Case Laws

NGO Compliances

fsadmin / December 13, 2021

In this article we shall discuss about all the compliances that the below mentioned 3 types of charitable organisations, also known as NGOs need to follow. COMPLIANCES OF A TRUST Compulsory Audit of Accounts When the total income of a Private Trust exceeds the limit given under the Income Tax Act, 1961 for non-taxable income, it should be compulsorily audited by a Chartered Accountant. Annual Return of Income After the accounts of the Trust are being audited by the Chartered Accountant, the audit report should be filed along with the Annual Return of income under Form ITR-7 on or before the due date. Report of Foreign Contributions Every Trust which receives foreign contributions needs to submit a report, duly certified by a Chartered Accountant and accompanied by an Income and Expenditure Statement, Receipts and Payments Account and Balance Sheet within 9 months of the closure of the financial year, to the Secretary, Ministry of Home Affairs, Government of India, New Delhi. A ‘Nil’ Report needs to be submitted if no such contribution is received during the last financial year. Submission of Annual Account Statement of FC A/c Duly certified copy of the Account Statement of FC A/c needs to be furnished within 9 months of the closure of financial year along with Report mentioned above in point 3. Issue of Certificate of TDS Where any Private Trust is deducting tax at source for payment of salaries to the staff or employees (kept for managing the Trust Property), it needs to furnish certificates of TDS to the persons on whose behalf TDS was being collected. It should be done within 1 month from the date of closure of the financial year. Publication of Accounts in newspaper Where annual income or receipts of the Trust (generated from the Trust Property) exceeds Rs. 1,00,00,000 (INR One Crore). Documents/Details Required for GST Registration of a Trust after registration PAN card of the Trust. PAN card and photo of settlors. Certificate of Registration. Details of bank. In case of leased property, the copy of lease deed for the registered office premises along with a NOC from Landlord and electricity bill/property tax receipt/water bill copy of the registered office property. In case of own property, copy of sale deed along with the electricity bill/property tax receipt/water bill copy of the registered office property. Appointment Proof of authorised signatory. Compliances as per GST Law Company is registered with GST Department and have valid GSTN then it has to furnish details of Sales & Purchases on Monthly Basis in prescribed form to GST department on GST Portal. Have to maintain records of Sales & Purchases on Regular Basis. Have to collect GST on Sales Invoices and deposit through GST Returns with the GST Department. Have to furnish Annual GST Returns, if required or cross threshold limit for Annual Return. Exemptions for a Trust Income of a charitable and religious trust is exempt from tax subject to certain conditions. The exemptions are provided to the trusts under various provisions, inter-alia, Section 10, Section 11, etc. Some of the exemptions allowed to a trust are as under: Section 11 provides exemption for income derived from property held under trust wholly for charitable or religious purposes to the extent such income is applied for charitable or religious purpose in India. However, this exemption shall be subject to certain conditions. In view of Section 12, income in the form of voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes shall also be exempt from tax (subject to certain conditions). Any voluntary contributions received by an electoral trust shall not be included in its total income (subject to certain conditions). Income of an educational institute is subject to exemption under Sections 10(23C)(iiiab)/(iiiad)/(vi). Income of a hospital or other institution shall be eligible for exemption if it satisfies the conditions prescribed under Sections 10(23C)(iiiab)/(iiiad)/(vi). Some Additional Certificates: 80G Certificate The 80G Certificate exempts the individuals who have made donations to the charitable trusts or the Section 8 Company fully or partially from paying the taxes. For example, a charitable organizations or trust that is registered under 12A allows an individual to avail tax exemption under Section 80G. There is a maximum allowable deduction criterion. If the amount donated exceeds 10% of the total gross income, then the excess amount will not qualify for tax benefits. Who can avail tax savings under 80G? An individual who makes an eligible donation is entitled to avail tax exemption under the 80G. Donations that are made to a listed trust and organizations only qualify for deduction u/s 80G. Who cannot avail of tax savings under section 80G? If the donation is made to a foreign trust, you cannot qualify for tax saving under section 80G. The deduction cannot be claimed if the donations are made to one or more political parties. The deduction cannot be claimed even for printing or publishing brochures, flyers, and pamphlets. Donations by NRI if made to eligible institutions and trusts also qualify for tax exemptions under section 80G. If the donation is made from individual’s salary and if the donation receipt carries the name of the employer, then employees can claim under Section 80G. Donations Eligible for 100% Deduction Without Qualifying Limit National Defence Fund set up by the Central Government Prime Minister’s National Relief Fund National Foundation for Communal Harmony An approved university/educational institution of National eminence Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district Fund set up by a State Government for the medical relief to the poor National Illness Assistance Fund National Blood Transfusion Council or to any State Blood Transfusion Council National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities National Sports Fund National Cultural Fund Fund for Technology Development and Application National Children’s Fund Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory The

Case Laws, Company Law

SUBSIDIARY COMPANY OF FOREIGN COMPANY IN INDIA

fsadmin / December 13, 2021

Incorporation of Wholly Owned subsidiary Company or Subsidiary Company of Foreign Company in India 1. Foreign Subsidiary A subsidiary company of foreign Company in relation to foreign holding means a company in which a foreign holding Company a. Control the full composition of the Board of directors or; b. Hold more than 50% of the total share capital. 2. Wholly owned subsidiary of foreign Company It is a company incorporated under the provisions of the companies Act, 2013 and in which the foreign company holds 100% of the total share capital of such company. 3. Steps to be taken for incorporation Reservation of the name The procedure for name approval and name reservation is same as any Indian Company Subject to some additional points Before making an application for the incorporation of the company, the foreign company shall apply for the reservation of the name. Points to be considered while making reservation of name a) A foreign company can apply for its own name for reservation for its subsidiary or WOS. b) In case if foreign company applying its own name to reservation for its subsidiary or WOS in India then first of all foreign company shall passed a resolution to use the name by its subsidiary or WOS in India. c) Subsidiary or WOS shall use such name but with the extension of word “India” in such name for example a Company named ABC Ltd is a foreign company and intend to incorporate a subsidiary or WOS in India and it giving its own name to the subsidiary or WOS, then the same can be use in India by the company but with “ABC India Ltd d) If a foreign company having any registered trademark outside India the same can be use by it for the trademark of its subsidiary or WOS in India. Documents required for the reservation of Name: Board Resolution of the subscriber. Identity & Address proof of the person who is signing the Board resolution. Trademark Certificate for using the word related to mark in the name of the Proposed¬ India Company. No Objection Certificate from the Trademark Holder along with the ID¬ & Address proof who will sign the NOC (through Board Resolution) Copy of Certificate of Incorporation, Memorandum of Association and Articles of¬ Association. Copy of Address Proof of Registered office of the subscriber (Bank¬ Statement/Electricity Bill or Telephone bill or charter document in which address is mentioned) to be notarized by the Notary public and further Apostilled mandatorily. Note: All the Foreign documents shall be notarized and apostilled from the home country and if the documents are not in English version, then the translated English version is also required along with the original version. 4. Incorporation of the subsidiary or wholly owned subsidiary through Spice+ A. Login to MCA Foreign company i.e., applicant has to login into their account on MCA website (if already have, other first of all register to MCA website. B. Click on SPICE + Then under Company services click on Spice+ and enter into new application. C. Part A of SPICE+. We can reserve the name of the company in part A of SPICE+ Thereafter the Application number will be generated for name reservation/Incorporation which is yet to be submitted/uploaded by the user and resubmission for the name will be done through Pat-A of SPICE+ If the applicant intends to apply for name, incorporation and other integrated services together, he can do so together by filling relevant information in Part A and Part B. D. Relevant fields of Part-A of SPICE+ (i) Type* of company (ii) Class of company (iii) Category of company (iv) Sub-Category of company (v) Main division/Branch of industrial activity of the company (vi) Description of the main division. E. If Part-A is complete, applicant can click on Submit Name Reservation (only can apply for 2 names) or ∙ Proceed to Incorporation (if the applicant chooses this option, then he will apply for ∙ single name and jump on the Part-B of web form). F. Note-1 While applying for the Name, the applicant has to ensure that the proposed name selected does not contain any word which is prohibited under Section 4(2) & (3) of the Act and Rule 8 of the Companies (Incorporation) Rules, 2014. The applicant has to read and understand Rule 8 of the Companies (Incorporation) Rules, 2014 in respect of any proposed name before applying for the same. G. Note-2 the applicant can only apply for 2 names in Part-A of SPICE+ by paying the fees of Rs. 1000. H. Note-3 There are not any mandatory attachments, however it would be mandatory to attach relevant documents and No Objection Certificates (NOCs) in Part A of SPICe+ only when a name which requires the approval of a Regulator or NOC etc. I. Note-4 The only one file is allowed to be uploaded as an attachment & Maximum size shall not exceed 6MB in overall. J. Part – B of SPICE+ This part has been divided into different parts like – One section is related to Companies Structure and – Other part is related to Directors and subscriber Particulars. – Each section of Part-B shall contain “Save and continue button” – Check form validation will happen on each of the section K. Services offered under Part-B of Spice+ (i) Incorporation (ii) DIN allotment (iii) Mandatory issue of PAN (iv) Mandatory issue of TAN (v) Mandatory issue of EPFO registration (vi) Mandatory issue of ESIC registration (vii) Mandatory issue of Profession Tax registration (Maharashtra) (viii) Opening of Bank Account and (ix) Allotment of GSTIN. L. Relevant Documents and information to be provided by foreign company 1. Duly apostle copy of the resolution by the Foreign Company, for their authorized representative. 2. Duly apostle copy of the resolution by the Foreign Company, for approving the no. and of subscribers. 3. Duly notarized and apostle copy of the ID proofs of the authorized representative, passport is mandatory if such person is non-resident; 4. Name of

Case Laws, Investment(Savings), Loan Or Working Capital, Market Research & Analysis, Marketing

FOREIGN DIRECT INVESTMENT IN INDIA

fsadmin / December 13, 2021

FDI is one of the important tools of economic growth for a developing nation like India. So to boost the flow of foreign investment the process of liberalization is undertaken. However, liberalization of an economy always comes with regulations. Routes for FDI Basically, there are two routes for FDI in India. There is the Automatic Route, where no approval or authority is required by the private foreign investor. He can invest in any company it wishes with no need for government approval. And then there is the Government Route. In this route, there is no investment without the prior approval of the Government of India. Foreign Direct Investment in India does not have a uniform rate. Some industries allow 100% FDI, i.e. the entire funds of the business can be from foreign direct investment. The percentages vary from 26% to 49% to 51%. There are a few industries where FDI is strictly prohibited under any route. These industries are Atomic Energy Generation Any Gambling or Betting businesses Lotteries (online, private, government, etc) Investment in Chit Funds Nidhi Company Agricultural or Plantation Activities (although there are many exceptions like horticulture, fisheries, tea plantations, Pisciculture, animal husbandry, etc) Housing and Real Estate (except townships, commercial projects, etc) Trading in Transferable Development Rights (TDR’s) Cigars, Cigarettes, or any related tobacco industry SECTOR SPECIFIC CONDITION FOR FDI FOR 100% AUTOMATIC ROUTE 1. Air Transport Services (non-scheduled and other services under civil aviation sector) Main condition: 1. Non-Scheduled Air Transport Services 2. Helicopter services/seaplane services requiring DGCA approval Other condition: (a) Air Transport Services would include Domestic Scheduled Passenger Airlines; Non-Scheduled Air Transport Services, helicopter and seaplane services. (b) Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines, helicopter and seaplane services, as per the limits and entry routes mentioned above. (c) Foreign airlines are also allowed to invest in the capital of Indian companies, operating scheduled and non-scheduled air transport services, up to the limit of 49% of their paid-up capital. Such investment would be subject to the following conditions: (i) It would be made under the Government approval route. (ii) The 49% limit will subsume FDI and FII/FPI investment. (iii) The investments so made would need to comply with the relevant regulations of SEBI, such as the Issue of Capital and Disclosure Requirements (ICDR) Regulations/Substantial Acquisition of Shares and Takeovers (SAST) Regulations, as well as other applicable rules and regulations. (iv) A Scheduled Operator’s Permit can be granted only to a company: iv.a) that is registered and has its principal place of business within India; iv.b) the Chairman and at least two-thirds of the Directors of which are citizens of India; and iv.c) the substantial ownership and effective control of which is vested in Indian nationals. (v) All foreign nationals likely to be associated with Indian scheduled and non-scheduled air transport services, as a result of such investment shall be cleared from security view point before deployment; and (vi) All technical equipment that might be imported into India as a result of such investment shall require clearance from the relevant authority in the Ministry of Civil Aviation. (i) The FDI limits/entry routes, mentioned at paragraph 5.2.9.2 (1) and 5.2.9.2 (2) above, are applicable in the situation where there is no investment by foreign airlines. (ii) The dispensation for NRIs regarding FDI up to 100% will also continue in respect of the investment regime specified at para (c) (ii) above. (d) In addition to the above conditions, foreign investment in M/s Air India Limited shall be subject to the following conditions: (i) Foreign investment in M/s Air India Ltd., including that of foreign airline(s), shall not exceed 49% either directly or indirectly. (ii) Substantial ownership and effective control of M/s Air India Ltd. shall continue to be vested in Indian Nationals 2. Automobiles Main condition: Subject to the provisions of the FDI policy, foreign investment in ‘manufacturing’ sector isunder automatic route. Further, a manufacturer is permitted to sell its products manufactured in India through wholesale and/or retail, including through e-commerce, without Government approval. 3. Biotechnology (Greenfield) Main condition: Greenfield projects Other condition: Nil 4 Broadcast Content Services (Up-linking of Non-‘News & Current Affairs’ TV Channels/ Down-linking of TV Channels) Main condition: Up-linking of Non-‘News & Current Affairs’ TV Channels/ Down-linking of TV Channels Other condition: Nil 5. Broadcasting Carriage Services Main condition: (a)Teleports (setting up of up-linking HUBs/Teleports); (b) Direct to Home (DTH); (c) Cable Networks (Multi System operators (MSOs) operating at National or State or District level and undertaking upgradation of networks towards digitalizationand addressability); (d) Mobile TV; (e) Headend-in-the Sky Broadcasting Service(HITS) (f) Cable Networks (Other MSOs not undertaking upgradation of networks towards digitalization and addressability and Local Cable Operators (LCOs)) Other condition: Infusion of fresh foreign investment, beyond 49% in a company not seeking license/permission from sectoral Ministry, resulting in the change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will require Government approval. 6. Capital Goods Main condition: Subject to the provisions of the FDI policy, foreign investment in ‘manufacturing’ sector isunder automatic route. Further, a manufacturer is permitted to sell its products manufactured in India through wholesale and/or retail, including through e-commerce, without Government approval. 7. Cash & Carry Wholesale Trading/Wholesale Trading (including sourcing from MSEs) Main condition: Cash & Carry Wholesale Trading/Wholesale Trading (including sourcing from MSEs) Other condition: Guidelines for Cash & Carry Wholesale Trading/Wholesale Trading (WT): (a) For undertaking WT, requisite licenses/registration/ permits, as specified under the relevant Acts/Regulations/Rules/Orders of the State Government/Government Body/Government Authority/Local Self-Government Body under that State Government should be obtained. (b) Except in case of sales to Government, sales made by the wholesaler would be considered as ‘cash & carry wholesale trading/wholesale trading’ with valid business customers, only when WT are made to the following entities: (i) Entities holding sales tax/ VAT registration/service tax/excise duty registration; or (ii) Entities holding trade licenses i.e. a license/registration certificate/membership certificate/registration under Shops and Establishment Act, issued by a Government Authority/Government Body/Local Self-Government Authority, reflecting that the entity/person holding the license/ registration certificate/ membership certificate,

Case Laws, Company Law, Insurance, Others

Import Export Code

fsadmin / December 13, 2021

Introduction In this age of cut-throat competition, everyone wants to grow their business beyond the limits of the domestic market. However, doing business globally isn’t just a cup of tea for everyone. Before going global, you need to follow several procedures and laws in place and get different registration and license. IEC (Import Export Code) license is one of such prerequisites when you’re thinking of importing or exporting from India. It is also known as Importer- Exporter Code. IEC (Import Export Code) is required by anyone who is looking to kick-start his/her import/export business in the country. It is issued by the DGFT (Director General of Foreign Trade). IEC is a 10-digit code which has lifetime validity. Predominantly importers merchant cannot import goods without the Import Export Code and similarly, the exporter merchant cannot avail benefits from DGFT for the export scheme, etc. without IEC. Situations Where IEC is required When an importer has to clear his shipments from the customs then it’s needed by the customs authorities. When an importer sends money abroad through banks then it’s needed by the bank. When an exporter has to send his shipments then it’s needed by the customs port. When an exporter receives money in foreign currency directly into his bank account then it’s required by the bank. Steps Involved in IEC (Import/Export Code) Registration Step 1: Application Form First, you need to prepare an application form in the specified format – Aayaat Niryaat Form ANF-2A format and file it with the respective Regional office of DGFT. Step 2: Documents Secondly, you need to prepare the required documents with respect to your identity & legal entity and address proof with your bank details & the certificate in respect of ANF2A. Step 3: Filing Application Once your application is completed, you need to file with DGFT via DSC (Digital Signature Certificate) and pay the required fee for the IEC Registration. Step 4: IEC Code Finally, once your application is approved then you would receive the IEC Code in a soft copy from the government. Documents required by different entities for IEC (Import Export Code) Registration Sole Proprietorship: Digital photograph (3*3) of proprietor Copy of pan card of the proprietor Copy of passport/voter id/driving license/UID If the business is self-owned, then sale-deed If the business is rented, then rental/lease agreement Partnership Firm: Digital photograph (3*3) of the managing partner Copy of partnership deed Copy of passport/voter id UID/driving license/PAN of the managing partner signing the application Sale-deed, in the case of self-owned business If the business is rented, then rental/lease agreement Bank certificate as per ANF 2A/ Cancelled cheque bearing blueprinted name of the applicant entity and A/c no. LLP: Digital photograph (3*3) of the designated partner/director of the company signing the application Applicant’s copy of pan card Copy of passport/voter id UID/driving license/PAN of the managing partner/director signing the application Sale-deed, in the case of self-owned business If the business is rented, then rental/lease agreement Bank certificate as per ANF 2A/ Cancelled cheque bearing blueprinted name of the applicant entity and A/c no. Trust: Digital photograph (3*3) of the secretary/chief executive/signatory applicant Registration certificate of society/copy of the trust deed Copy of passport/voter id UID/driving license/PAN of the managing trustee/chief executive signing the application Sale-deed, in the case of self-owned business If the business is rented, then rental/lease agreement Bank certificate as per ANF 2A/ Cancelled cheque bearing blueprinted name of the applicant entity and A/c no. HUF: Digital photograph (3*3) of the Karta Copy of pan of Karta Copy of passport/voter id UID/driving license/PAN of Karta Sale-deed, in the case of self-owned business If the business is rented, then rental/lease agreement Bank certificate as per ANF 2A/ Cancelled cheque bearing blueprinted name of the applicant entity and A/c no. Advantages of IEC Registration Expansion of Business – IEC assists you in taking your services or product to the global market and growing your businesses. Availing Several Benefits – The Companies could avail several benefits of their imports/ exports from the DGFT, Export Promotion Council, Customs, etc., on the basis of their IEC registration. No Filing of returns – IEC does not require the filing of any returns. Once allotted, there isn’t any requirement to follow any sort of processes for sustaining its validity. Even for export transactions, there isn’t any requirement for filing any returns with DGFT. Easy Processing – It is fairly easy to obtain IEC code from the DGFT within a period of 10 to 15 days after submitting the application. There isn’t any need to provide proof of any export or import for getting IEC code. No Need For renewal – IEC code is effective for the lifetime of an entity and requires no renewal. After it is obtained, it could be used by an entity against all export and import transactions. Cases Where Export Import Code (EIC) is not mandatory According to the latest circular issued by the government, IEC is not mandatory for all traders who are registered under GST. In all such cases, the PAN of the trader shall be construed as new IEC code for the purpose of import and export. Import Export Code (IEC) isn’t required to be taken in case the goods exported or imported is for personal purposes and isn’t used for any commercial purpose. Export/ Import done by the Government of India Departments and Ministries, Notified Charitable institutions need not require getting Import Export Code. Frequently Asked Questions (FAQs) What is IEC code registration? Ans. Import Export Code or IEC is a 10-digit code that a business or a person needs to import/export goods/services. This code is issued by DGFT (Director General of Foreign trade), Ministry of Commerce and Industries, Government of India. The validity of this code is for lifetime, that is, there is no need to renew it. This code is generated within 5-15 working days after the documents are submitted and all the corrections required are made. What is the process of getting IEC code registered? Ans.

Case Laws, Marketing, Others

Establishment of Branch/Liaison Office in India by Foreign entities

fsadmin / December 13, 2021

Every business, as it grows, wants to expand its business globally, for this, it need to establish a subsidiary or branch or liaison office in other country/countries. It is also required to obtain prior permissions from the respective authorities of other country in which it is willing to operate its business. (Known as Host Country). India is one of the fastest growing market compare to other countries, and also provides ample opportunities to foreign entities to operate their business from India. Let’s understand in detail: What is Foreign Company, Branch Office/ Liaison Office Permitted and Prohibited areas Rules and regulations for establishment of branch/liaison offices Tax Implications Meaning of Foreign CompanyAs per the legislative provisions, a foreign company means – company or a body corporate incorporated outside India and Which has a place of business Whether by itself or through an agent, physically or through electronic mode, and Conducts any business activity in India. Note: This definition includes a Branch Office; all the provisions of the Companies Act applying to the company will also be applicable for BO. Meaning of Branch Office (BO) A Branch office is an extension of foreign entity for carrying out the permissible activities in any other country/countries. The role of BO is to undertake the permissible activities in India. Permissible Activities: Export / Import of goods. Rendering professional or consultancy services Carrying out research work, in areas in which the parent company is engaged. Promoting technical or financial collaborations between Indian companies and parent or overseas group company. Representing the parent company in India and acting as buying / selling agent in India. Rendering services in information technology and development of software in India. Rendering technical support to the products supplied by parent/group companies. Foreign airline / shipping company. Normally, the Branch Office should be engaged in the activity in which the parent company is engaged. Prohibited areas: Retail trading activities of any nature is not allowed for a Branch Office in India. A Branch Office is not allowed to carry out manufacturing or processing activities in India, directly or indirectly Meaning of Liaison Office (LO) A Liaison office is a representative office of foreign entity which act as a channel of communication between Head Office abroad and parties in India. The role of LO is notundertaking any commercial activities but limited to collecting information and providing information about the company to the prospective Indian Customers. The Permission to set up such offices is initially granted for a period of 3 years and this may be extended from the date of expiry of the original approval/ extension granted by the RBI, if the applicant has complied with the conditions as prescribed by RBI. Permissible Activities: Representing in India the parent company / group companies Promoting export / import from / to India. Promoting technical/financial collaborations between parent/group companies and companies in India. Acting as a communication channel between the parent company and Indian companies. Note: However, no foreign law firm shall be permitted to open any LO as per recently passed order by the Supreme Court of India. Compliances for establishment of branch/liaison offices A body corporate incorporated outside India (including a firm or other associations of individuals), desirous of opening a Liaison office/Branch office have to obtain permission from the RBI under provisions of FEMA 1999. The application for establishing BO / LO in India should be forwarded by the foreign entity through a designated AD Category – I Bank to the address of – Foreign Exchange Department, Reserve Bank of India. The application should be forwarded along with prescribed documents which includes – English version of the Certificate of Incorporation / Registration or Memorandum & Articles of Association attested by Indian Embassy / Notary Public in the Country of Registration. Latest Audited Balance Sheet of the applicant entity The applications from such entities in Form FNC (Annex-1) will be considered by Reserve Bank under two routes: Reserve Bank Route Government Route Where principal business of the foreign entity falls under the sectors where 100 per cent FDI is not permissible. Note: – Applications from entities falling under this category and those from Non – Government Organizations / Non – Profit Organizations / Government Bodies / Departments are considered by the Reserve Bank in consultation with the Ministry of Finance, GOI. Criteria which are considered by the RBI while sanctioning Branch office/Liaison Office of foreign entities: Requirements For Liaison Office For Branch Office Profit making track record Immediately 3 FY in the home country. Immediately 5 FY in the home country. Net Worth >USD 50,000 or its equivalent. >USD 100,000 or its equivalent. The application in Form FNC shall be filed to an Authorized Dealer Category – I along with prescribed documents viz., Copy of Certificate of Incorporation/Registration attested by the Notary Public in the country of registration. AOA/MOA attested by the Notary Public Audited Balance Sheet Bankers’ Report from the applicant’s banker in the country of registration showing the number of years the applicant has had banking relations with that bank. Bankers’ Report from the applicant’s banker in the country of registration showing the number of years the applicant has had banking relations with that bank. Note: Applicants who do not satisfy the eligibility criteria and are subsidiaries of other companies can submit a Letter of Comfort from their parent company as per Annex-2, subject to the condition that the parent company satisfies the eligibility criteria as prescribed above. Compliance under Companies Act, 2013 Such foreign companies shall be governed by the provisions of: (i) Chapter XXII of the Companies Act, 2013 (ii) Companies (Registration of Foreign Companies) Rules, 2014 Rule 3(3) of the Companies (Registration of Foreign Companies) Rules, 2014 requires every foreign to file e-Form FC-1 to the Ministry of Corporate Affairs within 30 days of the establishment of its place of business in India. And Rule 3(4) provides that in case of any alteration in the aforesaid documents the Foreign Company is require to submit a return in e-Form FC-2 containing the particulars of alteration as

Case Laws, Company Law, Income Tax, Others, Start-Ups

LLP registration in India by an NRI

admin / October 28, 2021

Earlier, NRIs and Foreign Nationals looking to start a business in India did it through the automatic route of 100% foreign direct investment (FDI) in a private limited company. Subsequently, the Indian government permitted a 100% FDI in a Limited Liability Partnership (LLP) via the automatic route. This made it easier for NRIs and foreign nationals to invest in Indian businesses. Today, we will look at the process of LLP registration in India for NRIs and foreign nationals. Before November 2015, an NRI or a foreign national needed to seek approval from the Indian government to invest in an LLP in India. Hence, the process was long and expensive. This was another reason behind the preference of a private limited company for FDIs. However, with the relaxation of the rules in November 2015, LLPs became the ideal option for FDIs in India. Today, the government permits a 100% FDI in an LLP in India via the automatic route. While the government has restricted the sectors for these investments, there are no other deterring factors. Minimum Requirements for LLP registration by an NRI: Shareholders: Minimum 2 shareholders are required for the incorporation of LLP. Designated Partners: Minimum 2 designated Partners are needed of them at least 1 should be a Indian resident. An office address in India. In order to register a Limited Liability Partnership (LLP) by an NRI, the identity proof, address proof as well as documents regarding Indian origin are required. Each one of these documents is required to be attested through the Indian embassy or notary public. PROCESS FOR LLP REGISTRATION IN INDIA FOR NRIS AND FOREIGN NATIONALS In India, you need at least two people to register an LLP. One of them should be an Indian citizen and resident in India. Here are the steps for LLP registration in India for NRIs and foreign nationals: Obtain Digital Signature Certificate (DSC) All proposed designated partners of the LLP must have a DSC. NRIs and foreign nationals need to attach a notarized or apostilled copy of their Passport and proof of address along with the DSC application. Apply for a Designated Partner Identification Number (DPIN) All designated partners in an LLP need a DPIN. Thay can apply for the DPIN together with the application for incorporation of the LLP in form Fillip. Seek approval for the name of the LLP You must apply for reserving the name of the LLP. You must make this application to the Ministry of Corporate Affairs (MCA) in form RUN-LLP. Also, you can apply for up to four names as per your preference. (two names each attempt). The proposed names must follow the guidelines as per the LLP Act, 2008. Further, you must ensure that the name is unique and not similar to any other LLP name by making a check on the MCA website. Incorporate the LLP Once you receive approval for a name, you must submit the application for incorporation of the LLP within 3 months. You will have to submit the required documents ie. Subscribers’ sheet along with the consent of the partners, NOC and proof of Registered Office and details of interest of designated partners in other entities in form Fillip. Once the application is approved, the MCA provides a certificate of incorporation and you can commence business. File the LLP Agreement Within 30 days of incorporation of the LLP, you must ensure that all partners sign the LLP agreement and file it with the MCA. Unless you file the LLP agreement, the incorporation process is incomplete. Also, failure to comply results in heavy fines. PRIVATE LIMITED COMPANY REGISTRATION IN INDIA BY AN NRI In case of the ‘Non-resident Indian’ (NRI), and Overseas Citizens of India (OCI), the Private Limited Company registration in India could be considered as the ideal kind of business that could be registered in India. Reasons for choosing Private Limited Company registration in India by an NRI or OCI A Private limited company can be started with as less as two shareholders. Private limited companies are seen as particularly ideal for non-Resident Indians due to the nature of its legal and capital requirements. Compliance of a private limited company is much simpler compared to that of a Public limited company. There is no requirement of prior approval from the Government or the Reserve Bank of India for directing foreign investments into a private limited company. Pre requisites for Private Limited Company registration in India 2 directors 2 shareholders An office address in India. (one of the directors must be an Indian Resident) For becoming a director of an Indian Company one should obtain Directors Identification Number (DIN) and Digital Signature Certificate (DSC). Most of the forms filed with the Registrar of Companies (ROC) must be signed with the DSC. In order to register a Private Limited Company or Public Limited Company by an NRI, the identity proof, address proof as well as documents regarding Indian origin are required. Every one of these documents is required to be attested through the Indian embassy or notary public. FEMA Regulations for NRI and OCI for Company registration in India To ease investment in India, the government permitted NRIs as accepted entities for investment as per the Regulations notified under Foreign Exchange Management Act, 1999. NRIs as per current FDI/FEMA legislation in India includes persons who are resident outside India but are citizens of India or are persons of Indian origin. NRIs can invest in India either by purchasing shares of an Indian company or investing in the capital of any existing entity or by registering a new business in the country. The FEMA regulations for NRIs an OCI wanting to invest and register a company in India are described in Schedule 4 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017. SCHEDULE 4 OF FOREIGN EXCHANGE MANAGEMENT (TRANSFER OR ISSUE OF SECURITY BY A PERSON RESIDENT OUTSIDE INDIA) REGULATIONS, 2017 IN DETAILS BELOW: Schedule 4 [See Regulation 5(4)] Investment on non-repatriation basis A. Purchase

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INCORPORATION OF WHOLLY OWNED SUBSIDIARY COMPANY OR SUBSIDIARY COMPANY OF FOREIGN COMPANY IN INDIA

admin / October 28, 2021

Case Laws, Company Law

How to Choose the Best Legal Structure for Business

admin / October 28, 2021

Choosing the best structure for business can be dicey and confusing. Various factors are needed to be kept in mind while choosing because each form of business has different way of registration, different tax compliance, different liability, jurisdiction, authority, management and number of members. It also depends on what type of business you want to do, on what scale you want to do the business and whether you want to do it single-handedly or with two or more persons. One has to thoroughly study the types of business structures you can implement for your business and the benefits you can derive from it. Types of business structure one can create:- Sole Proprietorship Partnership Firm Non-Government Organisation One Person Company Private Limited Company Public Limited Company Limited Liability Partnership Hindu Undivided Family Sole Proprietorship – It is the oldest and the simplest form of business entity. This type of business entity is mainly suitable for small-scale business operators. Sole Proprietorship Company is owned and managed by the individual making him the sole authority to take all kind of decisions regarding the operations of the organization. Further, the taxation and accounting procedure in this form of company is much easier than other forms of companies. As a sole proprietor is not required to file a separate business tax return and all income generated from the business is reported on the personal tax form. Advantages – No need to file financial statements to any authority. Ease of starting business. Can be started with less cost. Less legal compliances required. Only one person is required to start business. Disadvantages – Unlimited liability of the proprietor. Less sources of funds available. Becomes difficult to be managed by single person when business grows at very fast pace. No perpetual succession. Limits – Only 1 individual is holds the authority. Unlimited liability. Partnership Firm – The partnership firm is an association of 2 or more persons who desire to come together and carry out a business. One of the advantages of partnership firm over sole proprietorship firm is the increase in the amount of capital investment. Further, more than one owner helps to increase the skills and improves the decision-making process. In addition to this, the risk of losses will be shared by all the members in this type of company. It is registered under The Partnership Act, 1932. Advantages – Audit of the firm is not required. Less compliances required. Less costly to establish. Can be owned by two or more persons. Disadvantages – Unlimited liability of partners. Less source of funds available. Disputable form of business. No transferability of shares. Limits – Minimum 2 partners; maximum 50. Unlimited liability. No fixed minimum capital requirement. Non-Government Organisation – The Non-profit Organisation is that Organisation which did not do their work for earning profit rather than its main objective is to do work to achieve a specific goal for the welfare of society or its members. These are founded by a group of people who come together for a common purpose, i.e. to provide service to members and people. These types of organisations run its operation mainly on the donations, entrance fee, subscription fee, or membership fee. Non-government organizations in India can be structured and incorporated as one of the following three forms: Trust registered under Indian Trust Act, 1882, Society registered under Societies Registration Act, 1860, Non-Profit Company registered under Section 8 of The Indian Companies Act, 2013. Advantages – Distinct Legal Identity. Zero tax. No Minimum Capital demand. Name. CARO. Tax advantages. Credibility Exemption to the donor’s Membership. Disadvantages – Use of Profits. No profit distribution. Remuneration Officer: Zero Benefits. .Objectives. Alteration in AOA not possible. Rules and Regulations. Limits – No limit number of members. One Person Company – The concept of One Person Company (OPC) was recently introduced to overcome the various disadvantages associated with sole proprietorship form of business. Just like sole proprietor company, one person company is also owned and managed by the single owner, giving him a full control over the company. However, unlike the sole proprietorship business entity, the liability of the owner is limited to his/her contributions to the business. Further, as the company formed is a separate legal entity from its members, the life of the company does not come to an end with the death of partners. It is registered under The Companies Act, 2013. Advantages – Less compliances to be maintained. Status of separate legal entity. Perpetual existence. Great opportunity for small business to expand. Having contractual rights. Disadvantages – It has to be converted into private limited company after some limits. A foreign national, minor or any corporate entity cannot participate in One Person Company. Cannot raise funds from public. Cannot run NBFC operations. Cannot turn into Section 8 companies. Limits – Only 1 member Only 1 nominee At least 1 director; maximum 15 PUSC Rs. 1 lakh ≤ Rs. 50 lakh Turnover ≤ Rs. 2 crore Private Limited Company – This type of company is basically suitable for medium and large-scale business enterprises. It is a form of privately held business with minimum 2 and maximum 50 members. Some of the advantages of this form of company are that the liability of the members of this company is limited to their share. It also involves many legal and tax compliances. It is registered under The Companies Act, 2013. Advantages – Preferred by banks, VCs and investors. Easy to allocate and redistribute shares to other directors/ people who have invested money in the company. Acts as separate legal entity which limits the liability. Offers the flexibility of a partnership firms and advantages of a Limited Company. Easy to register, manage and run. The company can be smoothly dissolved. Perpetual Succession. Disadvantages – Registration process is slightly lengthy and expensive. Compliance formalities. Division of ownership. Restricts transferability of shares. Cannot bring public issue. Limits – Minimum 2 shareholders; maximum 200. At least 2 directors; maximum 15 PUSC at least Rs. 1 lakh Public Limited Company – This type of company can be formed with at least 3 directors and 7 shareholders with

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INCORPORATION OF WHOLLY OWNED SUBSIDIARY COMPANY OR SUBSIDIARY COMPANY OF FOREIGN COMPANY IN INDIA

How to Choose the Best Legal Structure for Business

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