Recognition Guidelines for Startups:
1. Merger/Demerger/Acquisition/Amalgamation/Absorption: The resultant entity or entities formed due to such activities will not be eligible for recognition as a Startup. However, mergers or amalgamations under Section 233 of the Companies Act, 2013 between either two or more start-up companies or one or more start-up companies with one or more small companies will be allowed, provided they fulfill the norms specified in the DPIIT Notification.
2. Compromise/Arrangement: Entities formed due to compromises or arrangements as provided under the Companies Act, 2013 will not be recognized as Startups.
3. Conversion: Conversion of an entity from one form to another will not hinder the eligibility for recognition, subject to fulfilling the conditions mentioned in Sub-section (3) of Section 80-IAC of the Income-tax Act, 1961.
4. Holding, Subsidiary, Joint Ventures, Entities incorporated outside Indian Territory:
i. Holding/Subsidiary Companies will not be eligible for recognition. Any Startup becoming a holding/subsidiary of a company after recognition will be derecognized.
ii. Entities formed through Joint Ventures will not be recognized. Any Startup entering into a Joint Venture will be derecognized.
iii. Entities incorporated outside India will be ineligible for recognition.
iv. Indian promoters must hold at least 51% shareholding in the Startup, as per the Companies Act, 2013, and SEBI (ICDR) Regulations, 2018.
5. Name Change: Changes in the name of a recognized Startup, required under the relevant provisions of the applicable Act, will be permitted. The benefits will be applicable from the original date of incorporation/registration or commencement of business, whichever is earlier.
6. CIN/LLPIN Change: Changes in CIN/LLPIN due to (a) change in domicile State, or (b) conversion as mentioned in point 3 above, or (c) change in industry/sector (subject to cancellation of the existing certificate), will be allowed with proper approval as per the relevant act. The benefits will be applicable from the original date of incorporation/registration or commencement of business, whichever is earlier. Changes in CIN/LLPIN for any other reasons will not be permitted.
7. Incorporating Additional Entities: Incorporating additional entities with a similar address, same production line/services, and at least one common director/designated partner/partner will not be recognized as a startup.
8. Common Directorship/Partnership: Recognition of an entity having a common director/designated partner/partner with any other entity will be allowed within the permissible limits of the Companies Act, 2013. Related party transactions will not be allowed, except on an arm's length basis.
9. Regulatory Areas: Entities operating in domains specifically prohibited by law will not be recognized.
10. Sole Proprietorship: Sole proprietorships are not eligible to apply for recognition. If a sole proprietorship changes its entity type to one eligible for recognition, the recognition will be granted from the date of commencement of business of the sole proprietorship.
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