Author - Swapnil S

OVERVIEW OF COMPANIES FRESH START SCHEME [CFSS-2020]

INTRODUCTION:

Ministry of corporate affairs has received many representations from various stakeholders requesting for grant of one time opportunity, so as to enable them to complete their pending compliances by filing necessary documents and forms in the MCA-21 registry including annual filings without being subject to a higher additional fees on account of any delay filing.

Thus, recently Ministry has launched a scheme known as “Companies Fresh Start Scheme, 2020” where condoning the fees of delaying filing the above mentioned documents with Registrar, it relates to waiver of additional fees and granting of immunity from launching of prosecution or proceedings for imposing penalty on account of delay associated with certain flings.

OBJECT OF THE CFSS-2020 SCHEME:

The main object of this scheme to  give companies a one-time opportunity to make a fresh start by waiving off the additional fee as charged under section 403 of Companies Act, 2013 and granting of immunity from launching of prosecution and proceedings for imposing penalty on account of delay associated with certain filling. Further, CFSS-2020 also gives an opportunity to defaulting inactive companies to get themselves declared as ‘dormant company’ under the provisions of the Companies Act, 2013 (Act) or file the Form STK-2 for  striking off of name of the Company.

BENEFITS OF CFSS-2020 SCHEME:

The following benefit can avail from CFSS-2020 scheme.

  1. Pay only normal fees as prescribed under the Companies (Registration and Office) Rules, 2014 so no additional fees need to pay if filing done up to 30/09/2020.
  1. Immunity from launch of prosecution/penalties, pertaining to delay associated with filing of belated documents only. However, any violation of law, such as any proceedings involving interests of any shareholder or any person qua the company or its directors or key managerial personnel would not be covered by such immunity.
  1. For Disqualified Directors: If all the directors are disqualified then such company has to first appoint new directors and then after appointment of new director such companies can avail the Scheme.

NON APPLICABILITY OF THE SCHEME:

The scheme will not be applicable in below situation.

  1. Companies against which final notice of striking off of the name has been initiated by ROC.

However, a struck off company can avail the benefits of the Scheme after due process of revival from NCLT during the Specified Period. If a company is revived after 30th September, 2020 then such companies can’t avail the benefit of this Scheme.

ii)  Companies which have voluntarily filed STK-2.

iii) Companies which have been amalgamated.

iv) Companies which have already applied for Dormant status i.e. Dormant Companies as specified u/s 455 of the Act.

v) Vanishing Companies**

vi) Forms.

 Form SH-7 related to increase in authorized share capital

 Charge related documents i.e. {CHG-1, CHG-4, CHG-8 and CHG – 9}.

WHAT IS MEANING OF VANISHING COMPANIES:

There is no formal definition as per Companies Act, 2013 but pursuant to General Circular No. 2/2010, it was defined as:

A company registered under the Companies Act, 1956 and listed with Stock Exchange which, has failed to file its returns with Registrar of Companies and Stock Exchange for a consecutive period of two years, and is not maintaining its registered office at the address notified with the Registrar of Companies or Stock Exchange and none of its Directors are traceable

WHAT FORMS WHICH CAN BE FILED UNDER THE COMPANIES FRESH START SCHEME, 2020. :

The forms which are subject to additional fee under section 403 of Companies Act, 2013 are eligible for filing under CFSS, 2020 and are divided into.

Annual Based Forms:

  • Annual Return- MGT-7
  • Financial statement- AOC-4

Event Based forms:

♦Other forms required to be file with ROC Like.

– PAS-3

– MGT-14

– ADT-1

– Any other form.

Except Two Forms. :

– SH-7- Increase in Authorized

– Charge related form (CHG-1, CHG-4, CHG-8 or CHG-9) Capital.

Validity Of The Scheme:

1st April, 2020 to 30th September, 2020 (“Specified Period”).

COMPANIES FRESH START SCHEME FOR INACTIVE COMPANIES:

Inactive companies can complete there filing process under CFSS, 2020 and can simultaneously, either: Apply to get themselves registered as Dormant Company by filing form MSC-1 at a normal fee or Apply for striking off the name of the company by filing form STK-2 by paying normal fee.

GRANTING IMMUNITY FROM PROCEEDINGS AND PROSECUTION UNDER CFSS, 2020:

Defaulting companies will be required to pay only normal fee at the time of filing of belated documents and no additional fee will be charged. Upon filing, immunity will be granted to such company that no prosecution or proceedings for imposing penalty will be initiated against such company related to such delay filing. However, please note that immunity will be granted only with respect to delay and not with respect to any other consequential proceedings including proceedings involving interest of any stakeholders or any other person qua the company or its directors or Key Managerial person would not be covered under the immunity.

CASES WHERE APPEALED COULD NOT BE FILLED:

There can be certain cases where order is passed by adjudicating authority imposing penalty for delay in filing of documents, statements, returns etc. with MCA.

However, no appeal has been filed by the company or its officer against such order before regional director u/s 454(6) of Companies Act, 2013 on date of commencement of scheme. In such case, where last of filing of appeal falls between 1st March, 2020 to 31st May, 2020 (both dates inclusive) then an additional period of 120 days will be allowed with effect from such last date to all the companies or their officers to file their appeal. During such additional period, prosecutions for non-compliance of order shall not be initiated as far as it is related to delay filing of any document, statement or return.

KEY PROVISIONS OF CFSS, 2020:

Under the CFSS 2020 scheme, any company which has failed to file the Annual Returns and Financial Statements or any return or form which are governed under section 403 of the Act, then such defaulting companies can file such belated documents in the MCA-21 registry at a nominal fee as prescribed under the Companies (Registration and Office) Rules, 2014 with the ROC during the currency of the CFSS 2020 i.e. with effect from 1st April 2020 to 30th September 2020.

The defaulting inactive companies can also simultaneously apply for obtaining dormant status under the provisions of section 455 of the Act or apply for striking off the name of the company by filing e-form STK-2, by paying the normal fees as applicable under the Act.

On completion of CFSS 2020 on 30th September 2020, e-form  CFSS-2020 shall be available for filing for companies availing benefit under the scheme and an immunity certificate will be issued by the MCA.

The CFSS 2020 does not apply to companies stroke off by ROC under section 248, companies which have already applied for strike off, companies which have been amalgamated under a scheme of arrangement or merger, companies which have already filed for obtaining dormant status under section 455 of the Act, the vanishing companies and on forms for increase in capital & charge related forms i.e. form SH-7, CHG-1, CHG-4, CHG-8 and CHG-9.

CONCLISION:

CFSS-2020 is very good scheme and welcome step taken by Ministry of corporate affairs, and another good step taken by government in the area of ease of doing business apart from another step taken in the area of direct and indirect tax. Stake holder can take benefit of this scheme by only paying normal fees and easily avoid hefty additional fees. It is expected that lots of companies will take the benefit of this scheme and do their regular compliance and subsequently run the company in a disciplined manner. Make My Filing is leading services provider in the area of corporate compliance, registration and, startup services, etc. at an affordable rate so any of your compliance is pending then you can avail the services of make my filing where you can complete your pending compliance under company fresh start scheme 2020 well within time in affordable cost and without paying any penalty.

HOW & WHY TO RECOGNIZE YOUR BUSINESS AS A START-UP?

INTRODUCTION:

Under this article, the Mumbai CA explains what is a start-up, the process of recognised of start-up, benefits of recognised as a start-up which includes income tax deduction under section 80 IAC , the exemption under section 56 of income tax ( Angle Tax Exemption), intellectual property rights (IPR) benefits relaxations under public procurement norms self-certification under labour environmental lows, faster exit for start-up and fund of fund start-ups.  

What Is Start-Up?

start-up or start-up is a company or project initiated by an entrepreneur to seek, effectively develop, and validate a scalable business model. While entrepreneurship refers to all new businesses, including self-employment and businesses that never intend to grow big or become registered, start-ups refer to the new businesses that intend to grow large beyond the solo founder. Start-ups face high uncertainty and have high rates of failure, but a minority of them do go on to be successful and influential.

PROCESS OF RECOGNITION OF START-UP BUSINESS:

 The process of recognition of an eligible entity is stated below:

1.An application is to made to DPIIT via mobile application or online portal.

2.Following documents/information are required:

  • A copy of certificate of incorporation/registration certificate.
  • Director or partners details
  • A writeup stating the nature and highlights its works towards innovations, development or improvement (typically, a pitch deck/website link/video etc.

3. After receiving the application, the DPIIT may call for documents or information as it may deem fit-

  • Recognised the entity as the start-up.
    • Reject the application by giving specific reason

WHAT ARE THE BENEFITS OF RECOGNITION START-UP?

  1. INCOME TAX EXEMPTIONS:
  2. Recognition Under Section 80 IAC – Enjoy Tax Holidays For 3 Years:

Once you are recognized as a start-up, you can apply for tax exemption under Section 80 IAC of the Income Tax Act, after being cleared for the tax exemption, you can avail tax holiday for three consecutive years, out of the first 10 years from the date of incorporation.

Who Was Eligible to Get Exemption Under Section 80 IAC:

  • 1.entity recognised as start-up.
  • 2.only private limited company or the limited liability of partnership was eligible to get an exemption.
  • 3.the start-up is incorporated after 1st April 2016 and before 1st April 2021.

B) Avail Exemption Under Section 56 Of Income Tax Act (Angel Tax Exemption):

Once you get recognized as a start-up, you can apply for angel tax exemption. The eligibility criteria for claiming the deduction is:

  1. The entity should be a DPIIT recognized start-up
  2. The aggregate amount of paid-up share capital and share premium does not exceed INR 25 crores after the issue of shares.

II) INTELECTUAL PROPRTY RIGHTS:

For promoting awareness and adoption of IPRs by start-ups and helping them in protecting the IPRs, registration under DPIIT provides access to high-quality Intellectual Property Services and resources.

Following are the broad benefits:

1.Rebate on application fees: Start-ups get a rebate of 80% in filing of patents, thus reducing the cost to Rs 1600 from normal cost of Rs 8000. Similarly, there is a 50% rebate in Trademark application for companies recognized as a start-up, thus they can file a trademark application in half price i.e. Rs 5000

2.Fast tracking of Start-up patent applications.

3.Panel of facilitators to assist in IP applications: Central Government bears the entire fees of the facilitators for any number of patents, trademark or designs, and Start-ups only bear the cost of the statuary fees payable.

III) RELAXATION UNDER PUBLIC PROCUREMENT NORMS

The Government of India has authorized all its departments, ministries, and public sector undertakings to relax all the norms under public procurement. The start-ups can claim exemption over:

1. Prior turnovers.

2. Prior experience.

3. Earnest money deposit.

IV)  FUND OF FUND FOR STARTUPS:

The Ministry of Corporate Affairs has notified Startups as ‘fast track firms’ enabling them to wind up operations within 90 days whereas 180 days for other companies. An insolvency professional shall be appointed for the Startup, who shall be in charge of the Ministry of Corporate Affairs enabling the startups to wind up the company for liquidating its assets and paying its creditors within 6 months of filing an application in this regard.

V) FASTER EXIT FOR STARTUPS:

The Ministry of Corporate Affairs has notified Startups as ‘fast track firms’ enabling them to wind up operations within 90 days whereas 180 days for other companies. An insolvency professional shall be appointed for the Startup, who shall be in charge of the Ministry of Corporate Affairs enabling the startups to wind up the company for liquidating its assets and paying its creditors within 6 months of filing an application in this regard.

IV. SELF-CERTIFICATION UNDER LABOUR AND ENVIRONMENTAL LAWS:

The government has planned on reducing the regulatory burden on Startups by allowing them to focus on their core business & keep compliance costs low.

1. Startups are allowed to self-certify their compliance under 6 Labour and 3 Environment laws for a period of 3 to 5 years from the date of incorporation.

2. In respect of 3 Environment laws, units operating under 36 white category industries do not require clearance under 3 Environment-related Acts for 3 years.

TCS APPLICABILITY ON FOREIGN TRAVEL,TOURS PACKAGES AND REMITTANCE

INTRODUCTION:

 A new subsection 1G is introduced in section 206C to apply tax collected at source (TCS) on sale of overseas package. TCS is required that the seller of tour package will collect tax from the buyer over and above of cost of his tour package and will deposited in the government treasury on monthly basis seller would then to be required to quarterly file of TCS return separately.  

1. TAX COLLECTED AT SOURCE (TCS) :

TCS stands for Tax Collected at source. The tax is collected by the seller from the buyer at the time of settlement of the bill/invoice. Here, the seller shall be the collector and buyer shall be the collectee. Section 206C (1) specifies tax to be collected at source by every person, being a seller from the buyer of goods.

2. FOREIGN TRAVEL, EDUCATION BECOME COSTLY FROM 1ST APRIL BECAUSE OF TCS:

TCS on foreign travel tour packages remittance rules 2020: The new provisions regarding to overseas tour packages require that seller of foreign tour package shall collect tax at the rate of 5% and 10% if not PAN and Aadhar number submitted.

If you are planning to study abroad or enjoy exotic holiday abroad then there is bad news for you, your dream was more expensive now as per the provisions proposed by the Nirmala Sitaraman in budget 2020.Now, new provisions to collect TCS from 1st April 2020 have been proposals TCS will be collected on:

  • Remittance under liberalised remittance scheme (LRS) of RBI for the amount exceeding Rs7 lakhs in a financial year;
  • Sale of an overseas tour package through a tour operator.

DETAILS OF THE NEW PROVISIONS

  1. TCS ON REMITTANCE:

“There was no TCS earlier, but now if a resident individual has to send money abroad through an authorized dealer in excess of Rs 7,00,000 (either one time or in totality during the financial year) then the authorized dealer must collect TCS at the rate of 5 per cent at the time of remitting the money or at the rate of 10% if the remitter does not have a PAN /Aadhaar,” he said.

  1.  TCS ON TOUR PACKAGES:

The new provisions regarding TCS on overseas tour packages requires that a seller of overseas tour package shall collect TCS at the rate of 5 per cent or 10 per cent (if PAN /Aadhaar is not available) on total amount from the purchaser at the time of receiving the payment for the tour package and includes expenses for travel or hotel stay or boarding or lodging.

WHO RESPONSIBLE TO COLLECT TCS:

  1. In case of remittance, any authorised dealer from whom remittance is made is responsible to collect TCS.
  2. In case of travel, person is seller of package is responsible to collect TCS.

TIMELINE FOR COLLECT OF TCS:

At the time of receiving the amount or at the time of debiting the amount receivable whichever is earlier.

DIRECTORS LIABILITY UNDER THE INCOME TAX LAW FOR TAX DUES IN THE CASE OF LIQUIDATION OF PRIVATE LIMITED COMPANY

Section 179 of the income tax act,1961.provides that ,where any tax dues from Private Limited company in respect of any income of any previous year or from any other company in respect of any other income of any previous income witch such other company  was Private Limited  Company cannot be recovered then every person, who was director of Private Limited Company at any time during the relevance previous year shall be jointly and severally liable for the payment of such tax unless  he proves that  the non-recovery cannot be attributed to any gross neglect misfeasance or breach of duty on his part in relation to the affairs of the company.

Company as defined is a separate entity than its members, having rights to sue and be sue, right to have assets , create liabilities and appoint directors to run business but in cases of fraud, misfeasance or breach of provisions of applicable lows, revenues has right to lift the corporate veil to find out controlling the beneficial person behind the company and recover tax dues from their personal assets.

Who Can Be Liable?

The top mid-size ca firm in Mumbai Explain that the liability under section 179 will lie on every person who was at any point of time, a director of that company for the previous year in respect of which the tax is sought to be recovered. To illustrate, if Mr. X was director during the financial year 2019-20, and additional tax demand in respect of that financial is raised pursuant to a tax assessment that is completed 2021, Mr. X can be held liable under section 179, even if he resigns from directorship in 2020. further, even those individuals who have resigns directorship during the relevant year would be covered by the provisions. As we know that majority of Private Limited Company are own by families and some of them are closely held companies are owned by families and some of them are closely held companies, in these case, director/shareholders/members of company cannot hide behind the corporate veil of company.

NOTE: Tax dues means, any penalty, fees and interest or any other sum payable under act.

Lability of directors for tax dues of a private limited company arises only when the arrears cannot be recovered by the company.

Precautions To Be Taken by Directors:

Director as not liable under section 179 would largely depend on the facts and circumstances of case. But such reasons need to be built after identifying the reasons that have led to the companies financial position and after analysis the underlying causes that give rise to tax demand . the extent of actual participation by the director in decision making , the assent or dissent given for any resolution at the board meeting and the specific role and responsibilities assign to and actually carried on by the director would be relevant.      

SAILENT FEATURE OF NEW SPICE+ FORM INTRODUCE BY MCA FOR COMPANY REGISTRATION

Feature of SPICE+ form to use for Company Registration

  • Application for Reservation of Name with two proposed name in Part-A. Once the application is Auto-Checked and Saved, Submit button shall be enabled.
  • Upon clicking of “SUBMIT” button, one can either go for Reservation of Name or Incorporation Application.
  • INC-9 shall be required with Physical Signature, if total no. of subscriber / directors is greater than 20 OR Any subscriber / director has neither valid DIN nor PAN.
  • INC-9, if required, shall be auto-generated in PDF format and would have to be submitted only in electronic form.
  • Once the SPICE+ is properly filled in and successfully pre-scrutinized, “SUBMIT” button shall be enabled.
  • Once SPICE+ is successfully submitted, system will have automatically generated a pdf eform which can then be downloaded for affixing DSCs. Thereafter digitally signed PDF application can be uploaded at MCA portal as per the normal process.
  • Process for uploading SPICE+: SPICe+—->e MOA[if applicable] —-> e AOA[if applicable] —-> URC-1[if applicable] —->AGILE-PRO[mandatory in all the cases] —->INC-9[if applicable]

 Mandatory Application along with SPICE+

1) PAN

2) TAN

3) EPFO

4) ESIC

5) Opening of Bank Account (Currently, bank account with either of PNB or Kotak Mahindra Bank can be opened)

Make My Filing is largest services provider for Company Registration and corporate compliances services so if required any assistance, can contact us..

TRANSFER OF EQUITY SHARES UNDER COMPANIES ACT 2013

The article discusses

  • What is Share Transfer
  • Procedure of Share Transfer

WHAT IS SHARE TRANSFER OF PRIVATE LIMITED COMPANY

Share Transfer is a process of transfer of existing shares from one person to another. The procedure to transfer shares in a private limited company different from that of a public limited company. we should know that the articles of a company govern the transfer of shares in a private limited company. We can start with the transfer of shares form, which is Form No. SH-4 or, Securities Transfer Form. It is pursuant to Section 56 of Companies Act 2013 (1) and follows the share transfer rules. This is sub-rule (1) of rule 11 of the Companies (Share Capital and Debentures) Rules 2014.

MEANING OF TRANSFER AND TRANSMISSION OF SHARES IN COMPANIES ACT 2013:

  • Both Transfer and Transmission of Shares are different from each other. So, let’s understand how they’re different and exactly what is ‘transfer of shares
  • Transfer of shares means transferring title of shares voluntarily basic, by one party to another party. Whereas, the transmission of shares means, transferring title of shares by the operation of law which a legal heir initiate.
  • Transfer of shares has a stamp duty that needs to pay, based on the market value of shares, whereas in the transmission of shares procedure, there is no stamp duty that one needs to pay.

PROCEDURE FOR TRANSFER OF SHARES OF PVT. LTD. COMPANIES:

Section 56 of Companies Act 2013 provides that the transfer of shares of the company and other securities will be registered by a company only when a proper instrument for transfer of shares (share transfer form) is filed as prescribed in Form No. SH 4. We need to duly stamp the SH 4 format for transfer of share with adequate value and date. Also, one can execute it by or on behalf of the transferor and the transferee. One needs to send Form SH 4 to the company by the transferor or the transferee of the shares within 60 days from the date of execution, of the share transfer agreement. Along with the share transfer certificate or certificate relating to securities. In case there is no such share transfer certificate, then one must send the application for transfer of shares along with the letter of allotment of securities. Also, one must obtain a ‘No Objection Letter’ from the buyer within two weeks from the date of receipt of a notice.

TIME LIMIT FOR THE ISSUING OF SHARES TRANSFER CERTIFICATE:

One has to deliver all the share transfer certificates by the company within a period of one month from the date of receipt of the share transfer agreement or the share transfer certificate by the company. Unless the company can’t deliver due to an order of the Court or instruction by other authorities.

STAMP DUTY PAYABLE ON TRANSFER OF THE SHARES:

One has to duly stamp the share transfer form under Companies Act 2013. It also adds that the stamp should have adequate value with the date. Also, it should be cancelled in accordance with Section 12 of the Indian Stamp Act (2), when you have to send the share transfer form is to be sent to the board of directors. The seller of the shares has to pay the stamp duty at the rate of Rs 0.25 for every Rs. 100 worth of shares or we can say it is  0.25% of value of share. For stamping purpose in a transfer of shares special adhesive stamps having the word ‘share transfer’ shall be used. Section 8A of the Indian Stamp Act provides that for the electronic share transfer form, India. You can pay the stamp duty on the total amount of issuing the shares or securities.

CANCELLATION OF STAMP DUTY:

  • The adhesive stamps should be cancelled by drawing lines across or in some other way, so that can’t be used again. However, value of stamp should be visible.
  • If the share transfer deed bear stamps but it doesn’t not cancel, hence transfer can’t be recorded on basis of such transfer deed.
  • Cancellation of Stamp by Company is illegal.
  •  If once a company transfers shares by mistake even if the instrument was not duly stamped, it can’t then apply for rectification of members.

IMPORTANTS NOTES:

  • Articles of private limited company shall restrict the right to transfer the company’s shares.
  • Do not forget to cancel the stamps affixed at the time or before signing of the transfer deed.
  • The signatures of the transferor and the transferee in the share transfer deed must      be witnessed by a person giving his signature, name and address.
  • Share transfer can’t be declined if minor details are not given in share transfer form. Minor mistake in share transfer form should be ignored.

TRANSFER OF PARTLY PAID UP SHARES:

  • Duty of Company: If partly paid up shares are received for transfer: Company shall give notice to the transferee in form SH-5 and give 2 (Two) weeks’ time for objection, if any. Notice is not required if the partly paid shares are lodged by transferee.
  • NOC from transferee: As per Rule 11(3) if NOC is not received from the transferee then transfer can’t be recorded. But the section doesn’t say that if the transferee doesn’t reply within 2 weeks, it may be presumed that he has no objection. “Thus, in my view, positive no objection letter from his is required.
  • Liability of payment of balance amount lies with transferee.

THE SHARE TRANSFER PROCEDURE OF PUBLIC LIMITED COMPANY:

Section 56 to 59 of the Companies Act, 2013(3) provides for the procedure of transfer of shares of a public limited company. The basic transfer procedure of shares is as follows:

The board shall then register the transfer of shares if the documentation with regard to the transfer of shares is in as per order. The board shall register such transfer of shares only after passing a requisite board resolution

  • We have  to execute the share transfer deed in the share transfer Form SH 4 both by the transferor and transferee of the shares
  • To put stamps on the share transfer deed in accordance with the provisions of the Indian Stamp Act and one has to pay the stamp duty to the respective state.
  • Along with the signatures of the transferor and the transferee, there must be signatures of two witnesses who will also affix their name, address, and signature on the deed.
  • We needs to attach the share transfer certificate or the allotment letter of the shares to the deed and send the same to the company either by the transferor or the transferee of the shares
  • We needs to submit the share transfer deed to the company within 60 days from the date of execution of the deed by or on behalf of the transferor and transferee.
  • Once the company receives it, the board of directors shall consider the same
  • The board shall then register the transfer of shares if the documentation with regard to the transfer of shares is in order. The board shall register such transfer of shares only after passing a board resolution.

TRANSFER OF SHARES UNDER DEPOSITORY SYSTEM:

The Mumbai top CA firm clearly explains that Section 56(4) of the Companies Act, 2013 provides for the transfer of share under the depository system. Under this section when a company is doing a transfer of shares or other securities through a depository, then one should inform the details of allotment of shares or securities immediately to the depository.

Following the Step wise Procedure for Shares Transfer by the Depositary System:

  • Step 1:  The transferor of the share has to give delivery instructions to the Depository Participant No. 1 (DP1) to transfer the shares and debit his account against the clearing member 1 pool account with DP1. The clearing member-1 pool gives a parallel receipt instruction to DP1 to accept the transfer in his/her clearing account. Especially, if standing receipt instruction for all credits into his clearing account is not given. In turn, the securities are transferred from selling client A/c to clearing member pool A/c with DP1.
  • Step 2:  Delivery instruction is given to Clearing Corporation (CC) by the clearing member 1 to debit his Clearing Member 1 Pool A/c and credit his Clearing Member1 Delivery A/c. The transfer takes place on the execution date which is mentioned in the instruction. Delivery which is supposed to be given to CC instruction will be as per final/ net delivery obligation.
  • Step 3:  Till settlement day securities which are to be transferred lay in the clearing member-1 Delivery A/c. Transfer of Securities lying in clearing member-1 delivery A/c automatically transferred to the Clearing Corporation/Clearing House at the time of payment in. There is no requirement of debit instruction for this transfer. There is no set deadline time for pay-in of securities to the Clearing Corporation/Clearing House as it varies from one exchange to another.
  • Step 4:  Now, automatic transfer of securities from Clearing Corporation/Clearinghouse to clearing member 2 pool A/c with Depository Participant 2 (DP 2) at the time of pay out takes place and no instruction is required because of the automatic transfer.
  • Step 5:  Securities are transferred from clearing member2 receipt A/c to clearing member 2 pools A/c. Receipt account of clearing members is nothing more than a transit account used for maintaining the audit trail.
  • Step 6:  Clearing Member 2 gives a delivery instruction to DP 2 to debit his Clearing Member 2 Pool A/c and credit Buying Client A/c with DP 2. The buyer gives parallel receipt instruction to DP 2 to accept in his account securities transferred from Clearing Member 2 Pool A/c through DP 2 unless he has not given a standing instruction to receive credits to his account.
  • Step 7:  Lastly, the transfer of securities takes place from Clearing Member 2 Pool A/c o Buying Client A/c with DP 2. The securities will remain in clearing member pool A/c until one receives the delivery instruction.

COMPLETION OF TRANSFER OF SHARES:

The Jain Anurag & Associates – best CA in Mumbai’s When done all the formalities related to transfer of share such as share transfer deed has been executed and handing over the share certificate is complete.

What Are Mandatory Compliance Required For Private Limited Companies?

A private limited company is the most popular form of business entity. Private limited companies in India are governed by the Companies Act under the Ministry of Corporate Affairs (MCA). According to MCA, every private limited company is bound to fulfil the mandatory secretarial compliance filings or ROC compliance within the fixed due date to avoid penalties and prosecution.

MANDATORY ROC COMPLIANCES FOR PRIVATE LIMITED COMPANY:

1.BOARD MEETING:

First Board Meeting of Private Limited Company is required to be held within 30 days of its incorporation. The notice of Board Meeting refers to a document that is sent to all directors of the company. The Notice of Board Meeting and the Agenda of Board Meeting to be prepared and issued to every director at their registered address at least 7 days before the date of Meeting. Some particulars of agendas are constant and some may vary according to the requirement of corporate.

PROVISIONS OF THE FIRST BOARD MEETING AND SUBSEQUENT MEETINGS:

  • The First Meeting of Board of Directors to be conducted within 30 days from the date of Incorporation of the company.
  • The meeting may be conducted at any time that is fixed by the Board and the place of the meeting would be at registered offices or any other place in or outside India.
  • At least 1 meeting of Board of directors in each half of the calendar year
  • Minimum Gap between two meetings at least 90 days.
  • Quorum1/3RD  of the total strength of the board or 2 Directors, whichever is higher is subjected to the articles of association and subject to the conditions that the quorum must be present throughout the meeting.

2. ANNUAL GENERAL MEETING (AGM):

One AGM should be held every year and a gap of 15 months should exist between two AGMs. The purpose is to discuss financial statement, appointment of auditor, declaration of dividend, remuneration, etc. The very First Annual General Meeting should be held within a period of nine (9) months from the end of first Financial Year after its incorporation.  Annual General Meeting can be called by giving a 21 days’ notice to the members. AGMs can also be convened at a shorter notice.

DISCLOSURE OF DIRECTOR:

Every director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the disclosures already made, then at the first Board meeting held after such change, disclose his concern or interest in any company or companies or bodies corporate, firms, or other association of individuals which shall include the shareholding, in such manner as may be prescribed.

3. APPOINTMENT OF THE AUDITOR (FORM ADT-1):

Companies must appoint their First Auditor within 30 days of incorporation. The First Auditor will be appointed for five years and the appointment must be filed using Form ADT-1. When an auditor is appointed by the company then within 15 days from the date of the Annual General Meeting, form ADT-1 is to filed with the registrar of the company

4. FILING OF FORM ANNUAL RETURNS (FORM MGT-7 AND AOC-4) :

Every company is required to get its accounts audited by an auditor and file its Income Tax return with the Income tax department for every financial year. The company is also required to file its audited financials and Director’s report with the ROC in Form AOC-4 within 30 days of its Annual General Meeting. Whereas, the company has to file its Annual return in form MGT-7 within 60 days of its Annual General Meeting.

5.FILING OF FINANCIAL STATEMENT (FORM AOC-4):

This is a mode of communication between the shareholders and the Board of Directors to inform them about their investment and make disclosure of all the financial transactions done. It is to be done within 30 days from the date of the Annual General Meeting. Particulars about the auditor and board meeting should be filed. 

It should include the following:

  • Details of the particulars on the Balance sheet. Balance sheet should be disclosed
  • Details of the Profit and Loss account
  • Details of the Corporate Social Responsibility
  • All the Related Party Transactions that the company have entered into
  • The audit report and any other miscellaneous transaction (directors report and secretarial audit)

6. FILING OF DIRECTOR’S IDENTIFICATION NUMBER (DIN) KYC:

Every person who has been allotted a DIN is required to file form DIR-3 KYC with the ROC for submitting his/her KYC details for every Financial Year. A failure to file form DIR-3 KYC will result into deactivation of DIN and a penalty of Rs 5,000/- upon late filing.

7. CERTIFICATE OF COMMENCEMENT OF BUSINESS:

This is a one-time mandatory compliance for all the companies incorporated after November 2018 to file form INC-20A for the Certificate of Commencement of Business within 180 days of incorporation of the company.

8.EVENT BASED ROC COMPLIANCES:

SR.NO NATURE OF COMPLIANCES SECTION E- FORM
1. CHANGE IN DIRECTOR Section 149 DIR-12
2. Change in authorised share capital  Section 61 and 64 SH-7.
3. RETURN OF ALLOTMENT SECTION 62 MGT 14, PAS-3
4. APPOINTMENT OF STATUTARY AUDITOR SECTION-139 ADT-1
5. RESIGNATION OF STATUTARY AUDITOR SECTION 140 ADT-3

WHY SHOULD A PRIVATE LIMITED COMPANY FILE ROC COMPLIANCE?

For any default in ROC compliance, the company and the officers responsible for such non-compliance shall be penalized for the period of default. Fine imposed will be on a daily basis and will be imposed for the period for which default continues. Further, in case of delay filing . 

To maintain shareholders and public trust, bring the company to a competitive advantage, to get regular returns on the investment made Private limited Company also known as small company or any other company should follow their mandatory RoC compliance. Compliance act as an asset for the business and to avoid confusion company is required to maintain a register to fill in all the statutory change.

ADVANTAGES OF STARTING BUSINESS IN INDIA BY FOREIGNER:

INDIA Today is the consider to be one of the main forces in the global economic markets the majority of the world’s leading developed nations keep to have expand their business in India. If you are thinking to where to starts the business then look no further than India. If for nothing else, do so because of its large populations. According to IMF, India is one of the emerging economics leading the worlds output by the 5.9% which is double of the US at 2.5%.

Why starts business in India?

1. INDIA IS THE EMERGING ECONOMY:

In terms of GDP, India is seventh in the world and third in PPP. It also has the largest growing economy, which has attracted several global enterprises. India’s growing economy affords investors not only a large young population but also a strong export sector. India’s potential consumer base is more than that of most developed and developing nations. The median age in India is 25.10% which is better when compared to that of the United States that is 36.9%

2. ORGANISED EMPLOYABILITY: 

Employability is undoubtedly the deciding factor for any business starting operations in a new market. India boasts of a labour force of nearly 530 million, of which the majority is under 30 years of age. The proportion of the Indian population in the working age group (18-59 years) is likely to reach more than 64 per cent by 2021. In fact, the median age in India is 27.6 years, compared to the U.S.’s 37.9, which means that more years of service are available in the Indian market. Further, the aspirations of the Indian youth have changed.

3. AVALABILITY OF PROPER STARTUP ECOSYSTEM:

For any new organisation, the business culture of the economy is very important. Introducing a differentiating aspect in the business idea can be tough, but it differs globally. India is a hub for certain kinds of start-ups, including technology, e-commerce, and financial services. The fact that the Indian market is open to accepting new business ideas makes it easier for new businesses to enter it. Of course, you need to ensure that you have the right strategy as that can guide you through the tough times, as well.

4. BUSINESS-FRIENDLY LAWS:

Additionally, the Indian government’s Make in India initiative focuses on 25 industrial sectors and aims at building best-in-class manufacturing infrastructure by enabling foreign investments, promoting innovation through skill development, and focusing on intellectual property protection. These business-friendly laws make it easy for international players to actualise their plans of entering India. On implementation, these Bills will increase the efficiency in the movement of products across India. But, the most important law is the Land Acquisition Bill that promotes the twin objectives of social justice and industrial development in the country.

5.GOVERNMENT’S ROLE IN INDIA:

The government of India has taken several initiatives to attract foreign investments in India’s diverse sectors. It has announced a number of attractive schemes and policies from time to time to lure investments. The individual ministries of different industries have made special attempts to ease the rules and regulations related to foreign investment in the industry.

LIST OF GOVERNMENT AGENCIES FOR STARTING BUSINESS IN INDIA:

  • Ministry of Corporate Affairs-: They are in charge of regulating corporate affairs in India through the Companies Act and other allied Acts, Bills and Rules Registrar of Companies-: The Registrar of Companies in India is the official agency that carries out the administration of Companies Act. It is through them you can check if a company name is registered already.
  • Income Tax Department-: It ensures that tax is collected on income and checked via PAN card.
  • Professional Tax Office-: This is a tax levy by the state government.
  • Employees Provident Fund organization-: This is created and managed by the Central Government Trust, and oversees the contributions of both employers and employees towards a purse for the well-being of the employee throughout his tenure with the business.

TOP 5 BEST CITIES TO STARTS BUSINESS IN INDIA

India has one of the fastest growing economies in the world with cutting edge technology as well as disruptive innovation. If your aim is to start a business in India, then you should be guided on the best cities in which will give your business the success it deserves. Here is a list of top 5 best cities to do business in India:

  • Bengaluru
  • Gurgaon, National Capital Region near New Delhi
  • Hyderabad
  • Delhi
  • Mumbai.

CONCLUSION: Starting business operations in new markets is not a decision to take lightly. You need to give a lot of consideration to this move because it can easily go wrong and businesses can be compelled to incur grave losses. Because of its several advantages, foreign businesses can clearly take advantage of what the Indian economy has to offer, in order to execute growth and expansion strategies.

PROCEDURE AND REGULATIONS FOR THE APPOINTMENT OF ADDITIONAL DIRECTORS (UNDER COMPANIES ACT 2013)

Under the Companies Act 2013, every director is appointed by the members of the company, but the appointment of Additional Directors is the exceptions to this:

the chartered accountant in Mumbai explains to Under Section 161(1) board of directors have the power to appoint any person other than a person who fails to get appointed as a director in a general meeting, as an additional director at any time .such director shall hold office up to the date of the next annual general meeting or the last date on which the annual general meeting should have been held, whichever is earlier.

PROCCEDURE OF THE APPOINTMENT OF ADDITIONAL DIRECTORS:

  1. Make the application for the DIN U/S 153 by filling e-form DIR -3 with the following documents:

      Form DIR-2 section 152(5) consent to act as the director.

      Form MBP1 SEC 184(1) -discloser of the interest.

      Form DIR 8 SEC 152(4)-Qualified to become a director.

2. Hold Board meeting and pass board resolutions for the appointment of the additional director u/s 161(1)

3. Filling of E-form DIR-12 by the company with the registrar within 30 days of passing of board resolutions.

PROCEDURE TO MAKE THE ADDITIONAL DIRECTORE AS A NORMAL DIRECTOR:

1. Hold board meeting for calling AGM and dispatch detailed statement with notice of AGM to the members .

2.  Pass the ordinary resolutions for the appointment as director in the general meeting .

3. After filling the E FORM DIR 12 with the registrar for the intimation of change in designation from, Additional Director to the Director of the company.

4. maximum number of the additional  directors and  Power to appoint shall be fixed in the AOA .      

5. Power of the additional director is same of normal director

REQUIRMENT OF THE FORMS:

1. E-form DIR 3 application for allotment of din

2. DIR 2 consent to act as director

3. DIR-8 not disqualified to appoint as director

4. MBP 1 discloser of interest .

5.  e-form dir 12 :particulars of appointment of directors.

RELATED SECTIONS [161(1) ,152,153,Schedule I, Table F, Under The Companies Act 2019

Distinction Between Private Limited Company and LLP

Understand the Difference Between Pvt. Ltd. Company and LLP before taking decision to start Business.

When we plan to start business than so many form of business form are available and private limited company and Limited liability partnership (LLP) are the most popular form of business structure among others.

Before selecting the proper structure, first we should understand our requirement, scalability of business, control over business, funding and finance etc. because there are some benefit and limitation in both form of business structure which has been differentiate in below table.   

The Concept of Corporate Structure is years old but LLP is relatively a new concept.

The Present structure of LLP’s and Companies in India are governed by the LLP Act, 2008 and Companies Act, 2013 respectively. One the other side the traditional form of Partnerships and Company Structure is not suitable for everyone because they have their own limitations. The Companies Act, 2013 repealed the erstwhile Companies Act, 1956 to remove the inefficiencies of the later up to certain extent.

The company business structure is old and traditional and used extensively on the other side LLP id new concept and introduce in India first time in 2008 to provide flexibility to entrepreneurs to operate as a traditional partnership at the same time providing the benefits of a Corporate form which is already tried and tested by some advanced countries like UK, USA, etc.

The Table below shows the difference Between the two forms of Business Structure:

S. No Points of Distinction Pvt Ltd Company LLP
1 Regulating Act Companies Act, 2013 Limited Liability Partnership Act, 2008
2 Name Style Pvt Ltd/ Private Limited LLP/Limited Liability Partnership
3 Structure Type Plain Hybrid (Partnership + Company)
4 Liability of Owners Limited Liability Limited Liability
5 Entity Separate Legal Entity Separate Legal Entity
6 Type of Ownership Equity Share Holders Partners
7 Form of Owners Funding Share Capital Partners Contribution
8 Management Structure Directors Collectively referred as Board of Directors Partners and Designated Partners manages the LLP and Designated Partners are additionally responsible for regulatory compliances.
9 Charter Documents Articles and Memorandum of Association (MOA & AOA) LLP Agreement
10 Bank Funding More possibility to raise funds from Banks and others compare to LLP. Possible due to Separate Legal Status
11 Minimum  Members 2 2
12 Maximum Members 200 No Limit
13 Minimum Directors 2 Not Applicable
14 Maximum Directors 15 unless increased. Not Applicable
15 ROC Compliances More Compliances over LLP Lesser as Compared to Pvt Company
16 Statutory Audit Mandatory, even if no turnover Only if Partners Contribution exceeds INR 25 lacs or Turnover Exceeds INR 40 Lacs in any Financial Year
17 Tax Compliances More Complex as far as procedural requirement is concerned for tax rates kindly refer Income Tax. Simple Procedure as Compared to Company and for tax rates refer Income Tax.
18 Goodwill Enjoys more goodwill over LLP because a Company has more powers. Less as Compared to Pvt Company but overall good image over traditional partnership. Rather many MNCs are operating as LLP.
19 Registration Compliance More registration requirement Simple as compared to Pvt Company
20 Conversion Can be Converted to LLP Can be Converted to Company
21 Liquidation Only though Legal Process the death of Shareholders doesn’t impact the existence. Same and the death of partners doesn’t impact the existence.
22 Recommended for Comparatively more Capital Intensive Businesses. Less Capital Intensive preferably for Service Sector or small entrepreneurs.

Above text surely give better understanding for distinction between a traditional Corporate Pvt Ltd Company and a Modern LLP form of Business.

We are team of make my filing help you to choose best business structure to fit your future requirement and to fulfill your business goal so fell free to contact us.