Summary of RBI policy changes to support Start Ups
The regulatory relaxations announced by the RBI are summarised below:
A. Changes proposed to be made in consultation with the Government of India (‘GOI’)
a. Enabling Startup enterprises to receive foreign venture capital investment, regardless of the sector in which they operate
b. Explicitly enabling transfer of shares from foreign venture capital investors to other residents / non-residents
c. With regard to the transfer of ownership of Startup enterprises:
• Permitting receipt of consideration on a deferred basis – currently, such a deferral is not permitted
• Enabling escrow arrangement or indemnity arrangement facility for Startup enterprises up to a period of 18 months, as against the 6 months period permitted currently
d. Enabling online submission of Form A2 for outward remittances, with minimal documentation e. Introducing simplified process for delay in reporting of foreign direct investment (‘FDI’) and related transactions, by building a penalty structure in the Regulations.Currently, no specific penalty is provided in the Regulations
B. Proposals under consideration, in consultation with the GOI
a. Permitting Startup enterprises to avail rupee loans under the External Commercial Borrowings regulations, including relaxations with regard to ‘eligible lenders’, etc
b. Permitting issuance of innovative FDI instruments (example convertible notes, etc) by Startup enterprises
c. Streamlining of overseas investment operations for Startup enterprises
C. Clarifications with regard to certain issues currently permissible
a. Issue of shares through sweat equity or against any legitimate dues of the Startup enterprise; provided such remittance does not require approval under FEMA
b. Collection of payments by Startup enterprises on behalf of their overseas subsidiaries more