To boost entrepreneurship in India, the government is planning to announce extensions in a series of exemptions for startups. The Ministry of Corporate Affairs (MCA) is mulling over allowing startups to issue 50% of their paid-up capital as sweat equity and exempt them from regulatory filings for up to 10 years.
“Exemptions already given to startups for five years will be available for 10 years, in line with the revised definition by the DPIIT,” said an ET report quoting a government official.
At present, private firms are barred from raising deposits that exceed 100% of their paid-up share capital. The government is yet to issue any official notification about the proposed changes in this regard.
Meanwhile, the government would require parliamentary nod to implement an amendment to the Companies Act, which proposes to relax norms for financial filings and additional exemption like holding two board meetings every year.
Industry observers hailed the proposed plans as an encouraging step towards a better startup ecosystem. It will help startups in the long run as this would allow them to be flexible and focus on the growth of their business, they said.
Earlier in February, the government had announced a series of changes involving startups, investors and entrepreneurs.
It defined a startup as an entity that has been in operation for up to 10 years, instead of the previous seven years, from its date of incorporation. It also raised the turnover cap for startups for any of the financial years to Rs 100 crore from Rs 25 crore.
After facing backlash from startups, the government had also exempted Angel Tax for DPIIT registered startups.
Over the years, there have been concerns raised by startups over ease of doing business, the painful process for supportive business funds, Angel Tax and the lack of a good ecosystem for startups to flourish in the country.