Small Businesses Get a Boost Thanks to New Bill

The recent amendments carried out through the Companies Amendment Bill, 2021 would significantly promote start-ups, business innovation, entrepreneurship and improve the general business climate in the country.

Significant amendments include the addition of a new definition for “startup company,” removal of the requirements of filing unaudited financial statements for private companies, removal of the common seal, and the elimination of the requirement of filing the subscription form.

The newly introduced definition refers to a startup as a company incorporated within ten years, with an annual turnover of up to Rs. 500 million in any financial year, and working towards the innovation, development, or improvement of products or processes with a high potential of employment generation or wealth creation. The inclusion of the definition will allow special privileges to startup companies to attract investment, acquire credit, and innovative business products.

Moreover, new clauses have been added to allow private companies to issue shares to new investors against properties and to their employees under employee stock option schemes. Private companies have also been allowed to buy back their shares.

Other important amendments include empowering minority shareholders holding five percent shares to give notice for calling a members’ meeting. This was revised downward from ten percent to protect the rights of minority shareholders.

Furthermore, the board resolution through circulation was earlier required to be signed by all directors, and now it can be deemed passed if approved by a majority of directors. To promote gender equality, requirements to mention husband’s name for registration of a company have been abolished, bringing company registration requirements at par for men and women.