On 7th September 2020, the Central Government notified an amendment to the Companies (Acceptance of Deposits) Rules, 2014, in consultation with RBI.
Under the amendment, the amount received by a startup for the issuance of a convertible note equal to or in excess of Rs. 25 lakhs shall not be considered a deposit within the meaning of the rules. Broadly, a convertible note is an instrument issued initially as debt which can be converted into a certain number of equity shares on the occurrence of a specified event OR repayable within a period of ten years, as opposed to the pre-amendment five years.
The applicable norms for an entity to qualify as a startup within the meaning of the rules have also been revised in line with a notification issued by DIPP on 19th February 2019.
The notification can be found here: