Tag Archives: DST

Corporate Social Responsibility (CSR) Contributions in Incubators

Every company having a net worth of INR 500 crore or more, or turnover of INR 1000 crore or more or a net profit of INR  5 crore or more during the immediately preceding financial year is subject to the provisions related to Corporate Social Responsibility (“CSR”) under the Companies Act, 2013 (the “Act“). The CSR related provisions of the Act are applicable to not just companies incorporated in India, but also to a foreign company that has its branch or project office in India. For a deep dive on the general conditions attached to CSR, and how to structure your CSR activities please refer to our previous post here. In this post, we will focus on the various ways CSR can be taken by incubators.

CSR in Technology Business Incubators located within Academic Institutions:

The most straight forward way is through grants given to government recognised Technology Incubators. Under entry (ix) of Schedule VII of the Companies Act, 2013, a company is allowed to undertake activity under their CSR Policy for “contributions or funds provided to technology incubators located within academic institutions which are approved by the central govt”.

The process for obtaining approval of the Central Government as Technology Business Incubators (TBI) is captured in brief below:

  • A Host Institute (HI) which is generally an Academic/Technical/R&D Institution or other institutions with proven track record in promotion of technology-based entrepreneurship, is required to submit a proposal to National Science and Technology Entrepreneurship Development Board of the Department of Science and Technology (DST).
  • If the HI is not an academic institution, then it should be a legal entity registered in India with clear purpose of promoting research, innovation and entrepreneurial ecosystem. It is desirable to have partnership with at least one academic institute of repute.
  • Financial support for establishing a TBI is also extended to a not-for-profit legal entity registered as a trust/society/section 8 company. For-profit incubators are not given financial support by the DST.

A snapshot of the formal requirements and stages involved in constituting a TBI is provided here for ready reference[i]:

Stage Detailed requirements
Stage I – Proposal Two hard copies + soft version in MS word document in prescribed format; necessary enclosures, and consent for Terms and Conditions; must be forwarded by the Head of HI (with necessary endorsements).

Necessary enclosures that must be included:

Registration Certificate of the HI; Memorandum of Association/Bye Laws of HI; Audited Statement of Accounts for the last three years; and, Annual Reports for the last three years.

Stage II – Evaluation by NEAC and in-principal approval Evaluation of proposal is done by National Expert Advisory Committee (NEAC) on the standards innovation, incubation, and technology entrepreneurship which meets at least twice in a year. Proposal must be submitted up to one month before the meeting of NEAC.

If TBI is not-for-profit entity then, after in-principle approval they are eligible to funding from Govt. subject to these conditions:

·  Registration of TBI as not for profit society/trust or a section 8 company

·  separate bank account in TBI’s name

·  minimum 1000 sq. ft. of furnished space for hosting the TBI

·  minimum lease for land must be 15 years provided by HI

Stage III – Post Approval Conditions After the approval the following conditions must be met by the TBIs:

·  The TBI must be administered by the apex body called Governing Body.

· The Governing Body needs to be chaired by the Head of the Host Institution.

· The Governing Body of the TBI should meet every six months to review progress of TBI and provide policy guidelines for the operations of TBI.

· Each TBI would have a dedicated CEO & a compact team who works full time for TBI.

· Host institution would constitute a selection committee with a DST nominee as a member for the selection of the CEO.

· A suitable incentive mechanism (share of surplus, earning of TBI, equity stake, etc) should be evolved by the host institution for the CEO and his team. HI is free to decide on the remuneration of CEO.

·  TBI should execute appropriate agreement with incubatees. The residency period and the exit policy may also be defined clearly in the agreement.

Stage IV – Monitoring The TBI is expected to attain self-sustenance within five years of its being. However, after the approval, the Department of Science and Technology may constitute teams to monitor the progress of TBIs.

CSR in non-TBI Incubators

As per the Companies (Corporate Social Responsibility) Amendment Rules, 2018 dated 19 September, 2018[ii], provisions of the CSR Rules have been amended to widen the definition of CSR. It clarifies that the CSR Policy of the Company must include activities that are related to the ‘area or subjects specified’ in Schedule VII of the Act. Earlier, the provision only mandated activities mentioned in the CSR Policy to be related to the specific activities listed under Schedule VII of the Act. Through this amendment, the MCA has provided more freedom to companies in choosing their preferred CSR engagements under the CSR Policy.

Pursuant to the amendment, funding of activities by incubators not being TBIs approved by Central Govt. is now possible. However, the same should be within the scope of the CSR Rules.

Other important considerations for CSR by foreign companies:

Compliance with Foreign Contribution Regulation Act, 2010 (FCRA):

Under the FCRA, approval and license from the Ministry of Home Affairs (MHA) is required for accepting and utilizing grants under CSR from foreign companies (which qualifies as foreign contribution) to non-profit entities. Thus, foreign companies undertaking CSR will have to ensure that any third-party entities that it seeks to engage for its CSR activities have an FCRA license (For our post explaining the issue, read here).

Earlier Indian companies with majority foreign stake holding were also considered as a ‘foreign source’. However, after amendments made by the Finance Act, 2016, contributions made by companies whose foreign shareholding are within the limits specified under the FDI regulations are not be considered as ‘foreign source’. Thus, Indian subsidiaries of foreign companies do not fall within the ambit of FCRA compliances for their CSR activities.

[i] Detailed procedure may be referred to, available at:   http://www.nstedb.com/institutional/Approved%20Revised_guidelines_of_TBI.pdf

[ii] Available at:

 http://www.mca.gov.in/Ministry/pdf/CompaniesCSRPolicyAmendRules2018_19092018.pdf

Author: Avaneesh Satyang

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Promotion and Acceleration of Young and Aspiring technology entrepreneurs (“PRAYAS”) – Benefits for startups

For nurturing knowledge based and technology driven ideas and innovations into successful Start-ups, the Innovation & Entrepreneurship Division, Department of Science & Technology (“DST”), Government of India developed an umbrella programme called National Initiative for Developing and Harnessing Innovations (“NIDHI”). The programme is designed to augment and take forward national priorities and goals of building an innovation driven entrepreneurial ecosystem with an objective of socio-economic development through wealth and job creation. It is an USD 15 Million (INR 100 Crore) programme to promote Start-ups. There are 9 key components of NIDHI, namely:

  1. NIDHI-GCC – Grand Challenges and Competitions for scouting innovations;
  2. NIDHI-Promotion and Acceleration of Young and Aspiring technology entrepreneurs (NIDHI-PRAYAS) – Support from Idea to Prototype;
  3. NIDHI-Entrepreneur In Residence (NIDHI-EIR) – Support system to reduce risk;
  4. Start-up-NIDHI through Innovation and Entrepreneurship Development Centres (IEDCs) in academic institutions – Encouraging Students to promote Start-ups;
  5. Start-up Centre in collaboration with MHRD – Inculcating a spirit of entrepreneurship in National Institutions of Higher Learning;
  6. NIDHI-Technology Business Incubator (TBI) – Converting Innovations to Start-ups;
  7. NIDHI-Accelerator – Fast tracking a Start-up through focused intervention;
  8. NIDHI-Seed Support System (NIDHI-SSS)– Providing early stage investment;
  9. NIDHI Centres of Excellence (NIDHI-CoE) – A World class facility to help Start-ups go global.

In this era of Start-ups, young entrepreneurs have great innovative ideas that can be transformed into successful ventures but what pulls them back is lack of early stage support to transform their ideas into prototypes. Lot of innovators lose interest and are not able to sustain the journey due to absence of this critical support.

The National Science and Technology Entrepreneurship Development Board (“NSTEDB”) of the Department of Science and Technology, Government of India has promoted over one hundred Science and Technology Entrepreneurship Parks (“STEPs)” and Technology Business Incubators (“TBIs”). STEPs and TBIs are primarily housed in and around academic, technical, management institutions, technology and research parks to tap innovations and technologies for venture creation by utilizing expertise and infrastructure already available with the host institution. Many of these STEPs and TBIs have an in-house seed funding mechanism supported by NSTEDB & Technology Development Board (“TDB”). Seed funds, by their very nature tend, to focus more towards commercialization and market side of venture, rather than on the technology development, idea formation, proof of concept, proto typing, IPR and other knowledge side of the innovative Start-ups. There is a definite need to address the gap and provide young entrepreneurs with funding and support at a very early stage to conceptualise their ideas into something fruitful.

Under the umbrella initiative, on September 2, 2016, the DST launched “PRAYAS”program to support innovators to build prototypes of their ideas by providing a grant up to INR 10 lakhs to Start-ups and an access to a Fabrication Laboratory to provide them with physical infrastructure, technical guidance and business mentorship. The program focuses on addressing the idea to prototype funding gap whichwould attract a large number of youngsters to come forward to try out their ideas without actually worrying about the failure.

Model of the PRAYAS Programme

 PRAYAS GRANT – The quantum of prototype grant per innovator is a maximum of INR 10 lakhs. The PRAYAS grant would be handled by the PRAYAS CENTRE (“PC”). Each centre would get 10 innovators per year. Thus a support of Rs. 1.00 crore per year for five years will be provided as prototyping grant to each PC.

PRAYAS CENTRES – The PC is a place where innovative ideas are supported through physical infrastructure, technical guidance, business mentorship and a prototype grant for converting the idea into a prototype. A furnished and well equipped space of about 3000 sqft would be set up at the host TBIs. The innovators would approach one of the PC for seeking support under the programme. Each PC will seek applications from innovators in a common template. The PCs would have a transparent screening mechanism for selecting the innovators based on the potential of the idea/innovation. The selected innovators would get access to the infrastructure, prototype grant and mentorship. The PCs would also ensure that innovators who apply to seek fund support should be incubated/to be incubated with STEP/TBI. A total of 10 PCs will be approved each year and each PC shall be supported for 5 years.

Fabrication Laboratories – Dedicated Fabrication Laboratories would be set up in PCs to facilitate mechanical and digital fabrication (in case TBIs/STEPs do not have such facilities and infrastructure existing in the institute). Fabrication Laboratories would enable innovators to go through a cycle of imagination, design, prototyping, reflection, and iteration as a part of process to find solutions to challenges or bring their ideas to reality. The charges of using the equipment and consumables specific to an innovator would be decided by PC and would be in built in the grant to be provided to the PC innovator. The condition and usability of the equipment in the Fabrication Laboratory would be reassessed at the end of five years for obsolescence and for possible replacement.

A Nodal Program Management Unit (“PMU”) for effective implementation of PRAYAS – The DST has identified Society for Innovation and Entrepreneurship (“SINE”), IIT, Bombay at the national to act as the PMU of the PRAYAS program. The PMU is empowered to steer the entire process of PRAYAS, which includes creation of an online portal for submission of proposals, selection of PCs, fund disbursal, utilization of funds, monitoring and evaluation, organizing annual PC meets, documentation of innovation successes and failures, and innovator grievance redressal mechanism in consultation with NSTEDB, DST and in line with DST norms and PRAYAS Guidelines.

PRAYAS targets to facilitate and enable minimum 100 innovators annually across the country in translating their ideas into prototype through funding support to maximum 10 PCs in the country. The first call for applications for setting up PCs just got shut on September 25, 2016. For the first year, only STEPs/TBIs promoted by the Government of India can apply for PCs. Once PCs are set up, the selection process for innovators who wish to seek support under the program shall start. Apart from various departments and ministries of the government, academic institutions, and financial institutions, PRAYAS is also collaborating with Intel, Lockheed Martin and Boeing to establish research parks and Start-up centres. PRAYAS, indeed, is a great initiative for young businessmen looking for right mentors and initial capital to nurture their ideas into prototypes.

Please check our earlier posts on other Government benefits for startups: https://novojuris.com/2016/07/21/benefits-to-start-ups-under-the-startup-india-action-plan/

Author: Saumya Kakar