June 15, 2017

Corporate Update - Start-up Companies

1. “Start-up/ Start-up Companies” (“Start-up”) has been recognised and included in the Companies Act, 2013 (“Act”). A Start-up has been defined to mean a private company incorporated under the Act or the Companies Act, 1956 and recognized as start-up in accordance with the notification issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry.
2. The financial statement prepared under the Act of a Start-up, may not include the cash flow statement.
3. Small companies are not required to mention the amount of “remuneration drawn” by Directors in its Annual Return.
4. Except the requirement towards securing the deposits, the other requirements prescribed in Section 73 (2) of the Act have been exempted for the following companies:
   • Which accept from its members monies not exceeding 100% of its paid up share capital taken along with free reserve and securities premium account;
   • Start-up, for a period of 5 years; and
   • A company not being an associate or  subsidiary of any other company. Further, it should not be in  default in repayment and have borrowings from banks or financial institutions or body corporate greater than or equal to its paid up share capital or Rs. 50 crores, whichever is lower.
5. The disclosure requirement of adequacy of Internal financial control in the Auditor’s report has been removed for a private company which is One Person Company or a small company or which has a turnover of less than Rs. 50 crores as per latest audited financial statement or which has aggregate borrowings from banks or financial institutions or body corporates at any point of time during the financial year in an amount less than Rs. 25 crores.
6. The annual return of small companies no longer requires the details of the remunerations of KMPs. Further, the annual return of small companies and Start-ups can now be signed by the directors of the company in case it does not have a company secretary instead of a company secretary in practice.
7. A Start-up, are also not required to hold minimum number of four board meetings in a year and have now been put at par with One Person Company, small company and dormant company in this regard.
8. Interested directors can be counted towards quorum requirements after disclosure of interest under Section 184 of the Act.