All The Laws Applicable To Startups In India

Prime Minister Narendra Modi had announced the initiative of 'Startup India' in the year 2015. With the rapid advancement in the business sector, one can say that Startups are the future of India. They are required to follow the rules and laws for conducting business in India. The laws applicable to Startups in India are:

Incorporation -

As per the published announcement, which was made by the government on 23rd May 2017, an entity shall be considered as a Startup if it is incorporated in India as a private limited company (as defined in the Companies Act, 2013) or registered as a partnership corporation (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2008); and for 10 years from the date of its incorporation/ registration; in any case, through Startups in the biotechnology division, the period shall be as long as 10 years from the date of its incorporation/ registration; and if its annual turnover for any of the financial years since incorporation/ registration has not exceeded Rs. 100 crores; and if that it is working in the direction of innovation, development or improvement of goods or procedures or services, or if that it is a scalable business model with a high capability of employment generation or wealth creation. A business formed by splitting up or reconstruction of existing commerce shall not be considered a ‘Startup'. Also, a Startup must not be more than ten years old for startup recognition or not incorporated before April 2016 for claiming Tax Exemption certificate.

Tax Laws

Every entity is required to pay taxes at the Central, State and Local level. The taxes which Startups need to register with are; Service Tax; Value Added Tax (VAT); Central Sales tax; Tax Deducted at Source (TDS); and Income tax Return Filing. Also, the government has given a 100% exemption to startups for payment of any Income Tax for any three consecutive years, in a block of seven-year.

SEBI

Companies must comply with notifications which the Security Exchange Board of India (SEBI) issues. SEBI directs India's securities market regulator, public offers of securities, offers of securities by listed corporations, the provisions of mandatory and voluntary tender offers for shares of the listed corporations, and the procedure for delisting of a listed corporation.

Business Finance

It implies the way startups manage their financial requirements across their life-cycle. It consists of foreign direct investment (FDI), venture capital, joint ventures and angel investors.

Labour Laws

The labour laws are the most vital key to the commencement of startups as the employees functioning for the corporation must be satisfied. It brings innovations towards the corporation and also for the development of the corporation. It may also require that freelancers, contractors and the rights of these staffs be protected under the labour law. Furthermore, a good labour law brings efficiency towards the business.

Intellectual Property Laws and Information Technology Law

When a startup manages with codes, designs or research, then the intellectual property law is the most vital law to comply with to prevent startup from identity theft. The government has introduced Scheme of Facilitating Start-Ups Intellectual Property Protection (SIPP) which is meant to protect patents, trademarks, copyright, patent, design claims, timely intellectual property audits, etc.   

Information Technology Law

The IT laws are needed for the growing technology. If the startup manages with software designing or any IT services, there a bulk of data from the consumer is required, which needs to be protected. It also consists of digital signatures as well as e-contracts which must be protected for the user's privacy electronically. In such circumstances, the IT laws come into play in a business.

Indian Contracts Act

A business needs contracts to survive. Indian Contracts Act directs the grounds on which contracts are valid, regarding the formation and enforceability of contracts, consideration, and the various types of contracts which includes those of indemnity and guarantee, bailment and pledge, agency, as well as breach of a contract.

Settling Disputes

Disputes may arise at any time in business due to unavoidable circumstances. Thus, a proper alternate dispute-settling methods are required by the emerging startup as it is a method which could smoothen the progress of a successful business.

Also, the startup is required to comply with a few other sector-specific legislations reliant on the nature and type of the transaction. They are; the Indian Telegraph Act, Drugs and Cosmetics Act, Press Council Act, the Banking Regulation Act, the Insurance Act, and various labour legislation (Industrial Disputes Act, etc.). The winding-up procedure for startups has been made quite simple as the new Insolvency and Bankruptcy Code, 2015 has provided provisions for the fast track or voluntary closure of companies. 

By: Vikas Mehta