By Shreya Maskara
The Centre is considering setting up a regulatory institution to oversee the Indian startup funding market. The proposed Alternate Markets Commission (AMC) would regulate the $500 billion market and help in drafting regulations to increase investment into the same.
The institution will be independent of the Ministry of Corporate Affairs and the Securities and Exchange Board of India (SEBI). The authorised capital of unlisted private firms stands at Rs 20 lakh crore and unlisted public firms stands at Rs 14 lakh crore according to the corporate affairs ministry.
Heres what happened
The government will have to introduce a law for the proposal to go through, said a note prepared by the department of economic affairs (DEA), under the finance ministry, as reported by media sources. The DEA had also sent a note earlier to the SEBI, corporate affairs ministry and startup funding bodies stating that the new AMC would have the capability to frame policies for fundraising by unlisted private, public firms, nonprofits, trusts and other entities.
The note also detailed an important fact that the AMC would not have to consult the government or any governmental bodies before framing these regulatory rules.
What does the proposal entail
The proposal details that unlisted firms and individuals will have the authority to raise capital as equity or debt, including but not limited to convertible debentures, donations, units, deposits, partnership capital, other forms of shares. Additionally, the maximum an entity can raise in a year against any instrument will be Rs 100 crore. Although there has been no minimum limit set for investors to accommodate crowdfunding.
There shall be no minimum investment limit set for the investor to accommodate crowdfunding, the note detailed. An entity can raise funds through only one platform in any given financial year. In addition to this, the regulatory body will also be responsible to help and encourage start-ups to adopt policies that help them reduce the cost of raising capital.
After the AMC has been set up, all fundraising activities for start-ups will be exempted from the existing norms in place by the SEBI, corporate affairs ministry and the Reserve Bank of India. The AMC would be responsible for enforcement of all its policies, and any violation will be dealt by the law and the police.
Shreya Maskara is a senior copy editor at Qrius