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Amendment to Deposit Rules giving relief to Start-Ups

The Ministry of Corporate Affairs in consultation with the Reserve Bank of India has issued Notification dated 07 September, 2020 (“Amended Rules”), by way of which certain provisions of Companies (Acceptance of Deposits) Rules, 2014 have been amended. These amendments have been introduced to provide reliefs to start-ups in their fundraising.

The Amended Rules enable start-up companies to raise funds amounting to Rupees Twenty Lakh or more, by way of issue of convertible notes, which are convertible into equity shares or repayable, within a period not exceeding ten years from date of issue, in a single tranche from a person. Prior to this amendment, the period of repayment was five years from the date of issue, which has now been extended to ten years.

Further, the Amended Rules also provides an exemption, to private companies which are registered as start-up companies, from the maximum limit in respect of deposits to be accepted from members for a period of ten years. The said relaxation earlier was for a period of five years which has now been extended to ten years.

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