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MCA amends Deposits Rules in line with the current DPIIT start-up definition
Sep 08, 2020

The Department for Promotion of Industry and Internal Trade (DPIIT) had notified new start-up definition vide G.S.R. 127(E) dated 19th February, 2019 in which the period of start-up was extended upto 10 years from 5 years. MCA has now amended the following provisions in the Companies (Acceptance of Deposits) Rules, 2014 in line with the current start up definition:

    a) Amounts not to be considered as deposits [Rule 2(1)(c)(xvii)]: Now, an amount of Rs. 25 lakhs or more received by a start-up company by way of convertible note in a single tranche, which is convertible into equity shares or repayable within a period not exceeding 10 (ten) years from the date of issue shall not be considered as deposits. Earlier, the time period was 5(five) years.

    b) In the explanation, definition of “start up company” now gives reference to DPIIT Notification dated 19th February, 2019.

    c) Maximum limit of deposits from members: The maximum limit (i.e. 100% of aggregate of the paid-up share capital, free reserves and securities premium account) in respect of deposits to be accepted from members by a private company shall not apply to a start-up company for 10(ten) years from the date of its incorporation. Earlier, it was 5(five) years.

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