In a move to simplify the process of raising fund for start-ups, the Corporate Affairs Ministry has allowed these companies to accept deposits from shareholders. This amount will be separate from their share in start-up. Prior to amendment in the rules of the Companies Act, only limited liability partnership (LLP) was able to do the same.

International Business Advisors Head (Corporate Legal and IT) Neerav Maniyar said that this deposit will be for the company as a loan so that the start-up can increase its pace of growth. These deposits can be an addition to the shareholder’s share in the paid-up capital of the company. Since these deposits will be in form of debts, they will not affect the shareholder’s share.

Experts believe that this will assist start-ups in assembling money with ease. This deposit can also be in cash. The amendment is a part of government’s efforts to clear the path with ease-of-doing-business for start-ups.

The Ministry has also revised the norms of exemption in the Companies Act and exempted start-ups from depositing cash flow details. These companies only have to submit the details of profit and loss.

The Ministry has reduced the number of compulsory annual board meetings from four to two. As per the new amendment, start-ups have to submit the annual returns checked and passed by the company secretary or director. Earlier, only the company secretary could pass the returns.

Though the paper work has been made easy for the convenience of start-ups, not every new company is eligible under the category. Under the Companies Act, only those enterprises are considered start-ups whose annual turnover was less than Rs 25 crore in the previous financial year.

Giving relief to struggling start-ups, the government notified the provisional settlement of bankruptcy process on June 23. Under the Code, the entire process will be completed in 90 days. According to industry statistics, about 95 per cent start-ups are futile ventures and closed within two years of commencement of operations.