Startups can now issue stock options to employees for up to 10 years from their incorporation instead of five, the government said on Monday.
The ministry of corporate affairs notified changes to the definition of a startup in line with the one issued by the Department for Promotion of Industry and Internal Trade in February last year. As per the notification, startups can issue sweat equity of up to 15% of their paid-up share capital.
The ministry has also done away with a provision requiring a listed company that has privately placed its debentures to saside reserves every year. The notification amending the Companies (Share Capital and Debentures) Rules, 2014, addressed the long-standing issue of updating the definition of a startup.
In February last year, the DPIIT extended the period during which a company could be considered a startup from five years after incorporation to 10 years.
“Amendments in sweat equity provisions are welcome. Amendment in the definition of startup will remove ambiguity and increase in the period of allotment will help a startup to attract and retain talent,” said Ankit Singhi, a partner at Corporate Professionals.
Relief for listed firms
The ministry of corporate affairs also removed a provision that required a listed company that has privately placed debentures to invest or deposit a sum equivalent to at least 15% of the amount maturing during the financial year by April 30 each year.