UK Fund Investing in an Indian Blockchain Company: Legal Issues

A UK fund looking at an Indian blockchain company should first identify what the fund is actually buying. In many India-linked blockchain structures, the Indian company may build protocol infrastructure or software while token rights, treasury assets, governance powers or commercial relationships sit elsewhere. If that mapping is unclear, the fund can price the wrong asset and negotiate protections that do not reach the real sources of value or risk.

Start With The India Investment Route

The inbound investment analysis depends on the issuer, instrument, beneficial ownership, sector activity and closing mechanics. The Reserve Bank of India's Master Direction - Foreign Investment in India states that foreign investment in India is regulated under the Foreign Exchange Management Act, 1999 together with the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 and related reporting regulations. For a UK fund, that means the instrument cannot be chosen in isolation from the investee's actual business and cap-table position.

At the same time, the company's own governance file must be capable of supporting the investment. The Companies Act, 2013 remains the baseline statute for board approvals, shareholder actions, share issuances, record keeping and related corporate mechanics. Before signing, the fund should ensure the constitutional documents, prior financing papers, founder arrangements and approval pathway all line up with the proposed round.

Separate Software Value From VDA-Facing Operations

A blockchain company may describe itself as a software business while still touching activities that require a separate legal review. The first practical question is whether the Indian company is only building technology, or whether it is also facilitating transfers, operating a platform, handling treasury functions, administering wallets, providing issuer-related services or otherwise stepping into a regulated operational perimeter on the facts.

That distinction matters because India's official tax framework already speaks directly to virtual digital assets. The Income Tax Department's official text of section 115BBH addresses tax on income from transfer of virtual digital assets, and section 194S addresses tax deduction on consideration for transfer of a virtual digital asset in the circumstances stated there.

Operational perimeter also matters. FIU-IND's official downloads page lists the AML and CFT Guidelines for Reporting Entities Providing Services Related to Virtual Digital Assets updated as on 8 January 2026, along with a registration circular revision dated 15 September 2025. A UK investor should not assume every blockchain company falls inside that framework, but it should insist on a written analysis of whether the company's present or planned activities do.

Map IP, Token Rights And Inter-Entity Controls

Blockchain diligence often fails when investors review only the Indian equity story. The fund should instead request a map showing each relevant entity, the repositories and code base, founder and developer assignments, open-source dependencies, smart-contract audit records, token or treasury decision rights, brand ownership and all material inter-company licences or services agreements.

This exercise should answer three commercial questions. Does the Indian company own or validly control the technology supporting valuation? Can important economic rights move outside the investee through token allocations, affiliate arrangements or treasury decisions? Do the board rights and investor protections actually reach those decisions?

Build The Diligence File Around Execution Risk

For a UK fund, the highest-value diligence file is one that turns technical and legal complexity into closing decisions. It should cover the proposed instrument and reporting path, beneficial ownership review, corporate approvals, cap table, IP chain of title, developer and contractor agreements, token or treasury materials, audit follow-up, key commercial contracts and a current-law note on whether the operating model triggers additional regulatory or tax workstreams.

That review should also distinguish issues that must be fixed before closing from issues that can be handled through disclosure, covenants or post-closing remediation. Investors lose leverage when they postpone chain-of-title clean-up, governance controls or perimeter analysis until after funds are committed.

KAS & Co.'s broader cross-border transaction support is outlined on its services page and in Insights.

Typical Timeline and Cost Range

A focused red-flag review for a single Indian blockchain company that is mainly developing software can often be completed within 2 to 3 weeks after complete documents are delivered. A structure involving multiple entities, token-linked economics, treasury governance or substantial cross-border contracting usually requires a longer staged review.

Fees are best scoped by workstream: inbound investment and approvals, corporate and cap-table review, technology and IP ownership, token and treasury analysis, and material contract review.

Common Mistakes

1. Treating the Indian shareholding as the whole investment story. Value may depend on code, treasury rights or affiliate arrangements sitting elsewhere.
2. Assuming every blockchain company is legally the same. The real analysis depends on actual activities, transaction flows and control points.
3. Using a conventional venture checklist without protocol-specific governance terms. Material decisions can otherwise fall outside investor protections.

How KAS & Co. Can Help

KAS & Co. advises international investors and India-linked technology businesses on inbound investment structuring, blockchain diligence, IP ownership and transaction protections calibrated to the real operating model. For an India-UK blockchain investment review, contact KAS & Co..

FAQs

1. Does a UK fund automatically need a special approval to invest in an Indian blockchain company?

Not automatically. The answer depends on the issuer, instrument, business activities, ownership position and the rules applicable on the signing date.

2. Why should a fund ask for token and treasury documents if it is only buying equity?

Those documents may control value allocation, governance, conflicts and downside risk even where the investor holds shares rather than tokens.

3. Does every Indian blockchain company fall within FIU-IND's VDA guidance?

That should not be assumed from branding alone. The company must be analysed against its actual services, counterparties and transaction flows.

4. What should a UK fund request before finalising the term sheet?

The starting set should include the entity chart, cap table, proposed instrument, constitutional documents, approvals plan, IP ownership documents, developer agreements, token or treasury materials, audit records and key commercial contracts.

Sources

• Reserve Bank of India - Master Direction: Foreign Investment in India
• The Companies Act, 2013 - India Code
• Income Tax Department - Section 115BBH
• Income Tax Department - Section 194S
• FIU-IND - VDA service provider guidance and registration circulars