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

The corporate affairs ministry has amended the deposit rules bringing them in line with the current startup definition of the Department of Promotion of Industry and Internal Trade (DPIIT) to extend the exemptions up to 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 startup through a 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 a startup company now gives reference to DPIIT notification dated February, 19 2019 according to 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 startup for five years from date of its incorporation. This time period has now been amended to 10 years. Any startup private company would be able to accept deposits from its members without any limit till 10 years from its incorporation.