India Bolsters Start-up Ecosystem with Support Schemes and Streamlined Bankruptcy
The Indian government has taken significant steps to bolster its burgeoning start-up ecosystem. It has launched various schemes and initiatives to support struggling start-ups, while also streamlining the bankruptcy process through the Insolvency and Bankruptcy Code (IBC).
The government has introduced schemes such as the Start-up India Seed Fund Scheme, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), and Atal Innovation Mission to provide financial assistance and support to failing start-ups. Additionally, initiatives like 'Make in India', 'Production-Linked Incentive (PLI)' schemes, and 'Digital India' aim to promote domestic manufacturing, boost specific industries, and foster digital innovation.
When a start-up decides to shut down, the legal process varies depending on its registration type. For a Private Limited Company, a special resolution and ROC approval are required, followed by a 30-day public notice period. For a Limited Liability Partnership (LLP), a winding-up resolution and ROC application are needed, also with a 30-day public notice.
The IBC, enacted in 2016, has been effective in safeguarding stakeholders' interests, with 16,270 corporate insolvency cases filed since its implementation. It defines bankruptcy as a state of financial distress where a company cannot meet its financial obligations. Recognizing start-ups' unique challenges, the IBC introduced a 'fast-track process' for small companies, including start-ups, to expedite the resolution process within 90 days.
India's start-up ecosystem, driving innovation and job creation, benefits from the government's supportive schemes and the efficient IBC process. Despite challenges, start-ups can find recourse and resolution through these initiatives, ensuring a robust and resilient environment for business growth.
