered the startup and its promoters to pay a fine of ₹4 lakhs for violating the Companies Act, 2013, by using Tyke to advertise its offer to the public at large, which is prohibited for private placements—the method of fundraising opted by Deciwood (more on this below). What is Tyke: Tyke is an online platform that helps startups find potential investors and vice versa. The platform allows startups to display information about the business and also conduct pitch sessions to attract investors. The platform also partners with third-party vendors to provide other services like conducting KYC-verification of investors using their Aadhaar and PAN, setting up an escrow bank account for startups to receive funds, assisting startups in complying with the norms prescribed under various regulations, etc. Why does this matter: Tyke has become a popular avenue for startups to raise funding from the general public, but the platform, and many others like it, operate in a regulatory grey area. The order imposed on Deciwood should serve as a caution for other startups looking to raise money through Tyke or similar fundraising platforms. https://twitter.com/TheKenWeb/status/1632738559487803393?s=20 How much money did Deciwood raise and how: Deciwood, in July 2021, raised around ₹12.5 lakhs through private placement by issuing Compulsorily Convertible Debentures (CCDs) to 28 investors found on Tyke. Jargon busters: Compulsorily Convertible Debentures (CCDs): Compulsorily…
