Startup India action plan 2016: Part 2

Simplification and Handholding

Compliance Regime based on Self-Certification

Objective

To reduce the regulatory burden on Startups thereby allowing them to focus on their core business and keep compliance cost low

Details

Regulatory formalities requiring compliance with various labour and environment laws are time consuming and difficult in nature. Often, new and small firms are unaware of nuances of the issues and can be subjected to intrusive action by regulatory agencies. In order to make compliance for Startups friendly and flexible, simplifications are required in the regulatory regime.

Accordingly, the process of conducting inspections shall be made more meaningful and simple. Startups shall be allowed to self-certify compliance (through the Startup mobile app) with 9 labour and environment laws (refer below). In case of the labour laws, no inspections will be conducted for a period of 3 years. Startups may be inspected on receipt of credible and verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer.

In case of environment laws, Startups which fall under the ‘white category’ (as defined by the Central Pollution Control Board (CPCB)) would be able to self-certify compliance and only random checks would be carried out in such cases.

Labour Laws:

• The Building and Other Constructions Workers’ (Regulation of Employment & Conditions of Service) Act, 1996

• The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979

• The Payment of Gratuity Act, 1972

• The Contract Labour (Regulation and Abolition) Act, 1970

• The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

• The Employees’ State Insurance Act, 1948

Environment Laws:

• The Water (Prevention & Control of Pollution) Act, 1974

• The Water (Prevention & Control of Pollution) Cess (Amendment) Act, 2003

• The Air (Prevention & Control of Pollution) Act, 1981

Startup India action plan 2016: Part 1

Action plan January 16, 2016, Startup India


What if your idea is not just an idea?

What if it sees light?

What if it’s really born?

What if you can get someone to believe in it?

And help you nurture it?

What if you can set a clear path for it?

What if it can actually travel?

What if it grows and blooms?

What if the whole world embraces it?

What if your idea is not just an idea?

Introduction

Startup India is a flagship initiative of the Government of India, intended to build a strong eco-system for nurturing innovation and Startups in the country that will drive sustainable economic growth and generate large scale employment opportunities. The Government through this initiative aims to empower Startups to grow through innovation and design.

In order to meet the objectives of the initiative, Government of India is announcing this Action Plan

that addresses all aspects of the Startup ecosystem. With this Action Plan the Government hopes to accelerate spreading of the Startup movement:

• From digital/ technology sector to a wide array of sectors including agriculture, manufacturing, social sector, healthcare, education, etc.; and

• From existing tier 1 cities to tier 2 and tier 3 citites including semi-urban and rural areas.

The Action Plan is divided across the following areas:

• Simplification and Handholding

• Funding Support and Incentives

• Industry-Academia Partnership and Incubation

Start up Eligibility for taking various benefits (including Tax Exemptions) under  Startup India action plan

it should satisfy Point No 1 to 5 AND any of the Point 6 to 10 from below :‐

1. It should be either Private Limited Company/Limited Liability Partnership/Partnership Firm

2. It should not be older than 5 yrs

3. It’s Turnover is less than INR 25Cr

4. It should develop an Innovative product which should add to the Value of customers and should be of commercial use

5. It has applied and got approval from DIPP (Dept of Industrial Policy & Promotion) that the firm has Innovative product (i.e Certification from DIPP)

6. Get Validated/recommendation letter from Incubator in Post Graduate Indian College

7. Get Validated/Recommendation letter by Incubator funded by Govt of India

8. Get Validated/Recommendation letter by Incubator recognised by Govt of India

9. Funded by any Incubation fund/Angel fund/PE Fund/Accelerator/Angel Network

10. Has Patent granted by Indian Patent and Trademark Office related to business

Regulatory relaxations for start-ups(Clarifications acceptance of payments & Issue of Shares)

Regulatory relaxations for start-ups- Clarifications relating to acceptance of payments Regulatory Relaxations for Startups- Clarifications relating to Issue of Shares

Regulatory relaxations for start-ups- Clarifications relating to acceptance of payments

RBI/2015-16/318 A.P. (DIR Series) Circular No. 51 February 11, 2016 To, All Authorised Dealer Category – I Banks Madam/Sir, Regulatory relaxations for start-ups- Clarifications relating to acceptance of payments Attention of Authorised Dealer Category - I (AD Category-I) banks is invited to the Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2000, notified by the Reserve Bank vide Notification No. FEMA. 10 (R) /2015-RB dated January 21, 2016, as amended from time to time. 2. Pursuant to paragraph 14 of the Sixth Bi-Monthly Monetary Policy Statement for 2015-16, Reserve Bank of India vide Press Release dated February 2, 2016, had announced that in case of start-ups, to facilitate ease of doing business, certain permissible transactions under the existing regime shall be clarified. One of the issues relate to the start-ups accepting payment on behalf of overseas subsidiaries. 3. In this connection, it is clarified as under: A start-up in India with an overseas subsidiary is permitted to open foreign currency account abroad to pool the foreign exchange earnings out of the exports/sales made by the concerned start-up; The overseas subsidiary of the start-up is also permitted to pool its receivables arising from the transactions with the residents in India as well as the transactions with the non-residents abroad into the said foreign currency account opened abroad in the name of the start-up; The balances in the said foreign currency account as due to the Indian start-up should be repatriated to India within a period as applicable to realisation of export proceeds (currently nine months); A start-up is also permitted to avail of the facility for realising the receivables of its overseas subsidiary or making the above repatriation through Online Payment Gateway Service Providers (OPGSPs) for value not exceeding USD 10,000 (US Dollar ten thousand) or up to such limit as may be permitted by the Reserve Bank of India from time to time under this facility; and To facilitate the above arrangement, an appropriate contractual arrangement between the start-up, its overseas subsidiary and the customers concerned should be in place. 4. Authorised Dealer banks may bring the contents of this circular to the notice of their constituents and customers concerned and advise them to refer to the above notifications for further details. 5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (B. P. Kanungo) Principal Chief General Manager Regulatory Relaxations for Startups- Clarifications relating to Issue of Shares RBI/2015-16/319 A.P. (DIR Series) Circular No. 52 February 11, 2016 To, All Authorised Dealer Category – I Banks Madam/Sir, Regulatory Relaxations for Startups- Clarifications relating to Issue of Shares Attention of Authorised Dealer Category - I (AD Category-I) banks is invited to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, notified by the Reserve Bank vide Notification No. FEMA. 20/2000-RB dated 3rd May 2000, as amended from time to time. 2. Pursuant to paragraph 14 of the Sixth Bi-Monthly Monetary Policy Statement for 2015-16, Reserve Bank of India vide Press Release dated February 2, 2016, had announced that in case of startups, certain permissible transactions under the existing regulatory framework shall be clarified. One of the issues related to issue of shares without cash payment by the investor through sweat equity or against any legitimate payment owed by the company remittance of which does not require any permission under FEMA, 1999. 3. Accordingly, the following is clarified: a. Issue of shares without cash payment through sweat equity: Reserve Bank of India vide Notification No. FEMA.344/2015 RB dated June 11, 2015 has permitted Indian companies to issue sweat equity, subject to conditions, inter-alia, that the scheme has been drawn either in terms of regulations issued under the Securities Exchange Board of India Act, 1992 in respect of listed companies or the Companies (Share Capital and Debentures) Rules, 2014 notified by the Central Government under the Companies Act 2013 in respect of other companies. b. Issue of shares against legitimate payment owed: Reserve Bank of India vide Notification No. FEMA.315/2014-RB dated July 10, 2014, has permitted Indian companies to issue equity shares against any other funds payable by the investee company (e.g. payments for use or acquisition of intellectual property rights, for import of goods, payment of dividends, interest payments, consultancy fees, etc.), remittance of which does not require prior permission of the Government of India or Reserve Bank of India under FEMA, 1999 subject to conditions relating to adherence to FDI policy including sectoral caps, pricing guidelines, etc. and applicable tax laws (cf. paragraph 3 of Schedule 1 to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2015). 4. Authorised Dealer banks may bring the contents of this circular to the notice of their constituents and customers concerned and advise them to refer to the above notifications for further details. 5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (B. P. Kanungo) Principal Chief General Manager

Make in India Week -13th-18th Feb 2016/Mumbai