How to start a company in India: New reforms & exemptions by MCA to set up your business in India

1. 
   The Ministry of Corporate Affairs (MCA) is moving in making efforts to improve ease of doing business in India, especially in helping small businesses set up.
2. The MCA has given various exemptions to companies to help them with ease of compliance
3. These exemptions range from putting no limits on share capital, clarifying that loans from shareholders count as "deposits" and more.
4. In a latest update by MCA, it is making considerable efforts to provide ease of doing business in India by way of introduction of various relaxations and exemptions to varied structures of entities in India.
5. The intent is definitely to provide the investors with an integrated, streamlined and hassle-free process of continuing their operations in India. Also, it is important to understand that ease of compliance is directly proportional to the swift and smooth flow of business, wherein a certain degree of flexibility is given in day-to-day working.

Some of the exemptions are mentioned below:

No Minimum Share Capital For Starting A Company

MCA has stated that no minimum amount of share capital is required to be invested for setting up a company in India. This provides ease of business to young, budding entrepreneurs in the country in terms of funding requirements and initial cost of capital.

Loans from Shareholders

Pursuant to the provisions of Companies Act, 2013 (“Act”) no Company is allowed to take a loan from its shareholders as it will be considered as a “Deposit”, and accordingly all the compliances pertaining to deposits will need to be complied with. However, in case of a Private Limited Company, which is a closely held company with a minimum of two shareholders, leverage is provided in terms of taking loans from its shareholders up to the limit of one hundred percent of its aggregate of paid-up share capital and free reserves, and the same would not constitute as a Deposit.

This benefit has been provided keeping in view that in case of Private Limited Companies, shares are mostly held by promoters and tare the primary (if not the only) source of funding for such companies.

Funding Made Easy For Companies

As per the MCA guidelines, Private Limited Companies can borrow from banks and financial institutions from time to time, in order to meet the various funding requirements of the company. A Private Limited Company may borrow up to any limit from the banks and other lending institutions without any prior approval of its shareholders.

The Attendance of Directors in Meetings

Going forward, since in due adherence with the provisions of the Act, no interested Director is allowed to attend and participate in the meeting wherein any matter pertaining to his interest is being discussed and approved. However, the Ministry has extended benefit to Private Limited Companies in a way that since in such Companies, there is a minimum strength of Board of Directors, which is mostly two Directors.

MCA understands that foreign entities setting up business in India mostly comprise foreign shareholders residing outside India, therefore any General Meeting(s) of shareholders convened from time to time may be held outside India also so as to ensure the availability of shareholders for the said Meetings.