Category Archives: SSI, Small & Micro Enterprise, MSME

GSTN Registrations Set to Open Doors for E-Commerce Vendors

Small businesses won’t face the risk of their products being taken off online marketplaces

E-commerce com panies such as Amazon, Flip kart and Swiggy concerne about losing business after th rollout of the goods and services tax (GST) on July 1 shouldn’ have to worry about being for ced to exclude pro ducts sold by unregistered vendors.

The GST Network, which provides the new tax regime’s technological backbone, plans to start registra tion of new taxpayers soon to ensure there is no disruption in online commerce.“Registration for first-time taxpayers will open soon in about a week’s time,“ said a GSTN official.

All vendors on ecommerce platforms have to be registered on the GST Network.That’s because online market platforms have to mandatorily collect tax on any payment they make to a supplier.

The market places have been grappling with the matter as a d substantial number of vendors e fall below the tax threshold and hence aren’t registered with the  tax authorities of either the states or the Centre.

Many of these are small businesses, some even operating from home. Another set of sellers were only offering taxexempt items on these platforms and hence were not required to pay tax or register with the tax department.

Industry representatives who recently met finance ministry officials to lobby them on the issue were told that registration would be opened up soon, an e-commerce executive told ET.

GSTN had only opened enrol ment for existing taxpayers who were migrating to GST from either value-added tax, service tax or central excise duty and not for fresh registrants.Thursday was last day for enrolment in the second round.

The third round will open on June 25. It is expected that registration of the first-time vendors will begin before that. While early registration will be good, the government can consider providing some relief to vendors, experts said.

“Alternatively, the government may want to consider giving a relaxation to vendors to obtain the registration after GST is implemented till say the first GST return is filed.“The first GST returns have to be filed on August 10.

Source : The Economic Times New Delhi, 16th June 2017

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It’s time for start-ups to move to the next level: NASSCOM

The Indian start-up ecosystem is evolving and it is time for stakeholders to move to the next level and collaborate with the external eco-system, said KS Vishwanathan, Vice President at Nasscom.nasscom_leadership_shot

“It is now time for the companies to move to the next level of mid-stage and growth,” Vishwanathan, who is also head of Nasscom’s 10,000 Start-ups programme, in a interview.

A start-up is said to evolve through four stages – early stage (idea or prototype), mid-stage (prototype to product), growth stage (product business) and mature stage (business to scale).

The National Association of Software and Services Companies (Nasscom) is a trade association of Indian information technology and business process outsourcing industry. He also added that startups should begin collaborating with the external ecosystem, like academia and international alliances.

According to Nasscom, at present there are 10,000-12,000 startups, out of which 5,500-5,700 are technology start-ups — and between 80,000-100,000 people are directly employed in the business.

“Every year around 1,300 new start-ups get added and about 300 get dropped,” said Vishwanathan.

“In India, the success rate of startups is at 28% (compared to 10% in the US), which is very high. We should not worry about it. The key thing is to understand whether the idea is viable or not. If it is not, then it is better to fail early and then recover or get out of it and start something afresh,” he added.

About 60% of technology start-ups are in the business-to-consumer space and 40% are in business-to-business space.

The ambitious 10,000 Start-ups programme was started by the association in 2013 to scale up the ecosystem of such companies by 10 times in 10 years. The programme is supported by the government and industry and managed by Nasscom. “So far, we have impacted 1,500 start-ups,” he said.

The association provides working spaces to startups, gives them starter kits designed by Microsoft, Google and IBM. Also, nine warehouses funded by respective state governments and sponsored by technology providers like Microsoft, IBM, Google, Facebook, Kotak Bank and Digital Ocean have been provided for start-ups.

Additionally, the programme has nurtured 6,000 startups through a virtual programme. Talking about the roadmap ahead, Vishwanathan said: “We hope to touch 10,000 virtual training (programmes) in the next four years.”

“The programme gives special importance to women entrepreneurs,” said Vishwanathan, adding that female entrepreneurs comprised only 2% of the startup pie four years ago and it has gone up now to 11%.

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SMEs will benefit from composition scheme, says CBEC chief

Central Board of Excise and Customs (CBEC) Chairperson Vanaja Sarna has said that small and medium enterprises engaged in trade, manufacturing and restaurants business will benefit under the new limit of the Composition Scheme for the GST.

“Everybody will get the benefit, those who are already listed in the services or the traders or manufacturers among services… without any change in the rate that is already listed in the section,” Sarna told.

On Sunday, the GST Council decided to allow traders, manufacturers and restaurants with turnover of up to Rs 75 lakh to avail the composition scheme. The bar was earlier set at Rs 50 lakh.

Under the scheme, traders with turnover of up to Rs 75 lakh will be required to pay one per cent tax, while manufacturers will have to pay two per cent and companies engaged in restaurant business five per cent.

“Initially it was up to Rs 50 lakh. The Section 10 of the Act provides it to be increased up to Rs 1 crore. There was a discussion about the difficulties of the small and medium sector and because the central excise assessees were actually exempt below Rs one and a half crore, so it was felt it could be a hardship to them,” Sarna elaborated.

“So the council deliberated a lot on this and finally came to a conclusion that it would be appropriate to make it Rs 75 lakh instead of Rs 50 lakh and that may cover the concern of the small and medium sector.”

However, the business which avail the scheme will not be eligible for input tax credit.

Source: India.com

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Small Traders want penal norms delayed

With 60 per cent of the country’s small traders yet to be computerised, wholesalers and traders are demanding amnesty from penal provisions of GST for atleast nine months.

A large number of small traders are still not educated about GST and there are expected to be teething problem for them in the initial phase.

GST is expected to replace hand-written receipts as traders will need to maintain computerised records and file returns online. For that they will need to upgrade their existing business format and link digital payment with GST among other things.

“We are asking for interim period for general traders for whom so far no interaction has been initiated by the government and they are still unaware of nitty-gritty of GST. Since GST is a new thing for the trading community interim period will be best suited  to bring more people under GST net,” said Praveen Khandelwal, Secretary General, Confederation of All India Traders ( CAIT).

He said that when VAT was introduced there was around three years as transition period. Khandelwal said that during the trial period no penal action should be taken against any trader for procedural lapses.

As per the GST Council decision, traders in the country with revenue above Rs 20 lakh have to register for GST. “Till now GST rules have not been completely been framed. There are many things in pipeline. Trading community across country need to be informed about GST and GST is entirely different kind of taxation system against current tax regime. So it is obvious that during its operations there may be procedure lapse by the trading community,” he said.

“Still 60 per cent of the small businesses in the country  has not adopted computerisation which is a major challenge because GST is technology based taxation system,” he added.

Source: The Asian Age

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‘Fund of Funds’ for start-ups takes off

After almost a year since the Union Cabinet gave its green signal, the Centre’s ambitious ₹10,000-crore ‘Fund of Funds’ (FFS) for financing start-ups over a nine-year period is finally off to a roaring start.

In the first few weeks of April 2017, venture capital funds (VCFs) have lapped up the entire ₹1,100 crore that had collected in the fund’s kitty over the last two years following a change in some stringent guidelines that were not allowing them to take funds from the FFS earlier , a government official. “The DIPP now wants the Finance Ministry to increase its allocation for the FFS this year from the prescribed annual ₹1,100 crore to a higher amount to compensate for the lower allocations in the past two years,” the official said, adding that it may demand a total of ₹2,200 crore.

Stiff guideline

The main reason why the FFS had not taken off was a particular guideline which said that if a VCF was given some amount, say ₹20 crore, from the FFS, and it had a total corpus of ₹100 crore, it would have to invest the entire corpus, which includes the ₹80 crore it raised from other sources, in start-ups.

“It was not proper to force them to put their entire money only in start-ups, which are high risk ventures.

“They need to be allowed to spread their risks by also offering part of their corpus to low risk areas. That is why the guidelines were changed,” the official said.

As per the new guidelines, if a VCF with a corpus of ₹100 crore is given ₹20 crore from the FFS, it will have to invest twice that amount, which in this case would be ₹40 crore, in start-ups, and the remaining ₹60 crore can be invested in other low-risk ventures.

“The VCFs thought that it was a reasonable demand as in this case their obligation towards start-ups equals the government’s and they are also able to balance their risk by putting the rest of the fund in safer ventures,” the official said.

The Union Budget announced this February did not make any allocation for the FFS as the funds allocated earlier had not been used.

Talks with FinMin

“Now that all the funds have been given to VCFs, we can get our yearly allocation in the Supplementary Budget. We have already intimated the Finance Ministry and will hold detailed discussions soon,” the official said.

The Union Cabinet last June had approved the proposal to establish a FFS with a total corpus of ₹10,000 crore, with contribution spread over the 14th and 15th Finance Commission cycles based on progress of implementation and availability of funds.

It was decided that the FFS shall contribute to the corpus of Alternative Investment Funds (such as VCFs) for investing in equity and equity-linked instruments of various start-ups at early stage, seed stage and growth stages.

The FFS is being managed and operated by the Small Industries Development Bank of India.

                                                      Press Information Bureau
Government of India
Cabinet
22-June-2016 16:02 IST

Establishment of Fund of Funds for funding support to Start-ups

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has approved the establishment of “Fund of Funds for Startups” (FFS) at Small Industries Development Bank of India (SIDBI) for contribution to various Alternative Investment Funds (AIF), registered with Securities and Exchange Board of India (SEBI) which would extend funding support to Startups. This is in line with the Start up India Action Plan unveiled by Government in January 2016.

The corpus of FFS is Rs.10,000 crore which shall be built up over the 14th and 15th Finance Commission cycles subject to progress of the scheme and availability of funds. An amount of Rs.500 crore has already been provided to the corpus of FFS in 2015-16 and Rs.600 crore earmarked in the 2016-17. The Fund is expected to generate employment for 18 lakh persons on full deployment.

Further provisions will be made as grant assistance through Gross Budgetary Support by Department of Industrial Policy and Promotion (DIPP) which will monitor and review performance in line with the Start up India Action Plan.

The FFS emanates from the Start up India Action Plan, an initiative of Department of Industrial Policy & Promotion (DIPP). The expertise of SIDBI would be utilized to manage the day to day operations of the FFS. The monitoring and review of performance would be linked to the implementation of the Start Up Action Plan to enable execution as per timelines and milestones.

A corpus of Rs. 10,000 crore could potentially be the nucleus for catalyzing Rs. 60,000 crore of equity investment and twice as much debt investment. This would provide a stable and predictable source of funding for Start up enterprises and thereby facilitate large scale job creation.

Background:

Accelerating innovation driven entrepreneurship and business creation through Start-ups is crucial for large-scale employment generation. An expert committee on Venture Capital (VC) has opined that “India has the potential to build about 2500 highly scalable businesses in the next 10 years, and given the probability of entrepreneurial success that means 10000 Start ups will need to be spawned to get 2500 large scale businesses”.

Start-ups face several challenges – limited availability of domestic risk capital, constraints of conventional bank finance, information asymmetry and lack of hand holding support from credible agencies. A large majority of the successful Start-ups have been funded by foreign venture funds and many of them are locating outside the country to receive such funding.

A dedicated fund for carrying out Fund of Funds operations would address these issues and enable flow of assistance to innovative Start ups through their journey to becoming full fledged business entities. This would encompass support at seed stage, early stage and growth stage. Government contribution to the target corpus of the individual Fund as an investor would encourage greater participation of private capital and thus help leverage mobilization of larger resources.

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Foreign Residents in India : Important Provisions In The Companies Act 2013 for Doing Business In India

An entrepreneur willing to expand his/her business abroad must abide by the tax laws of the home country as well as of the particular foreign country and accordingly pay the required taxes. Taxes (or duties) are defined as the financial charges levied by the Government upon an individual or an organisation or property in return for the government services received by them.

These taxes may be broadly classified into direct and indirect taxes. Direct taxes are those where the tax payer pays the taxes directly to the imposing authority like income tax and corporate tax. Whereas, indirect taxes are those which are not paid directly to the imposing authority but paid to someone else who acts as an intermediary link between the tax payer and the tax levying authority like customs duty and service tax. In India, the power to levy taxes and duties is distributed among the three tiers of Government, in accordance with the provisions of the Constitution.

The most important tax which an entrepreneur is subjected to is the ‘customs duty’ which is a type of indirect tax levied on goods imported into India as well as on goods exported from India. In India, the basic law for levy and collection of customs duty is Customs Act, 1962. It provides for levy and collection of duty on imports and exports, import/export procedures, prohibitions on importation and exportation of goods, penalties, offences, etc. The Central Board of Excise & Customs (CBEC) is the apex body for customs matters. It is a part of the Department of Revenue under the Ministry of Finance, Government of India.

But due to different tax laws and rules prevailing in different countries, a businessmen faces the problem of ‘double taxation’. Double taxation refers to a situation where the same income becomes taxable in the hands of the same company or individual (tax-payer) in more than one country. This puts unnecessary and prohibitive burden on the tax-payer. In India, the liability under the Income tax Act arises on the basis of the residential status of the assessee during the previous year. Hence, if the assessee is resident in India, he/she has to pay tax not only on the income which is received in India but also on that income which accrues, arises outside India or received outside India. Thus he becomes liable to pay double taxes. The relief against such double taxation in India has been provided through, bilateral relief and unilateral relief.

Companies / Business having operations in countries other than india can set up wholly-owned subsidiary in India under those sectors where in 100% foreign direct investment is permitted under the Foreign Direct Investment Policy issued by Government of India. A foreign company or business can start their wholly-owned subsidiary in India may be either of the following business types like, Private Limited Company, Public Limited Company. These companies have to register their subsidiary companies with Registrar of Companies which can undertake any permitted business activities.

It is vital to choose the right kind of business consultant who have expertise in starting a subsidiary company in india which best suits its purposes and takes care of liability issues and tax planning issues.

The Companies Act 2013 brings a lot of new features, compliances, disclosures for foreign companies operating in India in any mode. The Central Government of India is promoting foreign investment in India and by coming out with a law, which is based on the principle of “Self Regulation Heavy Penalties”, it seems that corporate culture and discipline will improve in the system. The government has liberalized many provisions in the act and given powers to the Board and shareholders to take a conscious and compliant decision without intervention of the Central Government in the best interest of company and its stakeholders.

1. Modes of entry for foreign Residents desiring to setup business in India

Foreign company can carry on business in India by the formation of a wholly owned subsidiary, subsidiary, a joint venture or a place of business as branch/liaison/project office after obtaining permission from Reserve Bank of India, if applicable. Below are different types of options with a foreign entity to operate their business in India which are permissible under Companies Act, 2013 read with the provisions of Foreign Exchange Management Act, 1999.

1.1 Company under the provisions of Companies Act 2013

1.1.1 Wholly Owned Subsidiaries

Wholly-owned subsidiaries are the result of the parent company owning all (100%) of the subsidiary’s shares. Since the parent company owns all of the subsidiary’s shares, it has the right to appoint the subsidiary’s board of directors, which controls the subsidiary. Wholly owned subsidiaries may be part of the same industry as the parent company or part of an entirely different industry. A company operating in more than one country may choose to operate a business through a wholly owned subsidiary. The Investment is subject to compliance of FDI Policy.

1.1.2 Subsidiary

A foreign company can open up a subsidiary company in India. This can be done either by acquiring the majority of shares (more than 50%) of the company or by controlling the composition of board of directors of the company. Both holding and subsidiary companies are separate legal entities and they are related to each other by virtue of subsidiary –holding company relationship. The Investment is subject to compliance of FDI Policy.

1.1.3 Joint Venture

A foreign company can enter into India by forming a strategic alliance with an Indian partner. In general parlance, it is defined as a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. The ratio of foreign party in shareholding can be anywhere between 0 to 50%. By mutual agreement they may exercise control over the enterprise and consequently share revenues, expenses, assets & liabilities. It can be incorporated either as private limited company or public limited company which has to be registered under the Companies Act, 2013 and subject to exchange control regulations and Foreign Direct Policy of the Government of India. The Investments are subject to compliance of FDI Policy.

2.1 Limited Liability Partnership under Limited Liability Partnership Act, 2008

LLP is a hybrid between a corporate and partnership structure as it encircles elements of both. A corporate business vehicle that enables professional expertise and entrepreneurial initiative to combine and operate in a flexible, innovative and efficient manner, providing benefits of limited liability while allowing its members the flexibility for organizing their internal structure as a partnership. This entity has to get registered under the Limited Liability Act, 2008. No foreign investment can be made in LLP unless prior approval of Foreign Investment Promotion Board is obtained.

3.1 Place of Business under Companies Act 2013 with the permission of RBI

3.1.1 Branch Office- A branch office refers to an establishment, which carries on substantially the same business and activity as is carried out by its Head Office. Such offices help the company in spreading its business to diverse locations and thus help in increasing the customer base and bringing its product closer to the customers by increasing their accessibility to it. Such Branch office can be opened only with the prior approval of RBI.

3.1.2 Liaison/ Representative Office– Foreign companies can also start their Indian operations by setting up a liaison (representative) office in India. The role of liaison office is limited to collecting information about possible market opportunities in India and providing information about the parent company and its products to the prospective Indian customers. It acts as a communication channel between the parent company and Indian companies. Such Liaison office can be opened only with the prior approval of RBI.

3.1.3 Project Office-‘Project Office’ means a place of business to represent the interests of the foreign company executing a project in India but excludes a Liaison Office. Foreign companies planning to execute specific projects in India can set up temporary project and site offices for this purpose. The RBI has granted general permission to a foreign entity for setting up a project office in India, subject to the fulfillment of certain conditions

3.1.4 Place of Business in electronic mode- A new dimension under Companies Act, 2013 The Companies Act 2013 has also widened the definition of foreign companies to include those having a place of business in India via an agent or through electronic mode, which means online services provided by foreign companies without opening a physical office in India also covered under the provisions of companies Act 2013. This would require foreign companies to comply with the maintenance of financial records and reporting requirements in India.

4.1 Other Important & Material changes under Companies Act, 2013

  • Foreign companies will now have an option to form private or public limited companies in India at their choice without any limitation like sec 4(7) of the companies Act 1956;
  • The Articles of Association may contain entrenchments provisions, regarding the alteration of specified provisions of articles, which means that they may be altered only if conditions restrictive than special resolution are met. So there is indirect recognition to veto powers provisions as contained in articles of association for protecting the interest of minority.
  • The subscribed capital has to be received by company within 180 days of such subscription.
  • Shares of a public company are freely transferable, provided any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract, which means “Tag along” or “Drag Along” rights as mentioned in shareholders’ agreement will be enforceable as contract.
  • The minimum number of directors in case of public company and private company are same , however the Act, introduced a concept of One Person Company, where minimum 1 (one) director is mandatory, however as per rules no foreign resident can form a One Person company in India.
  • Mandatory one woman director on the board of every listed company and as per rules every other public company having a paid-up share capital of INR 100 crore or more or turnover of INR 300 or more.
  • Each Company to have at least one resident director who has stayed in India for a minimum period of 182 in previous calendar year.
  • Participation of director through video conferring is the welcome steps, which allow directors to attend the meeting from anywhere in the world, however it is also been stated that every director has to attend at least one board meeting physically in each 12 months.
  • The Board may appoint alternate director, if authorized by its articles or by a resolution passed by company in general meeting, not being a person holding any alternate directorship for any other director in the company, during the absence of a director, for a period of not less than three months from India.
  •  Director Responsibility Statement in Board report shall state that they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively.
  • CEO and CFO has been defined in the Act and covered in the category of KMP with wider responsibilities and liabilities.
  • The company can maintain its book of accounts in electronic mode.
  • A consolidated financial statement shall be produced at the Annual General Meeting, if the company has any subsidiary, associate company, joint venture in India or abroad along with the financial statement of the company and also attach with it a statement containing salient features of the financial statement of its subsidiary or subsidiaries.
  • The definition of financial year has been provided under the Act, where a company has to adopt a financial year starting form 1 April to 31 March. A period of two years as a transitional phase has been provided under the Act to comply with this provision, however companies having foreign subsidiary or are subsidiary of body corporate have an option to maintain different financial year to match the same with holding or subsidiary company with the permission of Tribunal.
  • An audit firm cannot be appointed for more than 2 consecutive terms of five years and individual auditor has to be rotated after the expiry of period of 5 years.
  • Cross Border Merger, means amalgamation of Indian Company with foreign company or vice versa has been allowed as per provisions of Companies Act 2013 subject to certain conditions.
  • Registered Valuer, with such qualification as prescribed by the Central Government, shall be appointed to do the valuation of property, stocks, shares, debentures, securities or goodwill or any other assets or net worth of a company or its liabilities.
  • Class Action Suit under which a prescribed class of members or deposit holders will have the right to file a Class Action suit with the Tribunal.
  • Where a company is formed and registered under this Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction such a company or an inactive company may make an application to the Registrar in such manner as may be prescribed for obtaining the status of Dormant company.
  • A document may be served on a Company by sending it to the registered office of the company by registered post, speed post, courier service, leaving it at its registered office, electronic means any other mode as may be prescribed.
  • A company with net worth of Rs. 500 crores or more or turnover of Rs 1000 crores or more or net profit of Rs 5 crores or more during any financial year shall have to constitute a CSR committee and implement CSR policies. Such companies will have to spend at least 2% of the average net profits made by the company in the preceding three financial years in accordance with the CSR policy.

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Annual Returns of the Companies Act 2013

INTRODUCTION:

Section 159,160,161,162 & Schedule V deals with the Annual Return & related Provisions under Companies Act, 1956. But in Companies Act, 2013 all these Sections are combined together in one Section namely – 92.

Annual return is a yearly statement, required to be filed by every company irrespective of their nature, i.e. private, public, listed, unlisted, or status, i.e. active, dormant or under amalgamation. It is perhaps the most important document required to be filed by every company with the Registrar of Companies. Apart from the Financial Statements, this is the only document to be compulsorily filed with the Registrar every year irrespective of any events / happenings in the company.

It is not a tax return: it is simply a corporate law requirement and every company is legally obligated to file this return with Registrar of Companies (ROC).

Section 92 of the Companies Act, 2013 requires every company to prepare an annual return, a comprehensive document which contains information of a company relating to its share capital, indebtedness, directors, shareholders, changes in directorships corporate governance disclosures etc.

The Companies Act, 2013, a historic legislation which intends to improve corporate governance and empower shareholders. The Act has incorporated a framework which is based on self-regulation but with enhanced disclosures and accountability on the part of companies and their managements.

The Ministry of Corporate Affairs vide General Circular 8/2014 dated 04th April 2014 clarified that annual return in terms of section 92 of the Companies Act, 2013 will be in form MGT 7 and will be applicable for financial years commencing on or after 1st April, 2014

Annual return is the snapshot of certain company information as they stood on the close of the financial year. Section 92 of the Companies Act, 2013 deals with Annual Return of the Company.

Annual return in a layman’s term means a return which a company is required to file annually and further it is a snapshot of company information as they stood on the close of the financial year. Section 92 of the Companies Act, 2013 and the Companies (Management and Administration) Rules, 2014 deals with filling of Annual Return of a Company

The basic purpose of filing annual return with the Registrar of Companies (‘ROC’) is to provide the annual information about the Company to the ROC and its members about the Company’s general  compliances.

B. TIME PERIOD:

Earlier in the Companies act, 1956 Annual return was prepared for the period from the date of last AGM to date of current AGM. But there is a major change under Companies Act, 2013 i.e. now Companies are required to prepare Annual Return for the financial year i.e. 1st April to 31st March.

C. ANNUAL RETURN OF FOREIGN COMPANY:

As per section 384(2), the provisions of section 92 shall also apply to a foreign company, subject to such exceptions, modifications and adaptations as may be made therein by rules. Rule 7 of the Companies (Registration of Foreign Companies) Rules, 2014 provides that every foreign company shall prepare and file, within a period of sixty days from the last day of its financial year, to the Registrar annual return in Form FC.4 along with fee, containing the particulars as they stood on the close of the financial year

D. EXTRACT OF ANNUAL RETURN:

As per sub-section (3) of section 92, the companies are also required to prepare extract of Annual Return in Form No. MGT-9 which shall form part of Board’s Report.

E. PENALTY:

If a company fails to file its annual return under section 92, before the expiry of the period specified under section 403 with additional fee, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lacs rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than fifty thousand rupees but which may extend to five lacs Rupees, or with both.(Section 92).

F. FILING OF ANNUAL RETURN WITH THE REGISTRAR (SECTION 92(4)

The return has to be filed with the Registrar of Companies within 60 days from the date of Annual General Meeting. If the Annual General Meeting is not held in any year, the return has to be filed within 60 days from the date on which Annual General Meeting should have been held together with the statement specifying the reasons for not holding the Annual General Meeting, on payment of such fee or additional fee as prescribed (Rule 12 of the Companies (Registration Offices and Fees) Rules, 2014.

Other Event Based Filings

Besides Annual Filings, there are various other compliances which need to be done as and when any event takes place in the Company. Instances of such events are:

  • Change in Authorised or Paid up Capital of the Company.
  • Allotment of new shares or transfer of shares
  • Giving Loans to other Companies.
  • Giving Loans to Directors
  • Appointment of Managing or whole time Director and payment of remuneration.
  • Loans to Directors
  • Opening or closing of bank accounts or change in signatories of Bank account.
  • Appointment or change of the Statutory Auditors of the Company.

Different forms are required to be filed with the Registrar for all such events within specified time periods. In case, the same is not done, additional fees or penalty might be levied. Hence, it is necessary that such compliances are met on time.

Other Key Points

The private limited company can be formed by minimum 2 persons whereas, there are 50 maximum shareholders. And those persons must be friends or relatives.

  • The minimum paid up capital should be at Rs. 1 lakh.
  • However, if the paid up capital is above Rs 10 lakhs, no third party loan from private lenders could be collected except the shareholders, directors and their relatives.
  • If the paid up capital is above 5 cr, the internal audit, cost audit, and report of company secretary are mandatory. However, those services should be obtained from engaging outside professional agencies.
  • The board of directors of the company is formed with minimum 2 directors and the maximum limit should be governed by the Articles of Association of the company.
  • The directors remuneration can be paid within the limit prescribed by the companies Act however, the rules & regulations thereof should be incorporated in the Articles of Association.
  • The meeting of the Board of Directors must be held once in each quarter. However, it may exceed than that number as per the rules framed in Articles of Association.
  • The company should hold an Annual General Meeting. However, any extraordinary general meeting could be held as per the regulations framed by companies act and incorporated in the Articles of Association.
  • The company could not pay interest or any consideration of any type except dividend on the paid up capital of the shares holders.
  • Normally, the company could raise loans from shareholders and directors, their relatives and the firms and companies in which such shareholders and directors have vested interest. The reasonable interest as per the provisions of Articles of Association could be paid.
  • The company can distribute dividend after paying dividend tax twice a year i.e., interim and final. However, there should be accumulated profit in the form of reserves in the books of the company. Accordingly there should be provision in the Article of Association.
  • The company cannot pay any amount to directors except remuneration. It is a very severe thing to have a debit balance of the directors in the books of accounts of the company who is holding shares 10% or more. In income tax this will be treated as income of the director. Even any firm or company in whom a director is holding more than 20% interest also could not take any loan or advance from the company except any other transaction with specific nature.
  • The company has to file annual return and balance sheet to the registrar of companies before 30th September of every  year. There are no other documents required to be submitted to ROC except in specific circumstances such as, change in RO, change in directors, change in authorized capital, creation of charge of bank or financial institution and the assets of the company etc.
  • In the case of dispute the director can refer the matter to the arbitrator as per the provision of Articles of Association regarding the appointment of arbitrators.
  • However, the aggrieved shareholders can also approach to the company law board from the wind up of the company in severe circumstances. Even the creditors have also right to do so.
  • The rights & duties of the directors are framed & governed by the Articles of association of the company. Therefore, the Articles of Association must be complied very carefully.
  • The company can raise loans from bank or institutions as prescribed by companies Act 1956 and framed accordingly in the Articles of Association.
  • Under old Companies Act (Prevailing Act) and the new company bill which is yet to be come into operation the electronic filing of all the requisite documents and payments to be made electronically thereof had been made compulsory.
  • The share of the private limited company cannot be transferred to anybody else other than the present shareholders and with the sanction of the company in the board meeting. The rules for this are incorporated in the articles of Association.
  • It is not easy to expel or debar any director from the board of directors it can only be happen as per the charges framed on the said director as mentioned in the Companies Act and rules thereof framed in the Articles of Association. Even the shareholders can remove any director in general meeting or extraordinary general meeting.
  • Since the company is an artificial judicial person different from the directors and shareholders therefore, the shareholders and directors have no excess over the assets of the company. Whereas, for the liabilities of the company the director of the company can be held liable jointly or severally.
  • VidyaSunil & Associates is into practice of Tax Complaince, Audit, Accounts , Corporate / Business Finance & Outsourced CFO Services.

    Advise for contacting VidyaSunil & Associates;

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