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Lesser paperwork for startups as govt does away with cash flow statements

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Industry experts are unsure of the number of startups it might benefit from this

In a move that could give much-needed relief to the startup ecosystem in the country and reduce their as well as administration costs, the government in a notification has said that would not have to prepare

However, industry experts are unsure of the number of it might benefit as the not many firms till now have not been able to fall under the government’s definition of

In a recent notification issued by the Ministry of Affairs (MCA), it has amended the exemptions to the Act to accommodate the start-up community. Essentially, these amendments are along the lines of reducing for smaller who run on a tight budget and might not have the manpower or the resources for maintaining extra

“These will not have to prepare Though will not be declared, these start-ups have to mention in detail accruals,” a senior official said.

It has also brought down the number of annual board meetings to two from four as per the Act prior to the amendment. Also making thing easier, the government has now permitted those in the start-up space to raise deposits from its shareholders, which weren’t permitted before the amendments.

The new act mandated a start-up to submit its annual returns vetted by a company secretary, in the absence of which the director may vet it. Earlier, the company secretary had to vet the annual returns of the firm.

According to industry, the effectiveness of the move would have to be seen. “It is a good measure, but a lot depends on government’s definition of As of now, only a small set of fall into the category of The ones who have made the cut the move would be quite beneficial,” said Harish HV, Partner, India Leadership team, Grant Thornton India.

The act recognises a firm as a start-up if the company’s annual turnover for any of the financial years since incorporation being less than Rs 25 crores. Giving a major relief to struggling startups, the government on Friday notified provisions for fast-track resolution of insolvency proceedings. Under this code, insolvency proceedings will be completed in 90 days.

According to industry data, around 95 percent of the are unsuccessful ventures and wind down within two years of operations. However, liquidation of the is a painful process which takes at least around five years, causing a major financial crunch on already cash-strapped firms. As opposed to this the main code that was formulated for insolvency proceedings mandates a firm’s restructuring or exit within 180 days from the day of admission.

The adjudicating authority, which is the (NCLT), may extend the period of 90 days by a further period of up to 45 days for completion of the process. Unlisted with total assets up to Rs one crore can use this section of the code for faster resolution. This move will benefit the start-up community in a big way.

 

Lesser paperwork for startups as govt does away with cash flow statements

Industry experts are unsure of the number of startups it might benefit from this

In a move that could give much needed relief to the startup ecosystem in the country and reduce their paperwork as well as administration costs, the government in a notification has said that startups would not have to prepare cash flow statements. However industry experts are unsure of the number of startups it might benefit as the not many firms till now have not been able to fall under the government’s definition of startups.In a recent notification issued by the Ministry of Corporate Affairs (MCA), it has amended the exemptions to the Companies Act to accommodate the start-up community. Essentially, these amendments are along the lines of reducing paper work for smaller companies who run on a tight budget and might not have the manpower or the resources for maintaining extra paperwork. “These companies will not have to prepare cash flow statements. Though cash flow statements will not be declared, these start-ups have to mention in detail accruals,” a senior MCA official said. It .

In a move that could give much-needed relief to the startup ecosystem in the country and reduce their as well as administration costs, the government in a notification has said that would not have to prepare

However, industry experts are unsure of the number of it might benefit as the not many firms till now have not been able to fall under the government’s definition of

In a recent notification issued by the Ministry of Affairs (MCA), it has amended the exemptions to the Act to accommodate the start-up community. Essentially, these amendments are along the lines of reducing for smaller who run on a tight budget and might not have the manpower or the resources for maintaining extra

“These will not have to prepare Though will not be declared, these start-ups have to mention in detail accruals,” a senior official said.

It has also brought down the number of annual board meetings to two from four as per the Act prior to the amendment. Also making thing easier, the government has now permitted those in the start-up space to raise deposits from its shareholders, which weren’t permitted before the amendments.

The new act mandated a start-up to submit its annual returns vetted by a company secretary, in the absence of which the director may vet it. Earlier, the company secretary had to vet the annual returns of the firm.

According to industry, the effectiveness of the move would have to be seen. “It is a good measure, but a lot depends on government’s definition of As of now, only a small set of fall into the category of The ones who have made the cut the move would be quite beneficial,” said Harish HV, Partner, India Leadership team, Grant Thornton India.

The act recognises a firm as a start-up if the company’s annual turnover for any of the financial years since incorporation being less than Rs 25 crores. Giving a major relief to struggling startups, the government on Friday notified provisions for fast-track resolution of insolvency proceedings. Under this code, insolvency proceedings will be completed in 90 days.

According to industry data, around 95 percent of the are unsuccessful ventures and wind down within two years of operations. However, liquidation of the is a painful process which takes at least around five years, causing a major financial crunch on already cash-strapped firms. As opposed to this the main code that was formulated for insolvency proceedings mandates a firm’s restructuring or exit within 180 days from the day of admission.

The adjudicating authority, which is the (NCLT), may extend the period of 90 days by a further period of up to 45 days for completion of the process. Unlisted with total assets up to Rs one crore can use this section of the code for faster resolution. This move will benefit the start-up community in a big way.

 

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Veena Mani & Karan Choudhury

Business Standard

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