Now BSE India Has A Platform For Startups

                          

With an aim to boost the Startup Environment, BSE India has now launched a platform for new-age companies. Startups on BSE’s new platform will go live on 9th July. 

Listings:

The BSE platform will facilitate the listing of the companies in sector such as :

  • IT , ITES , biotechnology and life science,
  • 3D printing , space technology , e-commerce , hi-tech defence , drones , nano-technologies,
  • artificial intelligence , big data , virtual reality , e-gaming , exoskeleton , robotics , holographic technology ,
  • genetic engineering , variable computers , inside body computer technology and any other hi-tech company.

Criteria/Pre-requisites:

  • The pre-issue paid-up equity share Capital of the company should be a minimum of Rs. 1 crore.
  • Company should be in existence for a minimum period of 3 years on the date of filing the draft prospectus with BSE.
  • Startup should preferably have an investment by QIB investors/ angel Investors for a minimum period of 2 years at the time of filing of draft prospectus with BSE, and such aggregate investment should be at least Rs 1 crore.
  • A net worth that is positive.
  • No reference to NCLT under IBC, 2016.
  • No winding up petition that has been accepted by NCLT.

Benefits:

  • Will help expose these companies to different forms of capital and also bring better transparency in terms of valuation, corporate governance etc.
  • Will provide ease of access to Startups and these emerging companies for getting listed on a national exchange and giving a boost to the Indian Startup ecosystem in terms of funding, by lifting investor confidence.
  • The Startups need not go through the conventional initial public offering, as they get access to a credible class of investors on this platform by BSE, India.
  • The expectation is that this new platform- the BSE Startup Platform will be further strengthened to give startups much-deserved visibility.
  • One can expect better corporate governance standards and more transparency in fundraising and valuation.

Challenge:

  • The biggest challenge on the BSE, India platform is the lack of participation from the retail class of investors, who actually provide the momentum.

Private Limited Company or Limited Liability Partnership. Which one to choose?

Many Entrepreneurs starting a new business are curious about the comparison between a Private Limited Company vs LLP. Both entities offer many similar features required to run a small to large sized business, while also differing starkly on certain aspects.

In this article, we will decode for you the comparison between Private Limited Company vs LLP from the viewpoint of an Entrepreneur starting a new business.

Registration Process

The Private limited company registration process and the LLP registration process are very similar with some differences in the documents and forms being filed for incorporation. The steps for incorporation of a Private Limited Company are:

  1. Obtaining Digital Signature Certificate (DSC) for the proposed Directors,
  2. Obtaining Director Identification Number (DIN) for the proposed Directors,
  3. Obtaining name approval from MCA and 4. Filing for incorporation.

LLP registration also has a similar process:

  1. Obtaining Digital Signature Certificate (DSC) for the proposed Partners,
  2. Obtaining Director Identification Number (DIN) / Designated Partner Identification Number (DPIN) for the proposed Partners,
  3. Obtaining name approval from MCA and 4. Filing for incorporation.

Both Private Limited Company and LLP are registered with the Ministry of Corporate Affairs and are issued a Certificate of Incorporation. The processing time for incorporation of a private limited company and LLP are also comparable with both entities taking on average about 20 days to incorporate.

Registration Cost

The Government fee for incorporation of an LLP is significantly cheaper when compared to the Government fee for incorporation of a Private Limited Company. LLPs have been introduced to meet the needs of small businesses and hence LLP enjoy lower government fee for incorporation. Also, the number of documents that have to be printed on Non-Judicial Stamp Paper and Notarized is lesser for LLP registration when compared to that of a Private Limited Company registration.

Features

Both LLP and Private Limited Company offer many of the same features. LLP and Private Limited Company are both separate legal entities and have assets and liabilities that are separate from that of the promoters. LLP and Private Limited Company are both transferable, though a Private Limited Company offers more flexibility when it comes to transferring or sharing of ownership. LLP and Private Limited Company both have perennial life, unless and otherwise closed by the promoters or a competent authority.

Ownership

Private Limited Company offers more flexibility for the promoters when it comes to ownership and ownership sharing. The ownership of a Private Limited Company is determined by its shareholding and a private limited company can have up to 200 shareholders. Further, since the shareholders do not directly participate in the management of the company, there is a clear distinction in a private limited company between the owners of share and the management. Hence, a private limited company is advantageous when it comes to ownership and management features.

In a LLP, there is not a clear distinction between the owners and management. In a LLP, the LLP Partners hold ownership of the LLP and also hold powers to manage the LLP. Therefore, a Partner in an LLP will be both an owner and a manager, whereas, in a Private Limited Company, the shareholders (owners) do not necessarily have to have management powers.

A private limited company is recommended for any business that is considering FDI or Employee Stock Options or Equity funding or Venture Capital funding.

Compliance

Tax compliances are similar for both private limited company and LLP. However, when it comes to compliance relating to the Ministry of Corporate Affairs, LLP enjoys significant advantages. An LLP does not have to have its accounts audited if the annual turnover of the LLP is less than Rs.40 lakhs and the capital contribution is less than Rs.25 lakhs. An LLP would, however, have to file LLP FORM 8 and LLP FORM 11.

A private limited company, on the other hand, would have to file annual return audited financial statements with the Ministry of Corporate Affairs each year.

Fines and Penalties

The penalty for non-compliance or late filing of documents with the Ministry of Corporate Affairs are most of the times higher for an LLP as a flat fee of Rs.100 per day is levied when the non-compliance continues with no cap on the liability. Therefore, LLPs could incur larger penalty or fines from MCA due to non-compliance. Therefore, it is important for the promoters of an LLP to be aware of the due dates and file the required documents with the registrar on time.

Other Factors

Private limited companies have been in existence for longer than LLPs and enjoy widespread recognition in India and the world. Therefore, there are well-established processes and procedures for Private Limited Companies. LLPs, on the other hand, is a recently introduced entity in India. Therefore, some of the rules, regulations, and procedures are continuing to evolve. LLPs are also not as recognized in India as a private limited company since it is a relatively new concept.

Private limited company offers its promoters a better image or standing than that of an LLP. Private limited company also enjoys better access to funding from banks and foreign direct investment.

Foreign Ownership

Foreigners are allowed to invest in an LLP only with prior approval of Reserve Bank of India and Foreign Investment Promotion Board (FIPB) approval, whereas in Private Limited Company Foreigners are allowed to invest in a Private Limited Company under the Automatic Approval route in most sectors.

Existence or Survivability

Existence of a Partnership business is dependent on the Partners. Could be up for dissolution due to death of a Partner.

In LLP, existence is not dependent on the Partners. Could be dissolved only voluntarily or by an Order of the Company Law Board, however in a Private Limited Company existence of a Private Limited Company is not dependent on the Directors or Shareholders. Could be dissolved only voluntarily or by Regulatory Authorities.

Registering the right type of company is crucial to the success of your business as it will help you avoid any complications later on. Every entrepreneur needs to closely consider his/her needs before even thinking of registering a company because every business is unique and the type of company you choose can go a long way in ensuring its success!

Contributed by: Vashvi Panwar