Govt steps up efforts on quicker exit for startups

NEW DELHI: The government is working on a fresh set of initiatives for startups, including rolling out norms for resolution of companies that are facing financial stress within 90 days and new tax proposals. Sources told TOI that the department of industrial policy and promotion (DIPP) will hold consultations over the next few days to provide a further boost to startups, including norms for allowing them to raise more debt from promoters.

While a committee had suggested that the time frame for deciding on a resolution package for startups be halved from the 180 days for companies, the ministry of corporate affairs has started work on notifying the norms although the process may take two-three months. “We need to hold public consultations before we notify the norms. But if everyone is on board and a company is not saddled with litigation, then the winding up process can start before the prescribed 90 or 180 days,” said an officer. The norms on faster exit are in focus after the arrest of Yogendra Vasupal, the co-founder of homestay aggregator Stayzilla.

The government’s latest effort, however, goes beyond quicker exit with DIPP’s consultations with other government agencies focusing on several issues related to corporate, financing and infrastructure. The finance part is also seen to be crucial as several companies are finding it tough to raise funds. “We want to ensure that startups have access to debt and equity to grow. Various measures are being discussed,” DIPP secretary Ramesh Abhishek told TOI.

So far, around Rs 650 crore has been cleared and the plan is to step it up significantly to over Rs 1,800 crore next fiscal and over Rs 2,300 crore by March 2019. This support is going to come from Sidbi, departments of science and technology and biotech as well as through the credit guarantee fund, whose Rs 2,000 crore corpus in four years will provide comfort to banks to lend to over 400 startups. To step up funding from the Rs 10,000 crore fund of funds, DIPP is seeking changes in the guidelines that will allow easier financing. The government expects around Rs 600 crore to flow to 15 venture funds next year, a significant jump from Rs 115 crore to five VCs this year.

Sources said that a further relaxation of Angel Tax is also in the works by recognising angel investors as a category and treating them similar to venture funds. Talks have also been initiated to allow for exit before one year without being burdened with capital gains tax, a benefit that is currently available in listed entities.

Source: Et Realty