MCA notices to startups due to last amendments

MCA has sent notice to over 2000 startups to explain the justification for high premiums on shares. It was done due to the last amendment by the central government. The clarification, issued as a tweet from Startup India handle, said that certain GNL-2 forms filed with private placement offer letters were marked for resubmission with a query to justify high share premiums.

GNL-2 forms are required for the submission of  important documents like private placement offer letter (PAS-4), copy of prospectus and information memorandum with the Registrar of Companies, MCA. In November this year, the MCA had issued notices to more than 2,000 startups that have raised money since 2013, questioning the valuations at which these startups raised funding.

Earlier, investors were required to file their “capital gains”, once every fiscal year while filing their Income Tax Returns (ITR). But now as per the new amendment, every time, a transaction occurs, the company or the buyer has to ask for a fair market value (FMV) from a chartered accountant and it has to be based on the audited financials.

Thus Ministry of Corporate Affairs asked startups to justify and make sure that startups are in line with the new Provisions of Private Placement under Section 42 of Companies Act, 2013 after enforceability of Section 10 of the Companies Amendment Act, 2017.



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