Start-up India Action Plan – Devil is the detailing (Part 2)

This post deals with the process of registering a Start-up as provided by DIPP

1. Registration through the Start-up India Platform.
2. Submission of application along with any of the following supporting documents:
   • a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from any Incubator established in a post-graduate college in India; or
   • a letter of support by any incubator which is funded (in relation to the project) from GoI or any State Government as part of any specified scheme to promote innovation; or
   • a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from any incubator recognized by GoI; or
   • a letter of funding of not less than 20 per cent in equity by any Incubation Fund/AngelFund/Private Equity Fund/Accelerator/Angel Network duly registered with SEBI that endorses innovative nature of the business. DIPP may include any such fund in a negative list for such reasons as it may deem fit; or
   • a letter of funding by GoI or any State Government as part of any specified scheme to promote innovation; or
   • a patent filed and published in the journal by the Indian Patent Office in areas affiliated with the nature of business being promoted.

Upon uploading the application, a recognition number will be issued to the start-up in real time. After subsequent verifications if the number is found to be obtained without uploading the documents, or uploading forged documents, a fine on the applicant will be levied, which shall be 50 per cent of the paid-up capital of the start-up and not less than INR 25,000.

Devil is in the detail: The word ‘innovation’ and the general nature of the definition of ‘start-up’ may give rise to ambiguity in interpretation. Further the inclusion of ‘Inter-Ministerial Board’ led by DIPP to validate the innovative nature of an enterprise, thereby qualifying it as a start-up and recommendation from an incubator for a start-up to be eligible are detrimental developments. These go against the core motive of the Action Plan, i.e., to reduce governmental involvement. This additional layer of red tape could slow down the process and open-up the start-up ecosystem to corruption and cronyism.

[This is the second of a series of 6 posts that seeks to consolidate all the benefits and policy directives directed towards promoting Start-ups in India.]