Applicable Laws & Legal Compliances for FinTech Start-ups: Lawyers Advice | FinTech Lawyer in Delhi NCR | FinTech Company Lawyer in Delhi NCR | Technology Lawyer in Delhi NCR

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The government is making sincere efforts to make India digital. It has been introducing the developments in the Fintech sector because of the rapid technological advancements.

Different Sources to Raise Funds for Fin-tech Start-ups:
1) Issuance of shares (equity, preference), debentures.
2) Angel investors, incubator and accelerators have shown significant involvement in start-ups.
3) Public offering and raising funds from the market
4) Crowd funding.

Encouraging Investment Schemes in India
The Department of Industrial Promotion and Policy has recognised 16000 start-ups and about 130 of them obtained financial assistance till February 2019. The government has launched tax benefits which include 3 years of exemption for recognised start-ups.The definition of the term “start-up” has been extended to more entities and eased tax norms dealing with angel tax which bifurcates between genuine and shell companies.

Major Recent Achievements in India:
1) Livquik technology India Pvt. Ltd was acquired 55Percent of its shares by the future group
2) Quantiguous solutions is acquired by Deutsche bank for acceleration of financial strategies.
3) Amazon is also increasing investment in India for Indian fintech market.

Ten legal compliances for Fin-tech Start-ups in India:

1. Securities Exchange Board of India (SEBI)– Governs the intermediaries in the securities market along with SEBI regulations (2013) which regulate investment advisors, SEBI regulations (1992) for stock brokers and sub brokers, SEBI regulations(1992) for regulating merchant bankers
2. Insurance Regulation and Development Authority (IRDA) – Undertakes regulations in the insurance industry.
3. Reserve Bank of India has issued the “peer to peer lending directions (2017)”which acts as a regulator for providing online portal for participants of peer to peer lending in the market.
4. The Payment and Settlement System (2007) read along with PSS Regulations (2008) which help to govern and regulate the payment mechanism of the country.
5. The Information Technology (IT) Act 2000 read along with Reasonable Security Practices & Procedures and Sensitive Personal Data Rules (2011). It also defines the intermediary’s liability
6. The Indian Penal Code (1860) also prescribes for cyber crime punishments like cyber fraud, spoofing etc.
7. The Prevention of Money Laundering Act (2002) which prohibits and penalises for any money laundering activities.
8. Companies Act (2013) that regulates the company’s setup in India.
9. The Income Tax Act, 1961 which provides for regulations of taxations which the entities have to comply with.
10. The Intellectual Property Laws which include the Patent Act (1970) which protects inventions. The computer programs are not patentable unless they have a “technical effect” to it. They are also protected as “literary work” under the Copyright Act 1957 but the functionality of the software is not protected herein.
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Framework of Regulatory Sandbox
Reserve Bank of India had issued a Framework for Regulatory Sandbox(August 13, 2009) also referred as the “RS Framework”. As per the RS Framework, the entities are qualified to partake as FinTech companies, including start-ups, banks, financial institutions and any other company partnering with or providing support to financial services businesses. The regulatory sandbox is meant to be a way to promote innovations intended for use in the Indian market in areas where
(i) If there is an absence or lacuna in the government regulations,
(ii) If there is a requirement of temporarily ease of regulations for enabling the proposed innovation,
(iii) If the planned innovation shows promise of easing/effecting delivery of financial services in a significant way.

ramework of Regulatory Sandbox
Reserve Bank of India had issued a Framework for Regulatory Sandbox(August 13, 2009) also referred as the “RS Framework”. As per the RS Framework, the entities are qualified to partake as FinTech companies, including start-ups, banks, financial institutions and any other company partnering with or providing support to financial services businesses. The regulatory sandbox is meant to be a way to promote innovations intended for use in the Indian market in areas where
(i) If there is an absence or lacuna in the government regulations,
(ii) If there is a requirement of temporarily ease of regulations for enabling the proposed innovation,
(iii) If the planned innovation shows promise of easing/effecting delivery of financial services in a significant way.

India provides a platform for unique opportunity for Fin-tech entrepreneurs to commence operations to the major under-served population in banking and other financial sectors. India has potential talent pool for software engineers, developers and policy makers which make it easier for Fin-tech industry to advance. The modern technology has transformed the face of financial institutions with its involvement.
Authored By: Adv. Anant Sharma & Shivangi Ghosh