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START APP INDIA: NURTURING YOUR BUSINESS IDEAS!

 

  COMPETITION LAWS
  LAW RELATING TO START UPS
 
Start Up Industry in India
Start-up laws in India
Start App India
Start-up Contracts and Agreements in India
Start-up Funding in India
Liability
Taxation
Incentives for Start-Ups in India
Challenges for Start-ups in India
Role of Intellectual Property Rights for Start-ups in India
FOOD LAWS
INFORMATION TECHNOLOGY LAW
REAL ESTATE LAW
COMPANY FORMATION LAW
FDI LAW
TECHNOLOGY TRANSFER & JOINT VENTURE LAW
COMMERCIAL AGREEMENTS & CONTRACTS LAW
LAWS RELATING TO INSURANCE
LABOUR LAW
SPORTS LAW
MEDIA & COMMUNICATION LAW
TELECOMMUNICATION LAW
ECOMMERCE BUSINESS LAW
CORPORATE LAW FIRM
COMMERCIAL LAW FIRM
ENVIRONMENT LAW
GAMBLING LAWS
 

 

Introduction:

 

Startups are becoming more of a business pattern instead of merely being a trend. They are no more “merely pursuing your hobby” trends, but very well, strategically preplanned, serious pursuits in business. However, it is not an easy task to take your startup from a thriving & struggling mode to a stable mode over the years. Many businesses are said to collapse when the initial energy of the founders falls inadequate. Realizing these and so many other concerns faced by startups, the Indian government had introduced an Action Plan for harnessing businesses during infancy. The Plan sought to reduce statutory burden on startups, provide institutionalized funds’ support and incubation and research infrastructure. The ‘Startup India’s Status Report released on December 13, 2016 released states the Startup Hub has been able handle about 25000 queries from Startups through telephone, email and Twitter. 1,368 applications have been received for out of which 502 had the required documents and have been recognized as Startups by DIPP.

 

To create more awareness about this Action Plan, so that more and more startups can be recognized and avail its benefits, we bring to you the highlights of the Plan:

 

What is a start up?

 

The Government notified1 a definition of “startup” which would be entitled to receive the benefits of the Action Plan. An enterprise will be a startup:

  1. Up to five years from the date of its incorporation/registration,

  2. If its turnover for any of the financial years has not exceeded INR 0.25 billion, and

  3. If it is working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

What is not considered a startup under the notification?

 

If however, the entity is formed from splitting or reconstruction of existing businesses it will not be considered a startup. Every startup is required to obtain a certificate from the Inter-Ministerial Board of Certification for availing the benefits of the startups. A proprietorship or a public limited company is not eligible as startup. A one-person company, being a private limited company is entitled to be recognized as a 'startup'.

 

How does it benefit you?

  1. Reduce statutory burden of Compliance, Self Certify:

    The Action Plan seeks to reduce the regulatory burden on Startups. Due to innumerable legislations governing the society, the number of compliances required by a business entity have increased. It takes up a completely new department to make sure that the entity is in compliance to the laws that govern it. Startups are not as well equipped as other establishments to devote such significant human resource and funds for compliance. To tackle this, the Action Plan provides for relaxed regulatory formalities in various labour and environment laws. The process of compliance has been eased by self-certification through the Startup Mobile App. In case of environment laws, Startups which fall under the ‘white category’, (as defined by the Central Pollution Control Board) would be able to self-certify compliance and only random checks would be carried out in such cases2.

  2. Mobile App for Startups:

    The Action plan provides for a Mobile App, for securing a single point contact with the Government. By using the App, the startup can register with different agencies of the Government. This App will be connected to the Ministry of Corporate Affairs and Registrar of Firms for processing registration applications. After making an application, its status can be tracked and later, the registering certificate can be downloaded anytime, anywhere! A digital version of the final registration certificate shall be made available for downloading through the Mobile App.

    Also, to ensure compliances and timely licensing, a checklist of the required licenses covering labour licensing, environmental clearances etc is provided in the application.

  3. Startup Intellectual Property Protection (SIPP): Easy, inexpensive and fast:

    The Action Plan facilitates easy and expedited process for filing of Patents, Trademarks and Designs for startups. The applications made by registered startups will be fast-tracked and the costs for the same will borne by the Government. Also the Controller General of Patents, Designs and Trademarks (CGPDTM) shall empanel a group of facilitators who would help the Startups in the complex process of IPR filing. This is one of the most important features of the scheme as it goes a long way to promote IP registrations among start-ups, and as a corollary boost valuation & provides early competitive advantage.

  4. Access to government tenders:

    For bagging government contracts, a lot of experience and considerable turnover are preconditions. The government, with the view of making the PSUs more accessible, has reserved 20% procurement by PSUs for Micro Small and Medium Enterprise (MSME).

  5. Funding Support and Incentives: The Fund of Funds.

     

    Every startup begins with an idea. Sometimes even though at a nascent stage the idea may seem to succeed, it is crucial to keep the idea at par with business practicalities of cash flow management and meeting financial demands. Lack of secured and supportive investors are fatal to startups. The Government has set up an initial corpus INR 25 Billion and a total INR 100 Billion over a period 4 years (i.e. INR 2,500 crore per year). The government will establish a ‘Fund of Fund’ which will indirectly invest by participating in the capital of SEBI registered Venture Funds. If investors invest in the Fund of Funds they shall be given certain exemptions. This will encourage funding in VCs and AIFs. Also, startups will be exempt from income tax for the first three years. The exemption shall be available subject to non-distribution of dividend by the Startup.

     

    The Finance Act, 2016 has made provision for Startups to get income tax exemption for 3 years in a block of 5 years, if they are incorporated between 1st April 2016 and 31st March 2019. To avail these benefits one must get a Certificate of Eligibility from the Inter-Ministerial Board of DIPP. Tax exemption on investments above Fair Market Value have been introduced for investments made in Startups (as per definition)3.

     

    In case a startup finds it difficult to survive, their Insolvency Resolution process will also be expedited as the Insolvency and bankruptcy Code gradually comes into effect.

  6. Industry-Academia Partnership and Incubation4:

    The government will also be initiating startups fests so that networking and inter-mingling of businesses can be improved. The “Make in India” initiative is taking steps in this regards. The Action Plan also seeks to launch Atal Innovation Mission for promoting entrepreneurship and innovation and acting as a platform for executing new ideas. Moreover, incubation centers to nurture and develop the products and services has been planned. This will include infrastructural facilities, mentorship support and access to markets. Other facilities such as R & D centers, setting up of 7 New Research Parks, promoting Startups in the Biotechnology Sector, Launching of Innovation Focused Programs for Students have been propagated in the Action Plan.

The list of facilitators, List of Incubators, List of SEBI registered Funds, details of the Plan, notifications related to startups are all available of their official website.

1 NOTIFICATION G.S.R. 180(E)

2 Action Plan, 2016

3 Action Plan, 2016

4 ibid

For more information about Strategic Alliance Agreement In India please write to us at: info@ssrana.com

 
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