Eased Companies Act to help startups take private company route
The recent relaxations in the Companies Act, 2013, notified by the ministry of corporate affairs (MCA) for private companies, such as flexibility in issue of share capital, ease in raising debt from shareholders and reduced compliance burden, has caught the attention of budding entrepreneurs.
As a minimum share capital is no longer required at the time of incorporation, entrepreneurs are increasingly looking at setting up a private company, rather than opting for other legal forms of entities - such as limited liability partnerships. The notification issued by the MCA in early June has been placed before both houses of Parliament for approval.
Since December 2000, the minimum paid-up share capital for a private company was Rs 1 lakh; now, there is no such requirement. In fact, this particular amendment was notified earlier on May 26. "Requirement of a minimum share capital was demoralizing for startups. Now, even the stamp duty burden attached at the inception stage has been done away with. INC-7, which is the e-application form for company incorporation, no longer requires mention of the quantum of share capital, "Many young entrepreneurs are showing keen interest in incorporating private companies. We will soon see many companies, largely in the services sector, being incorporated with minuscule capital.
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