Start-up means an entity, incorporated or registered in India not prior to ten years, with annual turnover not exceeding INR 100 crore in any preceding financial year, working towards innovation, development, deployment or commercialisation of new products processes or services driven by technology or intellectual property.
Incorporate your business: Before registering with Start-up India, the organisation has to be registered as Private Limited Company or a Partnership firm or a Limited Liability Partnership by following all the requisite procedures.
Registration with Start-up India: Once business is incorporated; it can apply to register for Start-up India. Entire process is simple and online, you just need to do is log on to the Start-up India website and fill up the form with details of your business and upload certain documents.
Documents to be uploaded (in PDF format only):
1. Certificate of incorporation of your company/LLP (Registration Certificate in case of partnership).
2. A brief description of the innovative nature of your products/services.
3. Recommendation letter: A letter of recommendation must be submitted along with the registration form. Any of the below will be valid:
> recommendation (regarding innovative nature of business) from an Incubator established in a post-graduate college in India, in a format specified by the Department of Industrial Policy and Promotion; or
> A letter of support by an incubator, which is funded (in relation to the project) by Government of India as part of any specified scheme
> letter of funding of not less than 20% in equity, by Incubation Fund/Angel Fund/Private Equity Fund/ Accelerator/Angel Network, duly registered with SEBI that endorses innovative nature of the business or,
> A letter of funding by Government of India or any State Government as part of any specified scheme to promote innovation; or
> A patent filed and published in the Journal by the Indian Patent Office in areas affiliated with the nature of the business being promoted.
Be careful while uploading the document, if it is found that the required document is not uploaded/wrong document uploaded or a document is forged you shall be liable to a fine of 50% of your paid-up capital of the start-up or Rs. 25000 whichever is lower.
> Aggregate amount of paid up share capital and share premium of the start-up after issue or proposed issue of share, if any, does not exceed 25 crore Rupees. (Provided that computing the aggregate amount paid up share capital, the amount of paid up share capital and share premium of 25 crore rupees in respect of shares issued to any NRI or Venture capital company won’t be included.
> It has been recognised by DPIIT
> The investor/ proposed investor shall have
♦ Returned income of rupees fifty lakh or more for FY preceding the year of investment.
♦ Net worth exceeding rupees two crore or the amount of investment made/proposed to be made in the start-up whichever higher, as on the last date of financial year preceding the year of investment
> It has not invested in any of the following asset:
♦ Building or land appurtenant thereto, being a residential house, other than that used by the start-up for the purpose of renting or held by it as stock-in – trade, in the ordinary course of business
♦ Land or building, or both, not being a residential house, other than that occupied by the Start-up for its business or used by it for the purposes of renting or held by it as stock-in-trade, in the ordinary course of business,
♦ Loan and advances, other than loans and advances extended in the ordinary course of business by the start-up where lending money is the substantial part of its business
♦ Capital contribution made to any other entity
♦ Shares and securities
♦ A motor vehicle, air craft, yacht or any other modes of transport, the actual cost of which exceeds ten lakh rupees, other than held by the start-up for the purpose of plying, hiring, leasing or as stock in trade.
♦ Jewellery other than that held by the start-up as a stock-in- trade in the ordinary course business
Provided the Start-up shall not invest in any of the above assets specified in for the premium period of seven years from the end of the latest financial year in which shares are issued at premium.
The application for approval under this para shall be made in form 2 to DIPP and shall be accompanied by the document.
The application of the recognised start-up shall be transmitted by DIPP to CBDT with the necessary document
Then CBDT, within a period of 45 days from the date of receipt of application from DIPP may grant approval to the start-up for the purpose of sub-section 56 of the Act or decline the approval.
The scheme for Start-up Intellectual Property Protection (SIPP) shall facilitate filing of Patents, Trademarks and Designs by innovative Start-ups. Various measures being taken in this regard:
Indian start-ups such as Flipkart, Olacabs, Snapdeal, Hike, Shopclues, Freecharge, Inmobi etc. receive various rounds of follow-on financing as well either from their existing investors or from any new investor. These various rounds of funding also help these firms to hire more talent into the company. This helps the company to grow strategically and also add some more experienced people in the firm.
Under the Start-Up India Action Plan, the Prime Minister has also announced Rs. 10,000 crore fund for new enterprises. Government has already launched PMMY, the MUDRA Bank, a new institution for development &refinancing activities relating to micro units with a refinance fund of ` 2000 crore. The Government is planning to set up a credit guarantee fund to provide funding facilities to start-ups in the country, it has a corpus of ` 2,000 crore and will be managed by the DIPP.
SoftBank, Japan’s telecom and technology conglomerate, is one of the biggest investors in the Indian start-up ecosystem. SoftBank CEO Masayoshi Son said that his company would be investing $10 billion in India by 2022. It has already invested close to $8 billion till date. Google has been investing heavily in the Indian start-up ecosystem over the last 3 years and has brought highly successful global programs to India like the Launchpad program for early stage start-ups and Launchpad accelerator program for mature start-ups. Oracle has launched The Oracle Start-up Cloud Accelerator Program, which was incubated in April 2016, Oracle has successfully scheduled 4 batches for Start-up entrepreneurs.
FDI policy 2017 has allowed start-ups to raise 100% funds from SEBI (Securities and Exchange Board of India) registered Foreign Venture Capital Investors (hereinafter referred to as “FVCI”) under the automatic route. Start-ups can issue equity or equity linked instruments or debt instruments to FVCI against receipt of foreign remittance, as per the FEMA Regulation. If a start-up is organised as a partnership firm or an LLP, the investment can be made in the capital or through any profit-sharing arrangement. In addition, start-ups can issue convertible notes to person resident outside India subject to fulfilment of certain conditions.
The Insolvency and Bankruptcy Code has provisions for the fast track and / or voluntary closure of businesses. In terms of the IBB, Start-ups with simple debt structures or those meeting such criteria as may be specified may be wound up within period of 90 days from making of an application for winding up on a fast track basis. In such instances, an insolvency resolution professional shall be appointed for the Start-up, who shall be in charge of the company (the promoters and management shall no longer run the company) for liquidating its assets and paying its creditors within six months of such appointment. On appointment of the insolvency resolution professional, the liquidator shall be responsible for the swift closure of the business, sale of assets and repayment of creditors in accordance with the distribution waterfall set out in the IBB. This process will respect the concept of limited liability.
The Ministry of Human Resource Development and the Department of Science and Technology have agreed to partner in an initiative to set up over 75 start-up support hubs in the National Institutes of Technology, the Indian Institutes of Information Technology, the Indian Institutes of Science Education and Research and National Institutes of Pharmaceutical Education and Research. Reserve Bank of India takes steps to help improve the ease of doing business in the country and contribute to an ecosystem that is conducive for the growth of start-up businesses.
Government has received 1,97,967 applications for registration under Start-up India, of which 17360 got recognised as Start-up Business. However only 182 of recognised start-ups have been funded by Government fund as per data available till 31st March 2019, and only 88 start-ups recognised for to get tax benefits till August 2018. Reference https://www.startupindia.gov.in/
Hence, taking into consideration all the above developments, it can be concluded that indigenous start-ups will not only make the lives of the people easier through their affordable and convenient services but will also act as a major booster for the development and the progress initiatives like tax relief, IPR protection, Start-up India Hub etc. Start-up India scheme has enough potential to make Indian Youth Job Creator from Job Seeker!!
Honest differences are often a healthy sign of progress – Mahatma Gandhi.
CA Pankaj Agarwal (from assist of ___________)
In case of any further queries author can be contacted at [email protected]