Registration | The Do’s and Don’ts

Lexplosion Solutions Pvt. Ltd.

Date: 30th September, 2016

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Announcement of the “Start-up India” initiative as part of Independence Day Speech by PM which aims for the following –

What Is A Startup?

Fostering entrepreneurship and promoting innovation by creating an ecosystem that is conducive for growth of Start-ups.

Targeted for India to become a nation of job creators instead of being a nation of job seekers.

Fostering a fruitful culture of innovation in the country is a long and important journey.

Formal launch of “Start-up India” initiative on January 16, 2016

Organizing a global workshop on “Innovation and Start-ups” on January 16, 2016 to:• provide a platform to bring together all stakeholders;• stimulate dialogue on key challenges that the Indian innovation ecosystem

currently faces; and• provide the potential solutions to address them.

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Private Limited Company OR Registered Partnership Firm OR Limited Liability Partnership

Including existing entity/ies or One Person Company which is/are registered as Pvt. Co.

Entity Type

Entity’s Age limit: Within 5 years from the date of incorporation

Turnover limit: Within 25 crore at the end of financial year

Operation: Working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

Other Conditions

o An entity formed by the splitting or reconstruction of an existing business shall not be considered to be a startup.

o A proprietorship or a public limited company is not eligible as startup.

Restrictions

Precondition for Registering as Startup

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How to Register (Online Only)

NEW ENTITIESA. Register entity through MCA or Registrar of Firms using the existing

processesB. Register itself on the Startup India portal and mobile app as a “Startup”.

Option 1

Option 2EXISTING ENTITIES

Register through the Startup India portal and mobile app using a seamless process.

Any One of the following documents is required to be uploaded along with the application for registration as a Startup on Startup India portal and mobile app:

*recommendation (with regard to innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any Incubator established in a post-graduate college in India; or * Letter of support by any Incubator which is funded (in relation to the project) from Government of India or any State Government as part of any specified scheme to promote innovation; or * Recommendation (with regard to innovative nature of business), in a format specified by Department of Industrial Policy and Promotion, from any Incubator recognized by Government of India; or * Letter of funding of not less than 20 percent in equity by any Incubation Fund/ Angel Fund/ Private Equity Fund/ Accelerator/ Angel Network duly registered with Securities and Exchange Board of India that endorses innovative nature of the business; or (Note: Department of Industrial Policy and Promotion may include any fund in a negative list for such reasons as it may deem fit.)

Documents Required for making Application:

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NEW ENTITIESA. Register entity through MCA or Registrar of Firms using the existing processesB. Register itself on the Startup India portal and mobile app as a “Startup”.

EXISTING ENTITIESRegister itself through the Startup India portal and mobile app using a seamless process.

Option 1

Option 2

Documents Required for making Application:

Any One of the following documents is required to be uploaded along with the application for registration as a Startup on Startup India portal and mobile app: * Letter of funding by Government of India or any State Government as part of any specified scheme to promote innovation; OR(Note: Prescribed formats for recommendation / support / endorsement letters are published on Startup India portal.)* Patent filed and published in the Journal by the India Patent Office in areas affiliated with the nature of business being promoted; AND(Note: If an entity has filed for a patent that has been published, then valid copy of the published patent would suffice as a supporting document.)* Valid PAN of the entity.

How to Register (Online Only)

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NEW ENTITIESA. Register entity through MCA or Registrar of Firms using the existing processesB. Register itself on the Startup India portal and mobile app as a “Startup”.

EXISTING ENTITIESRegister itself through the Startup India portal and mobile app using a seamless process.

Option 1

Option 2

Any One of the following documents is required to be uploaded along with the application for registration as a Startup on Startup India portal and mobile app: (Note: One can register as a Startup without a PAN, however, it is advised that a valid PAN of the entity is provided

at the time of registration, as each entity is separately taxable person. Mobile number of the authorized representative of the entity has to be provided at the time of registration.

The portal and the mobile app would be sending an OTP on the mobile number provided for the user to complete authentication and registration process.)

List of SEBI registered funds is also available on the Startup India portal.List of recognized incubators are published on the Startup India portal.

Document Required for making Application:

How to Register (Online Only)

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Register as Startup by applying on Startup India Mobile App / Portal.

Obtain certificate as an eligible business from the Inter Ministerial Board of Certification.

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(Note:The inter-ministerial board shall process the application within a period of 10-25 working days.)

During the registration process, the applicant has to mark the response to “Do you want to avail Tax benefits” as “Yes”*.

Once a user opts for availing the benefits, his/ her application would be evaluated by the Inter-Ministerial Board.

Once certified by the Board, the tax benefits may be availed**.

Process Evaluation Result

*Even if “No” is selected as response to “Do you want to avail Tax benefits”, option to opt for such benefits may be indicated at a later stage as well.**Startups incorporated between April 1, 2016 and April 1, 2019 shall be eligible to obtain tax benefits proposed under the Section 80 IAC of Finance Act 2016.

Preconditions for Availing Tax Benefits

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Cessation of being a Startup

Upon expiry of 5 years from the date of its incorporation or registration.

If entity’s turnover for any of the financial years has exceeded INR 25 crore.

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Intimate DIPP within 21 Days!TO DO

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Laws Covered as part of the SchemeIndustrial Disputes Act, 1947Trade Unions Act, 1926Building and Other Constructions Workers’ (Regulation of Employment and Conditions of Service) Act, 1996Industrial Employment (Standing Orders) Act, 1946Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979Payment of Gratuity Act, 1972Contract Labour (Regulation and Abolition) Act, 1970Employees’ Provident Funds and Miscellaneous Provisions Act, 1952Employees’ State Insurance Act, 1948

Zero inspection for start ups in the first year of establishment.

Flexibility to submit online self-declaration certifying compliances.

Inspection based on credibility - From 2nd year up to 3 years from date of setup, inspection only upon receipt of credible written complaint filed and subject to approval of senior officer.

Other BenefitsIncentive on engaging Apprentices

Self-certification of start-ups and filing of single returnGujarat, Telangana, Karnataka, Rajasthan & Kerala will show way to nation for setting up startup ecosystem

WHY Startup?Benefits | Exemption under Labour Laws

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Insolvency Professional Appointment of insolvency professional (IP) and swift closure of business

Winding Up Start ups to be wound up in 90 days from making application

Insolvency and Bankruptcy Code, 2016 procedure for voluntary closure

WHY Startup?Faster Exit options for Start-Ups

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Income tax is exempted for a period of three years-subject to the approval of the inter-ministerial board: subject to the non-distribution of dividends by the start-up.

Extending MSME benefits to Startups tax exemption to newly formed manufacturing MSMEs (if capital gains used to purchase new asset) shall extend to all start-ups.

Consideration for shares exceeding fair market value (as taxable under IOS) not to be levied on investment by venture capital funds and incubators in start-ups.

Exemption from paying Tax Start ups exempted from paying tax on capital gains if used for purchase of new asset.

Capital Gains Exemption on Capital Gains if the capital gain is invested in the start up fund of the Government.

Tax Benefits Start-ups to apply for tax benefits while filing for registration.

WHY Startup?Tax Exemptions for Start ups: Direct Tax

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Easier listing norms for start ups.

Minimum application size to be 10 lakh initially to pool in sophisticated investors.

Relaxation in delisting, takeover and AIF regulations for entities in IT, data analytics, IPR, bio-tech and nano-tech activities

Relaxations in disclosure requirements

WHY Startup?SEBI Listing Relaxations

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This aims to put start-ups on a level playing field with the MSMEs.

Ministries/Departments/PSUs may relax norms for condition of prior turnover and experience.

No relaxation on the quality standards or technical parameters.

Ministry of Micro, Small and Medium Enterprises- Exemption for Start-ups from criteria of prior experience/ turnover.

WHY Startup?Relaxed norms of public procurement for SMEs

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4 Simplifying the procedure for reporting of FDI transactions by specifying the penalty.

In case of outward remittances, Form A2 to be allowed to be filled online.

In case of transfer of ownership of start ups the receipt of the consideration amount on a deferred basis. Also, escrow arrangement or indemnity arrangement is permitted for upto 18 months.

Allow start-ups to receive foreign venture capital investment and enabling transfer of shares from FVC to other residents/non-residents.

RBI notified certain regulatory changes for easing cross-border transactions, particularly relating to operation of start-ups.

WHY Startup?RBI relaxations for Start ups- Foreign Capital

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or making repatriation through Online Payment Gateway Service Providers upto USD 10,000 or as prescribed by RBI.

Relaxation: Balance amount from such account is to be repatriated to India within a period that is applicable to realization of export proceeds (currently 9 months)

Opening Up: Start up may open foreign currency account abroad to pool foreign exchange earnings from its foreign subsidiaries.

Accepting payment on behalf of overseas subsidiaries:

WHY Startup?RBI relaxations for Start ups

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To promote commercialisation of intellectual property with ease

Registration of IPR will be in accordance to any relevant laws and rules.

The appointment of facilitators in no way transfers any IP right to the Government or the facilitator.

To empanel ‘facilitators’ to give advice on IPR including IPR regimes in other countries.

To provide rebate in fees for the patent application- 80% of the fee shall be provided as rebate.

To fast track patent application and examination processes. The Patent (Amendment) Rules, 2016 has added Rule 24C for ‘expediting patent application’ for start ups.

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The scheme eases out patent process with the following

objectives:

SIPP (Scheme for Start up Intellectual Property Protection)

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One day incorporation of Companies through the app.

CSR: Contributing to incubators notified as eligible spending under CSR. (Amendment to Schedule VII of Act made in 2014)

Dormant company: in case company does not have financial transactions. (Sec 455)

Small company: Paid up share capital less than 50 lakh or turnover less than 2 cr. (Sec 2(85))

One person company: Paid up capital of 1 lakh minimum-single promoter may incorporate (Sec 2(62))

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Though the concept of start up has been defined only recently, the Companies Act, 2013 makes indirect provisions beneficial for start ups.

Companies Act and Related Relaxations

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Entity

Manufacturing Services

Micro Investment in plant and machinery<25 L

investment in equipment < 10 L

Small Investment in plant and machinery between 25 L – 5 Cr

investment in equipment between 10L – 2 Cr

Medium Investment in plant and machinery between 5 Cr – 10 Cr

investment in equipment between 2 Cr – 5 Cr

While calculating the investment for plant and machinery, the cost of pollution control, R&D, Industrial safety device and other such items shall be excluded.

Definitions

COMPLIANCESFor MSMEs For buyers from MSMEs

Filing of Memorandum: An MSME shall file the memorandum to the State Government authority to set up their enterprise.

Registration under Udyog Adhaar: All MSME to be obtain the Udyog Adhaar number. There is an online registration facility.

Furnishing information: All MSMEs have furnish information with regard to Udyog Adhaar number, Plant capacity, investment, product manufactured etc.

Payment: Pay MSMEs within 45 days of acceptance of the goods or service.

Penalty: Compound Interest at the rate of 3 times the rate notified by RBI becomes payable in case of default.

Furnishing additional information in annual audited accounts with regard to principal and interest amount due (payable to MSMEs), amount paid as interest along with the amount paid after the due date, amount of dues remaining due and payable in the succeeding years, etc.

MSME Act | A Perspective

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Fully-automated compliance solution

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Hassle-free Updates &

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About Komplify

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• Know the applicable critical compliances online

• Move up or drill down the applicable compliances by various variables

• Real-time compliance status of your organization

• Generate customized compliance reports

• Slice and dice reports basis your requirements

• Get online compliance certificates

• No complicated workflows

• Easy to allocate compliances through quick links, bulk allocation, etc.

• Get email alerts well before compliance date

• Get compliance alerts from your calendar

• Stay updated about regulatory amendments

Identify laws online

Management by Exception

Easily manage

compliances

Ahead-of-time alerts

How Komplify can help MSMEs ?

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1. Depth of Laws Covered

2. Type of Laws and Compliances Covered

Central Laws State Laws Municipality Laws

Corporate Secretarial Compliances

Environment, Health & Safety

Fiscal Compliances(Registrations and Filings only)

Labour & Employment Industry Specific Compliances

Building, Infrastructure & Establishment

About Komrisk

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Comprehensive and Customized compliance repository

Ahead of time alerts and reminders

Single source of truth for all Compliance Proofs

Manage Incidents and Internal Policies

Management by Exception through Real-time status dashboards

Near real-time Compliance updates

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Why Komrisk?

Lexplosion’s Compliance Management tool – Komrisk, combines the benefits of a Comprehensive Compliance Content and a web-based software

(This is the preferred option for organizations)

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• Receive information on client's operations

• Discuss with client regarding applicability of laws

• Client reviews and signs-off the list of laws

Deployment of Komrisk• Basis applicable laws, identify the

applicable compliances• Create and configure client

workspace in Komrisk• Publish applicable compliances

onto the workspace  • Configure client details on

Komrisk• Impart Komrisk training for client’s

usersPeriodic Regulatory Updates

• Track applicable laws on an ongoing basis

• Update client-specific workspace with any regulatory amendments

Software Support

• SLA based software support

• Periodic software updates, as and when applicable

55+ Entities Using Komrisk 1800+ Komrisk

Users 22000+ Compliance Tasks~5 Years Since in

Existence

Identification of Regulations

Komrisk Deployment Process

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Founded by 4 experienced lawyers– Worked with GE; Genpact, Amarchand & Mangaldas

Focused on Legal & Statutory Compliance Management

Introduced India’s first cloud-based compliance solution – Komrisk in2012

Partnered with CII for providing Compliance Training & Updates to its Members

Deloitte’s “Technology Fast 500 Asia Pacific Companies ”NASSCOM’s “Outstanding IT/ITES Company” at Emerge January 2012.

NASSCOM’s Emerge 50 for 2012 and 2013 Deloitte’s “Technology Fast 50 India 2012”

Started in 2007

Highly decorated / acknowledged

by Industry/ Consultants

Delivered 150+ Compliance

Management Engagements

About Lexplosion

Leading Fortune 100 Companies

Top Fortune 500 Companies FTSE/ NYSE/

NASDAQ / BSE/ NSE Listed Entities

Reputed ecommerce companies

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Contact Us

Lexplosion is also a Member Firm of Leading Indian Industry Associations

HeadquarterLexplosion Solutions Private LimitedInfinity Benchmark, Floor 6, Office# 1, Plot# G1, Block - EP & GP, Sector V, Salt Lake, Kolkata- 700 091, IndiaT. +91.33.40 61 80 83/84/85, F. +91.33.40 61 80 86

Mumbai OfficeLexplosion Solutions Private LimitedRegus Trade Centre G/F & 1st Floor, Bandra East, Mumbai, Maharashtra 400051

www.lexplosion.in / www.kompify.com

NCT (Delhi) & Registered OfficeLexplosion Solutions Private LimitedD-20 Hauz Khas, Ground Floor, New Delhi – 110016, India

Bangalore OfficeLexplosion Solutions Private LimitedRegus, CBD Bangalore, Level 9 Raheja Towers, 26-27 Mahatma Gandhi Road, Bangalore - 560 001, India

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