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Representations to the Department of Corporate Affairs – Ease of Doing Ecosystem – Nov’12 - YourNest Venture Capital

Representations to the Department of Corporate Affairs – Ease of Doing Ecosystem – Nov’12

The department can help the entire ecosystem by intervening in the start-up process.

  1. Ease regulations and processes for setting up, operating, and exiting a business.
    • Setting-up: The process of starting a business in India is online and becoming easier but it is still ranked 173 globally. The reason is, that for company formation a lot of steps, time, and cost is spent on each aspect such as name search, DIN, Digital signatures, Incorporation certificate, PAN, TAN, registration under shop & establishment act, VAT, Professional Tax, EPFO, ESI, Service Tax, Trade mark, ROC fees for initial authorized capital, stamping of company documents and share certificates.International Benchmark with best in Setting up a business with India – Nov’12
    • Operating: Our policies and regulations do not provide time and concessions for a start-up business to stand-up and start walking. The compliances under the different regulations including but not limited to with holding tax requirements, profession tax, labour laws, etc. come into effect even before these businesses earn a penny in revenue. Even on a 6-month old business, a Venture Capital Fund has to conduct extensive due diligence and educate the entrepreneur on multiple non-compliances, that may amount to closure of a business.
    • Exiting: Majority of Start-ups and small businesses fail particularly when not mentored by a Venture Capital Fund, or an Angel Investor. Procedures for winding-up a private limited company are required to be reduced for the time and cost involved.

    This requires permitting self-regulation and self-compliance for businesses with turnover of less than Rs. 25 crore, and stringent penalties for prevention of potential misuse.

  2. Facilitate investments by Venture Capital Funds (VCFs) – The risk of investing in Start-ups and small business is extremely high. While operating and exiting a start-up, our policies should offer adequate protection to such investors. May be a separate chapter dealing with SEBI approved VCFs is desired in the Act.

The risk taking can be encouraged for a young entrepreneur only if the entry and exit process are simple and easy to comply with.