Amendment to Acceptance of Deposits Rules for Start-up Companies

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Sep 30, 2020

Amendment to Acceptance of Deposits Rules for Start-up Companies

MCA, by its Notification dated September 7, 2020 has amended the Companies (Acceptance of Deposits) Rules, 2014 (‘Deposit Rules’). Pursuant to the amendment: (a) a deposit will not include an amount of ₹ 25 lakh (approx. US$ 35,000) or more received by a start-up company in a single tranche from a person, by way of a convertible note which is convertible into equity shares or repayable within a period not exceeding 10 years (as opposed to five years provided earlier) from the date of issue; and (b) the maximum limit in respect of deposits to be accepted from members set out in Rule (3)(3) of the Deposit Rules (i.e. 35% of the aggregate of the paid-up share capital, free reserves and securities premium account of the company) will not apply to a private company which is a start-up for 10 years (as opposed to five years provided earlier) from its date of incorporation.

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