Government-appointed panel to discuss the need for ‘stricter’ startup rules
- ByStartupStory | July 31, 2023
A government-appointed panel is set to discuss the possibility of implementing a stricter regulatory regime for startups in light of recent instances of corporate governance concerns at some entities, according to an official. While startups are generally small and require a balanced approach to regulations, the focus should be on ensuring ease of doing business while maintaining a compliance-oriented regulatory environment.
The Company Law Committee (CLC), established by the corporate affairs ministry in September 2019, will examine various aspects of the regulatory framework for startups, as per the official’s statement to PTI. The committee, headed by the corporate affairs secretary, comprises government officials, industry representatives, and experts, among others. Its primary objective is to ensure effective implementation of the Companies Act, 2013, and the Limited Liability Partnership (LLP) Act, 2008, while promoting greater ease of doing business.
As of now, the ministry has not taken a definitive stance on whether startups require a more rigorous regulatory framework. The official emphasized the importance of not burdening startups with excessive regulatory compliance requirements.
Under the companies law, startups are defined as private companies incorporated under it and recognized as startups according to notifications issued by the Department for Promotion of Industry and Internal Trade. To facilitate their growth, startups are provided with various relaxations, including exemptions from certain procedural compliance requirements.
For a period of five years from their incorporation, private companies considered startups are allowed to accept deposits from members without any restrictions on the amount. Despite these relaxations, the corporate affairs ministry recently ordered an inspection of edtech giant BYJU’S books due to delayed submission of financial statements and corporate governance concerns.
The ministry will conduct the inspection of Bengaluru-based Think & Learn Pvt Ltd, operating under the brand BYJU’S, to address the aforementioned issues.
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