The changes brought to the Companies (Acceptance of Deposits) Rules, 2014 can be seen as

a most welcome step. The same was done vide notification No. G.S.R. 548 (E) dated 7th
September 2020.

The proposed amendments in the notification:

Earlier, the Deposit Rules provided that any amount received by a start-up company through
a convertible note would not be considered as a deposit if convertible into equity shares or
repayable within a period of 5 years from the date of issue. Now, the period of conversion or
repayment has been increased to ten years which enables start-ups to raise money for a longer
time frame.

Also, the concept of a ‘start-up company’ for the above clause has been changed and is in
accordance with the notification provided by the Department for Promotion of Industry and
Internal Trade dated 19th February 2019.

Another take away is that, now, according to the notification, the time period for restriction
on the maximum amount of deposits accepted or renewed by a company from its members
will not apply to a private limited company which is a start-up for a period of 10 years. The
same was 5 years earlier.

The key takeaway:

The notification can be seen as a blessing for most companies at the nascent stages of
development as the same will prove pivotal in raising funds and procuring investments that
are crucial for growth in any sector.1

1
http://www.mca.gov.in/Ministry/pdf/Rule_08092020.pdf