A Great Boost Is Expected for Startups

India proposes to let startups issue sweat equity and grant additional exemptions as it eases norms for them under the Companies Act with a view to boosting entrepreneurship in the country. Although it is not confirmed the news it has been getting indicated and published in some of the leading media publications.

According to India's leading business newspaper- Economic Times, the ministry of corporate affairs plans to allow startups to issue 50% of their paidup capital as sweat equity and extend the period of exemptions from other regulatory filings for up to 10 years instead of five now. They will be exempted for 10 years from a rule that bars private companies from raising deposits exceeding 100% of their paid-up share capital.

“Exemptions already given to startups for five years will be available for 10 years, in line with the revised definition by the Department for Promotion of Industry and Internal Trade,” a government official was quoted in media.

The DPIIT expanded the definition of startups earlier this year to state that entities would be considered startups for up to 10 years from the date of their incorporation.

The official said a notification would be issued soon to put into effect the proposed changes, although relaxation of norms on financial filings for startups would require an amendment to the Companies Act.