Issuance of 51% stake to investor by 2 years seafood startup

An investor came forward to invest 5 cr with 51% stake and asked to achieve projected turnover of 38 crores in 1stvyear towards infra or tech or sales, if achieve will invest further else he gives 12% back this hold 39% . Inor fresh , is it viable 4 year old traditional fish trader with tech support.
 
If viable, the legal aspects of share holding agreement, as there are 2 directors, authorised capital 10 lakhs and paid up capital is 1 lakh. last year unaudited turnover is 1.82 crore. 
 
Termsheet called for management wanted to give 3 options, 1. 10% dividend for 3 years 2. returning 10 crores with 12% interest 3. giving 51% stake and sourcing other funds upt 10 cr ( banks,instituitions)
 
Replies (1)

Yes, it is legally possible for a private limited company to bring in an investor and issue shares, but it must be done through proper Companies Act compliance, mainly Section 42 and Section 62, and authorised capital may need to be increased first. However, on the facts stated, giving 51% for ₹5 crore at this stage appears commercially risky unless backed by a proper valuation, audited numbers, milestone-based business plan, and strong shareholder documentation.

A safer structure would be tranche-based investment or convertible instruments instead of immediate 51% transfer. The company should execute a detailed Share Subscripttion Agreement and Shareholders’ Agreement covering valuation, board control, reserved matters, exit rights, anti-dilution, milestones, founder protection, and default consequences. Before proceeding, please obtain a company secretary/corporate lawyer opinion and valuation report.

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