India has over 61,400 start-ups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT), with at least 14,000 recognised during fiscal 2022. The government of India is making tremendous efforts to help businesses run smoothly.

Start-up laws and guidelines have also seen a major boost in the past few years. With exemption to angel funds being taxed for their investments, to concession for start-ups in their intellectual property (IP) fee, there have been several advantages given to start-ups.

There have been several changes to the ways in which an entity can be incorporated. Apart from angel tax, the government has designed many tax exemptions, especially for start-ups. More than anything, the fact that different businesses need different tax policies to be applied, and there is now a demarcation of that, is significant.

The laws, however, also mandate that every firm or business needs to maintain proper accounts and tax audits to adhere to the taxation rules applied and adhered to in the country. Considering the financial limitation that a start-up has, there are now laws to help entrepreneurs protect their unique, unusual ideas which could help their business grow and gain immensely if protected well by bigger competitions in the market.

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The start-up scheme for IP rights introduced a few years ago, eases the protection and commercialisation of IP. Also, the government has reduced its fees by 80 per cent for all types of IP filings for start-ups. The government has also launched the SAMRIDH scheme, through its “Startup India Seed Fund” to help the start-ups with necessary funding crucial for the growth of their business.

Need for more legislation

While there have been several incentivisation schemes and rules that have been introduced for start-ups, there also needs to be more legislation and regulation of the innovative businesses that start-ups today are setting up. With technology being used for financial transactions, health diagnoses and medication being developed by trained machines, and sensitive data being handled by artificially intelligent platforms, the law needs to pick up the pace if it intends to protect the rights and interests of all stakeholders.

Regulatory bodies such as RBI and SEBI have also brought in helpful regulations. While these efforts are far and few in between, the regulations for trying to curb cyber theft, regulations around the usage of data by digital platforms, trying to fix liabilities for intermediary and third-party platforms have seen some massive developments over the past few years.

Tribunals or specialised panels set up for start-ups to help them get their concerns adjudicated would help start-ups immensely. A start-up, as defined under the law, is an organisation that is seven years or younger. If an early-stage start-up gets embroiled in a legal dispute, it’ll take a minimum of 2-4 years to successfully resolve the dispute, not to mention issues like legal fees and time wasted.

Can an upcoming start-up invest resources of that magnitude to resolve a legal dispute where it perhaps has no liabilities whatsoever? Setting up a dedicated panel or a set of industry-specific or dispute specific tribunals to adjudicate on concerns regarding start-ups and their disputes would be a welcome step for upcoming businesses and will provide a much-needed boost to their growth trajectory.

The author is Managing Partner, Verum Legal

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