Category - COMPANY REGISTRATION

PROCEDURE TO REGISTRATION OF LIMITED LIABILITY PARTNERSHIP

Page Content

1) Objective

2) Procedure and Requirement for LLp Registration.

  1. DSC requirement

b. DIN requirement

c. Reservation of Named

d. Incorporation of LLP (FILLIP FORM) and documents required

e. LLP Agreement (FORM 3)

f.  Closure procedure

3) Conclusion


Objective

Whenever a person wants to start any business he/she needs to select the form in which he/she going to operate. If he/she decided to run their business in the form of Limited liability Partnership (LLP), then there is lots of question arises in their mind like how to incorporate the company and what is the compliance he/ she has to perform to proceed with their goals of doing business. So, to guide/assist them all I have mentioned some details below which should be kept in mind before taking any decision.

Procedural Part for LLP incorporation 

To incorporate LLP, one should follow the below procedure:

STEP 1: DSC requirement

To start the process of Limited Liability Partnership registration, first, we need to apply for the digital signature of the designated partners. This is important because all the documents required in the online LLP registration are digitally processed and would require digital signatures (DSC) of the designated partners. DSC certificates can avail from government recognized certifying agencies

STEP 2: DIN requirement

DIN is required by all designated partners or those who are intending to become the designated partners of the proposed LLP. In the current LLP registration process, we don’t need to separately apply for DIN rather during LLP registration when we fill FILLIP FORM where DIN can apply accordingly are allot.

STEP 3: Approval or Reservation of Name

In this, we should apply for the NAME registration facility which has been given by MCA.  We need to give any 2 names, which` we want to be the name of LLP. Then, the appropriate authority will Reserve any 1 name out of the 2 provided subject to availability and the same should be intimated to us. After that, we need to incorporate the LLP within 90 days from the name reservation date by filing FORM FILLIP.

STEP 4: Incorporation of LLP

To proceed further, we need to fill FILLIP FORM which can be downloaded from MCA website. This form requires details such as particulars of 

  • the proposed or approved name of the LLP,
  • business activity supposed to carried out by the LLP,
  • proof of address of registered office of the LLP,  
  • subscriber’s sheet, Interest in other entity, consent to become designated partner, details of the designated partners along with the DPIN, 
  • The total monetary value of the contribution to be made by partners in the LLP etc.

    Document required (before Application)

  • Proof of Office address 
  • NOC from the owner of the property.
  • Copy of the utility bills (not older than two months)
  • Subscriber Sheet including Consent.
  • In the case of Designated Partner does not have a DIN, it is mandatory to attach: Proof of identity and residential address of the subscribers (i.e KYC)
  • Details of LLP and/ or company(s) in which partner/designated partner is a director/ partner
  • Partnership Agreement filed in FORM 3.
  • Proof of identity and address of Applicant I, II.
  • Optional Attachment (if any).

STEP 5: Partnership Agreement (FORM 3)

After FILLIP form, we should fill the details of LLP Agreement into the FORM 3

attach agreement therein.

STEP 6: Closure Procedure

In the end, we have to file the FILLIP and FORM 3 to the MCA website electronically along with the statutory fees.

Conclusion

To conclude it, one should apply for the registration of a LLP as the procedure mentioned above so that no interruption will arise thereafter.

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 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 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:

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:

When 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.

Concept of Dormant Company

Dormant Company Concept

As per the companies act 2013, if the company files an application Form MSC-4 under section 455(5) seeking active status of the company along with prescribed fees and form MSC-3 with respect to the financial year in which the application seeking active status is being filed .The Registrar will issue a certificate of recognizing active status of the company in form MSC- 5

In case company has not filed application in form MSC -1 , the directors are entitled to file application under Rule 8(1) for obtaining active status of the company within 7 days of such an act or omission.

Further the Registrar on suo moto, if he is satisfied that the dormant company has been functioning, can order an enquiry under section 206 of companies Act ,2013 and after providing reasonable opportunity of being heard and after hearing in  enquiry, if  it is observed  that the company has been functioning, then he can remove the name of the company from the dormant list and treat the company as active company

The idea of a dormant company is new concept under companies act 2013 and was not there in the companies Act 1956.

Contents

  • What is Dormant Company
  • Why Dormant companies?
  • Who can apply for a dormant status?
  • Procedure for obtaining dormant status
  • Maximum period allowed the company to retain the dormant status
  • Conditions necessary to be fulfilled for acquiring the status of dormant
  • The Registrar on suo-moto apply for dormant status for the company
  • Dormant company can be made active?

WHAT IS DORMANT COMPANY

Section 455 of companies Act explain about the dormant company. The meaning of Dormant Company means inactive or inoperative. The basic idea of dormant company is for the benefit of a company to start a future project or hold an asset/intellectual property without having significant accounting transactions. On the other hand if a company has not filed its annual returns for two consecutive years then such a company will also be called as a dormant company. Companies may apply for a dormant status if the company is incorporated for a future project, incorporated for holding an asset or intellectual property, company which has not filed Financial Statement and Annual Returns during the last two financial years and the company which is not carrying out any business or has made any significant accounting transactions

*Significant accounting transactions would mean transactions other than the basic procedural transactions i.e the payment of fees by a company to the Registrar and also payments to fulfil the requirements of this Act or any other law, allotment of shares to fulfil the requirements of this Act and payments for maintenance of its office and books

WHY DORMANT COMPANY?

The object of dormant company is invest now and enjoy the fruits later is the concept under which the idea of dormant company emerges. If the company wants to hold assets or intellectual properties and use it later when the formation of company has been completed .Suppose Company wants to start the operations after three years but the land prices today are very cheap and the same would be very costly after three years. Hence company will buy the land and hold it for three years and thereafter start the company, until that time, company apply for dormant status.

Similarly the company will complete all formalities at present and actual commencement of operations will take some more time. To avoid procedural delays, the company will complete all formalities and apply for dormant status until commencement of operations After formation of company, the company will apply for dormant status until commencement of operations.

The immediate question that arises why would anyone create a company and register it only to get it declared as dormant? The main object of obtaining or retaining the dormant status of a company is so that the company retains its corporate status despite not carrying out any business.

So restarting dormant company is easier than fresh start of company. So Company with dormant status can always have an option to start operations whenever it wants without following further procedures and subject to certain conditions need to ful fill. Well, the restart is always better than a fresh start and dormant companies offer this advantage. So if a company chooses to take a backseat for a good reason then they can always restart when they want to, without further procedures subject to certain conditions. So as a dormant company, the company may not be active but it still has a status of a company in the eyes of law.

There are some benefits that can be derived from the concept of dormant company. Some of such benefits are

1. The company can reserve the name and hold it for certain time i.e. until commencement of operations

2. Retaining intellectual property rights until commencement of operations

Who can apply for a dormant status ?

As per the section 455 of the companies Act 2013,a company which has not been carrying any business or not having any significant accounting transactions for last two years , the company can apply for dormant status.

The Registrar on suo-moto apply for Dormant status if the company is not filing annual or financial statements for the last two years and not submitted reasonable explanation to the ROC , then the Registrar can declare the company as dormant company

Inactive company” means a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns filing during the last two financial years;

“Significant Accounting Transaction” means any transaction other than–

  • Payment of fees by a company to the Registrar;
  • Payments made by it to fulfil the requirements of this Act or any other law;
  • Allotment of shares to fulfil the requirements of this Act; and
  • Payments for maintenance of its office and records.”

So if company carrying any transaction other than listed above, will get a chance of losing its dormant status

Procedure for obtaining dormant status

The following are the procedure to be adopted for obtaining dormant status

Step 1 Company should call for shareholders meet and ensure passing of special resolution with ¾ majority.

Step 2 After Passing special resolutions; file form miscellaneous form -1 with MCA along with prescribed fees

Step 3 Registrar if satisfied and if the terms and conditions of section 455 are satisfied, issue certificate of Dormant Company

Step. 4 Registrar will maintain the list of dormant companies

Maximum period allowed the company to retain the dormant status

The company applies for dormant status only for five years. The Companies Act 2013 empowers the Registrar of companies to strike off the name of the company from the Register if it remains dormant for more than five years.

Conditions necessary to be fulfilled for acquiring the status of dormant

As per rule 3 of Companies (Miscellaneous) Rules 2014 lays down several conditions that a company must fulfil before it can acquire the status of a dormant company.

  • No prosecution should have been initiated and pending against the company under any law.
  • No inspection, inquiry or investigation should have been ordered or taken up or carried out against the company.
  • The company should neither have any public deposits which are outstanding nor should it be in default in payment thereof or interest thereon.
  • The company should not have any outstanding loan, whether secured or unsecured.
  • The company should not have any outstanding statutory taxes, dues, duties etc. payable to the Central Government or any State Government or local authorities etc.
  • The company should not have defaulted in the payment of workmen’s dues
  • There should be no dispute in the management or ownership of the company and a certificate in this regard should be enclosed with Form MSC-1.
  • The securities of the company should not be listed on any stock exchange within or outside India.

The Registrar on suomoto apply for dormant status for the company

The Registrar on suomoto apply for dormant status to the company if the company fails to submit annual /financial statements for the last two years. Immediately after declaring the status of dormant to the company, the Registrar will enter the details of the company in the Register of dormant companies and  Registrar will strike off the name of the company, if the company has not submitted a reasonable explanation and fails to comply with section 455.of the companies Act 2013.  The dormant company is not exempted from the statutory compliance of submission of annual returns and also holding annual meetings etc.

Dormant company can be made active ?

As per the companies act 2013, if the company files an application Form MSC-4 under section 455(5) seeking active status of the company along with prescribed fees and form MSC-3 with respect to the financial year in which the application seeking active status is being filed .The Registrar will issue a certificate of recognizing active status of the company in form MSC- 5

In case company has not filed application in form MSC -1 , the directors are entitled to file application under Rule 8(1) for obtaining active status of the company within 7 days of such an act or omission.

Further the Registrar on suo moto, if he is satisfied that the dormant company has been functioning, can order an enquiry under section 206 of companies Act ,2013 and after providing reasonable opportunity of being heard and after hearing in  enquiry, if  it is observed  that the company has been functioning, then he can remove the name of the company from the dormant list and treat the company as active company.

Procedure of Conversion From OPC Company to Private Limited Company

Conversion of  OPC Company to Private Limited Company

Complete Procedure, Benefits & Cost

One person company have certain limitation and one limitation is capital investment in business because if business need additional capital, in that case need more person who can invest money in business so that business can head in next stage so in order to grow bigger and expand its business, One Person Company usually shifts to Private limited company.

We cover the article in following heading.

  1. Advantage of conversion from OPC to Pvt. Ltd. Company.
  2.  Type of Conversion
  3.  Procedure of conversion from OPC to Private Limited Company
  1. ADVANTAGE OF CONVERSION FROM OPC TO PVT. LTD. COMPANY.
  • Easy Fund raising
  • Taxation Benefit
  • Business credibility improve
  • Cross border expansion

2. TYPES OF CONVERSION

Following given below the types of conversion and condition applicable.

1. Mandatory Conversion:

Mandatory Conversion of OPC takes place when a One Person Company (OPC) has a paid-up share capital of more than or equal to Rs. 50 lakhs or the Annual turnover during the relevant period exceeds Rs. 2 crore, then in that cases, the company has to mandatory convert itself into Private Limited Company or Public Limited Company.

2. Voluntary Conversion:

Initial 2 year of after incorporation of OPC company, cannot covert into private limited company. If the time period gets elapsed, it can convert as per the Companies act 2013. It is much more advantageous to convert it into Private Limited Company voluntarily after two year because most of the companies which opt for One Person Company generally tend to exceed the threshold limit within these two years.

3.    PROCEDURE OF CONVERSION FROM OPC TO PRIVATE LIMITED COMPANY

STEP I- Intimation of Conversion to Registrar of Companies

The first step of conversion involves intimation to the concerned ROC regarding conversion. The Registrar of Companies must first be informed through the prescribed procedure that the One Person Company is now transforming itself into a private limited company or a limited company.

STEP II- Passing of Resolutions

The next steps is to passing of resolutions by the members of the Company in a General Meeting to effect that:

  • Conversion of OPC to Private Limited Company.
  • Alteration of MOA and AOA of the Company.
  • Appointment of additional directors of the Company.
  • Approval for increase in capital of the Company, if required.

STEP III-  Filing of form MGT-14

The third step towards the process of conversion is Filing of Form MGT-14 with Registrar of Companies within 30 days of passing the special resolution, along with certified copies of minutes and resolution passed.

STEP IV- Filing of Form INC-6

The next step requires to file Form INC-6 which has to be filled properly with all the details of particulars and thereafter it has to be submitted along with the fees and the documents that are required with the concerned ROC within 30 Days from Passing the resolution. Within fifteen days an application shall be filed to the Registrar along with the copy of the resolution regarding the conversion of the company into a Private company.

Documents and Attachments to be attached along with the form:

1. Notice to board of directors

2. Copy of board resolution authorizing giving of notice

3. Copy of Altered Memorandum of Association (MOA)

4. Copy of Altered Articles of Association (AOA)

5. Declaration from directors

6. List of Members

7. Copy of  NOC from Secured Creditors if any

8. Copy of NOC from directors and shareholders

9. Last Audited Financial Statements

10. It is mandatory to attach a certificate from CA if the conversion is because of exceeding average annual turnover

STEP-V Certificate

Registrar of Companies (ROC) after filing all the required documents on being satisfied that Company has complied with prescribed requirements the Registrar will issue the Certificate certifying the conversion of One Person Company (OPC) to a Private Limited Company.