Ahead of its IPO, food-tech unicorn Swiggy has granted special indemnity to the directors on its board who were appointed by its major investors – Accel, Prosus and Softbank, the company’s IPO documents showed. The indemnity would protect the directors from claims and liabilities against the company.

For instance, if the company fails to adhere to any compliance, these board members would be protected from any regulatory proceedings that the company might face. “The company shall indemnify and hold the Accel director, MIH director (Prosus) and SoftBank director harmless from all claims and liabilities to the maximum extent permitted under applicable laws,” as per the document. Swiggy had filed its updated draft red herring prospectus last Thursday.

Such indemnities cover limited scenarios such as violation of the Companies Act, lawyers said. In case of violations like anti-money laundering rules or foreign exchange management rules, the indemnified board members can be still pulled up by regulatory agencies.

Indemnity clauses are fairly common in the startup ecosystem, said a partner at a venture capital firm. Usually, investors holding a double-digit ownership in a startup would want to have indemnity since the start of their investment. Earlier this year, Softbank had entered an into an indemnity agreement with Snapdeal co-founders, Kunal Bahl and Rohit Bansal, prior to the IPO of their portfolio company Unicommerce, where Softbank is classified as a promoter.

“VC appointed directors who are nominees of investors are there to provide strategic guidance and oversee governance. They are typically not involved in the day to day operations. So, it is crucial that they are indemnified against any liability emanating from operational matters,” said a founder, adding that many startups indemnify investor directors.

Swiggy’s current largest shareholder Prosus holds a 30.95% stake in the company, while SoftBank owns 7.75% and Accel owns 6.08% of the company. As per its documents, Prosus is allowed to nominate and maintain two directors on Swiggy’s board, as long as they hold 5% of the share capital, while bothe Accel and SoftBank are allowed to nominate one director each.

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“The company and founders have also agreed that the Accel director, MIH director (Prosus) and Softbank director shall, subject to applicable law, not be considered as officers-in default of the company and shall not be liable for any default or failure of the company in the past or in the future in complying with the provisions of any applicable law,” the document further added.

With the IPO, Prosus plans to sell upto 118 million shares while Accel may sell upto 10.6 million shares. Anand Daniel is the nominee director of Accel, Sumer Juneja is the nominee director of SoftBank, and Ashutosh Sharma and Roger Clark Rabalais are nominees directors of Prosus.

Swiggy has filed to raise Rs 3,750 crore through a fresh issue, and will also include an offer-for-sale component of upto 185.3 million shares. The issue will see 10 of its existing shareholders including Accel, Apoletto Asia, Elevation Capital, Norwest Venture Partners and Chinese internet major Tencent’s  Netherlands-based arm Tencent Cloud Europe selling part of their stake in the company.