NGO Compliances
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
SUBSIDIARY COMPANY OF FOREIGN COMPANY IN INDIA
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
Import Export Code
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.
Annual Compliances of all types of business entities
mum 4 Board Meetings every year – A meeting of board of directors of the company should be held within 30 days of its incorporation. For this, a 7 days’ prior notice shall be given to the board of directors specifying the date, time, venue and agenda matters of the meeting. Thereafter, next every meeting should be conducted within 120 days. Company will send to the members of the Company approved Financial Statement, Directors’ Report and Auditors’ Report at least 21 c;ear days before the Annual General Meeting. A bank account should be opened in the name of the company. Statutory audit by a Chartered Accountant. Appointment of Statutory Auditor with 30 days of incorporation. The subscriber to the shares of the company will have to infuse the subscription amount in the bank account opened in the name of the company. Once the subscription amount is credited, the company shall allot the shares to the shareholders of the company After the allotment of shares, the company shall issue the share certificates in the name of the shareholders within 60 days of incorporation of the company. The share certificates shall be adequately stamped and signed. The stamp duty to be paid on share certificates will depend on the state in which the company is incorporated. A company having a share capital must file a declaration for commencement of business within 180 days of its incorporation in e-Form INC-20A. A company is restricted from commencing any business activities unless it has filed such declaration with the Registrar of Companies. A director in every first board meeting of the relevant financial year must declare in writing that he is not disqualified to act as a director of a company. The declaration shall be made in Form DIR-8, as specified under the Companies Act, 2013. A director must disclose his concerns or interest in any other entity at the first board meeting in which he participates at the director. The disclosure shall be made in Form MBP-1 as specified under the Companies Act, 2013. A Company has to file half yearly return in respect of pending payments of more than 45 days to MSME vendors in the Form MSME – 1. For the period of April to September, return must be filed by 30th October and for the period of October to March; return must be filed by 30th April. Director KYC (DIR-3 KYC and Web KYC) must be done on or before 30th September every year of all directors of the company. Return of deposits must be filed on or before 30th June to furnish information about deposits and/or outstanding receipt of loan or money other than deposits in the Form – DPT -3. Directors’ Report shall be prepared by mentioning all the information required for Company under Section 134 read with relevant rules and relevant provisions of other Act. It should be signed by the “Chairperson” authorized by the Board, where he is not so authorized by at least 2 Directors one of them MD if there is any. Annual filings to the ROC. (e.g. AOC-4 for Financial Statement, MGT-7/MGT-7A for Annual return) Private Company having Paid-up Share Capital of Rs. 10 crore or more or Turnover of Rs. 50 crore or more shall be certified by a Company Secretary in Practice. Filing requires with Annual Return MGT – 7 and certificate MGT – 8 with UDIN number. Maintaining minutes and statutory registers. Public Limited Company (Unlisted) Holding of minimum 4 Board Meetings every year – A meeting of board of directors of the company should be held within 30 days of its incorporation. For this, a 7 days’ prior notice shall be given to the board of directors specifying the date, time, venue and agenda matters of the meeting. Thereafter, next every meeting should be conducted within 120 days. Cost auditor is required to be appointed as per Section 148(3) along with Rule 6(2) and Rule 6(3A) of the Companies (Cost Records and Audit) Rules, 2014. For this, Form CRA-2 has to be filed. Return of Deposits has to be filed with the ROC under whose jurisdiction the company falls via Form DPT-3, in compliance with Rule 16 of Companies (Acceptance or Deposit) Rules, 2014. Section 203 read with Rule 8 & 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 requires appointment of CFO or CS or CEO within 30 days of AGM or within 6 months in case of casual vacancy. For this, Form MGT-14 and Form DIR-12 are filed. AGM for declaration of dividend has to be conducted in compliance with Section 96 of the Companies Act, 2013. CSR Committee (If exists) has to hold four meeting with a gap of not less than 120 days between two meetings for discussion and approval of CSR activities. This is done in compliance with Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014 and Secretarial Standard-1. Director’s are required to disclose any financial interest in the company via Form MBP-1in compliance with Section 184(1) of the Companies Act, 2013 read with Rule 9(1) of the Companies (Meetings of Board and its Powers) Rules, 2014. Statutory audit by a Chartered Accountant whose appointment of should be done within 30 days of incorporation. The subscriber to the shares of the company will have to infuse the subscription amount in the bank account opened in the name of the company. Once the subscription amount is credited, the company shall allot the shares to the shareholders of the company. After the allotment of shares, the company shall issue the share certificates in the name of the shareholders within 60 days of incorporation of the company. The share certificates shall be adequately stamped and signed. The stamp duty to be paid on share certificates will depend on the state in which the company is incorporated. A company having a share capital must file a declaration for commencement of business within 180 days of its incorporation
Trademarks
Introduction A trademark is a type of intellectual property consisting of a recognizable sign, design, or expression which identifies products or services of a particular source from those of others, although trademarks used to identify services are usually called service marks. Customers identify a product by its trademark. Value and importance of trademark increases as the business grows. Trademark is a valuable property of any business. Sometimes trademarks like Coca-cola, Pepsi, IBM, Philips, etc. get worldwide recognition. It is necessary for a business that a trademark is not used by an unauthorized person. The Trademarks Act, 1999 has been enacted with an intention to protect rights of trademarks of business. The foundation behind right to restrain the use of a similar name is the principle that no one is entitled to represent his business or goods as being the business or goods of another. A trademark may consist of a device depicting the picture of animals, human beings, etc., words, letters, numerals, signatures or any combination thereof. Since a trademark indicates relationship in the course of trade, between trader and goods, it serves as a useful medium of advertisement for the goods and their quality. Definition of Trademark Trademark means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include shape of goods, their packaging, and combination of colours. A trademark is any word, symbol, phrase or logo design adopted and placed on a product offered for sale or on a container to identify its source. In this way, the connection between the product and the manufacturer/trader is bought to the notice of the public at large. Trademarks are an integral part of a firm’s strategy to differentiate its products and services from other competitors and to establish consumer brand loyalty. Trademark Search Trademark search must be completed before trademark registration application to find any faults in existing trademarks. This can be done through government website. Trademarks registration is controlled by Comptroller general of patent designs and trademarks. Procedure of Trademark Search Navigate to website of the Comptroller General of Patent Designs and Trademarks and follow these steps:- Select “Wordmark” as the Search type at the top of the page Enter the wordmark you would like to search on the trademark database. The trademark database can be compared against the search query with three conditions- ‘start with,’ ‘contains’ and ‘match with.’ The class of the Trademark that is applicable should be entered. Trademarks are divided into 45 classes wherein each class represents a distinct group of goods and services. A registered trademark or trademark application will only be pertinent to the class under which it is applied for With the final step, you can click on search to begin the Trademark search. Selecting the option “show details” would display information pertaining to the trademark. Trademark must not be registered same as any existing one. If the results show no results found then there’s no registered trademark same as searched ones. Trademark Consultation Trademarks are those marks which helps business to get identified in market. It is very easy to get trademark registered but it is preferred by most of the business to get it done professionally in order to avoid any unwanted consequences. Trademark consultation with professional is very much convenient. It has following benefits- Helps in the systematic filing of the application. Registration is done in a manner as prescribed by the rules and regulations governing Trademark law. Helps in removing ambiguities. An application not filed in a manner prescribed can be rejected and applicant will get no legal right on the trademarks. That’s why it is good to get trademarks registered professionally. Trademark Registration Trademarks are those marks which helps business to get identified in market. Trademark registration India is under Controller General of Patents Designs and Trademarks, Ministry of Commerce and Industry, Government of India. Trademarks are registered under the Trademark Act, 1999. Trademarks are intellectual property. Types of Trademarks Name Symbol Music Image Logo Number Word Packaging Shape Slogan Graphic content 3D image/content Who can apply for trademark registration? Private firms Individuals Companies – LLP, OPC, Private Company, Public Company, Partnership, etc. NGO’s Process of Trademark registration Trademark search to ensure that there are no issues & there are minimal chances of an objection being raised in the future. After choosing name or design, prepare the authorization letter duly signed, to a registered lawyer or agent to apply for trademark registration. Once the application gets approved, we can start using ™ symbol. Once a trademark application is complete, the application will be verified by the trademark office. The government can also object if your name similar to some other trademark in the same class, or the name is deemed obscene and hurts religious sentiments. In case no objection is raised, the trademark registrar will publish an advertisement in the trademarks journal. If no opposition is filed by any party within 4 months, the trademark should be registered within the next 6 months. If the objection has been filed on your trademark and the opposition doesn’t agree with your response, then hearing is held before the registrar. Documents required for registration Address proof of applicant. Identity proof of applicant. Trademark material. Registration certificate. User affidavit. Proof of use of ™. Signed form 48. MSME recognition. Advantages of Trademark Registration Helps in differentiating products/services. Protection from infringement. Helps in building goodwill. Gives legal protection. Helps in promotion. Opens up better opportunity. Gives unique identity to the business. Creation of intangible asset. Trademark objection After the scrutiny and verification, registrar issues an examination report for trademark. In that report registrar can come up with an objection. A response to this must be filed within a month otherwise registrar will abandon the application. Reply to objection Assess the examination report. You must get it done professionally. Get assessment of implications of notice. Get drafted objection reply and review it. Submit the response. Trademark Renewal The trademark remains valid just for 10 years after that
Subsidiary Company – Indian & Foreign
Introduction A subsidiary, subsidiary company or daughter company is a company owned or controlled by another company, which is called the parent company or holding company. Two subsidiaries that belong to the same parent company are called sister companies. The subsidiary can be a company, corporation or limited liability company, and in some cases a government- or state-owned enterprise. They are a common feature of modern business life and most multinational corporations organize their operations in this way. Examples include holding companies such as The Walt Disney Company, Warner Media, or Citigroup; as well as more focused companies such as IBM, Xerox, or Microsoft. These, and others, organize their businesses into national and functional subsidiaries, often with multiple levels of subsidiaries. Subsidiaries are separate, distinct legal entities for the purposes of taxation, regulation and liability. For this reason, they differ from divisions, which are businesses fully integrated within the main company, and not legally or otherwise distinct from it. In other words, a subsidiary can sue and be sued separately from its parent and its obligations will not normally be the obligations of its parent. However, creditors of an insolvent subsidiary may be able to obtain a judgment against the parent if they can pierce the corporate veil and prove that the parent and subsidiary are mere alter egos of one another, therefore any copyrights, trademarks, and patents remain with the subsidiary until the parent shuts down the subsidiary. Tiered Subsidiaries In descriptions of larger corporate structures, the terms “first-tier subsidiary”, “second-tier subsidiary”, “third-tier subsidiary”, etc., are often used to describe multiple levels of subsidiaries. A first-tier subsidiary means a subsidiary/daughter company of the ultimate parent company, while a second-tier subsidiary is a subsidiary of a first-tier subsidiary: a “granddaughter” of the main parent company. Consequently, a third-tier subsidiary is a subsidiary of a second-tier subsidiary—a “great-granddaughter” of the main parent company. Definition as per The Companies Act, 2013 As per Section 2 (87) of the Companies Act 2013, a subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company: (i) controls the composition of the Board of Directors; or(ii) exercises or controls more than one-half of the total share capitalEither at its own or together with one or more of its subsidiary companies:Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed. Explanation-For the purposes of this clause— a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company; the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors; the expression “company” includes any body corporate; “layer” in relation to a holding company means its subsidiary or subsidiaries. The above definition includes all the below mentioned types of holdings: Company A holds more than 50% of the share capital in Company B. Company A holds the power to appoint or remove the majority of the directors of Company B. Company A holds more than 50 % share capital in Company B; Company B holds more than 50% share capital in Company C, then Company A is Holding company to both B and C. Company X holds rights to modify the structure of directorship of Company Y; Company Y holds similar rights in company Z, then company X is the parent company to both Y and Z. Minimum Requirement To Incorporate Indian Subsidiary Company At least 2 Directors 2 Shareholders Procedure of Incorporation of a Indian Subsidiary Company Application in the prescribed form: Step 1: SPICe+ Form, which is an integrated form for the reservation of name and other services, is to be filled for the registration of subsidiary companies. SPICe+ form has two parts: – Part A – Name Reservation (New Companies)Part B:1. Incorporation of Company2. Application For DIN3. PAN and TAN Application4. EPFO and ESIC Registration5. GSTIN Application6. Bank Account Opening7. Professional Tax Registration(Applicable to Companies in Maharashtra) Step 2: After successfully approval of name from ROC (Registrar of Companies) of Ministry Of Corporate Affairs, an applicant is required to file: Form INC-7 which means application for incorporation of company other than one-person company. Form DIR-12 Which Means particulars of appointment of directors and key managerial personal. Form INC-22 which means MOA of the company along with notice of situation clause. Step 3: Document upload The following are the documents that will be required for the filing of the application. The documents are the same as required for the incorporation of the company: Company Related– Memorandum of Association and Articles of Association– Proof of Address of registered place of Business that is if the rented property, then rent agreement and if the owned property then copy of ownership documents– Copy of Utility Bills– Copy of resolution passed by the promoter company – Capital Layout of company – Copy of certificate of incorporation in case of foreign corporate Directors and Shareholders Related– Digital Signature Certificate (DSC) and Director Identification Number (DIN) for the directors and designated shareholders– Proof of identity and address for Directors and Shareholders– Photographs of Directors and Shareholders– The interest of first directors in other entities.– Declaration by Directors and Shareholders Step 4: After the related determined fees paid to ROC verifies all filed documents which was upload in application. Forms which were given above INC-22 and DIR-12 are approved via the Straight- Through-Process (STP) and then the ROC verifies Form INC-7 Means application of incorporation of companies in detail manner. The ROC may be suggest some changes in the form or attachment wherever its required. Finally, the changes have been affected and the ROC is satisfied on the full application and documents requirement, then the Certificate of Incorporation is sent to the applicant via email in detailed manner. If the above mentioned procedure of documents are available and the proper procedure
Nidhi Companies
Introduction The primary object of Nidhis is to carry on the business of accepting deposits and lending money to member-borrowers only against jewels, etc., and mortgage of property. For over a century Nidhis, with the objective of cultivating the habit of thrift, generally promoted by public spirited men drawn from affluent local persons, lawyers and professionals like auditors, educationists, etc., including retired persons. The area of operation was local – within municipalities and panchayats. Some Nidhis on account of their financial and administrative strength opened branches within the respective revenue district and even outside. The principle of mutual benefit has been incorporated to pool the savings from members and lend only to members and never have dealing with non-members. Nidhis were not expected to engage themselves in the business of Chit Fund, hire purchase, insurance or in any other business including investments in shares or debentures. As stated these Nidhis do their business only with Members. Such Members are only individuals. Bodies Corporate or Trusts are never to be admitted as Members in these companies. In simpler terms, NIDHI companies are effectively non-banking financial companies and are engaged in the business of accepting deposits and making loans to their members. The recent failures in the NBFC sector also extended to the NIDHI companies compelling the Government to introduce strict prudential norms for such companies. The deposit taking activities of NIDHIs are governed by the RBI Act and guidelines made thereunder. The power to give exemptions to the NIDHI companies in the administration of NIDHI i.e. with the Ministry of Company Affairs. This dual control leads to confusion in the administration of the provisions of the RBI Act and the Companies Act, 1956. Since, RBI is the regulator of all the NBFC incorporated under the Companies Act, the Committee felt that NIDHI companies should also be controlled by RBI through close supervision. What does the name “Nidhi” means or naming Criteria of a Nidhi Company As per section 406 of the Companies Act, 2013, “Nidhi” or “Mutual Benefit Society” means a company, which the Central Government may by notification in the Official Gazette, declare to be a Nidhi or Mutual Benefit Society, as the case may be. Nidhi” means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and saving amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with the rules made by the central Government for regulation of such class of companies. In exercise of powers conferred under section 406 read with section 469 of the Companies Act, 2013, Central Government issued the Nidhi Rules, 2014 which came into force on the 1st day of April, 2014. Nidhi Rules, 2014 applicable to: every company which had been declared as a Nidhi or Mutual Benefit Society under sub-section (1) of Section 620A of the Companies Act, 1956; every company functioning on the lines of a Nidhi company or Mutual Benefit Society but has either not applied for or has applied for and is awaiting notification to be a Nidhi or Mutual Benefit Society under sub- Section (1) of Section 620A of the Companies Act, 1956; and every company incorporated as a Nidhi pursuant to the provisions of Section 406 of the Companies Act, 2013. every company declared as Nidhi or Mutual Benefit Society under sub-section (1) of section 406 of the Companies Act, 2013. Every “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name. Eligibility for registering a Nidhi Company A Nidhi shall be a public company and shall have a minimum paid up equity share capital of Rs. 5 lakh. Nidhi company shall not issue preference shares. If preference shares had been issued by a Nidhi before the commencement of the Companies Act, 2013, such preference shares shall be redeemed in accordance with the terms of issue of such shares. No Nidhi shall have any object in its Memorandum of Association other than the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit. Every “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name. Minimum requirements of a Nidhi Company Every Nidhi shall, before incorporation, ensure that it has- 7 members; 3 directors; No minimum Capital Requirement; No Preference Shares allowed to issue; The object of the company shall be receiving deposits from and lending to its members only for their mutual benefits. Every Nidhi shall, within a period of one year from the date of its incorporation, ensure that it has– (a) not less than 200 members; (b) Net Owned Funds of Rs. 10 lakh or more; (c) unencumbered term deposits of not less than 10% of the outstanding deposits; (d) ratio of Net Owned Funds to deposits of not more than 1:20. It may be noted that “Net Owned Funds” means the aggregate of paid up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet. Further, the amount representing the proceeds of issue of preference shares shall not be included for calculating Net Owned Funds. If a Nidhi is not complying with clauses (a) or (d) of sub-rule (1) above mentioned, it shall within 30 days from the close of the first financial year, apply to the Regional Director in Form NDH-2 along with fee specified in Companies (Registration Offices and Fees) Rules, 2014 for extension of time and the Regional Director may consider the application and pass orders within thirty days of receipt of the application. Provided that, the Regional Director may extend the period upto 1 year from the date of receipt of application. Membership of a Nidhi Company A Nidhi shall not admit a body corporate or trust as a member. Every Nidhi shall ensure that its membership is not reduced to less than two hundred members at any
Producer Companies
Introduction A producer company can be defined as a legally recognized body of farmers/agriculturists with the aim to improve the standard of their living and ensure a good status of their available support, incomes and profitability. Under Companies Act 1956, a Producer Company can be formed by 10 individuals or 2 institutions or by a combination of both having their business objective stated as under. Objects of Producer Company In terms of Section 581B (1) of the Companies Act, 1956, the objects of a producer company registered under this Act may be all or any of the following matters: production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the members or import of goods or services for their benefit. processing including preserving, drying, distilling, brewing, vinting, canning and packaging of the produce of its members. manufacturing, sale or supply of machinery, equipment or consumables mainly to its members. providing education on the mutual assistance principles to its members and others. rendering technical services, consultancy services, training, research and development and all other activities for the promotion of the interests of its members. generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communications relatable to primary produce. insurance of producers or their primary produce. promoting techniques of mutuality and mutual assistance. welfare measures or facilities for the benefit of the members as may be decided by the Board. any other activity, ancillary or incidental to any of the activities referred to in clauses (a) to (i) above or other activities which may promote the principles of mutuality and mutual assistance amongst the members in any other manner. financing of procurement, processing, marketing or other activities specified in clauses (a) to (j) above, which include extending of credit facilities or any other financial services to its members. Further, under Section 581B(2) it has also been clarified that every producer company shall deal primarily with the produce of its active members for carrying out any of its objects specified above. Some criterias of a Producer Company The name of the company should end with “Producer Company Limited”. Only persons engaged in an activity connected with, or related to, primary produce can participate in the ownership. The members have necessarily to be primary producers. Termed as “Companies with Limited Liability” and the liability of the members will be limited to the amount, if any, unpaid on the shares. On registration, the producer company shall become as if it is a Private Limited Company for the purpose of application of law and administration of the company However, it shall comply with the specific provisions of part IXA. The limit of maximum number of members is not applicable to these Companies. Minimum and Maximum requirements of a Producer Company Any 10 or more individuals, each of them being a producer or, Any 2 or more Producer institutions, or A combination of 10 or more individuals and producer institutions Every Producer company shall have at least 5 and maximum of 15 directors having tenure of at least 1 year to a maximum of 5 years. A minimum capital of Rs. 5 lakh is required to incorporate a producer company. It can never be converted into a public company however it can be converted into a multi-state co-operative society. Documents/Details Required for Incorporation of a Producer Company DIR -2 – Declaration from first Directors along with Copy of proof of identity and residential address. Passport size photo of the directors. NOC from the owner of the property. Proof of office address. Copy of utility bills (not older than 3 months). In case directors not having DIN, their identity proof and address proof. PAN & TAN and any other document if required. Preparation of MOA & AOA in INC-33 and INC-34. Steps for incorporation Applicants have to signup/login into their account on MCA Website Click on New Application and a window will open Choose the “Type of company” as Producer company, “Class of company” as Producer company limited, “Category”, “Sub-category”, “Main division”, “Description of main division” and “Name” as required and desired Submit the application. If the registrar if is satisfied that all the requirements of the Act have been complied with he shall, within 30 days of the receipt of documents required for registration, issue a certificate of incorporation. Share Capital Share capital of a Producer Company shall consist of equity shares only. Members’ equity cannot be publicly traded but only transferred Voting Only of individuals, then voting rights shall be based on a single vote for every member. Only of producer institutions, then voting rights on the basis of their participation. Combination of both the individuals and producer institutions then voting rights shall be based on a single vote for every member. Annual General Meeting First AGM shall be conducted within 90 days from the date of incorporation. The Registrar may permit extension of the time for holding Annual General Meeting (not being the first annual general meeting) by a period not exceeding 3 months. The Producer Company shall in each year hold an Annual General Meeting and not more than 15 months shall elapse between the date of one Annual General Meeting to the next. The AGM shall be called by issuing at least 14 days notice. The proceedings of every AGM along with Directors’ Report, the audited Balance Sheet and Profit & Loss Account shall be filed with the Registrar within 60 days of AGM. Members’ Benefits Members will initially receive only such value for the produce or products pooled and supplied as the directors may determine. The withheld amount may be disbursed later either in cash or in kind or by allotment of equity shares. Members will be eligible to receive bonus shares. An interesting provision is for the distribution of patronage bonus(akin to dividend) after the annual accounts is approved — patronage bonus means payment out of surplus income to members in proportion to their respective patronage (not shareholding). Audit Producer Companies shall carry out an
LLP registration in India by an NRI
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
INCORPORATION OF WHOLLY OWNED SUBSIDIARY COMPANY OR SUBSIDIARY COMPANY OF FOREIGN COMPANY IN INDIA
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