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

Easing the process of raising funds for start-ups, the ministry of corporate affairs 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 Companies Act to this effect, only limited liability partnerships could avail of this.

The Companies Act 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