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MCA amends deposit rules for startups, extends exemptions up to 10 yrs

Earlier, the limits of total deposit from members did not apply to a startup for five years from date of its incorporation

Topics
start- ups | Ministry of Corporate Affairs | DPIIT

Ruchika Chitravanshi  |  New Delhi 

Private equity and venture capital investments in H12019 were 27% higher at $23.4 billion compared to  the same period last year, EY says
Any startup private company would be able to accept deposits from its members without any limit till 10 years from its incorporation.

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 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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First Published: Tue, September 08 2020. 19:25 IST
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