Govt-appointed panel likely to look at tighter regulatory regime for startups amid corporate governance lapses

Startups are generally small and there needs to be a balancing when it comes to regulations for them. Image: Shutterstock

A government-appointed panel is likely to discuss whether there is a need for a stricter regulatory regime for startups against the backdrop of instances of corporate governance concerns at some of the entities, according to an official. Startups are generally small and there needs to be a balancing when it comes to regulations for them, the official said and added that ease of doing business as well as a compliance-oriented regulatory regime should be ensured.

The Company Law Committee (CLC), which was set up by the corporate affairs ministry back in September 2019, is likely to look into various aspects of the regulatory regime for startups, the official told PTI recently.

The standing panel, which is headed by the corporate affairs secretary, has government officials, representatives from the industry and experts, among others as members. It broadly looks at the effective implementation of the Companies Act, 2013 and the Limited Liability Partnership (LLP) Act, 2008 as well as facilitating and promoting greater ease of doing business.

The ministry has not made its view on whether there is a need for a more rigorous regulatory framework for startups, the official said and noted that there should not be too much regulatory compliance burden on such entities.

Both companies law and the LLP Act are implemented by the ministry.

Under the companies law, a startup is defined as a private company incorporated under it and recognised as a startup in accordance with the notification issued by the Department for Promotion of Industry and Internal Trade.

Startups have been provided various relaxations, including certain exemptions from procedural compliance requirements.

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Among others, a private company, which is considered as a startup for a period of five years from the date of its incorporation, is allowed to accept deposits from members without any restriction on the amount.

Recently, the ministry ordered an inspection of the books of edtech major BYJU'S.

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The inspection of the books of Bengaluru-based Think & Learn Pvt Ltd, which operates under the brand BYJU'S, will be carried out by the ministry, amid delay by the edtech major in submitting its financial statements and corporate governance concerns.