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Start-ups can now raise deposits from shareholders

Deposit amount can equal investor's stake, won't impact his holding as it is a loan

Veena Mani  |  New Delhi 

start-ups

Easing the process of raising funds for start-ups, the has allowed these companies to raise deposits from their shareholders. This will be over and above the stake one holds in the start-up.

Before the government amended the rules under the to this effect, only could avail of this.

The recognises an entity as a start-up if its annual turnover for any of the financial years since incorporation is less than Rs 25 crore.

The deposit could go up to stakeholders’ contribution to the paid-up capital. Since deposits are loans, these would not impact shareholders' stake.

The amendment to the rules is part of a recent efforts by the government to make life easier for The ministry has also amended the rules on exemptions under the Companies Act, sparing from filing cash flow statements. These companies will only have to file profit-loss statements.

The ministry has also brought down the number of required board meetings in a year to two, from the earlier four. Also, according to an amendment in the rules, a start-up has to submit its annual returns vetted by a company secretary or a director. Earlier, only a company secretary could do so.

And, on Friday, the government notified provisions for fast-track resolution of proceedings in such entities. Proceedings under the code in this regard are supposed to be completed in 90 days. According to industry data, about 95 per cent of are unsuccessful and wind down within two year of starting operations.

FUNDRAISING

  • can now raise deposits from shareholders
  • Experts say shareholders will be loaning money to the company
  • Deposits to be over and above the capital invested in the start-up
  • Move to help grow

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