CONVERSION & CLOSURE
The Limited Liability Partnership (LLP), which is not carrying on its business since its incorporation or which has terminated/stopped carrying on its business for a period of one year or more, can apply to the Registrar for its closure and also for removal of its name from the Register of the LLPs. If the LLP has turned dormant, then it is better to close it than fulfilling all the compliances, and it is also better to close than pay a fine or penalty in case the LLP is inactive.
Reasons for the closing of Limited Liability Partnership:
• When the LLP is registered for a specific purpose, and the purpose is complete.
• The LLP has become insolvent.
• When the LLP is not active for at least one year.
• The court has ordered the closing of LLP.
• The partners of the LLP are not interested in continuing the partnership.
• If, after the death of another partner/partners, the one who is alive wants to close the LLP.
Documents Required to Close an LLP
An application is required to be made in e-Form 24 to remove the name of the LLP, including the followings:
Address Proof of LLP
NOC from the landlord (If the registered office place is rented, rent agreement & one utility bill (water bill, electricity bill, property tax bill, gas receipt etc.)
A statement of accounts revealing NIL assets & NIL liabilities, made up to a date not earlier than thirty days of the date of filing of Form 24 certified by a Chartered Accountant in practice.
Copy of acknowledgment of latest ITR- Self Explanatory
Copy of the initial LLP agreement, along with changes thereof if entered into and not filed,
An affidavit signed by the designated partners of LLP, either jointly/severally, to the effect: -
1. That the Limited Liability Partnership has not commenced business or where it commenced business, it ceased to carry on such business.
2. That Limited Liability Partnership has no liabilities and indemnifies any liability that may arise even after striking off its name from the Register.
3. That the Limited Liability Partnership has not opened any Bank Account and where it had opened, the said bank account has since been closed together with certificate(s) or statement from the respective bank demonstrating closure of Bank Account;
4. That the LLP has not filed any Income-tax return where it has not carried on any business since its incorporation, if applicable.
NOC from Creditors: - NOC for strike-off to be obtained from secured creditors & Partners if any
Copy of Detailed Application- Mention full details of LLP plus reasons for closure
Copy of Authority to Make the Application- Duly signed by all the Partners
Indemnity Bond: -
1. The application in the form as may be prescribed must be accompanied by an Indemnity Bond given by each designated partner duly notarized about the liabilities that even after the removal of the name of such LLP, the liabilities will be met.
2. Indemnity Bond should be given on the Non-Judicial Stamp Paper of adequate value as applicable in the State where the Registered Office of the LLP is situated. Therefore, the text of the Indemnity Bond should be typed on the Non-Judicial Stamp Paper and then should be executed before the Public Notary
Before the introduction of the LLP (Amendment) Rules, 2017, the procedure for winding up an LLP used to be extended and burdensome. On the other hand, with its introduction and introduction of LLP E-Form 24, the procedure has been made simple and easy.
Dormant refers to the state of being temporarily inoperative or dormant. A dormant company is one which has been registered under the Companies Act, 2013 but does not have any “significant accounting transaction” or is an “inactive company” which has been applied to Registrar to be declared as a dormant company.
Significant Accounting Transaction is defined under the explanation of the same section as:
“any transaction other than-
• Payment of fees by the Company to the Registrar
• Payment made to it to fulfill the requirements of this Act/any other law
• Allotment of shares to comply with the requirements of this Act &
• Payments for maintenance of its office & records.”
A company that carries out no other transactions except the ones mentioned above shall be considered a dormant company. However, a company carrying out any other transactions other than the ones mentioned above shall lose its dormant status.
Requirements To Be Declared As A Dormant Company
There are certain requirements which a company must meet for it to achieve the status of this Company. These requirements are laid down under the Companies (Miscellaneous) Rules, 2014. The proviso to Rule 3 lays down the conditions a company is required to fulfil and are as follows:
There must have been no investigation, inquiry or inspection ordered or carried out against the Company
The Company must not have any secured or unsecured outstanding loan in its name
The Company must not have erred in paying workmen their dues
There must be no prosecution either initiated or pending against the Company under any law.
The Company must not have any outstanding public deposits, nor must it have many any defaults in the payment of such deposits.
The Company must not have any statutory duties, dues, or taxes which are outstanding and payable to the State Government and Central Government or local authorities.
The Company’s securities must not be listed not any stock exchange either within or beyond India
There must be no dispute regarding the ownership or management of the Company and a certificate in this regard must be submitted along with Form MSC-1
Rule 6 of the Companies (Miscellaneous) Rules, 2014 states that the dormant Company must have at least 2 directors for a private company, three directors for a public company and one in a One Person Company.
Documents required for obtaining status of Dormant Company
The certified copy for the board resolution.
The certified copy for the special resolution.
Certificate from the auditor.
A statement of affairs, duly approved by the auditor or chartered accountant.
The Annual Return and the Latest Financial Statement.
A certificate to the effect of declaring no dispute between the management or the ownership.
A Company having the status of a dormant company may become an active company in terms of the provisions of Section 455(5) of the Companies Act, 2013 and Rule 8 of the Companies (Miscellaneous) Rules, 2014 under the following situations:
1. By making an application in Form MSC-4 to the Registrar to this effect
2. Upon omission or committing of any act abstained in the Grounds of application in Form MSC-1, which eventually affects its status as a dormant company
3. The Registrar on being satisfied that any company registered as a ‘dormant company’ under his jurisdiction has been functioning in any manner, directly or indirectly, removes the name of such company from the register of dormant companies and treats it as an active company
MANDATORY REQUIREMENTS
Shareholder’s Approval in general meeting.
In case the Conversion of the Dormant Company into an active company is done voluntarily, the following steps are followed:
• The Dormant Company should make an application for conversion of Dormant Company status into an Active Company in Form MSC-4.
• The fee as prescribed under Companies (Registration Offices and Fees) Rules, 2014, should also be paid with an application filed for the Conversion of a Dormant Company into an Active Company. The MSC-4 should be accompanied by the return Form MSC-3 of the Dormant Company.
• After considering the application filed, the Registrar can approve the application and issue a certificate in Form MSC-5, allowing the status of the Dormant Company to be an Active Company.
In case the Registrar Strike off the company, the following steps are followed:
• If the company is in dormant status for 5 consecutive years, then the Registrar shall start the process of striking off the name of such company from the Register of Dormant Companies. In this case, the applicant should apply for the Conversion of a Dormant Company into an Active Company, or the Registrar will voluntarily strike off the company from the Register of dormant Companies.
• After considering the application filed, the Registrar can approve the application and issue a certificate in Form MSC-5, allowing the status of the Dormant Company to be an Active Company.
Strike-off means temporary closure of the Company or removal of the name of the Company from the Register of Company by the Registrar following the provisions of the Companies Act, 2013. It is a substitute for winding up the Company, and in this case, the Company can get revived for a period of twenty years from the date of the strike-off. The appeal or application can be filed by the Registrar, any person aggrieved by order of the Registrar or by Company, or by member or creditor or workman.
The member, creditor or workman of a company can file a petition for Revival of the Company before the expiry of 20 years of striking off from notification in the official gazette under section 252(1), and others can file a petition under section 252(3) within three years from the publication of notification in the official gazette. The demand draft of Rs. 1000/- should be filed with the petition as fees.
It is important that the appeal has to be filed within three years of the date of order of the Registrar of the Company in case of compulsory striking off by the Registrar and the limitation period is twenty years in case of voluntary striking off. It is on condition that the application shall be made before the expiry of twenty years with respect to striking off the Company's name from the date of publication of notice in the Official Gazette.
The documents required for the revival of struck off companies
The application to restore the name of the Company shall be filed, stating that the Company was actually in operations (recommendatory) with the following documents:
• The certificate of incorporation
• The MOA
• The copy of the audited financial statement from the date of strike off
• Bank statements
• The striking off order of the Registrar of Company
• Affidavit verifying the petition
• The copy of the board resolution authorizing the filing of the petition
• PAN
• Income Tax returns
• All the property documents if the property is owned by the Company
• Memorandum of Appearance or Vakalatnama
• Any other documents which are required.
The private Limited Company initiates the process of liquidation to close its business. There are many reasons, such as insolvency, unwillingness to perform the activities related to the business, etc., because which a private decides to wind up. Liquidation means liquidating the assets of the Company, and by it, the corporate entity sells its assets to satisfy its responsibilities and repay the liabilities. When the Company is liquidated, then it is dissolved, and it ceases to exist.
If the Company fails to fulfill its compliances, then it can be held liable for fines and penalties, or even its director can be disqualified from incorporating another entity, so it is advisable for a company to wind up the moment it becomes inactive or insolvent. Winding up of a company includes a complete shutdown of all activities and transactions related to its business and then selling off of all the assets to clear the debts of the Company. The debts are cleared, and then the assets of the Company will be shared among its shareholders.
Section 270 of the Companies Act 2013 states that a private company can go for winding up either by the National Company Tribunal (NCT) or voluntarily.
Documents required for winding up of the Company
The following checklist is required for winding up the Private Limited Company:
1. Consent of all the creditors of the Company
2. Indemnity bond notarized by directors of the Company
3. A certified statement of all assets and liabilities of the Company by the Chartered Account
4. Affidavit from the directors of the Company
5. Duly signed CTC of a special resolution by directors of the Company
6. Digital signature of all the directors of the Company
7. The PAN and Aadhar Card of all the directors
8. Consent letter of all the directors
9. A statement related to pending litigation of the Company
10. No Objection Certificate (NOC) from the Income Tax Department
A Public Limited Company, legally known as PLC, is a publicly held company. It is a limited company whose shares can be traded with the public. PLC can be listed or not listed on the stock exchanges. PLC requires a minimum of 3 Directors as a prerequisite.
A Public Limited Company may be closed voluntarily by the shareholders or compulsorily by the judiciary. Registrationwala provides thorough services during this difficult transition of closing a Public Limited Company in India.
Eligibility Criteria for Closing Public Limited Company in India
Voluntarily closing a Public Limited Company:
• Creditors' Voluntary Liquidation – The Company and its shareholders chose to liquidate the Company because it can't pay debts
• Members' Voluntary Liquidation – There Company can pay its debts, but the members want to close it.
Compulsory closing of Public Limited Company:
• The Company is unable to pay its debts
• Tribunal orders the Company to be shut down or is of the opinion that the Company is equitable and must be shut down
• When the Company has not filed financial statements or annual returns in the preceding five consecutive years
• The Company has acted against the sovereignty and integrity of the state and India, friendly relations with foreign states, public order, decency or morality
• If the Company has been conducted in fraudulent manners or is guilty of fraud or misconduct
Documents Required for Filing Closing Public Limited Company
The following documents are to be submitted to close a Public Limited Company.
• Application for Striking off of the Public Limited Person Company
The Company that wishes to close must file a closing application with the Registrar
• Board Resolution for Closure
The Public Limited Company must submit the resolution of closing approved by the board members
• Consent of all the Creditors
The Company or its representatives must arrange the consent from all its listed creditors for the closure of the public limited Company.
• Consent of Directors
A letter of consent from the Directors stating their opinion to close the Public Limited Company must be submitted.
• Director's Affidavit
The Company must instruct all its appointed directors to draft and prepare an affidavit for the closure of the PLC.
• Statement of Assets and Liabilities
A financial statement indicating the sold-off assets and cleared debts must be submitted.
An LLP can be converted into a Pvt. Ltd. company as per the provisions contained in Section 366 of the Companies Act, 2013 and Company (Authorised to Register) Rules, 2014.
Pre-requisite conditions for the conversion of LLLP into a private company
The conditions to be fulfilled before moving forward towards the conversion of an LLP into a Private Limited Company are as follows:
a. The Limited Liability Partnership must have at least two partners who are required for incorporation of a Private Limited company.
b. All the partners should have approved the conversion of LLP.
c. The LLP should have complied with all the required returns.
d. Publication related to such conversion of LLP into a Private Company, in at least two newspapers, one in English Language and another in any regional language newspaper of the place of registered office.
e. No Objection Certificate from the Registrar.
Documents Required for Conversion of LLP into a Private Limited Company
The List of documents required for conversion is as follows:
• Address Proof of the applicant
• Identity Proof of the applicant
• Passport-size photographs of the applicant
• Copy of the latest returns file by the Limited Liability Partnership
• The NOC was obtained from members of LLP and the Registrar.
The List of documents required at the time of filing the Form URC-1:
List of members with their details such as name, address, the share held by them, etc.
List of the persons who are first directors of the Company along with their details such as name, address, DIN, Passport number, etc.
An affidavit from all first directors that he is not disqualified from being a director of the Company under section 164 of the Companies Act, 2013 and that the documents submitted to the Registrar for registration of the Company have true and complete information.
List of partners of the Limited Liability Partnership along with their details such as name, address, etc.
A copy of the Limited Liability Partnership agreement and certificate of registration which are duly verified by at least two members/partners of the LLP.
A statement indicating the followings:
a. The number of all the shares of the Company with the detail of the ratio in which they are divided.
b. The number of all the shares taken and the amount that is involved in every share.
c. The name of the same LLP with the addition of Pvt. Ltd. in the end.
The written consent or No Objection Certificate (NOC) from all the creditors of the LLP.
The account statement of the private Limited Company duly certified by the auditor should be six days preceding the date of application.
A copy of the newspaper in which the publication related to such conversion has been made.
Reason for Conversion of an LLP into a Private Limited Company
The followings are the reasons for converting an LLP into a Private Limited Company:
LLP converts into a private company for growth and to extend its existing business.
LLP can attract only a few types of investors, so to attract more investors, such as foreign investors or equity investors, they go for conversion.
The LLP is converting for issuing equity share capital in the private limited Company.
One of the reasons for conversion is to avoid capital tax gain.
To carry forward all the unabsorbed losses and depreciation of the last year.
For continuing with the same brand name and goodwill of their LLP, the LLP decides to convert into a Company.
Legal provisions for converting an OPC to Private Company According to Section 18 of the Companies Act of 2013, and Rule 7 of the Companies (Incorporation) Rules of 2014, an OPC can be converted into a Private Limited Company by changing its Memorandum of Association and Articles of Association.
There are two ways to convert an OPC into a Private Limited Company –
1. Voluntary Conversion of OPC into Private Limited
2. Compulsory or Mandatory Conversion of OPC into Private Limited
1. Voluntary Conversion of OPC into Private Limited
An OPC cannot voluntarily change to a Private Limited Company until two years have passed from the date of establishment of the OPC. Following the alteration of the OPC’s MOA and AOA, an application is filed to Central Government for conversion. The legal existence, rights, and obligations of the Company remain unchanged following the Conversion. In order to meet the minimal requirements of a Private Limited Company, at least two shareholders and two directors must be appointed. Within 60 days, the OPC must notify voluntary conversion to the ROC through E-Form INC-5.
2. Compulsory or Mandatory Conversion of OPC into Private Limited
The OPC is required to establish a private limited company if: the paid-up share capital reaches Rs. 50 lakhs or the average annual turnover during the relevant period surpasses Rs. 2 crore. Such a company must change to a private or public limited company within 6 months of the above-mentioned conditions.
Prerequisites to convert an OPC to a Private/Public Company
The applicant company needs to prepare and audit its Profit and Loss A/c, Balance Sheet, Financial Statements and other Books of Account.
1. Before undertaking conversion, the applicant company must file all returns and documentation with the ROC.
2. On the issuance of a share certificate, a private business must pay its stamp duty.
3. A private company is required to file TDS Returns for all deductions.
4. A private corporation is required to file its GST Returns.
5. The company must implement all of the provisions of the professional tax.
Converting a Partnership firm to a private limited company, which becomes a separate legal entity, reduces the risk of liability, and the personal assets will remain untouched except in case of fraud. The incorporation and compliance procedure of a private limited company is as per the Companies act, 2013, and the shares are held privately.
Documents Required for Converting a Partnership Firm to a Private Limited Company
The following is the list of documents required for the conversion of a Partnership firm into a Private Limited Company-
Documents required in E-form URC-1
o Particulars of the members reflect the names, addresses, and occupations of all, along with details of shares held by them.
o Particular of the first directors of the company.
o An affidavit from all the 1st directors that he is not disqualified from being a director under section 164(1). Additionally, all the documents filed with the ROC for the Incorporation of the company contain information that is accurate and true to the best of the applicant’s knowledge and belief.
o Details of the partners of the partnership firm, such as their Identity and Address Proof.
o Copy of Partnership Deed. Also, in case the Partnership deed was revised at any time in the past, copies of the principal and all altered deeds. Additionally, if the firm is registered, the certificate of registration issued by the Registrar of Firms is also required.
o A statement of assets and liabilities of the Partnership Firm duly certified by a Practicing Chartered Accountant which is made on a date not earlier than 30 days of the filing of form no.URC-1
o All the Income tax-related documents of the Partnership Firm.
o A copy of the Newspaper Advertisement.
o No Objection Certificate from all the secured creditors of the applicant firm.
o A Consent from the majority of Partners.
o A statement specifying-
1. The nominal Share Capital of the company,
2. The number of shares,
3. The number of shares taken, and
4. The amount paid on each share,
5. The name of the company, with the addition of the word “Private Limited”.
Documents required in Spice+ form
o DIR-2 Declaration from the first Directors,
o Copy of ID and Address proof of the shareholders and directors,
o NOC from the owner of the property,
o Proof of Commercial address (Rent Agreement or lease deed),
o Copy of the utility bills (not older than two months)
Converting a private limited company to a public limited company is a significant step towards expanding the business and increasing access to capital. A public limited company can issue shares to the public, which means it can raise funds from a large number of investors. However, this process requires compliance with various legal and regulatory requirements, such as obtaining the approval of shareholders and the Registrar of Companies (ROC), and making changes to the Memorandum and Articles of Association. It is recommended to seek professional guidance from experts to ensure a smooth and efficient conversion process.
What are the Minimum Requirements for Conversion?
1. Minimum 7 Shareholders
2. DSC for 1 Director
3. DIN for all directors
4. No Minimum Paid-up Capital
5. Director and shareholder can be the same person
6. Minimum 3 Directors
What are the Documents Needed for the Conversion of Pvt. Ltd. to Public. Ltd.?
1. PAN Card of shareholders & Directors.
2. Foreign nationals should provide a valid passport.
3. Voter ID/ Driving License/ Passport of Shareholders & Directors
4. Address Proof: Electricity Bill/ Telephone Bill / Latest Bank Account Statement of Shareholders & Directors
5. Photograph: Latest Passport-size photo of Shareholders & Directors
6. Business Residence Proof: Telephone Bill/Electricity Bill of the certified office address
7. No Objection Certificate from the landlord: NOC to be collected from the owner(s) of certified office
8. Rent Lease: Rent Lease-Agreement of the certified office must be granted if any.
9. Income Tax Return: ITR filed for the previous fiscal year to be submitted
10. Memo: Documents of the director(s) must be notarized in case of NRI or Foreign National
11. Financial Statements: Duly attested copy of latest audited Financial Statements
12. Incorporation certificates: Declaration of Incorporation, MoA and AoA to be offered
What are the Post Conversion Requirements?
• A fresh PAN card has to be applied for.
• All business letterheads and related stationery should be updated with the company’s new name
• The bank account details of the company are to be updated.
• The intimation is to be given to the tax authorities and other related personnel regarding the conversion into public limited company.
• Printed copies of the new MOA and AOA have to be made at the earliest.
The conversion of one company class to another class, i.e. conversion of a private limited company into OPC is provided under Section 18 of the Companies Act, 2013 (‘Act’) and Rule 7 of the Companies (Incorporation) Rules, 2014. The compliance requirements are less in OPC than in private limited companies; thus, private limited companies choose to convert into OPC.
Documents Required for Converting a Company to OPC
The following attachments should be made with the Form MGT-14:
1. The EGM notice with the explanatory statement copy.
2. A true certified copy of the special resolution.
3. The altered MOA and AOA of the company.
4. A certified copy of the board resolution.
The following attachments should be made with Form INC-6:
1. The total list of creditors and members.
2. The latest balance sheet of the company.
3. A copy of the NOC letter of secured creditors.
4. The NOC of creditors and members.
5. The company directors should give a declaration through a duly sworn affidavit confirming that all creditors and members of the company have given their consent for conversion.
POST CONVERSION REQUIREMENTS
1. Arrange new PAN No. of the company
2. Arrange new stationery with new name of the Company
3. Update company bank account details
4. Intimate all the concerned authorities like Excise and sales tax etc about the status change
5. Printed copy of new MOA & AOA.
A company may amend its articles by special resolution, including amendments that result in the conversion of a public company into a private company, according to the requirements of the Companies Act 2013 and any restrictions set forth in its memorandum, if any. Any modification that results in the conversion of a public company into a private company must first receive approval from the central government in the form of an order, which must be issued in accordance with any applicable regulations. This is stated as per Section 14(1) of the Companies Act, 2013.
Rule 41 for the conversion of public companies into private companies was added by MCA on December 18, 2018, and its authority to approve the conversion of public companies into private companies was delegated to the regional director, of the Companies (Incorporation) Rules, 2014.
Conditions for Applying Conversion
• The term “Private” has to be added to the name clause of the memorandum, by removing the word “Public” from the name clause.
• The Company’s Articles must be appropriately modified to include any limiting clauses that apply to Private Companies. Adopting new articles that are appropriate for a private company is advised.
• It should also be ensured that the company has not missed a deadline for completing any required paperwork with the Registrar, including annual returns, financial statements, or other forms as required by Companies (Incorporation) Rules, 2014, Rule 29(1).
• Lastly, they need to ensure that the company hasn’t fallen behind on paying interest or maturing deposits or debentures, either as stated in the Companies (Incorporation) Rules, 2014, Rule 29(1).
File Necessary Amendment Application under following Acts
• Goods and Services Act
• Shops & Establishment Act
• Factories Act
• Inter-State Migrant workmen Act
• Private Security Agency Act
• EPF
• ESI
• Other Labour Laws
• Industry Specific Laws
For converting a sole proprietor into a private company, an agreement has to be signed between the sole proprietorship and the newly incorporated private limited company for the sale of its business. Such an incorporated Private company should mention in its Memorandum of Association that it has taken over a sole proprietorship. The sole owner of the proprietorship should be made a part of the board of directors with the voting right.
Documents Required for Conversion to Private Limited Company
The documents required for the conversion of a sole proprietorship into a Private Limited Company are:
Proof of identification of all directors
Address Proof of all the directors
Passport size photographs of all the directors
Proof of the ownership of the place of business
Lease/rent agreement, if the property is rented
No Objection Certificate from the owner of the land
Utility bills
Other documents required with the appropriate Forms:
Memorandum of Association
Articles of Association
Details of registered office
Particulars and information of directors
Conditions required for conversion into Private Limited Company
The takeover agreement or sale agreement between the sole proprietor and the new private limited company
The takeover should be mentioned in the MOA of the new Private Company as one of the objectives.
All the assets , as well as liabilities of the sole proprietorship, should be transferred to the newly incorporated Private Company
The shareholding of the sole proprietor should be at least 50%, and the same should continue for the next five years.
The proprietor should not have received any additional benefits
EVENT BASED COMPLIANCE
The appointment of the directors is made as per the Articles of Association (AOA) or by virtue of section 152 of the act the subscribers to the memorandum shall be deemed directors of the company. There are categories of directors under act 2013 which are
• Woman directors are there must be one woman in the board of director where the company has paid-up capital of Rs 100 crore or more or has a turnover of Rs 300 crore or more.
• Independent Director under section 149(6)
• Directors elected by Small shareholders under section 151
• Resident director under section 149(3) is required in a company who has lived for 182 days in India in the previous year.
• Additional director under section 161
• Alternative director under section 161(2) can be appointed on the absence of the main director for at least three months and above.
• Nominee Directors under section 161(3) can be appointed by a third party or by the Central Government in the case of mismanagement or oppression.
The Requirement Of Director In A Company
Public Company : Minimum number of 3 Directors
Private Company : Minimum number of 2 Directors
One Person Company : Minimum One Director
There are several ways in which directors can be appointed in a company. Here are some of the common ways:
1. Appointment by Shareholders: Shareholders of a company can appoint a director by passing an ordinary resolution at a general meeting. The proposed director's name and details must be provided in the notice of the meeting, and the shareholders must approve the appointment by a simple majority vote.
2. Appointment by Board of Directors: The board of directors can appoint a new director by passing a resolution at a board meeting. The proposed director's name and details should be provided in the notice of the meeting, and the board must approve the appointment by a majority vote.
3. Appointment by Nomination Committee: A nomination committee consisting of members of the board of directors can be established to identify suitable candidates for directorship positions. The committee can propose the appointment of a new director to the board of directors for approval.
4. Appointment by Central Government: In certain circumstances, the central government may have the power to appoint a director to a company. For example, if the number of directors falls below the minimum required by law, the central government may appoint a director to fill the vacancy.
5. Appointment by Tribunal: A tribunal may have the power to appoint a director to a company if the company is unable to fill a vacancy in the board of directors due to a deadlock or other reasons.
DOCUMENTS
1. Form DIR 12 filled along with the letter of the appointment and then submission of the documents by the director within 30 days.
2. The consent Form DIR-2 has to be given in writing for willingness to be a director. It is under Rule 8 of Companies Appointment and Qualification of the Director Rules 2014.
3. The appointing director has to provide Form DIR 8 intimating that he is not disqualified under the provisions of section 164(2) of the act.
4. After the appointment, the director has to give Form MBP-1 in compliance to section 184(1) read with Rule 9(1) of Companies (Meeting of Board and Its Powers) Rules 2014.
Section 168 of the Companies Act, 2013 (hereinafter referred to as CA, 2013) provides for resignation of director. A director may resign from his office by giving a notice in writing to the company and the board shall upon receipt of such notice take note of it and intimate the Registrar. Board shall also the fact of such resignation in the report of directors laid in the subsequent general meeting of the company. Section 168(2) required the resigning director to submit a copy of resignation along with detailed reasons to the Registrar within thirty days of resignation.
The resignation shall take effect from the date on which the notice is received by the company, or the date as specified by the director in notice. Also, the proviso states that the resigning director shall be liable even after his resignation for the offences which occurred during his tenure. Section 168(3) considers a situation where all the directors of a company resign from their offices or vacate their offices under Section 167 then the promoter will take over or if they are not present then the Central Government shall appoint the required number of directors who will hold office till directors are appointed in the general meeting.
DOCUMENTS
• For intimation to ROC by the company via Form DIR 12, it is required to submit a notice of resignation, evidence of cessation and a copy of board resolution.
• For intimation to ROC by the director itself via Form DIR 11, a notice of resignation filed with the company, proof of dispatch and acknowledgment received from company.
The authorized capital is the greatest amount of Capital for which the Company can issue shares to the shareholders. As per the Section 2(8) of the Companies Act, 2013, the Authorised Capital limit is specified in the Memorandum of Association under the Capital Clause. A company may take the necessary steps required to Increase/Change the authorized capital limit to issue more shares. However, it cannot issue shares exceeding the authorized capital limit in any case.
FORMS AND DOCUMENTS
Form MGT – 14
This form must be filed with the RoC within 30 days of the resolution being passed.
The following documents needs to be attached with the Form MGT 14:
• Notice of the EGM, as well as the Explanatory Statement required by Section 102 of the Companies Act, 2013.
• A certified copy of the EGM resolution was passed.
• A cop of the new MOA.
• A copy of the new AOA (provision for the increase in authorized share capital).
Form SH – 7
This form must be filed with the RoC within 30 days of the resolution being passed. The purpose of this form is to notify the Registrar of the details of the increase in authorized capital.
The following documents needs to be attached with the Form SH 7:
• A certified true copy of the resolution for capital change.
• A copy of the new MOA.
• A copy of the new AOA (in case of alteration to include provision for the increase in authorized share capital).
• Any additional optional attachments, if any.
The forms must be submitted within the time frame specified to avoid penalties or subsequent punishment for which the company and its officers will be held liable.
Changes to the name of a company would require an alteration to the MOA by passing a special resolution. In case changes to the name of a private limited or public limited company is effected, consent or authorization of Central Government is not required. In any other case, the consent of the Central Government would be required. Further, in the event of a company being registered with a name that bears a resemblance to the name of an existing company, the Central Government might ask it to alter its name. In such a case ordinary resolution is adequate.
In some cases, the alteration of the name may not be allowed to the following companies:
• Not filing the annual returns or financial statements due for filing with the Registrar or
• Failed to pay or repay the matured deposits or debentures or interest thereon
Here are some of the methods which can be utilized after the incorporation of the company. Hence, with any of the following methods, you can convert your company’s name.
• Conversion of private limited company into public limited company and thereby change in the name from private to public; or
• Conversion of public limited company into private limited company and thereby change in the name from public to private; or
• Change of name from ABC limited to XYZ limited.
Whenever a company is incorporated it shall prepare an MOA (Memorandum of Association). It is the very First step for company incorporation as it defines the area within which the company can operate during its existence.
One of the Clauses of Memorandum is Object Clause, which defines as well as confines the areas within which it will operate. It defines the very object/purpose for which it is being incorporated
But there are many situations that come in front of companies when it has to make alterations in its object clause i.e., addition or deletion of some objects. The very common reason for alteration is expansion
Here are some of the key compliance requirements that should be considered:
a) Board Meeting: The board of directors of the company should convene a board meeting to approve the proposed changes to the object clause. The board resolution should clearly state the reason for the proposed changes and authorize the company to take all necessary steps to implement the changes.
b) Shareholder Approval: An extraordinary general meeting (EGM) of the company's shareholders should be called to obtain their approval for the proposed changes to the object clause. The notice of the EGM should be sent to all shareholders in advance, stating the purpose of the meeting, the proposed changes to the object clause, and the date, time and venue of the meeting.
c) Special Resolution: A special resolution should be passed by the shareholders present at the EGM, with at least three-fourths of the votes in favor of the changes to the object clause.
d) Filing with Registrar of Companies: Once the special resolution is passed, the amended MOA, along with the minutes of the EGM and other necessary documents, should be filed with the Registrar of Companies within the prescribed time limit.
e) Registrar's Approval: The Registrar of Companies will review the amended MOA and may request additional information or clarification if needed. Once satisfied, the Registrar will issue a certificate of registration confirming the changes to the object clause.
f) Public Notice: The company should issue a public notice of the changes to the object clause in at least one local newspaper and on the company's website, if applicable.
• File Form MGT-14 with the ROC (Registrar of Companies) within a period of 30 days from the date of passing resolution along with the prescribed fees.
a. Attachment with MGT-14:
b. A copy of the notice of EGM
c. A copy of the Explanatory Statement
d. A copy of Special Resolution
e. A copy of the altered MOA
Every business organization has a principal place of business activities, which in case of a company called its registered office. The address of the situation of the registered office is very important from general public, shareholders, customers and various other points of view. Every company is governed in accordance with the provisions of the Companies Act, 2013, therefore, it is mandatory for all companies to keep the Registrar of Companies informed about the location of the registered office and changes Thereto from time to time. Promoters of the Company decide the State in which the registered office shall be situated.
A registered office is the official address of a company to which all official letters and reminders will be sent by any person, any government or non government or regulatory body. In terms of Section 7 of the Companies Act, 2013 (the “Act”), all registered companies are legally required to have a registered office address in India from the date of commencement of business or within thirty days from the date of incorporation whichever is earlier. However, under the incorporation process effective as on date, the proposed company is required to intimate the address of its proposed registered office at the time of incorporation itself.
Out of State Shifting of the Registered Office under the Companies Act, 2013 Provisions relating to shifting of the registered office from one state to another are contained in Section 13(4) of the Companies Act, 2013 which are detailed in the rule 30 of The Companies (Incorporating) Rules, 2014. In the present article, this procedure has been given in a step by step manner for easy understanding of the readers.
Modes of Shifting of Registered Office
1. Shifting of the registered office from its “Existing location in a city, town or village to another place within the limits of the same city, town or village”.
2. Shifting of the registered office to a place “Outside the local limits of the existing place but in the same State” under the jurisdiction of the same Registrar of Companies”. [Section- 12, sub section- 5 clause- a]
3. Shifting of the registered office from the “Jurisdiction of one Registrar of the Jurisdiction of another Registrar within the same State”. [Rule- 28 of The Companies (Incorporation) Rules, 2014
4. Shifting of the registered office to another State in India. [Section13(4)] [Rule- 30 of The Companies (Incorporation) Rules, 2014
Under Section 169 of the Companies Act of 2013, shareholders can remove a director from their position before the end of their term of office by passing an ordinary resolution. However, before taking this action, the director must be given a fair opportunity to be heard.
The removal of a director is not a simple process and every document related to the removal would be scrutinized by the Registrar of Companies to decide whether the director should be removed. It is important for shareholders to follow the specific procedures outlined in the Companies Act of 2013 when removing a director.
It is worth noting that Section 242 of the Companies Act, 2013 prohibits the Tribunal from appointing a director and a director proposed to be dismissed is not appointed by the Central Government. Therefore, the removal of a director by shareholders is the only legal way to remove a director from their position.
Mandatory Requirements for removal of Director
• It is mandatory to issue Special Notice u/s 115 of the Companies Act, 2013 for removal of director.
• Special Notice shall be sent to concern director at least 14 days before passing the resolution.
• It is mandatory to give opportunity of being heard to the concerned director and representation of such director shall be in writing.
• The director who has been removed from office shall not be re-appointed.
LABOUR LAW
Contract Labour Registration refers to the process of obtaining a registration certificate under the Contract Labour (Regulation and Abolition) Act, 1970. This act regulates the employment of contract labour in establishments that employ 20 or more contract workers on any day of the preceding 12 months. The registration certificate is issued by the respective State Government and is mandatory for employers who engage contract workers in their establishment.
The Contract Labour (Regulation and Abolition) Act aims to protect the rights and interests of contract workers by regulating their working conditions, wages, and other benefits. The act also provides for the abolition of contract labour in certain circumstances where it is deemed exploitative or detrimental to the interests of the workers.
DOCUMENTS REQUIRED
The documents required for Contract Labour Registration may vary depending on the state in which the establishment is located. However, some of the commonly required documents are:
1. Application form: The registration form needs to be duly filled and submitted.
2. PAN Card: A copy of the establishment's PAN card needs to be submitted.
3. Proof of Address: A copy of the establishment's address proof, such as a utility bill or rent agreement, needs to be submitted.
4. Nature of work: A detailed description of the nature of work carried out by the establishment needs to be provided.
5. Number of workers: A list of the total number of contract workers employed by the establishment needs to be provided.
6. Registration fee: The prescribed registration fee needs to be paid.
7. Bank account details: The details of the establishment's bank account need to be provided for payment of wages.
COMPLIANCES
Employers who engage contract workers in their establishment are required to comply with the provisions of the Contract Labour (Regulation and Abolition) Act, 1970. The act provides for various compliances that employers must adhere to. Some of the key compliances under the act are:
1. Registration of establishment: The establishment must obtain a registration certificate under the Contract Labour (Regulation and Abolition) Act, 1970.
2. Maintaining registers and records: Employers must maintain various registers and records such as the register of contractors, muster roll, wage register, and annual return.
3. Payment of wages: Employers must ensure that contract workers are paid wages on time, and the payment should be made through a bank account.
4. Working conditions: Employers must provide suitable working conditions such as clean and hygienic restrooms, drinking water facilities, and adequate lighting and ventilation.
5. Health and safety measures: Employers must provide necessary health and safety measures such as first-aid kits, fire extinguishers, and protective equipment.
6. Display of notice: Employers must display notices at conspicuous places informing workers about their rights, wages, and other benefits.
7. Maintenance of registers and records: Employers must maintain various registers and records such as the register of contractors, muster roll, wage register, and annual return.
8. Submission of annual return: Employers must submit an annual return to the Labor Department containing details of the contract workers employed in the establishment.
Failure to comply with the compliances under the Contract Labour (Regulation and Abolition) Act, 1970 can attract penalties, fines, and legal consequences. Hence, it is essential for employers to ensure timely compliance with all the act's provisions and adhere to the compliances applicable to their establishment
EPF (Employees' Provident Fund) is a government-mandated savings scheme for employees in India. Employers who have more than 20 employees are required to register for EPF and provide their employees with an EPF account.
The documents required for EPF registration are:
• PAN card
• Aadhaar card
• Bank account details
• Address proof of the establishment
• Address proof of the authorized signatory
• Details of the authorized signatory
EPF registration compliance refers to adhering to the regulations set forth by the Employees' Provident Fund Organization (EPFO) after registering for EPF. As an employer, you must comply with the following requirements:
• Contribution: You must make a contribution of 12% of the employee's basic salary plus dearness allowance (DA) to their EPF account every month. The employer is also required to contribute 12% of the basic salary and DA to the employee's EPF account.
• Timely Deposit: The contribution must be deposited in the employee's EPF account within 15 days from the end of the month. Delayed deposit of contribution may lead to penalties and interest charges.
• Filing of Returns: Employers are required to file monthly and annual returns with the EPFO. Monthly returns must be filed by the 15th of the following month, and annual returns must be filed by April 30th of the following year.
• UAN Generation: Employers must generate a Universal Account Number (UAN) for each employee and provide it to them. The UAN remains the same throughout the employee's career and can be used to link multiple EPF accounts.
• Updating KYC: Employers must ensure that the Know Your Customer (KYC) details of the employees are updated regularly on the EPFO portal. KYC documents include Aadhaar, PAN, and bank account details.
• Display of Notices: Employers must display notices related to EPF in the workplace, such as the rate of contribution, the UAN, and the procedure for filing a claim.
• Non-compliance with EPF regulations can lead to penalties and legal action. Therefore, it is essential to comply with EPF regulations and ensure that all necessary steps are taken to provide the benefits of EPF to employees.
ESIC (Employees' State Insurance Corporation) is a social security and health insurance scheme for Indian workers. ESIC provides medical benefits, sickness benefits, maternity benefits, and various other benefits to eligible employees.
To register for ESIC (Employees' State Insurance Corporation), the following documents are generally required:
• Registration certificate or license issued by the government authorities such as a shop and establishment registration certificate, GST registration certificate, etc.
• PAN card of the establishment.
• Bank account details of the establishment.
• Proof of identity of the authorized signatory of the establishment such as a voter ID card, PAN card, driving license, etc.
• Address proof of the establishment such as a utility bill, lease agreement, etc.
• Details of the employees such as their name, age, date of joining, salary, etc.
• Photographs of the employees.
• Aadhar card or any other identity proof of the employees.
• Bank account details of the employees.
• Bank account details of the employees.
ESIC (Employees' State Insurance Corporation) compliance refers to the adherence to the rules and regulations set by ESIC related to the social security and health insurance scheme for Indian workers. The following are some of the ESIC compliances that employers need to adhere to:
• Monthly contribution: The employer needs to contribute 4.0% of the total monthly wages of the employees towards ESIC. The employee also needs to contribute 1.5% of their monthly wages towards ESIC.
• ESIC challan payment: The employer needs to deposit the ESIC contribution amount every month through an online ESIC challan.
• ESIC registration certificate: The employer needs to display the ESIC registration certificate at a prominent place in the workplace.
• ESIC benefits to employees: The employer needs to ensure that the employees are provided with the benefits offered by ESIC, such as medical benefits, sickness benefits, maternity benefits, and various other benefits.
• ESIC return filing: The employer needs to file the ESIC returns every six months, which contains details of the employees, their wages, and the contributions made towards ESIC.
• Record maintenance: The employer needs to maintain accurate records of the ESIC contributions made, benefits provided, and any other relevant details related to ESIC compliance.
Labour Welfare Fund (LWF) is a statutory contribution that employers in India are required to make towards the welfare of their employees. The objective of LWF is to promote the welfare of laborers and to provide them with better working conditions, facilities, and opportunities. The fund is utilized for the social security and welfare of the workers in various ways such as providing medical facilities, educational assistance, housing, and skill development.
The LWF contribution amount and the registration process vary depending on the state in which the employer operates. The employer is required to contribute a certain percentage of the employee's basic wages towards the LWF. The percentage of contribution, the maximum limit, and the due date for payment may vary depending on the state's rules and regulations.
It is important for employers to comply with the rules and regulations of LWF and to make timely contributions to ensure the welfare of their employees. Failure to comply with the rules may result in penalties and legal consequences.
DOCUMENTS REQUIRED
The documents required for registering for Labour Welfare Fund (LWF) may vary depending on the state in which your organization is located. However, here are some of the common documents that you may need to provide:
• PAN card of the employer
• TAN (Tax Deduction and Collection Account Number) of the employer
• Proof of the company's address such as a copy of the electricity bill, water bill, or property tax receipt
• Proof of the number of employees such as a copy of the employee register or attendance register
• Registration certificate of the company
• Bank details of the company to make the LWF contribution payment
• Board resolution authorizing the authorized signatory to register and remit LWF contributions on behalf of the company.
COMPLIANCES
To comply with the Labour Welfare Fund (LWF) regulations, employers in India must follow these key compliance requirements:
• LWF Registration: Employers must register themselves under the respective state's LWF authority, obtain a registration certificate and display it in a prominent place in the workplace.
• Contribution Payment: Employers must make the LWF contributions within the due date as specified by the respective state's LWF authority. The contribution amount and due date may vary depending on the state. Typically, the employer must contribute a certain percentage of the employee's basic wages towards the fund.
• Maintenance of Records: Employers must maintain records related to LWF contributions, such as contribution registers, challans, and receipts. These records must be kept up to date and available for inspection by the respective state's LWF authority.
• Annual Return Filing: Employers must file an annual return with the respective state's LWF authority. The return must include details of the contribution made during the year, the number of employees, and other relevant details as required by the state's rules.
• Display of Notices: Employers must display notices related to LWF contributions in the workplace, informing employees about the contributions made on their behalf, the benefits provided by the fund, and the procedure to claim the benefits.
• Compliance with Rules and Regulations: Employers must comply with the rules and regulations related to LWF as specified by the respective state's LWF authority.
Non-compliance with LWF regulations may result in penalties, fines, and legal consequences. Hence, it is important for employers to ensure timely compliance with all LWF-related requirements.
Professional tax is a tax levied by the state governments on salaried individuals and professionals engaged in various trades, professions, and employment. It is a direct tax that is imposed on income earned by professionals such as lawyers, doctors, chartered accountants, and architects, among others.
The tax is collected by the respective state government and the amount of tax varies from state to state. The tax amount is generally a fixed slab based on the income bracket of the individual or professional. In some states, the tax is collected annually, while in others, it is collected monthly.
Professional tax is an important source of revenue for state governments and is used for the development of infrastructure, education, and healthcare, among other things. It is mandatory for individuals and professionals to pay professional tax as it is a legal requirement. Failure to pay the tax can result in penalties and legal action.
Compliance with professional tax is essential for individuals and professionals to avoid penalties and legal consequences. The following are some of the compliance requirements in relation to professional tax:
• Registration: Individuals and professionals are required to register with the state government within the prescribed time limit after they commence their profession or employment.
• Payment: Professional tax must be paid regularly, either monthly or annually, depending on the rules of the state. The tax must be paid by the due date to avoid late payment penalties.
• Filing of returns: Individuals and professionals are required to file regular returns with the state government, providing details of their income, deductions, and tax paid.
• Maintenance of records: Individuals and professionals must maintain proper records of their income, tax paid, and returns filed. These records must be kept for a prescribed period and produced when required by the tax authorities.
• Compliance with rules: Individuals and professionals must comply with the rules and regulations laid down by the state government regarding professional tax. Failure to comply with the rules can result in penalties and legal action.
• Audit and assessment: The tax authorities may conduct audits and assessments of the records and returns filed by individuals and professionals to ensure compliance with the professional tax laws.
COMPLIANCES
A Private Company is a legal entity and enjoys a separate identity from its directors. It requires controlling its active status through the regular filing with the Ministry of Corporate Affairs (MCA). Every private company must file an annual return and audited financial reports with MCA for every fiscal year. The Registrar of Companies filing is necessary irrespective of the turnover, whether it is zero or in crores. Whether a single business is undertaken or none, annual compliances for private limited are compulsory for every certified company.
MANDATORY ANNUAL COMPLIANCES
The followings are some of the mandatory agreements that a private Limited company must ensure
1. First Board Meeting
The First Meeting of the Board, along with Directors, is expected to be held within 30 days of the Incorporation of the Company. Declaration of Board Meeting must be sent to each director at least seven days prior to the meeting.
2. Subsequent Board Meetings
Minimum of 4 Board Meetings to be checked every year with a gap of not more than 120 days between two meetings.
3. Filing of Acknowledgement of Interest by Directors
Every director at:
• The first meeting in which he engages as director; or
• The first meeting of the Board in each Financial Year; or
• Whenever there is a variety in disclosures shall reveal in Form MBP 1 (along with a list of relatives and attention of relatives in the company as per RPT definition), his interest or interest in any company, body corporate, organizers/firms or other organization of individuals (including shareholding interest). Form MBP‐1 shall be kept in the documents of the company.
4. First Auditor
The Board of Directors shall designate the first Auditor of the Company within 30 days of Incorporation, who shall continue the office till the completion of the 1st Annual General Meeting. In the matter of First Auditor, filing of ADT-1 is not necessary.
5. Subsequent Auditor
The Board of Directors shall delegate the Auditor in the first Annual General Meeting of the Company, who shall hold the position until the 6th Annual General Meeting and notify the same ROC by filing ADT-1. The capacity to submit Form ADT 1 is of the company and not the Auditor in between the 15 days from the time of appointment.
6. Annual General Meeting
Every company is needed to hold an Annual General Meeting on or before 30th September every year during working hours (9 am to 6 pm). On a day that is not a general public holiday and either at the certified office of the company within the city, town/ village where the certified office is positioned. A 21-day notice is required to be given for the same.
7. Filing Of Annual Returns (Form MGT-7)
Each and every Private Limited Company is expected to file its Annual Return within 60 days of conducting of Annual General Meeting. Annual Return will be for the time 1st April to 31st March.
8. Filing Of Financial Statements In (Form AOC-4)
Every private Limited Company is expected to file its 'Balance Sheet' along with a statement of 'Profit and Loss Account' and 'Director Report' in this Form within 30 days of holding off 'Annual General Meeting'.
9. Statutory Audit of Accounts
Each and every company should prepare its Accounts and get the same audited by a Chartered Accountant or any appropriate person at the end of the Financial Year mandatorily. The Auditor should provide an Audit Report and the Audited Financial Statements to file with the Registrar.
1. Filing of Annual Return: Every LLP has to file an Annual Return in Form 11 with the Registrar of Companies (ROC) within 60 days from the close of the financial year.
2. Filing of Financial Statements: Every LLP has to file its Financial Statements in Form 8 with the ROC within 30 days from the end of the financial year.
3. Maintenance of Books of Accounts: Every LLP is required to maintain proper books of accounts as per the provisions of the LLP Act, 2008.
4. Tax Audit: LLPs whose turnover is more than Rs. 40 Lakhs or whose contribution is more than Rs. 25 Lakhs are required to get their accounts audited by a Chartered Accountant.
5. Income Tax Return Filing: Every LLP is required to file its Income Tax Return with the Income Tax Department by 31st July of the assessment year.
6. TDS Returns: If an LLP is liable to deduct TDS (Tax Deducted at Source), it has to file TDS returns on a quarterly basis.
7. GST Returns: If an LLP is registered under GST, it has to file monthly, quarterly or annual GST returns, depending on the turnover of the LLP.
Non-Banking Financial Companies (NBFCs) are regulated by the Reserve Bank of India (RBI) and are required to comply with various regulatory and statutory requirements to ensure their financial stability and protect the interests of their customers. Here are some of the key compliance requirements for NBFCs:
1. Registration with the RBI: NBFCs are required to obtain registration from the RBI to carry out their business activities. The registration process involves submission of various documents and compliance with certain eligibility criteria.
2. Capital Adequacy Ratio: NBFCs are required to maintain a minimum capital adequacy ratio (CAR) of 15% of their risk-weighted assets. This ensures that NBFCs have sufficient capital to absorb losses and maintain their financial stability.
3. KYC/AML Compliance: NBFCs are required to comply with the Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines issued by the RBI. This involves verifying the identity of customers and ensuring that their transactions are not used for illegal activities.
4. Maintenance of Reserve Funds: NBFCs are required to maintain certain reserve funds such as a Statutory Liquidity Ratio (SLR) and a Cash Reserve Ratio (CRR) as prescribed by the RBI.
5. Submission of Periodic Reports: NBFCs are required to submit periodic reports to the RBI such as monthly returns, quarterly returns, and annual returns. These reports provide information on the financial health of the NBFC and help the RBI to monitor their operations.
6. Compliance with Accounting Standards: NBFCs are required to comply with accounting standards prescribed by the RBI. This includes maintaining accurate books of accounts and preparing financial statements in accordance with the prescribed format.
7. Compliance with Other Regulatory Requirements: NBFCs may be subject to various other regulatory requirements such as tax compliance, data protection regulations, and consumer protection laws. They are required to comply with these requirements to avoid legal and financial penalties.
The following are some of the annual compliance requirements for Non-Banking Financial Companies (NBFCs) in India:
1. Annual Return: NBFCs are required to file an annual return with the Reserve Bank of India (RBI) in the format specified by the RBI. The return must be filed within 90 days from the end of the financial year.
2. Audited Financial Statements: NBFCs are required to prepare and submit audited financial statements for the financial year to the RBI within six months from the end of the financial year. The financial statements must be prepared in accordance with the accounting standards prescribed by the RBI.
3. Compliance Certificate: NBFCs with a net worth of Rs. 50 crores or more are required to obtain a compliance certificate from a qualified chartered accountant. The compliance certificate must be submitted to the RBI along with the annual return.
4. Net Owned Fund: NBFCs are required to maintain a minimum Net Owned Fund (NOF) as prescribed by the RBI. The NOF must be calculated as per the guidelines issued by the RBI and should be reflected in the audited financial statements.
5. Statutory Auditors: NBFCs are required to appoint statutory auditors who are qualified chartered accountants. The auditors must conduct an audit of the financial statements and submit their report to the Board of Directors.
6. Board of Directors: NBFCs are required to hold at least one meeting of the Board of Directors every quarter. The meetings must be minuted and the minutes must be maintained in a register.
7. Annual General Meeting: NBFCs are required to hold an Annual General Meeting (AGM) of the shareholders within six months from the end of the financial year. The audited financial statements and the Board's report must be presented to the shareholders at the AGM.
NIDHI COMPANY COMPLIANCES
Nidhi Companies are non-banking finance companies (NBFCs) that are formed with the objective of cultivating thrift and savings habits among its members. These companies are regulated by the Ministry of Corporate Affairs (MCA) under the Companies Act, 2013 and Nidhi Rules, 2014.
Here are some of the compliances that Nidhi Companies need to follow:
Incorporation: Nidhi companies must be registered with the Registrar of Companies (ROC) and obtain a Certificate of Incorporation.
Minimum members: Nidhi companies must have a minimum of 200 members within a year of incorporation.
Minimum Net Owned Funds (NOF): Nidhi companies must maintain a minimum NOF of Rs.10 lakhs.
Name: Nidhi companies must have the word "Nidhi Limited" as part of their name.
Board Meetings: Nidhi companies must hold at least four board meetings in a year, and the gap between two meetings must not exceed 120 days.
Statutory Registers: Nidhi companies must maintain various statutory registers, such as the Register of Members, Register of Loans, Register of Deposits, etc.
Investments: Nidhi companies are not allowed to invest in shares or debentures. They can only invest in specified securities or deposit schemes of other Nidhi companies.
Loans: Nidhi companies can only provide loans to their members, and the amount of loan cannot exceed 20 times the deposits received from the member.
Deposits: Nidhi companies can accept deposits from their members, subject to certain conditions, such as the maximum limit of deposits, minimum and maximum periods of deposits, etc.
Annual Compliances: Nidhi companies must file various annual returns and forms with the ROC, such as the Annual Return, Financial Statements, Audit Report, etc.
ANNUAL COMPLIANCES OF NIDHI COMPANY
Annual compliances are an essential part of the regulatory framework that Nidhi Companies need to comply with. Here are the annual compliances that Nidhi Companies need to follow:
1. Annual Return: Every Nidhi Company needs to file its annual return in Form NDH-1 within 60 days from the closure of the financial year. This form includes details of the company's registered office, directors, members, loans, deposits, and other important information.
2. Financial Statements: Every Nidhi Company needs to prepare and file its financial statements in Form NDH-2 within 30 days from the conclusion of the Annual General Meeting (AGM). These statements include the balance sheet, profit and loss account, cash flow statement, and other related documents.
3. Auditor's Report: Every Nidhi Company needs to obtain an audit report from a qualified auditor and file it in Form NDH-3 along with the financial statements. The auditor's report includes comments on the financial statements, internal controls, compliance with laws and regulations, and other related matters.
4. Income Tax Returns: Every Nidhi Company needs to file its income tax returns by 30th September of the following year. The company needs to get its accounts audited by a chartered accountant and file the tax return in Form ITR-6.
5. ROC Annual Filing: Every Nidhi Company needs to file its annual compliance in Form AOC-4 and MGT-7 within 60 days of the conclusion of the AGM.
6. Board Meeting Minutes: Every Nidhi Company needs to maintain minutes of all its board meetings and file them with the ROC in Form MGT-14 within 30 days of the board meeting.
7. Statutory Registers: Every Nidhi Company needs to maintain various statutory registers, such as the Register of Members, Register of Loans, Register of Deposits, etc., and update them regularly.
Sec bretarial Audit is an independent audit of companies’ management and corporate compliance which helps us to detect non compliance and to take corrective measures. It also called a compliance audit. It helps us to ensure that the company follow all applicable provisions and regulations of the different applicable acts. Secretarial auditing aids in the detection of non-compliance and the implementation of corrective actions. It examines the company’s adherence to good corporate practices.
Applicability:
• Every Listed Company Every public company having a paid-up share capital of fifty crore rupees or more
• Every public company having a turnover of two hundred fifty crore rupees or more
• Every company having outstanding loans or borrowings from banks or public financial institutions of one hundred crore rupees or more
Periodicity Of Secretarial Audit-
The Secretarial Audit helps the Company take disciplinary measures and build up its compliance mechanism and processes. The Secretarial Audit can be carried out-
• Periodically,
• Quarterly,
• Half-year and,
• Annually.
Documents Required For Secretarial Audit-
The documents required for Secretarial Audit are mentioned below-
a) MOA, AOA, and Statutory Registers,
b) Minutes and Notices of Board and General Meeting
c) Previous year Secretarial Audit Report and Audited financial statements,
d) In case Listed entity- Filings & Intimations with ROC, Stock Exchanges, Newspaper Advertisements.
e) Performance Reports prepared on an annual basis, Deed, Bonds, and returns.
f) In case of foreign investment, filings with Reserve Bank of India and other statutory departments,
g) Registers maintained under Labour Laws,
h) Bank account details for dividend
i) Disclosure of Remuneration and Sitting fees paid by the Company to the directors.
j) Particulars of CSR amount
k) SAST Disclosures
l) Particulars of External Commercial Borrowing Returns, if any.
Secretarial Compliance Certificate Under The Companies Act,2013-
Secretarial Compliance Certificate is a certificate given by a Practicing Company Secretary based on the documents received by the Company for the respective financial year.
Under the Companies Act,2013, Secretarial Compliance Certificate is a Secretarial Audit Report prepared by Secretarial Auditor. The Secretarial Auditor while preparing a Secretarial Audit report, shall mark in his report-
• A qualification,
• Reservation, or
• Adverse remarks are highlighted in Bold type or Italics.
However, suppose the Secretarial Auditor cannot form their opinion on any matter. In that case, they should specify that they cannot express an opinion on that particular matter, stating the reason.
Note- The Board of Directors of the Company in its Board’s report shall explain in full any qualification or observation, or other remarks made by PCS in the Secretarial Audit Report.
General Compliances
Whether company has kept and maintained all statutory registers, filed all forms, return and notices to respective authorities as per companies Act, 2013 Whether company follow all requirements of the Act and provisions of MOA & AOA .
Details of Documents to be Checked:
Register and Record
Register & Index of members
Register & Index of debenture holders
Foreign registers of members of debenture holders
Registers and returns
Minutes book of meetings
Minutes book of class meeting/creditors meeting
Register of investments
Register of deposits
Register of charges (creation)
Books of accounts & cost records
Register of contracts
Register of directors, MD, manager & secretary
Register of directors’ shareholding
Register of investments, loans made, guarantee given or security provided
Register of renewed & duplicate certificates
Register of directors’ attendance
Register of shareholders’ attendance
Register of proxies
Register of Transfer
Register of fixed assets
Register of debenture holders
Returns
Annual Returns
Annual Accounts (Balance Sheet and Profit and Loss Account)
Return of Allotment
Notice of change in situation of Registered office
Court or CLB Order
Return of Appointment of MD/WTD/Manager
Return of Deposits
Registration of Resolutions and Agreements
Registration of Creation/ modification/ satisfaction of Charge
Meetings
1. Board of Directors Meetings, as per section 173 of Companies Act, 2013
2. Extraordinary General Meeting, as per section 100 of Companies Act, 2013
3. Annual General Meeting, as per Section 96 of Companies Act, 2013
4. Committee Meetings duly convene as per provisions of Companies Act, 2013
5. Minutes of All Meetings maintained as per section 118 of Companies Act, 2013
6. Proof of Dispatch of Notices to Members/ Directors as per respective provisions of Companies Act, 2013
e- Filing
Check whether company has filed the following Documents;
MGT- 14 within 30 Days of passing Special Resolutions/Board Resolutions as the case may be
MGT-14 in case of Board Resolutions (other than Private Company)
To make political contributions
To Diversify the Business of the Company
To approve Merger, Amalgamation or Reconstruction
To takeover of the Company
To Appoint Secretarial Auditor (section 204 of Companies Act, 2013)
To Appoint Internal Auditor (section 138 of Companies Act, 2013)
To invest the fund of Company under section 186 of Companies Act, 2013
To Approve Financial statement and Board’s Report
To Appoint or Remove KMP (defined under section 2(51) of the Companies act,2013
To issue securities including debenture, by letter of offer
To Borrow Monies from any sources including Directors
To authorize Buy Back of Securities under Section 68
MGT- 14 in case of Ordinary Resolutions
For Appointment of Director under section 152 of companies Act, 2013
Invitation given to member for Deposit as per section 73 of Companies Act, 2013
Appointment of Small Shareholder Director (section 151 )
Appointment of independent Director
Issue of Bonus Share
Change of the name of the Company
MGT-14 in case of Special Resolutions
Conversion of Private Company into OPC
Approve the any scheme for giving loan to MD/WTD under section 185
Loan or Investment by Company exceeding the limit under section 186 of the Companies Act, 2013
Special resolution for winding of the Company
Appoint Managerial Personnel exceeding the age of 70 Years
Remuneration to managerial personnel in case of inadequacy of profit a per Schedule V
Resolutions under Section 180 (a), (b) and (c) of the companies Act, 2013
Re- appointment of Independent Director
For keeping of the register any other place in India
For buyback of share as per section 68
For reduction of share capital as per section 66
Issue of Sweat equity share as per section 54
Private Placement of Securities
Conversion of Section 8 Company in any other kinds or alteration of its MOA
Change of its registered office under section 12 and 13 of Companies Act, 2013
• File return of allotment in form PAS-3 within 30 days of allotment of share with ROC
• File SH -11 returns in respect of Buy back of Securities
• File form DPT 3 for return of deposit
• File CHG-1 in case of Application for registration of creation, modification of charge, within 30 days of its creation
• Particular for Satisfaction of Charge in form no CHG-4 filed with ROC
• For condonation of delay in filing of charges has been made to CG in form no CHG 8
• Whether MGT 7 (Annual Return) filed with ROC within 60 days of its AGM
• Whether company maintained AOC 2 for related party disclosure
• Whether company file ADT 1 within 30 days of Appointment of Auditors
• Whether application has been made to CG in ADT 2 for removal of Auditors
• Whether company received DIR 2 (consent to act as a director) changes among them) with ROC within 30 days of appointment or changes
• Whether DIR 11 filed with ROC within 30 days of its Resignation
• Whether Company maintain Register of Loans and investment in MBP 2
• Whether Company Receive MBP 1 (nature of Interest) from all director in its first BM of Financial Year
• Whether company maintained register of Contract and arrangement in which director are interested in Form MBP 4
• Whether company file MR 1 with Roc within 30 days of appointment of MD/WTD/Manager
• Whether MR 2 filed with CG for approval of appointment or reappointment and remuneration or increase in remuneration or waiver for excess or over payment to managing director or whole time director or manager and commission or remuneration
Share Certificates, Transfer/Transmission of Shares, Dividend, Board’s Report
• Copies of Endorsed shares certificates and other securities
• Transfer Deeds and transmission request letters etc.
• Declaration, payment and transfer of dividend Board’s report
• Transfer of unpaid amounts to the IEPF
List of mandatory Section 8 company compliances
a. Appointment of Auditor
It is compulsory for a Section 8 company to appoint an auditor to take care of their financial recordings every year.
b. Maintaining Registers
Maintaining statutory records in registers is expected from Section 8 companies. These registers are maintained on a year basis and the purpose of these registers is to check how the company has performed annually. Information related to members, loans, charges and investment is provided in the register.
c. Maintenance of Financial Statements
Financial records of a Section 8 Company are maintained on an annual basis. Once the financial records are prepared they are presented in the front of the registrar. Financial records consist of the following information:
1. Trading Account
2. Profit and Loss Account
3. Balancesheet
d. Preparing Director’s Report
Section 134 of the Companies Act, 2013 says that Form AOC-4 is needed to file the Director’s Report. The purpose of preparing a Director’s Report is to give shareholders a preview of the financial position of the company and the scope of its business. The signed ‘minutes of meetings’ is required to be maintained at the Registered Office.
e. Income Tax Return Filing
Section 8 company are required to file for Income Tax Returns on or before 30th September of the next fiscal year. In order to give complete overview of the company’s income it is essential to file for Income Tax return. But if the company is registered under Section 12A and 80G it can avail the benefit of tax exemption.
f. Conduct Board Meeting
Board meeting of every company should be held twice a year in case of small companies. The gap between the two meetings should not be more than 90 days.
g. Conduct Annual General Meeting
Annual General Meeting of the Section 8 Company should be held yearly on or before 30th September. It is necessary for all the directors, members, and auditors to attend the meeting. They should be notified regarding the meeting by giving not less than 21days notice. Form MGT-15 is used to submit the report of Annual General Meeting. The report must be submitted within 30 days of conducting the meeting.
h. Filing of Financial Return with RoC
E-form AOC-4 is used to file the copy of financial statements. It is filed within 30 days from the date on which the annual general meeting is held.
i. Filing of Annual Return with RoC
Form MGT-7 is used to file the annual return of the company. Annual return is filed within 60 days from the conclusion of the Annual General Meeting. Where at whatever year no Annual General Meeting is held, the yearly return ought to be recorded inside sixty days from the days on which the yearly General Meeting ought to have been held that is 30 September. It ought to be connected with the announcement referencing the explanations behind not holding the Annual General Meeting.
Event-based Annual Compliances of Section 8 Company
Event based, as the name recommends, are the compliances should be documented on the event of explicit occasions. In contrast to annual compliances, these are non-periodical in nature.
Checklist for Event-based compliances for Section 8 Company:
a. Transfer of shares
b. Allotment of shares
c. Appointment/Resignation of Directors
d. Appointment/Resignation of Auditors
e. Modification in company’s name
f. Modification in company’s MOA
g. Appointment of Key Managerial Personnel
h. Receipt of share application money
i. Any alteration in the company’s structure
Tax Compliance for Section 8 Companies
Section Company is bound to pay corporate tax as mentioned in the Income Tax Act. But by adopting certain measures the Company can exempt its certain income from the income tax. To entertain such exemptions Section 8 Company needs to fulfil the following compliances:
• Section 8 companies must be registered under Section 12A of the Income Tax Act, with the Principal Commissioner using form 10A.
• It must adhere to the conditions mentioned in the Section 11 if the company wants to fall under the criteria of eligibility for the exemption.
• Section 80G must approve the company through Form 10B.