The corporate affairs ministry has amended the deposits rules, bringing them in line with the current start-up definition of department of promotion of industry and internal trade, to extend the exemptions up till 10 years from the date of incorporation of a company.
With the new amendment, an amount of Rs 25 lakh or more received by a start-up through convertible note in a single tranche, which is convertible into equity shares or repayable within a period not exceeding 10 years from the date of issue, shall not be considered as deposits. Earlier, the time period was five years.
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In the explanation, the definition of start up company now gives reference to DPIIT Notification dated February 19, 2019, as per which an entity is considered a startup up to 10 years from the date of its incorporation.
Earlier, the limits of total deposit from members did not apply to a start-up for five years from date of its incorporation. This time, the period has been amended to 10 years.
Any private start-up firm would be able to accept deposits from its members without any limit till 10 years from its incorporation.
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