ABOUT PRACTISING COMPANY SECRETARIES
1Who is a Practising Company Secretary?
A Practising Company Secretary (PCS), also known as a Company Secretary in Practise, is a member of the Institute of Company Secretaries of India (ICSI), a statutory body, who holds a valid Certificate of Practice and is not a Company Secretary in full-time employment. A PCS serves as a consultant and advisor to companies on regulatory and secretarial compliance matters.
2What is the Institute of Company Secretaries of India?
The ICSI, constituted under the Company Secretaries Act, 1980, is a statutory body that develops and regulates the profession of company secretaries in India. It authorises its members to practise the profession of company secretary by issuing a Certificate of Practice. An ICSI member holding a valid certificate is known as a PCS.
3What types of services can a PCS render my business?
Qualifying as a PCS is a rigorous process involving extensive study, training, and practical exposure. Once in practice, a PCS is well-equipped to offer a wide range of corporate services to companies of all sizes, industries, sectors and scales, and is hired either on a retainer or on a per-assignment basis. Though individuals may specialise in fields of particular interest, a PCS is qualified to render services in several areas, including
- PROJECT PLANNING
- FINANCIAL SERVICES
- CORPORATE RESTRUCTURING
- CORPORATE LAW ADVISORY
- TAX PLANNING & MANAGEMENT
- ARBITRATION & CONCILIATION
- INTELLECTUAL PROPERTY RIGHTS
- PERSONNEL MANAGEMENT
- STATUTORY CERTIFICATIONS
- EXPORT, IMPORT & FOREIGN EXCHANGE
4Does my business need a company secretary?
While small companies may engage a PCS on a retainer or per-assignment basis, under Indian law, companies with paid-up capital of Rs. 10 crores (Rs. 100 million) or higher are required to employ a full-time company secretary. ProJuris serves as a consultant to such companies in complying with certifications and other advisory requirements.
5My company doesn’t carry on any business. Do I still need to adhere to corporate compliance rules and regulations?
All registered or incorporated companies must meet certain minimum compliance requirements, even if no business is extant. If your company is defunct, it may be better to close the company down under the provisions of the law if you don’t intent to resume business in future.
6Can a PCS give a legal opinion on company law matters?
Yes. A PCS can provide a legal opinion on matters of law pertaining to companies, securities, foreign exchange, competition and more, though much depends on the expertise of the individual PCS providing the opinion.
7Can a PCS handle corporate law litigation in a quasi-judicial forum like the National Company Law Tribunal (NCLT)?
Yes! Reach out to us to gain a clearer understanding of where a PCS can act on behalf of a company and the limitations of such action under Indian law.
THE RESERVE BANK OF INDIA (RBI) AND THE FOREIGN EXCHANGE MANAGEMENT ACT (FEMA)
1What is Foreign Direct Investment (FDI)?
Companies wishing to meet their capital requirements by raising funds from international sources can do so in two ways: automatic and through the government. Choosing the right approach requires a clear understanding of the pros, cons, policies, procedures and requirements of each. The automatic route requires no prior approval, but when companies seek to go through the government, they must get permission from the Ministry of Commerce & Industry through a single-window system called the Foreign Investment Facilitation Portal (FIFP).
2What is Overseas Direct Investment (ODI)?
ODI is when Indian individuals and entities invest in entities outside India by subscribing to their share capital in either the primary or the secondary market. In a sense, ODI is the reverse of FDI. ODIs are governed by the FEMA regulations of 2004 and subsequent amendments. The law changes often in line with global economic and geopolitical developments. Staying compliant means following several procedures and submitting the mandated filings regularly under the guidance of experts.
3What is the annual Foreign Liabilities & Assets (FLA) return?
Any entity involved in FDI or ODI must submit an annual return to the RBI, declaring its foreign assets, liabilities and foreign currency transactions in the current year and previous years, if any. This return is due by July 15th each year. Incorrect or delayed submissions attract heavy penalties.
4What is FC-TRS?
FC-TRS is the Foreign Currency – Transfer of Shares form that must be filled when transferring capital instruments (for example, equity shares), of an Indian company if such a transfer is:
- Between a person resident outside India (repatriable) and a person resident outside India (non-repatriable)
- Between a person resident outside India (repatriable) and a person resident in India
5What are Convertible Notes and how do startups use them?
Startups issue capital instruments called Convertible Notes to raise funds at the outset. These Convertible Notes are debt that must be repaid or converted to equity shares within 5 years, subject to the terms and conditions agreed upon by the startup and its funders. The FEMA regulates how startups can obtain and manage credit through Convertible Notes. Indian startups that issue Convertible Notes to persons resident outside India must inform their authorised dealer bank within 30 days of the issue, following a prescribed format. The compliance, documentation and reporting requirements to manage Convertible Notes are rigorous and exacting.
6What are the requirements for External Commercial Borrowings (ECBs)?
Indian borrowers can accept External Commercial Borrowings (ECBs) from foreign lenders. ECBs include loans, buyer’s credit, supplier’s credit, fixed/floating rate bonds, etc. There are several restrictions and compliance filings that govern the purpose and mode of ECBs. Filing requirements include being assigned a loan registration number, applying for approval to accept ECBs, filing monthly returns to report actual transactions, and obtaining permission to convert ECBs into equity.
LIMITED LIABILITY PARTNERSHIPS (LLPs)
1How are LLPs incorporated?
Incorporating an LLP is a 6-step process with rigorous documentation, attestation and compliance requirements. The steps are name approval, preparing incorporation documents, filling the Form for Incorporation of Limited Liability Partnership (FiLLiP), obtaining the Certificate of Incorporation, and preparing the LLP Agreement.
2What is an LLP Agreement?
The LLP Agreement describes the roles, responsibilities, rights, duties and powers of the partners. It governs capital contribution, profit sharing and other aspects of running the LLP. Several clauses of LLP Agreements are mandated by law.
3How do we change the name of our LLP or the names of the partners?
The LLP Act, 2008, governs the process for changing the name of the LLP or its partners. The Act describes several procedures and central government directives that the LLP and its Designated Partners must follow to avoid punitive action.
4What statutory compliances must an LLP adhere to?
All LLPs registered with the Ministry of Corporate Affairs must comply with several annual filing requirements.
- Annual Returns must be filed with the Registrar of Companies within 60 days of the close of the financial year
- LLPs must file their Statement of Account & Insolvency for the financial year and maintain proper books of accounts, whether on a cash or accrual basis. The Statement is due with the ROC by October 30th each year.
- LLPs and FLLPs with annual turnover exceeding Rs. 40 lakh (or in which a partner’s obligation of contribution exceeds Rs. 25 lakh) must have their accounts audited.
5What are the compliance requirements for the Designated Partners of an LLP?
Every LLP must have a minimum of 2 Designated Partners, and should a vacancy arise, it should be filled within 30 days to avoid financial penalties. All Designated Partners must have a Designated Partner Identification Number (DPIN) or Director Identification Number (DIN), which can be used interchangeably. Class 3 digital signatures are accepted when obtaining a DPIN. Several other documents are required to become a Designated Partner.
6How do I cancel my LLP registration?
The Registrar of Companies (ROC) has a well-defined process involving documentary submissions and fees to cancel LLP registration. It’s important to note that defaults and violations by an LLP can result in the ROC initiating the cancellation of registration.
SPECIALISED PROFESSIONAL SERVICES
1How are Private Equity Investments (within India or abroad) handled for Venture Capital Investment firms and startups?
The Companies Act, 2013, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and Indian tax laws lay down many legal formalities and compliance requirements to be observed when the equity of a private company is affected by fresh investments or transfers. These requirements can be onerous for startups and small firms to handle on their own.
2What are the compliance requirements for altering share capital distribution?
Companies wanting to alter their share capital structure (whether increase, decrease or consolidation) must adhere to the conditions of the Companies Act, 2013. Share buybacks are also governed by the Act. In addition, disclosures and filings are mandated by the SEBI.
3What is legal Due Diligence?
Creditors, potential investors, government departments and other stakeholders often request legal due diligence of a company to aid in decision-making. It is a precautionary in-depth evaluation of a company to identify the company’s strengths, weaknesses and outlook by consolidating and analysing all available information. Once completed, legal due diligence serves as a risk mitigant, enabling stakeholders and perhaps the company itself to put in place remedial measures to address the vulnerabilities identified.
4What is a Secretarial Audit?
A secretarial audit of a company is performed by a qualified independent professional. The audit ensures that the company complies with the provisions of laws, rules and regulations; maintains accurate and updated books; and follows all legal and procedural requirements. Every public company with paid-up share capital in excess of Rs. 50 crore or annual turnover exceeding Rs. 250 crores or every company having outstanding loans or borrowings from banks or public financial institutions of one hundred crore rupees or more must conduct a secretarial audit by appointing a Practising Company Secretary.
5What role do Practising Company Secretaries play in mergers and acquisitions?
When companies merge, acquire or spin off (demerger), many legislations are involved, including Acts pertaining to corporate affairs, competition, foreign exchange, securities, tax and stamp duty. The intersection of these legislations creates a plethora of procedures to follow, documents to be prepared and legal statements to be drafted.
6What are ESOPs?
Companies give their employees the right to purchase shares at a discounted price. Employee Stock Options (ESOPs) are a type of retirement and benefits plan that employees can gain from if certain conditions are fulfilled. Administering an ESOP programme is subject to many legal requirements and companies can be severely penalised for non-compliance.
7What does the National Company Law Tribunal (NCLT) do?
The NCLT adjudicates disputes between companies. There are several legal procedures to be adhered to when filing petitions and appeals with the NCLT, and the procedure attracts a fee.
8Can we shift our company’s Registered Office to another state?
Yes, you can! A company wishing to shift its registered office to another state must first complete several prerequisites. A meeting of the Board of Directors & shareholders must be held, with the necessary documentation as prescribed by the rules. A notice must be published in the newspapers, and lists of creditors, debenture holders and employees prepared. The Company Secretary must sign an affidavit certifying, among other things, that the company has looked into any objections raised against the proposed move. The Registrar of Companies (ROC) requires that certain forms must be submitted within a given time, and the ROCs of both states must approve both the application and the supporting documentation before the new state issues a Certificate of Incorporation.
9Can a company’s statutory Charter documents be modified?
Yes. Under the Companies Act, 2013, there are a series of steps to be followed to modify the Memorandum of Association (MOA) and the Articles of Association (AOA).
10What are share subscription and purchase agreements?
When a company issues shares, agreements on the issue of securities, registers and copious other documentation must be created to obtain approval from the authorities and provide the necessary information to potential share buyers. This documentation is mandatory under law.
11Can a Sole Proprietorship, Partnership, LLP or OPC be converted into a private or public company? What about the reverse?
Every business hopes to become a corporation, but there are situations in which a private or public company may wish to go the other way. The Companies Act, 2013 describes the procedures to do either.
12Can my company enable e-voting and/or postal ballots for Board, shareholder or Committee meetings?
The Companies Act, 2013 mandates that every company hold meetings at prescribed frequencies and within certain time limits. Votes may be cast in person, electronically (i.e., online) or by postal ballot. Many regulations govern the proper conduct of all these modes of voting, appropriate protocols for closing the meeting, and documenting the proceedings.
13What are compounding and condonation?
If a company is charged with some kind of offence or penal action, it may apply for compounding the offence or condonation of delay. Compounding of an offence is a suo-moto action by the company to rectify the non-compliance. It is a process in which the company files an application accepting that it has committed the offence and express willingness to accept punitive action, usually by means of a fine. Not all offences are compoundable – only those that are not punishable by imprisonment (with or without a fine), and not all applications for compounding are accepted. If a company misses submitting mandated forms, returns or other documentation to the authorities within the stipulated time, it may apply, providing reasons, for the delay to be condoned in order to comply.
14My company is no longer operating. Can it be struck-off from the Register of Companies?
Yes, non-operative companies can be struck-off the Register of Companies through a well-defined application procedure with detailed supporting documentation. Companies which have defaulted in some manner may receive notice from the Registrar of Companies that they are due to be stricken off. These companies can apply to have the decision revoked.
REGISTRATION, TAX AND INITIATIVES FOR TRADE PROMOTION
1What are the different types of business entities? Do they all need to be registered?
There are several categories of business entities under Indian law, including
- Private Limited Company
- Public Limited Company
- One Person Company (OPC)
- Section 8 Company (not-for-profit)
- Foreign companies, their branch offices and liaison offices
- Wholly Owned Subsidiary / Joint Venture (JV)
- Limited Liability Partnership (LLP)
2What are the registration requirements for GST?
The Goods and Services Tax (GST) requires that businesses with annual turnover exceeding Rs. 40 lakh (or Rs. 10 lakh in the North East and hill states) register as a normal taxable entity. GST registration is mandatory for certain types of entities, and penalties apply to entities who do not register.
3What is the Software Technology Parks of India (STPI) programme?
The STPI is a 100% export-oriented scheme for developing and exporting computer software and professional services that use communication links or physical media. It marries the concepts of export processing zones (i.e., designated areas where all production is exported) and science and technology parks. To become a certified member of the STPI, a company must be approved by a competent authority. An elaborate list of supporting documentation accompanies the application, and a fee may be prescribed.
4Does my company need to register for Employees’ State Insurance and/or Employees’ Provident Fund?
The Employees’ State Insurance Corporation (ESIC) is an autonomous body under the Ministry of Labour and Employment. It manages state-provided insurance for working people. Any company with more than 10 employees (20 in some states) with salary not exceeding Rs. 15,000/- per month must register itself with the ESIC by providing a set of mandated documents. The Employees’ Provident Fund of India (EPFO) is one of the world’s largest social security programmes, providing retirement annuities to all salaried employees. Any registered company with 20 or more employees must register with the EPFO, though employees earning less than Rs. 15,000/- per month need not have an EPF account. Companies with less than 20 employees can choose to register with the EPFO voluntarily. Both the registrations is now mandatory along with incorporation of company itself.
5What is the procedure to register trademarks?
A company’s unique brand is essential to its value. To register trademarks, a company must:
- Check for name availability
- Prepare and file a trademark application
- Follow up the brand name application
- Publish the brand in Indian trademark journals
- Obtain a trademark registration certificate
6What is the Shops and Establishments Act?
The Shops and Establishments Act requires that every shop and commercial establishment register itself within 30 days of commencement of business. This licence to operate is a fundamental document, used as proof of a commercial business for many other purposes. A number of supporting documents must be submitted along with the application.
7Should I register my fledgling company with Startup India?
Startup India is a Government of India initiative to build a strong ecosystem conducive to the growth and success of startups by supporting entrepreneurs through online education, government grants and partnerships, and networking and exposure opportunities, among others. To benefit, budding entrepreneurs must incorporate their business and register with Startup India by submitting the necessary application, supporting documents, optional exemption requirements and a self-declaration that the conditions for acceptance are satisfied. Each registrant receives a recognition number that can be used to participate in and benefit from the available Startup India infrastructure.
8What is an Import Export Certificate (IEC) and does my business need one?
For importers to clear shipments from customs and send money abroad through banks, and for exporters to ship goods and receive payments in foreign currency, an IEC is mandated. Obtaining one is a four-step process involving a standard application form, supporting documentation, digital signatures and the payment of a fee. Once the application is approved, the IEC is issued electronically.
9How do I register my company for PAN and TAN?
The Permanent Account Number (PAN) is the primary identifier of taxable entities and its primary purpose is to prevent tax evasion. The Tax Deduction Account Number (TAN) enables tax assesses to claim the tax already deducted in their income tax return. The PAN is required for every taxpayer, but only those responsible for deducting or collecting tax at source need to obtain a TAN. Both registrations can now be obtained along with the Certificate of Incorporation.
10Does my company qualify as a micro, small or medium enterprise?
MSMEs (Micro, Small and Medium Enterprises) are classified based on their investment in plant and equipment. Entities registered under the MSME Act, 2006 can avail several benefits including cheaper bank loans, tax rebates, a 5-year carry-forward of the Minimum Alternate Tax credit, government tenders exclusively for MSMEs, government-preferred licences and certifications, one-time settlement fees for unpaid amounts, and much more. If your company meets the necessary criteria to qualify as an MSME, registering is a well-defined process involving filling a single form with supporting documentation as required.