Govt committee likely to finalise startup regulatory framework within 2 months amid Paytm, Byju’s' concerns

The Ministry of Corporate Affairs is considering scrutiny of large, unlisted startups following recent regulatory concerns at Byju's, Paytm Payments Bank and BharatPe, according to sources in the Ministry of Finance.

The Company Law Committee, a government-appointed panel, convened last month and is expected to meet again soon to finalize a regulatory framework for large unlisted startups.

This initiative aligns with the government's goal to foster startup growth amidst regulatory and corporate governance challenges faced by major startups like Byju's and Paytm Payments Bank.

The objective of this regulatory regime is to oversee companies not directly under the jurisdiction of the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI).

“We are conducting an ongoing inspection against Byju's and expediting the report. Regarding Paytm Payments Bank, if contacted by the Reserve Bank of India, we will investigate." an official shared.

As per the official, a fresh notice was recently sent across to BharatPe seeking details on the findings in a status report by the Delhi Police’s Economic Offences wing.

Sources indicate the committee is also assessing norms and provisions for investors and board directors to enhance control without adding undue regulatory burden.

The Committee, chaired by the corporate affairs secretary, comprises government officials, industry representatives, and experts, focusing on the effective implementation of the Companies Act, 2013, and the Limited Liability Partnership (LLP) Act, 2008, while facilitating ease of doing business.

According to company law, a startup is defined as a private company incorporated under it and recognised as a startup per notification from the Department for Promotion of Industry and Internal Trade (DPIIT).