Incorporation of Limited Liability Partnership

Incorporation of Limited Liability Partnership

 

Contributed by Ms. Sneha Chaturvedi

 

Introduction

Limited Liability Partnership (LLP) is a separate legal entity which has the benefits of    “Limited Liability”. It is governed and registered under the Limited Liability Partnership Act, 2008 and the rules made thereunder. Small and Medium Enterprises (SMEs) can function as LLP. LLP is suitable for service sector especially for the professionals like Company Secretaries, Chartered Accountants, Lawyers, Cost Accountants, etc.

Salient Features of LLP

Ø Seperate Legal Entity / Status;

Ø Limited Liability;

Ø Perpetual Succession;

Ø Can sue and can be sued;

Ø Minimum number of partners is two (individual or body corporate);

Ø No upper limit for maximum number of partners

Ø No requirement of minimum capital contribution

Ø Easy and low cost to form

Ø Easy dissolution or winding up

Ø No need to maintain other statutory records excpet Books of Accounts

Ø Less compliances as compared to any company

Following important points should be noted:

ü All the Designated Partners of the proposed LLP should have a Designated Partner Identification Number (DPIN). The Directors Identification Number (DIN) can be used instead of DPIN if the partner is already having a DIN.

ü One of the designated partner should have a Digital Signature Certificate (DSC) if he/she does not have one.

ü One of the Designated Partner of the proposed LLP should be a resident of India. In case of a LLP in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such LLP or nominees of such bodies corporate shall act as designated partners. 

Step 1:  Acquire/ Register DSC

The proposed Designated Partner(s) should have Digital Signature Certifcate (DSC). The Information Technology Act, 2000 (IT Act) provides for use of DSC on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically.

Acquire DSC -A licensed Certifying Authority (CA) issues the digital signature. Certifying Authority (CA) means a person who has been granted a license to issue a digital signature certificate under Section 24 of the IT Act.

Register DSC – The DSC once issued by the CA  should be registered by Role check on MCA21 portal as only then the DSC can be used for online filings of LLP eforms.

Step 2: Application for DIN or DPIN

The Designated partners of the proposed LLP are required to apply for DIN/DPIN in           Form DIR-3 by attaching prescribed documents. DIN/DPIN is an eight digit numeric number allotted by the Ministry of Corporate Affairs in order to identify a particular partner of the LLP.

Note: If the proposed designated partner already having DIN/DPIN need not follow apply for another DIN/DPIN.

Step 3: Incorporation of LLP

Ø  Application for reservation of name: The application for the reservation of the name of the LLP is to be filed in Form 1.

Criteria for name approval - The registrar will approve the name provided the name is not either undesirable or that is identical with or that which too nearly resembles to the name of any existing partnership firm or a LLP or a body corporate or a trade mark registered or pending registration under the Trade Marks Act, 1999.

Ø  Filing of Incorporation Document and Subscribers’ Statement – Details of registered office, partners, etc has to be filed in Form 2. Following are the mandatory attachments:

• Proof of Address of registered office of the proposed LLP
• Subscribers’ sheet alongwith the consent of the Designated Partners of the proposed LLP
• Details of LLP(s) / Company(s) in which the Designated Partner is already a Director or Designated Partner, if any.

Step 4: Filing of LLP Agreement

LLP shall file its LLP Agreement filed in Form 3 within 30 days of its incorporation.

Annual Compliances for LLP

LLP being a legal entity has to comply with certain annual compliances which are stated below:

Form	Particulars	Due dates
Form 8	Statement of Accounts & Solvency Divided into two parts ·         Part A: Statement of Solvency ·         Part B: Statement of Accounts/ Statement of Income and Expenditure	30 days from end of 6 months from the financial year i.e.     30th October every year
Form 11	Annual Return	60 days from closure of financial year i.e. 30th May every year
	Income Tax Return	·        In case of requirement of Audit: 30th September ·        Incase Audit not required:     31st July

Note:

·         Filing of aforesaid returns is mandatory whether the LLP is doing business or not. Incase of LLP not doing any business, it should file a Nil return;

·         Penalties for non compliance of Annual Filings is Rs. 100 per form per day;

 

Contributed by Ms. Sneha Chaturvedi

 

Alteration of Memorandum of Association of a Company

Alteration of Memorandum of Association of a Company

Contributed by Ms. Sneha Chaturvedi

MEANING of MOA :

The expression “alter” means to modify/change or vary; to make or become different in some respect.

As per Section 2(3) of the Companies Act, 2013 (the Act) “alter” and “alteration” shall include the making of additions, omissions and substitutions.

Following are the cases where a company has to alter its Memorandum of Association (MOA) as per provisions of Section 13 of the Act read with Companies (Incorporation) Rules, 2014 (the Rules)

·           Change of Name;

·           Alteration of Authorized Capital

·           Change in Objects, and

·           Shift of Registered Office

 

Let us consider the above mentioned cases in brief:

è  CHANGE IN NAME

A company desiring to change its name may do so in accordance with the provisions of Section 13 read with Section 4 of the Act by passing Special Resolution and the name approved by the Ministry of Corporate Affairs (MCA) on prescribed application. The power of the Central Government under Section 13(2) to approve change in name has been delegated to Registrar of Companies (ROC).

However, if the change required is the addition thereto or deletion there-from, of the word “Private”, consequent upon conversion of a public company into a private company or vice versa, no such approval of central Government is required.

è  ALTERATION OF AUTHORIZED CAPITAL

A Company seeking to issue shares by way of Private Placement or Rights Issue or by any other prescribed methods, has to check the Authorized Capital, as the issue cannot exceed the amount of Authorized Capital. Thus in the view of the above, a Company may alter its Authorized Capital i.e. Capital Clause by virtue of Section 13 read with Section 61 by passing an Ordinary Resolution.

 

The Capital Clause will be altered by prescribed process as per the applicable rules and payment of relevant stamp duty as may be applicable and levied by concerned state in which the registered office of the Company is situated.

è  CHANGE IN OBJECTS

A company may change its objects as enshrined in its MOA in accordance with the provisions of Section 13 of the Act. Accordingly, any alteration of MOA with respect to the objects of the company is permitted through Special Resolution.

However, Section 13 (8) restricts the change in object of a company which has raised money from public through prospectus and still has any unutilised amount out of the money so raised unless a special resolution is passed by the company and the details of such resolution shall be published in one vernacular language and one English language newspaper in circulation at the place of registered office of the company as well as on the website of the company indicating the justification for such change in the object.

è  SHIFT IN REGISTERED OFFICE

As per Section 12 of the Act, every company shall have a registered office at all times, to which all communications and notices may be addressed.

Every company within 30days of its incorporation or any change in the address of its registered office shall furnish a verification of its registered office in INC-22 prescribed under Companies (Incorporation) Rules, 2014.

A company is permitted to change its registered office from its existing location to another location-

·         Within the local limits of the same city, town or village (e.g. Bandra, Mumbai to                   Andheri, Mumbai)

·         Outside the local limits of the same city, town or village but

ü within same state under jurisdiction of same ROC (e.g. Bandra, Mumbai to Kalyan)

ü under jurisdiction of another ROC within same state (e.g. Mumbai to Pune)

·         One State to another State. (e.g. Mumbai to Delhi)

Note: As per Section 13 (11) any alteration of MOA, in the case of Company Limited by Guarantee or Company not having share capital, purporting to give any person a right to participate in the divisible profits of the Company otherwise than as member shall be void.

 

Contributed by

Ms. Sneha Chaturvedi

Procedure for Incorporation of Private Limited Company

Procedure for Incorporation of Private Limited Company

 

 

Contributed by Parth Sharma

Features of Private Limited Company

·         Separate Legal Status

·         Capacity to borrow

·         Easy Transfer of shares

·         Minimum number of Members : 2 ; Maximum number of Members : 200

·         Minimum Capital : Nil {omitted by Companies (Amendment) Act, 2015}

·         Limited Liability

·         Minimum number of Directors : 2

·         Foreign investment permitted (subject to applicable Sectoral Cap as per FDI guidelines)

·         Capacity to sue or to be sued

Procedure for Incorporation of Company

·         Obtain Digital Signature Certificate (DSC) for the proposed Director / Promoter not having DSC;

·         Obtain Directors Identification Number (DIN) for proposed Director / Promoter not having DIN by applying to Ministry of Corporate Affairs (MCA) in Form DIR-3;

Requirements for Form DIR-3

·         Passport Size Photograph

·         Identity Proof: PAN (mandatory) duly attested by Practicing Chartered Accountant / Practicing Company Secretary / Practicing Cost Accountant

·         Address Proof: Passport / Aadhar / Telephone Bill / Electric Bill (not older than 2 Months) duly attested by Practicing Chartered Accountant / Practicing Company Secretary / Practicing Cost Accountant

·         Educational  Qualification

·         Email Id and Mobile Number

·      Apply for Reservation of Name in Form INC-1 along with the prescribed fees

·      On approval of Name of the proposed Company is received, the following Forms need to be filed;

·      Form INC-7

·      Form INC-22

·      Form DIR-12

·      On scrutiny and examination of the aforesaid forms, the concerned Registrar of Companies (ROC) shall issue Certificate of Incorporation of Company along with Corporate Identification Number (CIN).

Note: Certificate of Commencement of business is not required to be filed in Form INC-21 as the same has been omitted by the Companies (Amendment) Act, 2015.

Requirements for Form INC-7, Form INC-22, Form DIR-12

·         Memorandum of Association & Articles of Association (MOA & AOA) along with subscribers sheet

·         INC-8 duly notarized

·         INC-9 duly notarized

·         INC-10 duly verified by Banker or notarized

·         Affidavit for non - acceptance of deposit

·         Full address of Police Station under whose jurisdiction the registered office is situated

·         Utility Bill (not older than two months) of the registered office premise

·         Conveyance/Lease deed/Rent Agreement

·         NOC from the owner of the premise, if taken on lease

·         Form DIR-2

·         Directors Directorship details in other Companies / LLPs, if any.

Note: For Incorporation fees please refer Table of Fees Rules and Stamp duty will be levied as per prevailing stamp rate of the concerned State.

Taxation of Companies

Direct Tax

Corporate Tax Rates

Particulars	Domestic Company
Rate of Tax	30% of the Total Income
Surcharge	·      5% of Income Tax, if taxable income exceeds Rs. 1 crore upto Rs. 10 crore ·      10% of Income Tax, if taxable income exceeds Rs. 10 crore
Education Cess	2%
S.H.E.C.	1%

Minimum Alternate Tax (MAT) @ 18.5% on Book Profits plus surcharge and cess, as applicable.

Due date for filing of returns: September 30 of the relevant Assessment year

Note: Maximum of MAT or Income Tax should be considered.

Indirect Tax

Service Tax

Service Tax Registration is mandatory if the annual turnover exceed Rs. 9 Lakhs Service Tax is charged at 14% (notified) plus 2% Swachh Bharat Cess (not yet notified) as per Finance Act, 2015.

VAT

VAT is levied on goods sold by the Company. The criteria for registration and charging VAT varies from State to State based on the rules and regulations formulated by the concerned state.

Mandatory Compliances

·         Quoting of CIN on all letterheads, invoices, notices etc.

·         Printing of share certificate and MOA & AOA

·         Opening Bank Accounts

·         Maintaining Books of Accounts

·         Appointment of First Statutory Auditor

·         Board Meeting Compliances as per Companies Act, 2013 and rules made thereunder

·         Maintaining Minutes Book

·         Annual General Meeting every year

·         Annual Filings with the MCA

·         Appointment of Company Secretary in whole-time employment if paid up capital exceeds Rs. 5 Crore

·         Maintaining Statutory Registers

·         Keeping Books of Accounts and Statutory Registers at the Registered Office of the Company

 Contributed by

Parth Sharma