Executive Summary

What was the challenge? A Bengaluru-headquartered medical technology company was managing multiple interconnected matters at the same time. Its overseas parent and technology licensor had entered insolvency proceedings in the United Kingdom, while a secured lender to the overseas entity was asserting rights over its shareholding in the Indian company. At the same time, the company was preparing for a growth capital raise and needed its financial information to withstand investor scrutiny. Its statutory AGM deadline was also approaching while the audit remained incomplete following an accounting team transition.

What service did the firm provide? APCALLP was engaged as an integrated transaction advisory and virtual CFO partner. The engagement covered review of the shareholders agreement and registered debenture instruments, reconciliation and analysis of financial information, preparation of investor and financing materials, assistance with the statutory application for extension of the AGM, and indirect tax advisory on the company's revenue model.

What was the result? The engagement identified several matters requiring management attention, including a statutory date-computation issue, a discrepancy in the reported shareholding, an imbalance in one year's audited balance sheet, an unaddressed reverse charge exposure and an indirect tax classification issue with an estimated annual exposure of approximately ₹46 lakh. The identified matters were incorporated into the respective transaction, financial, compliance and tax workstreams.

Client Overview: A Remote Patient Monitoring Company in Bengaluru

• Business Type: Private limited company
• Location: Bengaluru
• Industry: Medical technology
• Business Activity: Remote patient monitoring using wearable patient-monitoring devices deployed in hospitals
• Engagement Type: Transaction advisory, virtual CFO support, secretarial compliance and indirect tax advisory
• Problem Summary: The company was dealing simultaneously with the insolvency of its overseas parent and technology licensor, a dispute concerning the overseas parent's shareholding, an upcoming growth capital raise, incomplete audit work and a statutory AGM deadline.

The company was incorporated in 2021 and operated in the remote patient monitoring segment. It held a licence from an overseas technology group to manufacture, deploy and service a wearable sensor platform across India and neighbouring markets.

Its customers included multi-specialty hospital chains contracted on minimum three-year terms. Approximately two-thirds of revenue was recurring subscription income. The shareholder base comprised resident promoters, the overseas technology group and angel investors, with unconverted convertible notes also outstanding. At the time of engagement, the company was loss-making but improving, with a contribution margin above 60% and a business plan indicating operating breakeven in the third year.

The Challenge: Four Interconnected Pressures on One Company

Overseas Parent Entered Insolvency

The overseas entity that licensed the company's core technology and held a significant minority stake in the Indian company entered creditors' voluntary liquidation, with joint liquidators appointed. The development affected the Indian company's commercial and legal relationship with the overseas entity and required the underlying agreements and insolvency-related communications to be reviewed.

Secured Lender Asserted Rights Over the Indian Shareholding

The overseas entity had granted all-asset debentures to a secured lender. The lender asserted rights over the Indian shareholding, while other shareholders relied on a right of first offer contained in the shareholders agreement. The position therefore required analysis of the contractual provisions and the security documents.

Growth Capital Required Financial Preparedness

The company was simultaneously engaged in investor discussions. It had a negative net worth position, limited cash resources and outstanding convertible notes. Its financial information therefore needed to be presented in a manner that accurately reflected both its historical performance and its business plan.

Audit and Statutory AGM Deadline

The previous accounting team's tenure had ended around the financial year-end and the successor team inherited a reconciliation backlog. The audit remained incomplete while the statutory deadline for the AGM was approaching, creating a need to assess and prepare the appropriate extension application.

Our Approach: Validate the Source Information First

APCALLP approached the engagement by reviewing the underlying documents and financial information before preparing the respective deliverables.

The shareholders agreement and share subscription agreement were reviewed together with three registered debenture instruments, the winding-up resolution and certificate of appointment of the overseas liquidators and the correspondence issued by them to shareholders. Certain documents were scanned copies and required optical character recognition before detailed clause-level review.

Four years of financial information were analysed, comprising three years of audited financial statements and the current-year management accounts. The financial information was brought into a comparable view covering the profit and loss trajectory, balance-sheet movement and expense composition. EBITDA and compound growth rates were recomputed from the underlying line items. The company's five-year financial model was also reviewed, including unit economics, deployment assumptions, capital expenditure and the projected breakeven position.

Based on the underlying review, the engagement workstreams were developed to address the legal, financial, statutory and indirect tax matters together rather than considering each issue independently. This is how our outsourced CFO support typically works alongside transaction advisory engagements.

Key Strategies Implemented Through Virtual CFO Advisory Services

Clause-Level Review of Transaction Documents

The shareholders agreement was analysed at clause level to determine the treatment of transfers, including involuntary transfers and transfers arising through enforcement of security. The relevant provisions were considered alongside the registered debenture instruments to develop the position on the secured lender's assertion.

Reconciliation of Shareholding Records

The shareholding position was cross-checked against the shareholders agreement, capitalisation table and statutory master data. A discrepancy was identified between the company's records and the shareholding figure stated in correspondence received from the overseas liquidators.

Financial Reconstruction for Investor Readiness

Four years of financial information were analysed to present the historical financial trajectory and the movement in margins, as part of preparing for investor scrutiny. The analysis also considered the company's negative net worth, cash position, convertible notes and projected operating performance.

Investor-Facing Financial Briefing

An investor-facing financial briefing was prepared using the underlying financial information. The analysis included the historical performance and the numerical questions that could arise during investor discussions.

Independent Computation of Statutory Dates

The proposed AGM extension was assessed by computing the applicable statutory dates rather than relying on a conventional three-month assumption. The review identified a date-computation issue that could otherwise have affected the compliance of the application.

Financing Information Note

An anonymised information note was prepared for equipment financing partners, using the company's financial and operational information while withholding identifying details.

Indirect Tax Position and Exposure Quantification

Through indirect tax advisory, the company's revenue model and relevant payments were reviewed. The analysis included the competing tax characterisations and identified an estimated annual differential of approximately ₹46 lakh.

Identification of Additional Compliance Matters

The engagement also identified an unaddressed reverse charge exposure on overseas payments and an imbalance in one year's audited balance sheet, allowing these matters to be brought to management's attention as part of the wider review.

Outcome: Deliverables and Issues Surfaced for Management

The integrated engagement resulted in the following deliverables and identified matters:

• A documented position on the shareholding issue based on the shareholders agreement and debenture instruments.
• Identification of a discrepancy between the company's shareholding records and the figure stated by the overseas liquidators.
• A four-year financial analysis supporting investor discussions.
• A financial briefing addressing historical performance and investor-facing questions.
• An anonymised information note for equipment financing partners.
• Preparation of the statutory AGM extension application and the related Board resolution.
• Identification of a statutory date-computation issue before submission.
• Identification of an imbalance in one year's audited balance sheet.
• Identification of an unaddressed reverse charge exposure on overseas payments.
• A written indirect tax position on the company's revenue model, including an estimated annual exposure of approximately ₹46 lakh.

The engagement therefore brought the company's transaction, financial, statutory and indirect tax matters into a coordinated advisory framework.

Conclusion: Integrated Virtual CFO Advisory Services When Issues Overlap

The engagement involved several matters that were interconnected through the same underlying facts: an overseas insolvency affected the company's shareholding position, financial reporting, investor discussions, statutory compliance and tax considerations.

APCALLP addressed these matters through an integrated review of the underlying agreements, financial information, statutory requirements and tax considerations. The approach focused on validating the source information, identifying inconsistencies and quantifying issues requiring management attention before finalising the respective deliverables. The engagement demonstrates the role of virtual CFO advisory services and integrated transaction advisory where legal, financial, secretarial and tax matters arise simultaneously.

Facing Several Financial and Compliance Issues at Once?

APCALLP works with growth-stage companies in Bengaluru, Kochi and Kozhikode as an integrated finance, transaction and compliance partner. Get in touch with our team to discuss your situation.