Everything You Need to Know About The Start-up Action Plan (The Legal Perspective)

To sustain economic growth & suffice the economy with employment opportunities, PM Narendra Modi in 2016 launched the Start-up Initiative in India. To this policy, he added many appraising benefits for small and beginning ventures to get legal aid in their beginning days by helping them to raise quick funds from credit agencies, reduced business cost with major tax exemptions and ease in compliances of incorporation and closure within the most feasible time possible.

Adding further branches to this drive, he unveiled his Start-up Action plan to bring a common direction to his vision of bringing Ease of Doing Business in India. Highlighting key focus areas of this plan he stated that this thought of government will empower the start-ups to grow & will surely bring them to a common start-up ecosystem equipped with all benefits and aids available.

Scripted Pillars of Government Start-up Action Plan

1. Compliance Regime based on Self-Certification: To reduce regulatory burden and to relieve startups from unnecessary business cost, the government presented the thought of Self-Certification. It was always a nuisance situation for start-ups to comply with various labour and environmental laws while dealing with incorporation compliances. With implemented steps in the plan, Start-ups will be able to self-certify (through the Start-up mobile app) themselves in 9 labour and environmental laws, provided that no inspection would be done for a period of 3 years until verifiable complaint of violation is not filed. Also, it was specified that self-certification would be equally valid for compliances held in cases of environmental laws for start-ups which fall under the ‘white category’ (as defined by the Central Pollution Control Board (CPCB).

2. Start-up India Hub:To create a single point of contact for complete start-up ecosystem and to make it more effective for exchange of knowledgeable information, the idea of Start-up India Hub was suggested. As a regulatory invigilator it will – collaborate with Central & State governments, Indian and foreign VCs, angel networks, banks, incubators, legal partners, consultants, universities and all R&D institutions; will provide assistance to start-ups on all important aspects like funding, testing business structure etc & will foster to present all guiding mentors to young entrepreneurs to bring their business ideas to reality .

3. Rolling-Out of Mobile App and Portal: Bringing interaction of young entrepreneurs to digital devices, the Start-up India mobile app as linked with the Start-up India web portal was launched to bring a long route of compliances to finger clicks of Start-up owners; it will track major incorporation compliances and government interactions of start ups on a regular basis.

4. Fast Tracking of Patent and Legal Support :To promote awareness and adoption of IPRs by Start-ups and to facilitate them in protecting and commercializing IPRs by providing access to high quality Intellectual Property services and resources, special provisions related to IPRS were also suggested, these  include fast-tracking & examining of patent applications and allowance of rebates in fees.

5. Ease in Exit for Start-ups : Start-ups would be able to plan and voluntary close their business within 90 days of application, as specified in The Insolvency and Bankruptcy Bill 2015 (“IBB”) act passed in Lok Sabha keeping in roll of a professional liquidator, who would be responsible for soft closing and keeping all closure records of business .

6. Funding with a corpus of Rs 10,000 Crore: To oversee the key challenge of fund requirement of start-ups, an initial corpus of Rs 2,500 Crore and a total corpus of Rs 10,000 Crore would be kept for 4 years. The fund would add up LIC as a co-investor and would be managed by professionals drawn from the industry. The credit guarantee fund for start-ups would help the flow of venture debt from the banking system to start-ups by standing guarantee against risks.

7. Credit Guarantee Fund for Start-ups: To catalyse entrepreneurship and bring velocity to new start-up ideas, the plan brings strategic policies of providing a guaranteed flow of funds from the banking system to unexceptional business models. Numerous policies have been specified to encourage banks and other lenders to provide venture debts to startups and credit rated agencies like National Credit Guarantee Trust Company (NCGTC)/ SIDBI are envisaged by the government by up-to Rs 500 crore per year to work in direction of stimulating start-up funding.

8. Tax Exemption on Capital Gains: To bring easy investment from individual and other business groups it has been proposed in the plan to exempt all such capital gains received by an individual or a start-up or any other concern received against any amount used in as investment in a newly formed start-up provided that such exemption is to be used in buying new assets only.

9. Tax Exemption to Start-ups for 3 years: To bring financial freedom in terms of tax obligations, it has been proposed to allow complete exemption in income tax for a period of 3 years to all those start-ups getting newly registered under the Start-up Action Plan. Also, in context of newly set up ventures, the plan holds another exemption on gains received on issue of shares which exceeds their Fair Market Value (FMV).

10. Launch of Job oriented drives: It was proposed to highlight and fund talent hunt programmes and implement schemes of Atal Innovation Mission (AIM) with Self-Employment and Talent Utilization (SETU) Program.

11. Annual Incubator Grand Challenge: To ensure professional management of Government sponsored/funded incubators, Government will create a policy and framework for setting-up of incubators across the country in public-private partnership. Also, to promote and provide assistance to startups, it was proposed to stand new incubators in the country with a corpus of Rs. 10 crores each to help them ramp up the quality of service to start-up required in different areas of their incorporation needs. Timely Incubator challenges would be conducted to bring the most experienced and well-equipped mentors mending new possibilities of operations to startups in their workshops.

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