Wednesday, April 27, 2011


Every person liable to pay service tax is required to register himself by making an application to SCE as per section 69. The service provider before registering himself shall ensure that he has crossed the exemption limit of registration for the small service provider which is Rs. 10 lakhs, specified by notification 6/2005 ST dated 01.03.05 as amended from time to time. Branded service providers i.e providing services under brand name or trade name of others, would not be admissible for the exemption. The provisions under service tax with regard to registration not only require the assessee to register himself when he starts providing a taxable service, but also to amend his certificate of registration every time there is a change in his business profile. He is also required to state at the time of registering as whether he wants to opt for centralized registration or not. This option can be exercised even at a later date in which case, he would have to get his Registration Certificate amended. Apart from a service provider, even a service receiver who is liable to pay service tax u/s 68(2) of Chapter V of Finance Act 1994 would be required to register himself under service tax for the purpose of paying service tax. The requirement as to registration would also extend to an Input Service Distributor who would want to distribute Cenvat credits on inputs, input services or capital goods to the unit providing taxable service or engaging in manufacturing of dutiable final products. The procedures with regard to registration under service tax in each of the scenarios would basically be the same with very minor changes which would be evident on the application for registration. 

Steps and Procedure of registration

1.      The assessee shall make an application in form ST 1 to the Superintendent of Central Excise in duplicate. Such application can be filed online For this the following procedure shall be adhered to :
a)      The user shall first log onto the site and select “Service Tax” option on the left side of the screen 

b)      He shall then register himself by clicking on “New users to click here to register with ACES” option. On clicking the same he will be required to give certain basic details and a e-mail id. The password for such registration will be sent to this mail id.

c)      On submitting the form the password will be sent to the ID above and the user shall login into ACES with this password. Such a password is only to gain access to ACES and it does not imply that registration with the department is done. 

d)     In the case of an existing assessee, he shall fill in the “Declaration Form for ACES” (in Appendix I) and submit it to the respective commissionerate. The assessee will then receive a user ID and password at the mail ID specified in such form to activate his registration number in ACES. An existing assessee is NOT required to fill Form ST-1 again in ACES.

e)      For a new assessee who does not have a service tax registration certificate, shall register with ACES with the ID and password that is sent as mentioned in ‘c’ above and select the option “REG” and “Fill ST-1”.

f)       The form shall be filed online with all the required details and submitted online itself.

g)      A print of the form submitted online shall be taken and along with this the documents as mentioned in 5 below shall be submitted to the department at the concerned commissionerate.

2.      The application shall be filed within 30 days from the date of providing taxable service and shall bear the address sought to be registered 

3.      The application should be filled up carefully without errors and columns and boxes which are not applicable may contain “NA” stated across them. All the taxable services provided should be mentioned on the application and there would not be separate applications for each of such taxable services

4.      The Form should be signed by the director/partner/sole proprietor as the case may be or the authorized signatory.

5.      The application shall be accompanied by copies of the following documents -

·         Self certified copy of PAN, (where allotment is pending, copy of the application for PAN may be given)
·         Copy of MOA/AOA in case of Companies
·         Copy of Board Resolution in case of Companies
·         Copy of Lease deed/Rental agreement of the premises
·         A brief technical write up on the services provided
·         Registration certificate of Partnership firm
·         Copy of a valid Power of Attorney where the owner/MD/Managing Partner does not file the application

6.      Once filed, the acknowledgement for having filed the application is to be obtained on the duplicate copy for one’s own reference

7.      If the Particulars stated in the Form are correct, then the registration certificate would be provided within a period of seven days. Where not so provided, the registration is deemed to have been granted.

Centralized registration 

Centralised registration is opted for in a case where the accounting and billing operations of the assessee are centralized in an administrative office which may be a branch or Head Office despite the services being provided from more than one location. The premises that is registered here is the one where the centralized accounting and billing is done. This decision is at the option of the tax payer and he can also opt to have multiple registration which however may not be advisable. The procedure would be the same as explained above with a few exceptions -

1.      The registration in case of centralized registration would be granted by the Commissioner of Central Excise having jurisdiction over the centralized premises

2.      The registration formality at the department’s end takes a little longer than the period stated above and the concept of deemed registration need not apply here.

The following documents are required in addition to the documents needed under the aforesaid procedure -
a. Proof of address of each such premises or branches for which centralized registration is sought

b. Proof of address of branches, new offices opened if any

Tuesday, April 26, 2011

Making Call on Shares: Legal Considerations and Provisions

Making Call on Shares Legal Considerations and Provisions
(Relevant Sections: 69, 91, 92(2) and 292(1) (a) of the companies act, 1956)
Ø  The procedure for making call on shares should not  contravene the provisions of Section 69, Section  91, Section 92 (2), Section 292 (1) (a) of The  Companies Act, 1956, SEBI Guidelines for Issue of Capital and Disclosure Requirements, Provisions of Table A in Schedule I of the Companies Act, 1956 and Listing Agreement with the Stock exchange(s).

Ø  Call means a demand by a company under the terms of its articles or terms of issue of shares, requiring the members to pay up fully or in part the unpaid amount of their shares.

Ø  Ordinarily, a part of the nominal value of a share is payable at the time of making the application for  shares and a part on allotment and the remaining  dues could be called up by the company at any point of time by way of making calls for the remaining unpaid part.

Ø  Every step pointed out by the Articles or the terms of the issue should be strictly followed in making a call on the shareholders.

Ø  A company can calls up the balance remaining as and when it’s Board of directors considers it fit. The power of making a call vested in the directors is a fiduciary power to be exercised for the benefit of the company. [Re Cawley & Co. (1889) 42 Ch D 209 (CA)].

Ø  Convene a Board Meeting to pass the resolution calling upon the members to pay the unpaid part of their share capital within certain time period.


Ø  The Companies Act nowhere provides for the amount which a company can demand as call money at a time, and thus provisions of Articles of Association of the company must be followed, and if they are silent the provisions contained in Table A, article 13, should be followed which provides that no call shall exceed one-fourth of the nominal value of the share.

Ø  The amount payable on application on each share shall not be less than 5% of the nominal amount of such share, and it applies both to the first as well as any subsequent public issue.

Ø  In the case of shares issued by a listed company, make sure that call money is according to the limit, if any, stipulated in the SEBI Issue of Capital and Disclosure Requirement

Ø  Calls must be made on a uniform basis on all shares falling under the same class, otherwise it will be void. But shares of the same nominal value on which different amounts have been paid-up shall not be deemed to be of the same class for the aforesaid purpose.

Ø  It is not proper to make full amount of the calls on some members only and not on others, merely because they are dilatory in the payment of previous calls. [Galloway v. Halle Concerts Society (1915) 2 Ch 233].

Ø  In the Board meeting the resolution must be passed taking into account the following details:-
a. The number of shares held by each member;
b. The call money payable on each share and the total amount payable;
c. The date and place of payment;
d. The manner of payment;
e. Interest on delayed payment; and
f. Consequences of failure to the call money, i.e., forfeiture of shares.
Ø  Send the Call Notice to every member who is liable to pay call money specifying the above details, well in advance and strictly in accordance with the provisions of the Articles in all respects.

Ø  In the case of a listed company, get the format of the Call Notice approved from the Regional Stock Exchange and make arrangements for collection of the call money at select branches of the company's bankers and at all places where recognized Stock Exchanges are located. [Listing Agreement]

Ø  In case of Joint shareholding call notice will be sent to the first-named joint holder but since every joint shareholder is a member of the company, all of them are jointly and severally liable to pay the call money.

Filing and Fees

Follow Up
Ø  Reminders should be sent to the shareholders who have not paid call money in response to the first notice, making sure that it inter alia states the:-
a. Interest payable on the delayed payment of the call money; and
b. A warning about forfeiture of the shares for nonpayment of call money.
Ø  Forfeiture of shares for non-payment of calls will be invalid and ultra vires if any of the requirements of the articles is not satisfied or the call has been made in contravention of any provisions of the Companies Act, 1956. [In Re Bengal Electric Lamp Works Ltd. (1942) 12 Comp Cas 238 (Cal); AIR 1942 Cal 516].

Ø  Make entries in the in the Register of Members in respect of call money received, and make necessary endorsement on the share certificates received from the members which must be initialed/signed by the Company Secretary or other authorized officer and duly stamped.

Ø  Particulars in respect of amount called up and unpaid call must be disclosed in the Balance Sheet as required by Schedule VI.


Ø  If the Articles of a company so authorize, the company may accept from any member the whole or a part of the amount remaining unpaid on any shares held by him, although it has not been called up, however no voting rights will accrue on such shares.

Saturday, April 23, 2011

Legal Considerations while employing a foreign national

Legal Considerations while employing a foreign national

While employing a foreigner in the company in the capacity of a director or an employee due care should be taken. The following are the important considerations that should be taken:

Under Immigration Rules:

  • Foreign National has to obtain "employment Visa,” otherwise he is not eligible to work in any company in India. (For obtaining "employment Visa, the company has to issue offer letter, give an undertaking .....etc)  Any company is also not supposed to employ any foreign national without valid "employment Visa"

  • If his stay in India is for more than 180 days, he has to get himself registered before 180 days with concerned Registration Officer (FRO) (Normally it is in nearest police station)

  • While him going back to his country permanently, he has to inform the FRO and you have to give an under taking

Under FEMA:

If he is working as an employee, the company can make payment 100% in INR. If he insists the payment in foreign currency, then the company is allowed to make payment in foreign currency up to 75% and balance in INR subject to deduction of proper taxes on salary. (FEMA Notification no.13 & 21 dated May 2000 and Master circular no.4 dated 1st July 2009) 

Income Tax:

  • If you are paying him as "consultancy fee", you need to deduct tax as applicable for individual’s u/s195 (TDS Section 194J of Income Tax Act 1961 is not applicable for non-residents). 

  • If it is being paid as "Salary" then you need to deduct tax u/s 192 of Income Tax Act 1961

Labour Laws:

The provisions of PF, Contract Labour Act, ESI, are applicable to foreign national also

Friday, April 15, 2011

Provisions of Minutes of Board Meetings under Companies Act 1956

Provisions of Minutes of Board Meetings under Companies Act 1956

Types of recording the minutes of the Board meetings
The Board meeting minutes are basically of two types, as stated below:—
(i) Minutes of narration, and
(ii) Minutes of decisions or resolutions.

1 Minutes of narration
As the expression "Minutes of Narration" itself indicates, the minutes of narration mean minutes, which are in a descriptive or narrative form. They contain preamble to formal resolutions or record of directors/members present, record of leave of absence, confirmation of minutes of previous meeting, proposal as to vote of thanks to chair, etc.
These are records of events or items of business, which do not require formal resolutions to establish them. In general, they consist of:—
(a) recording names of those who are present at the meeting;
(b) recording of the reading and signing of the minutes of the previous meeting;
(c) recording of leave of absence;
(d) recording of the tabling and consideration of correspondence received;
(e) taking note of financial statements, reports, plans, etc., tabled and considered;
(f) taking note of the receipt of disclosure notice from directors;
(g) declaration of closure of meeting.

2 Minutes of decisions or resolutions
These are records of formal decisions of the directors of the company at duly convened meeting and are prefixed by the word 'Resolved'. Minutes of resolution may be recorded in various ways. They may be simply set down as a statement of what was resolved. Alternatively, they may be accompanied by a statement indicating the mover and seconder and how the resolution was carried. Either form of recording the resolution is acceptable. Some advocate that the latter form should be used in respect of minutes of general meetings of members and the former in respect of Board meetings. But that is entirely a matter of opinion. A third type of recording, which is desirable in cases where the recitals are numerous and/or lengthy, is one which prefixes a recital to the resolution. A recital is a short explanation of why it is necessary or expedient to pass the resolution. It is generally not necessary, and in fact brought with the risk of unpredictable consequences, to record the discussion which led up to the adoption of a certain resolution or making of a certain decision. Only the decisions or resolutions actually taken and the names of the persons proposing and seconding those decisions or resolutions, should, therefore, be recorded. However, motions carried through or ruled upon by the chairman are on the same footing as resolutions for the purpose of recording the minutes.
As the element of urgency is part of the word 'minutes' as used in the context of minutes of proceedings, it is advisable to draft the minutes as soon as possible after the conclusion of meetings.

Contents of the minutes of Board meeting
The Board meeting minutes should contain the following details:—
(a) Date, time and place of the Board meeting;
(b) Names of the directors present in the meeting;
(c) Name of the person on the chair;
(d) Granting of leave of absence to the directors;
(e) Confirmation of previous meeting's minutes;
(f) Confirmation of minutes of committee meetings;
(g) Recording the resolutions passed by circulation during the period of the previous Board meeting to the date of the current Board meeting, if any;
(h) Various items of agenda discussed at the meeting;
(i) The names of directors, if any, who have dissented from any resolution passed at the meeting;
(j) Appointment of officers made at the meeting;
(k) The fact of unanimity of decision of directors as required by sections 316, 372A and 386;
(l) Reading of notice given by the directors for disclosure of their interest, other directorship and their shareholdings and non-disqualification for their appointment under section 274 of the Act;
(m) Vote of thanks to the chair;
(n) Signature of the chairman with date in his own hand.

Time-limit for recording and signing of minutes of Board meetings
Section 193(1) of the Companies Act, 1956 inter alia provides that every company shall cause minutes of all proceedings of every meeting of its Board of directors, to be kept by making within thirty days of the conclusion of every such meeting concerned, entries thereof in the books kept for that purpose with their pages consecutively numbered.

Correction in the minutes of the Board meetings
Minutes once recorded and signed cannot be changed materially, subsequently. If a correction involves a major departure from the earlier minutes, the proper procedure is to pass a resolution at a subsequent meeting and mention the fact of the resolution in the old minutes as a cross reference.

Adoption of minutes of Board meetings
It is the general practice to draft the Board meetings minutes and get it approved by the chairman and thereafter it is recorded in the minutes book. Simultaneously, copy of the draft minutes is circulated to all the directors either before or at the time of circulating the agenda for the next meeting. At the next meeting, the minutes of the earlier meeting recorded in the book, are adopted by the Board and in token thereof, the chairman signs the minutes with the date. It would be more appropriate to record that 'the Board approved the minutes of the previous meeting of the Board held on .......' instead of saying that 'the Board confirmed minutes of the last meeting'.

Action on any resolution can be taken after conclusion of the meeting
Action on any resolution or any matter approved by the Board at a meeting can be taken immediately on the conclusion of the meeting. It is not necessary to wait till the minutes are recorded, approved and adopted at the next meeting. [Karnataka Bank Ltd. v A.B. Datar (1994) 99 Comp Cas 417 (Kar)] It must be ensured that the extracts of the resolution passed has the approval of the chairman.

Numbering of minutes and resolutions
Either of the following methods may be used for the purpose of numbering of the minutes:—
(i) Number the minutes of the Board meeting like 1st, 2nd, 3rd and so on as to confirm that there is no fabrication in the minutes at a later stage.
(ii) Resolution may also be serially numbered with identification of the number of the Board meeting like 1.2, 4.12, 6.7 (in that case the 1, 4 and 6 denotes the number of the Board meeting and 2, 12 and 7 specify the item number of the particular business transacted at the meeting). It may be noted that the number should be confined to special items and not to routine matters.

Circulation of the minutes of the Board meetings among the directors
The Companies Act, 1956 has neither provided for confirmation of minutes of the Board meeting at the next such meeting nor it has contained provisions making it mandatory to circulate the minutes of Board meetings among directors. Generally, at the time of nomination of directors on Boards by financial institutions, banks, etc., they impose conditions in this regard. In general practice, the nominating bodies require circulation of minutes. It is also a good secretarial practice that after the minutes have been written and got signed, should be circulated among the followings:—
(i) All the directors, including nominee director of company;
(ii) The financial institutions/bank which has nominated director on the Board of a company.

Inspection of the minutes of the Board meetings
The Companies Act, 1956 has no express provision in relation to inspection of minutes books of Board meetings, the same shall be open for the inspection of auditors. The directors shall also be eligible to see these books.

Related registers and files to the minutes of the Board meetings
Following optional registers may also be taken care of being related to minutes books of Board meetings:—
(i) Attendance Register of directors;
(ii) Common Seal Register;
(iii) Index of Minutes Register;
(iv) Agenda Book.

In addition to the above, the file containing the notices of Board meetings, letters of disclosures made by the directors, copy of the statements placed before the meeting duly initialed by the chairman, proof of dispatch of notice to the directors, copy of the resignation letter from the directors, agenda papers, etc. should be carefully kept in the custody of the company secretary of the company.