Glossary
Side Letter
A separate agreement granting specific rights to one investor beyond what's in the main SHA — typically MFN, special information rights, or reporting privileges.
By Amit Tyagi, Fitoor Capital · AletheiaAI Glossary
Definition
Side Letter is a separate written agreement between the company and a specific investor, granting that investor rights or accommodations not in the main Shareholders Agreement. Common contents: Most Favoured Nation (MFN) clauses, special reporting requirements, regulatory accommodations (for AIFs or family offices with specific compliance needs), or one-off commercial terms.
Side letters exist because they let founders accommodate specific investor requirements without amending the main SHA (which would require all-investor consent). They also enable confidentiality — terms in a side letter aren't automatically visible to other investors.
India Context
Side letters are standard in Indian institutional rounds — most lead VCs request them for accommodating their specific LP reporting requirements. The most common side letter terms in India: AIF-specific reporting fields, FEMA compliance acknowledgements, ESG/diversity reporting commitments, and MFN clauses.
Founders should track all side letters carefully — they create stacked obligations that can become operationally burdensome at Series B+.
Example
A Series A SHA covers all 6 investors. The lead VC requires a side letter granting AIF-specific monthly reporting on portfolio company KPIs in a defined format. A US-based co-investor requires a side letter on FATCA compliance and US tax reporting. Both side letters bind the company without affecting the main SHA.
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