Company Law Introduces ‘Start-ups’

The concept of “start-up” has been introduced in the company law by the Ministry of Corporate Affairs.

MCA has defined “start-up” through an executive order under the Companies Act, 2013, but has also given few operational and compliance relaxations for a “start-up company”.

As per this definition, a start-up company means a private company incorporated under the Companies Act, 2013 and recognised as a “start-up” in accordance with the notification issued by the Department of Industrial Policy and Promotion.

The relaxations relate to allowing start-ups to raise deposits from members (shareholders), with exemption from procedural compliance for five years.

Also, start-ups would not be required to prepare cash flow statements. Relaxation has also been provided on the board meetings front. A company secretary of a start-up or a director can now sign the annual return.