MCA amends Deposit Rules for Startups

The Ministry of Corporate Affairs has amended the Deposit Rules to allow start-ups to raise funds through corporate bonds or other convertible instruments for 10 years instead of 5 years.

So an amount of twenty-five lakh rupees or more received by a start-up company, by way of a convertible note (convertible into equity shares or repayable within a period not exceeding ten years from the date of issue) in a single tranche, from a person shall not be considered as deposit.

The definition of start-up is also changed to bring it in-line with the definition used by the Department for Promotion of Industry and Internal Trade (DPIIT).

As per the new rules, a start-up may accept deposits from its members without any maximum limit for a period upto ten years from the date of incorporation.

The amendment was long overdue considering the changes within the definition of start-up caused by the DPIIT. The disconnect between DPIIT and therefore the MCA led to chaos for the start-ups which has now been ironed out with this notification.

As has been the trend, 5 years might not be sufficient for a start-up to turn-around and begin meeting in financial obligations. Hence the extended period of 10 years should make sure that the start-ups have a minimum of matured enough to manage its finances efficiently.

The notification may be accessed here.

Similar Articles

Contact us for a Solution

Contact us for more information about our services and how we can help


As per the rules of the Bar Council of India, we are not permitted to advertise or solicit work. By accessing and browsing through this website, all users agree and acknowledge that the content of this website is for informational purposes only and that there has been no form of solicitation, advertisement or inducement by NovoJuris Legal or its members, in any form. No information provided on this website should be construed as legal advice and NovoJuris Legal shall not be liable for consequences of any action taken by relying on the information provided on this website.