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Private Limited Company Registration Articles
14
Jun
17
Checklist for Due Diligence of Company

Due diligence is a formality performed before bank loan funding, business sale, private equity investment, etc., It is the process to check, the financial, legal and compliance aspects of the company that are usually reviewed and documented. This procedure can be followed in any type of company whether it Private Limited Company or any other Limited Company. Companies should be updated with the checklist by performing due diligence on a company in India.

Due diligence mainly helps the buyer take an informed investment decision and mitigate risks associated with a business purchase transaction. In the procedure both the parties usually enter into a non-disclosure agreement prior to starting a business due diligence as sensitive financial, operational, legal and regulatory information would be divulged to the buyer during the due diligence process. It is the responsibility of the seller of the business or shares or “Seller” to provide the documents and information necessary for performing a due diligence on the company to the buyer. Business due diligence is process performed prior to the purchase of a company or investment in a company by the acquirer or investor or we can say buyer.

Documents Required During Company Due Diligence

  • Certificate of Incorporation
  • Memorandum of Association
  • Articles of Association
  • Shareholding Pattern
  • Financial Statements
  • Income Tax Returns
  • Bank Statements
  • Tax Registration Certificates
  • Tax Payment Receipts
  • Property Documents
  • Statutory Registers
  • Intellectual Property Registration or Application Documents
  • Employee Records
  • Utility Bills
  • Operational Records

Review of MCA Documents

Mainly due diligence of a company starts with the MCA (Ministry of Corporate Affairs) website. The master data about a company is made publicly available. Further, with the payment of a small fee, all documents filed with the Registrar of Companies is made available to anyone. The relevant information from the MCA website is usually verified first. The documents and information gathered in this step include:

  • Company Information
  • Date of Incorporation
  • Authorised Capital
  • Paid up Capital
  • Date of Last Balance Sheet
  • Date of Last Annual General Meeting
  • Status of the Company
  • Director Information
  • Date of Appointment of Directors
  • Directors of the Company
  • Charges Registered
  • Details of Secured Lenders of the Company
  • Quantum of Secured Loans
  • Documents
    • Certificate of Incorporation
    • Memorandum of Association
    • Articles of Association

In addition to the above, the financial information of the company and other filings with the MCA pertaining to various aspects of the company can be downloaded and reviewed. The review of MCA documents of the company would provide a good overview of the company to the person performing the due diligence.

Review of Articles of Association

It is very important to review the articles of association of a company during the due diligence process to ascertain the different classes of equity shares and their voting rights. The articles of association of a company can restrict the transfer of shares of a company. Thus, the articles of association should be studied carefully to ascertain the procedure for transfer of shares.

Review of Statutory Registers of Company

Under Companies Act, 2013, a private limited company is required to maintain various statutory registers pertaining to share allotment, share transfer, board meetings, board of directors, etc., Therefore, the statutory registers of a company must be reviewed to obtain and validate information pertaining to directorship and shareholding.

Review of Taxation Aspects

Taxation aspects of a company must be thoroughly checked during the due diligence process to ensure that there are no unforeseen tax liabilities created on the company in a future date. The following aspects relating to the taxation aspect of a company must be checked:

  • Income tax return filed
  • Income tax paid
  • Calculation of income tax liability by the company
  • ESI / PF Returns Filed
  • ESI / PF Payments
  • ESI / PF Payment Calculation
  • Service Tax / VAT Returns Filed
  • Service Tax / VAT Payments
  • Basis for Service Tax / VAT Payment Calculation
  • TDS Calculations
  • TDS Returns
  • TDS Payments

Review of Book of Accounts and Financial Statements

 Companies need to maintain book of accounts along with detailed transaction information by the Companies Act, 2013. Hence, detailed financial transaction information must be audited and verified against the financial statements prepared by the company. Some of the matters relevant during the business financial due diligence process are:

  • Verification of cash flow information
  • Verification and valuation of all assets and liabilities
  • Verification of bank statements
  • Verification of all financial statements against transactional information

 Review of Legal Aspects

A comprehensive legal audit of the company must be performed by a legal practitioner to ascertain if there are any pending legal actions, suits by or against the company and liability in each. Further, the following aspects must be checked during the legal due diligence:

  • Legal due diligence for all real estate properties of the company.
  • Verification of court documents and court filings, if any.
  • No objection from Secured Creditor for transfer of company.

Review of Operational Aspects

It is important to obtain a through understanding of the business model, business operations and operational information during the due diligence process. The review of operational aspects must be extensive including site visits and employee interviews. Following are aspects that must be covered and documented in the operational aspects review:

  • Number of Customers
  • Number of Employees
  • Business Model
  • Production Information
  • Machinery Information
  • Vendor Information
  • Utilities

In addition to the above, based on the business and business model, other operational aspects may be important. Those aspects must be thoroughly checked and documented during the due diligence process.

05
Jun
17
What is the Fees of Private Limited Company Registration?

Private limited is the most preferred form of company in India. Since, it is to raise funds in this type of company. Private limited company registration has now become very simple process.  One of the major factors is the authorized share capital with which you want to register your private limited company.

If you want to register your private limited company with the minimum requirements then cost of company registration will be less. Cost of company registration depends upon the authorized share capital.

In this article we will calculate cost of company registration applicable to a private limited company to let you know how costs are derived.

Following are the various factors on which let us discuss these factors that affect the cost

  • Initial authorized share capital
  • Number of directors
  • Stamp duty
  • Professional Fee charged by a Chartered Accountant or Company Secretary

Company registration in India is not possible without the help of a chartered accountant or Company Secretary.

Cost remains same in some of the factors the fact on which costing differ is stamp duty charges (but the difference will be very less).

Costing also depends upon the professional fee that a chartered accountant or CS will charge you. This is mainly in case of private limited company.

Following are important things used in the company registration according to which cost of company registration can differ

Getting digital signature certificate is one of the most important step of your company registration. Online Company registration is not possible without DSC. If you do not have DSC then you cannot fill single online form. According to the provisions of Companies act, 2013.Application for DIN (e-Form DIR3) has to be signed digitally by each applicant with DSC.

Chartered Accountants or Company Secretary are not required in getting DSC. DSC cannot be obtained by any Certifying authority providing these services. Chartered Accountants or Company Secretaries provide some offer which will also include DSC with some charges. You should be thorough about this on company registration.

Getting Director Identification number (DIN) is also one of the most important step of company registration. Obtaining DIN is not a complex process. In case you want obtain DIN immediately then your Chartered Accountants or Company Secretary need to electronically certify your DIN application.

Company Approval

One of the processes for registering your company is getting the proposed name of the company approved from MCA before its registration.

This process does not cost you much. Cost of getting your private limited company name approved from Ministry of corporate affairs will cost you Rs. 1, 000 only.

Registering your private limited company This is the final step for registration of private limited company. You pay major part of your expenses in this final step. Cost will vary depending on the authorized share capital of the company. Following costs are involved at this stage of company registration process;

  • Fee for Memorandum of Association
  • Fee for Article of Association
  • Fee for SPICe

MCA portal has all the cost details for this part from by entering the authorized share capital amount of your company. In case you select SPICe from the drop down and then enter the share capital amount for registration, it will show you the cost for filing MOA, AOA.

Sr. No

Particulars

Calculation

Amount is Rupees

1

Getting DIN

Rs. 500 per DIN

1000

(if requirement is for 2 directors)

2

Getting DSC (DSC depends on the number of director applying for DIN)

Rs. 1000 per DSC

2000

(if requirement is for 2 directors)

3

Stamp Papers and notary charges for affidavit

depends on number of affidavit, certification and declarations

200 (approx if requirement is for 2 directors)

4

Company Registration

   
 

I

Spice (Normal)

500

 
 

II

MOA

2000

 
 

III

AOA

300

 
 

IV

PAN

107

 
 

V

TAN

63

 
   

Total

 

2,970

5

Stamp Duty Charges for MOA, AOA and Form Spice(cost depends on the state of your registration)

 

 360

Total cost of company registration

6,530/-

09
May
17
Women Director of the Company

India is a country of opportunities where all people have equal right. According to Indian Constitution people, All the citizen in India deserves equal right whether they are of any Caste, Religion or Gender. There are opportunities of some fields where women are less preferred. But now the scenario has been changed. Women are walking parallel with Men in every field whether it is Defence, Finance, Banking, Corporate or any other sector.   

Women are part of many board meetings of companies in and outside India. In India, there are certain provisions preferred/ privileged considering the fact of disadvantages in some ways. Companies are showing interest more and more on appointing professionals as women directors on the board, instead of inducting family members, including wives and daughters, as directors to meet a regulatory deadline that require listed firms to appoint at least one woman director on their boards. 

Importance and Role of Board of Directors

According to the Companies Act, 2013 there are certain provisions made for employing women directors on the Boards of the certain class of companies and it is a welcome move. Before we get more into it let’s pick a point of importance and role of the Board of directors. The Board of Directors is an important body. These are important persons elected by the shareholders and responsible for running the company.

Board of directors is collectively responsible for making policies for good governance. The Body should act in the best interests of the Company and Stakeholders. It mainly focuses on the accountability and responsibilities of directors by mandating certain disclosures such as evaluation of the performance of the board, CSR policy, whistleblower mechanism, risk policies etc in the Directors report.

Duties of Directors, Companies Act 2013

Companies Act, 2013 defines duties of directors and role of independent directors. It also cast a duty on the Board to device proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

There are certain provisions for appointment of woman director. Due to this there has been an increase in the maximum number of directors from existing limit of 12 to 15 and provided for an increase. According to the special resolution, it can be beyond 15 by a special resolution. Kept the power with Central Govt for prescribing minimum number of directors in case of certain companies or class of companies - prohibited insider trading - provided for stringent penalties for violation of duties and nondisclosure of interest in related party transactions

Why focus on Woman directors? 

According to the survey in North America, more than 700 reputed companies have the highest representation of women directors on board and have achieved better financial performance than those have less representation of women directors on Board. In the United States, women held about more than 16% of the board seats of companies. It is having a better percentage in European countries. These are listed companies which are a very dismal percentage. There has been thrust given by the New Act, 2013 is helping to improve the representation of women directors on the board.

According to the relevant Section is 149 of the Act, 2013. The provisions are mainly related to appointment of directors and matters such as the minimum and a maximum number of directors, type/class of directors to be appointed.

Rules have been displayed on the MCA website that indicates the following for appointment of women directors on the boards of companies:

  1. a) Every listed company shall appoint at least one woman director within one-year
  2. b) Every Public company that is having paid up capital of 100 crores or more or - a turnover of 300 crores or more have to compulsorily appoint within 3 years.

Point of view has made many things right. Companies have taken decisions and successfully built a good Business. In many situation Gender bias has affected many companies. According to the new Act a company should compulsory appoint at least one woman director and the company will have to search for good woman directors.

For more information about company registration visit Registrationwala.

08
May
17
How to Close a Private Limited Company?

Initiation of any Business needs Company Registration. Organization should be enlisted to have business foundation. Closing down an organization is a testing procedure. In any case, on the off chance that you are the proprietor of a fused business as a Private Limited Company then it is significantly more so can be closed down in a few conduct contingent on the necessities of the entrepreneur.

  • Sell the company
  • Declare the organization " defunct " and close it down
  • 'Wind up' and disintegrate the Company

Defunct Company mainly deals with the closure of companies under the Companies Act 2013 have not yet been notified. According to Section 560, of the Companies Act, 1956, deals with a strike off provisions of a defunct company.

Company can be defuncted or strike off its name from the  of Registrar of Company can apply by means of for strike off of its name from the enlist kept up by ROC. A private restricted organization might be proclaimed outdated and closed around appealing to the Registrar of Companies.

This may be done in the following manner –

  • Board Meeting – Two Directors of the company must sign a resolution that resolves to apply to the ROC for the declaration of the company as defunct.
  • Affidavit –Notarized affidavit must be submitted by 2 director which has also been signed and verified that the company did business for a period up to date, and has since then discontinued its operations, and has no assets or liabilities.
  • Indemnity Bond – A notarized indemnity bond, duly signed by two Directors, which states that in the case of any liabilities on the company, such liabilities will be met fully by the applicants, even after the name of the company is struck off the register of companies must be submitted.
  • Accounting Information – The financial statement of the Company for the most recent year, prepared up to a period which ended one month before the date of application, must be filed by the Company. The statement of accounts submitted must provide a true and fair view of the company’s financial position, and to verify the same, a declaration stating this shall be submitted by a practicing Chartered Accountant.
  • Financial Statement – At least one year from the date of incorporation must have passed before the company petitions the ROC for declaring it as defunct. Audited financial statements for the period in which business has been undertaken must be submitted along with the application. In case any unsecured loans are there, then a waiver letter for the same must be submitted.

Winding up the Company

 (a) By the Tribunal (also known as compulsory winding up); or

(b) Voluntary winding up company

Voluntary winding up may be

  1. Member’s Voluntary winding up.
  2. Creditor’s Voluntary winding up.

Whereas Compulsory winding up may be, in addition to the a fore mentioned –

  1. Any contributor or contributors
  2. By the central or state govt.
  3. By the registrar of any person authorized by central govt. for that purpose.

In the case of voluntary winding up, the process is undertaken without court supervision.

Procedure for Voluntary Winding Up –

  • Board Meeting with 2 Directors is conducted and a resolution consisting of a declaration given by directors that they are of the opinion that the company is under no debt or that it will be able to pay off its debt from the proceeds from the sale of its assets is passed.
  • General Meeting is conducted after issuing due notice for proposing the resolution along with the explanatory statement. In the case of ordinary majority an Ordinary resolution, or a special resolution in case of the 3/4th majority, for the purpose of winding up is passed in the General Meeting. The winding up will start from the date of passing of the resolution.
  • Creditors Meeting is conducted after passing the resolution and if majority creditors are of the opinion that winding up of the company is beneficial for all parties then the company can be wound up voluntarily.
  • Liquidators Account is prepared after winding up of affairs of the company, and the same is audited as well.

Winding up the Company

(a) By the Tribunal; or

(b) Voluntary Winding up

Deliberate Winding up might be

  1. Member's Voluntary Winding up.
  2. Creditor's Voluntary Winding up.

Though Compulsory twisting up might be, not with standing the previously mentioned –

  1. Any donor or givers
  2. By the focal or state govt.
  3. By the enlistment center of any individual approved by focal govt. for that reason.

On account of deliberate twisting up, the procedure is embraced without court supervision.

Strategy for Voluntary Winding Up –

  • Board Meeting with 2 Directors is led and a determination comprising of a presentation given by executives that they are of the supposition that the organization is under no obligation or that it will have the capacity to pay off its obligation from the returns from the offer of its advantages is passed.
  • General Meeting is directed subsequent to issuing due notice for proposing the determination alongside the informative explanation. On account of conventional greater part an Ordinary determination, or an uncommon determination if there should arise an occurrence of the 3/fourth lion's share, with the end goal of twisting up is passed in the General Meeting. The twisting up will begin from the date of going of the determination.
  • Creditors Meeting is led in the wake of passing the determination and if larger part leasers are of the feeling that ending up of the organization is valuable for all gatherings then the organization can be twisted up willfully.
  • Liquidators Account is set up in the wake of ending up of issues of the organization, and the same is reviewed also.

If you have any intension to close your company Registrationwala has all the solution.

04
Apr
17
Foreign Companies Registration in India

India is one of the fastest growing nations in the world. India is the country with a lot of opportunities for not only Indians but also a foreign citizen. Make in India is an initiative taken by Prime Minister Shri Narendra Modi.  Due to globalization and privatization, the efforts of have turned into reality. ‘Make in India’ is the step for investors to invest their money in India.

Foreign Company

Foreign Company is any company or Corporate Body formed outside India. There certain rules and guidelines have to be followed as laid down by The Companies Act, 2013, RBI guidelines etc. Foreign Company can Start the business in India.

Company has a place of Business in India whether by itself or through an agent. It can be physically or in electronic mode. Any business activity in India in any other manner

Following are the forms in which a foreign company can enter the market of India or set up business operations in India

In case of an Indian company

  • Wholly Owned Subsidiary
  • Joint Venture

In case of a Foreign Company

  • Branch Office of the foreign company
  • Representative Office or a Project Office or
  • Setting up a Liaison Office
  • Being an Indian company Way Foreign Company Registration in India

What is a Wholly owned subsidiary Company?

Wholly owned subsidiary Company is form of company in which a foreign company invests 100% FDI in Indian company through automatic route.

For  ABC of UK owns 100% shares in CD Ltd of India then CD Ltd becomes subsidiary company of ABC

It can also be called as an entity whose whole share capital is in the hand of a foreign corporate body. Companies can be Private limited Company by guarantee or shares or an Unlimited Liability Company.

Documents required

Office’s Address proof and in case of accommodation is rented then latest electricity bill.

 Indian citizen

  • PAN card is mandatory
  • Address proof (DL, Aadhar, Passport, Voter id)
  • Photograph

Foreign national

  • Passport is mandatory
  • Address Proof (Passport)
  • Photograph
  • ID Proof (Government license or Document containing Name in full, Photo and Date of birth)
  • Documents submitted must be certified by the Indian Consular or consulate.

Need and Procedure of registration

  • Minimum 2 shareholders or directors.
  • All directors have to obtain DIN (Director’s Identification No.) and DSC( Digital signature certificate).
  • Name of the company has to be filed In Form INC-1 application.
  • Draft your MOA and AOA and then a subscription to MOA has to be done by shareholder and appropriate persons.
  • ROC approves ie. Application for Incorporation of Company)
  • Form DIR-12 -Particulars regarding appointment of directors, the key managerial personnel and any changes in them
  • ROC online fees and stamp duty has to be paid as per the authorized capital of the company.
  • ROC verifies all the documents and also Form INC-22 and DIR-12 are approved and INC-7 is verified.
  • After the satisfaction of registrar certificate of incorporation can be issued.
  • Obtain PAN card and open company’s bank account.
  • After the subscription of share, capital documents have to be submitted for FDI compliance.

What is a Joint Venture?

Joint Venture is an arrangement where two or more parties cooperate to achieve a commercial object or run a business. There are various forms like Company, Limited Liability Partnership, Partnership firm etc. This can be on long term basis like running for perpetuity or for a limited time based on the object. It is a very flexible concept.

 NRI or foreign partner involved in a joint venture it requires government approval ie. either from RBI or FIPB.

The entity has to select a local partner with whom you want to enter into joint venture then a Memorandum of Understanding or a Letter of Intent is to be signed which will state the basis for the joint venture agreement. All the terms should be discussed thoroughly and negotiated and must be consistent with regional as well as international law. It should address the important matters like Dispute resolution agreements, law Applicable, holding shares, Transfer of shares, Board of Directors Non-Compete, Confidentiality etc.

Foreign Company Registration as a Foreign Company in India

  • Setting up a Liaison Office or Representative Office in India has the criteria prescribed by RBI.
  • There should be profit making record in the immediate preceding 3 financial years in the home country and their net value should not be less than USD 50,000
  • Letter can be submitted by a subsidiary of other company which does not satisfy the above condition can submit a letter of comfort from their parent company.
  • RBI approval is required under FEMA 1999 as well as approval from the IRDA Insurance Regulatory and Development Authority).
  • Company should be engaged in activities like manufacturing or trading.
  • Company should have a profit in the immediately preceding five financial years and should have a net worth of not less than USD 100,000 in its home country.
  • The subsidiary company of other if does not fulfil the above condition then they can submit a Letter of Comfort from their parent company if parent company fulfils the above condition

Following are the activities

  • Import & Export of goods.
  • Carrying out research work in area which its parent company is engaged
  • Providing professional or consultancy services.
  • Foreign Airline/ Shipping Company.
  • The representing parent company in India and acting as buying/selling agent in India.
  • Promoting technical/financial collaborations on behalf of the parent
  • Providing IT services and developing software in India.
  • Providing technical support for products supplied by the parent
24
Mar
17
Importance of Annual Filing

Company is a legal entity made up of association of people carrying on a commercial or industrial enterprise. Opening up and running a company is not everyone’s cup of tea .Several things needs to be kept mind while and after setting up a company. People need to obtain many documents, permits and go through several registrations. Company formation requires several taxes and other filings.

It is most important to keep a record of all these events with all the certificates and acknowledgments slips are to be kept carefully. It acts as solid evidence and helps you to file certain documents. This procedure is one of the most difficult tasks. All these documentations are carried out under The Companies Act,2013. This is the act required the same act, you are required to go through company annual filing.

Annual filing includes the filing of certain documents with the Registrar of Companies. Documents included are balance sheet, profit and loss account, annual return and compliance certificate. These documents are filed by filing some forms which can be filed online also. It ensures that you are keeping records of all the important happenings of your company properly. It helps you to run your company smoothly and point out any possible loopholes or mistakes. Detailed guidelines of annual filing are available on the MCA web portal.

Procedure for annual return filing

  • Prepare a financial statement of Company.
  • Appoint and Auditor for Company.
  • Conduct annual general meeting of the company
  • File annual with MCA

Company Annual Filing Importance

Company will face problems if a company does not annually file. Annual Return provides a detailed insight into the health and profitability of a company. It is a way to keep the workings of the company transparent.

  • One of the factors used to decide whether the company will receive additional or any funding at all.
  • Annual filing helps to decide the market price of the shares of the company in case of listed or on a stock exchange.
  • In case the company is going in a loss it helps to figure out what the next best action should be and the direction the company.

Guidelines of annual filing are available on the web portal of MCA

DIN(Director Identification Number) and DSC (Digital Signature Certificate) are required to complete the company annual filing. Annual filing can create some serious issues for you. It ranges from a fine to a victim of a bad image which will ultimately cost you, your investors and customers. This is very important to file all the documents on time and in order. Guidelines should be read properly. Legal advice is very much suggested. You need to verify all the documents and then only can you expect a successful annual filing.

For more information about Annual Compliance filing visit Registrationwala.com

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