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Why we picked it This is the actual Companies Act 2013 mechanics for the thing you want to do: put your co-founder's 5 lakh cheque in as a director's loan, not equity. It spells out the June 2016 startup exemption, the written declaration that the money is the director's own (not itself borrowed), and the board-report disclosure, so your CA can paper it correctly instead of quietly issuing shares against cash.

Can Startups and Pvt Ltd Companies Accept Loans From Directors or Relatives?

From Lawyered.in by Lawyered Legal Team 8 min read

• A private company can accept a loan from a director if the director signs a declaration that the funds are their own and not themselves borrowed, disclosed in the board's report.
• The June 2016 MCA exemption notification relaxed deposit rules specifically for private companies and startups, making a clean founder loan straightforward.
• A loan is repayable debt with defined terms, structurally separate from equity, which is exactly why founder cash belongs here and not on the cap table.