- External Commercial Borrowing regulations relaxed for start-ups - Startups allowed to raise ECB up to USD 3 million
- Investment by foreign Venture Capital Investors (FVCI) - SEBI registered FVCI can invest in equity/ equity linked instrument or debt instrument of Indian ‘startup’ under automatic route
- Opening of foreign currency account - Indian startup, having an overseas subsidiary allowed to open foreign currency account with a bank outside India
Startup India is inviting suggestions from the Startup ecosystem to submit Regulatory and Policy recommendations to improve the business environment.
Submit a precise proposal and if feasible it shall be presented to relevant Government departments and regulators.
29th October - 19th November.
23rd November. The feasible regulatory and policy proposals shall be identified for deliberation.
Policy problem/ roadblock in the current regime:
As per The Companies (Acceptance of Deposits) Rule, 2014, a private company is allowed to accept deposit up to 100% of aggregate of the paid up share capital, free reserves and securities premium account from its members. As initial source of funding for a startup company is through deposits from its members, the 100% limit imposed is low."
Regulatory/ policy proposal:
Completely remove the limit for acceptance of deposit by startup companies from its members.”
Justify the proposal using examples and impact on startup
The business model of startups is innovative and risky, due to which startups find it difficult to borrow money from banks.
In such a situation, one of the recourse can be through funding from its members.
Relaxing this limit will help startups in access fundraising from their existing members with ease.
Such a regime exists in <<mention country>>/ <<Relevant statute>>
This will impact approximately 500 DIPP recognised startups (Give reference)
This will help in raising capital worth US$ 1 billion (Give reference)”
Mention the exact Central Act or Regulation
Proviso to sub-rule 3 of Rule 3 of “The Companies (Acceptance of Deposits) Rule, 2014”
- Lock in period for investments made by an Angel Fund reduced to 1 year from 3 years
- Angel funds allowed to invest up to 25% of their corpus in overseas start-ups
- Upper limit for number of angel investors in an angel fund increased to 200 from 49
- Minimum investment made by angel fund in a start-up reduced from INR 50 lakhs to INR 25 lakhs
- Exemption from providing Cash flow statement as part of financial statements
- Removal of limit on acceptance of deposits from shareholders - As per the regulations, private companies are allowed to accept deposits of upto 100% of their share capital and free reserves from shareholders. MCA released a notification stating that the limit will not apply to a private company which is a start-up, for five years from the date of its incorporation
- Start-up defined for the purpose of Companies Act, 2013 - 'startup’ means a private company incorporated under the Companies Act and recognised as start-up in accordance with the notification issued by DIPP
- Exemption from procedural compliance (eg. such as issue of an offer circular or creation of a deposit repayment reserve) for raising deposits from shareholders
- Annual return can be signed by company secretary of a director (Earlier, only to be signed by a company secretary)
- Reduction in number of board meeting for start-up companies (from 4 to 2)
- 25% corporate tax slab for companies with an annual turnover of less than INR 250 crores
- Definition of eligible business as stated in Section 80-IAC aligned with Startups definition
- Introduction of section 54EE to encourage start-ups - Introduction of section 54EE to provide for exemption of capital gain arising out of transfer of long term capital asset (not exceeding INR 50 lakhs in a financial year) invested in a fund notified by Central Government
- Section 54GB tweaked for Capital Gains Exemption to Start-ups - Section 54GB of Income-tax Act, 1961 has been amended to provide exemption from tax on capital gains arising out of sale of residential house or a residential plot of land if the amount of net consideration is invested in equity shares of eligible Startup for utilizing the same for purchase of specified asset.
- MAT tax credit allowed to be carried forward up to fifteenth assessment years instead of ten assessment years
- Exemption provided to eligible start-up for any 3 consecutive assessment years out of 7 years beginning from the year in which such eligible start-up is incorporated (Earlier 3 out of 5 years)
- “Consideration received by startup for issue of shares exceeding face value of such shares from an investor in accordance with the approval granted by the Inter-Ministerial Board of Certification” included under class of person under section 56(2)(viib) of the Income Tax Act
- Taxation of convertible notes - Period for which a bond, debenture, debenture-stock or deposit certificate was held prior to conversion shall be considered for determining the period of holding of such shares or debentures acquired upon conversion.