Sunday, March 6, 2011

Checklist for Establishment of Liaison Office in India

Establishment of Liaison Office Checklist
Eligibility criteria

Ø  A successful, profit making track record during the immediately preceding three years in the home country
Ø  Net Worth [total of paid-up capital and free reserves, less intangible assets as per latest Audited Balance Sheet or Account Statement certified by a CPA] shall not be less than USD 50,000 or its equivalent.

Document Checklist

1.      Letter from the Principal Officer of the Parent Company to RBI.
2.      Copy of Certificate of Incorporation / Registration attested by the Notary Public in the country of registration [If the original Certificate is in a language other than in English, the same may be translated into English and notarized as above and cross verified/attested by the Indian Embassy/Consulate in the home country.
3.      Certified copy of the certificate of incorporation and MOA and AOA of the Foreign Company. (English Translation of these documents required if they are in any other language.)
4.      Latest Audited Balance sheet of the applicant company. [If the applicants’ home country laws/regulations do not insist on auditing of accounts, an Account Statement certified by a Certified Public Accountant (CPA) or any Registered Accounts Practitioner by any name, clearly showing the net worth may be submitted]
5.      Banker’s Report from the applicant’s banker in the host country / country of registration showing the number of years the applicant has had banking relations with that bank.
6.      Nature and location: Nature and location of the activity of proposed branch/liaison office and parent company on parent company’s letter head.
7.      Sources of funds: A declaration to be obtained from the customer and the judgment should be made that the source is in line with the activities of the customer (parent company)
8.      Power of Attorney in favor of a person resident in India, authorizing him to accept on behalf of a company service of process and any notices or other documents required to be served on the company.
9.      A list of directors of the Company, containing particulars regarding name & surname in full, his usual residential address, nationality, business occupation and if he has no business occupation but holds any other directorships, particulars of that directorship or of some one of those directorships
10.  A list of secretary(s) of the Company, containing particulars regarding name & surname in full, his usual residential address (If any secretary otherwise the Director or Chief Executive may be assigned as Secretary)
11.  Extracts of Board Resolutions of the Foreign Company
12.  Documentary Proof of Establishment of office (E.g.: - Rent agreement, lease deed etc.)
Information’s Required from Your Side
Ø  Telephone Number(s) Fax Number(s), E-mail ID of the parent company
Ø  Amount of i)Paid-up capital, ii) Free Reserves/Retained earnings as per last audited Balance Sheet and iii) Intangible assets, if any
Ø  Brief description of the activities to be carried out by the Parent company
Ø  If the company had any previous Import or Export with India the provide the following details:
i) Value of goods imported from and / or exported to India by the applicant during each of the last three years:
a) Imports from India
b) Exports to India
Ø       Particulars of the existing arrangements, if any, for representing the company in India
Ø       Particulars of the proposed Liaison/ Branch Office
a) Details of the activities / services proposed to be undertaken / rendered by the office.
b) Place where the office will be located.
c) Phone number
d) E-mail ID
e) Expected number of Employees
Ø  Any other information which you wishes to furnish in support of the application that why you shall be allowed to establish a Liaison office in India. (If any)

Saturday, March 5, 2011

CAN A COMPANY GIVE LOANS TO LLP


CAN A COMPANY GIVE LOANS TO LLP
Similarly a critical analysis of some of the provisions of the LLP Act, 2008 and Companies Act, 1956 becomes necessary to answer to the second question i.e. whether a Company registered under the relevant provisions of the Companies Act, 1956 can extend loans to an LLP without obtaining the previous approval of the Central Government, if any of the directors or relatives of such directors of the company are also partners in the said LLP?
Section 295 of the Companies Act, 1956 states that save as otherwise provided in sub-section (2) no company (hereinafter in this section referred to as “the lending company” without obtaining the previous approval of the Central Government in that behalf shall, directly or indirectly make any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to, or to any other person by,
a)      any director of the lending company, or of a company which is its holding company or any partner or relative of any such director:
b)      any firm in which any such director or relative is a partner;
c)      any private company of which any such director is a director or member;
d)     any body corporate at a general meeting of which not less than twenty-five per cent of the total voting power may be exercised or controlled by any such director, or by two or more such directors, together; or
e)      any body corporate, the Board of directors, managing director or manager whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.
Since LLP is not a firm as explained above the provisions of clause (b) of Section 295(1) shall not be applicable. Though an LLP is a body Corporate, still the provisions of clause (d) or (e) shall not be applicable since under the LLP Act, the LLP is neither required to hold any general meeting nor it is required to have any Board of Directors, Managing Director or Manager and hence a Company registered under the relevant provisions of the Companies Act, 1956 can extend loans to an LLP without obtaining the previous approval of the Central Government, if any of the directors or relatives of such directors of the company who are also partners in the said LLP. However the provisions of Section 372A of the Companies Act, 1956 shall be applicable for extending loan to LLP since it is a body corporate. Section 372A of the Companies Act, 1956 restricts extension of loan to any body corporate in excess of 60% of the paid up share capital and free reserves or 100% of the free reserves without the approval of the shareholders of the company by way of a special resolutions and approval of the Banks and Financial Institutions whose loans are outstanding.

Friday, March 4, 2011

Checklist For Demerger

DEMERGER CHECKLIST

Demerger, in relation to companies, means the transfer, pursuant to a scheme of arrangement under Sections 391 to 394 of the Companies Act, 1956, by a demerged company of its one or more undertakings to any resulting company in the manner specified in Section 2(19AA) of the Income Tax Act. The provisions of Section 395 of the Companies Act, 1956 are available to protect the interest of shareholders dissenting from the scheme approved by the majority. Section 2(42C) of the Income Tax Act, 1961 and introduced a concept of “slump sale’. Slump sale means the transfer of one or more undertakings as a result of sale fro a lump sum consideration without values being assigned to the individual assets and liabilities in such sale. Therefore, demerger cannot be accomplished with ‘slump sales’ since such a sale is only for sale of undertaking. The demerger should be in accordance with the act by the Central Government in this behalf which envisages the Companies Act, 1956. If the original company which is split into several companies after divisions is wound up voluntarily, the provisions of Sections484 to 498 of the Companies act to be followed.

STEPS TO DEMERGER:

Generally the following steps are adopted in a demerger process:
Step-1: Preparation of scheme of demerger
Step-2: Application to court for direction to hold meeting of the members/creditor
Step-3: Obtaining court’s order for holding meetings of members/creditors
Step-4: Notice of the meetings of members/creditors
Step-5: Holding meeting(s) of members/creditors
Step-6: Reporting the result of the meeting by the chairman to the court
Step-7: Petition to the court for sanctioning the scheme of demerger
Step-8: Obtain order of the court sanctioning the scheme
Step-9: Court’s order on petition sanctioning the scheme of demerger

ACTIVITIES FROM BOARD MEETING FOR APPROVAL OF DEMERGER SCHEME TO COURT ORDER:

Ø  Intimation in Stock Exchange of Board Meeting date for considering Demerger
Ø  Board Approval for the Scheme
Ø  Informing Stock Exchange of Board’s decision
Ø  Consent from shareholders to the Scheme for Resulting       Companies (in case of Closely held unlisted Companies)
Ø  Filing scheme with the Stock Exchanges
Ø  NOC/ Approval from Stock Exchanges (BSE/NSE)
Ø  Filing of application under section 391(1) with High Court (along with Judge’s summons, affidavit in support of summons and draft minutes of order)
Ø  Finalizing the Notice/Explanatory Statement for Meeting of the Shareholders/Secured and unsecured Creditors
Ø  Hearing of company’s application
Ø  Hearing of Resulting Companies application
Ø  Receiving authenticated copy of order for holding/ dispensing with the Meeting of Shareholders/ Secured and unsecured Creditors
Ø  Obtaining certified copy of order of High court for court
Ø  Convened Meeting
Ø  Commencement of Printing of Notice for court convened meetings
Ø  Completion of dispatch of notices for meeting under UCP
Ø  Advertisement of notice of meetings         
Ø  Filing of Notice – Advertisement of meeting with stock Exchange(s)
Ø  Filing of advertisement of meeting with court
Ø  Filing of Affidavit signed by Chairman of the meeting or other person directed by the court verifying that the directions regarding the issue of notices and the advertisements have been duly complied with
Ø  Meeting of Creditors and Members
Ø  Reporting the decision of the poll to the High Court
Ø  Filing of petition with the Court along with relevant documents
Ø  Admission of the petition
Ø  Minutes of order by judge fixing the date of hearing of petition and advertisement of notice of hearing
Ø  Advertising the notice of hearing in news paper
Ø  Obtaining certified copy of order on admission of petition
Ø  Filing of copy of petition with annexures with RD / ROC through FORM 61 (eform)
Ø  Filing of affidavit confirming service of notice of petition and publication in newspaper
Ø  28 Follow up with RD/ ROC
Ø  Receipt of letter, queries etc., from RD and ROC
Ø  Follow – up with RD/ROC/ Legal Counsel to resolve issues, if any
Ø  Initial date of hearing of petition
Ø  Adjoined hearing if any
Ø  Filing of amended petition if any
Ø  Final date of hearing of petition
Ø  Obtaining certified copy of order on petition
Ø  Payment of Stamp duty, if required
Ø  Filing of certified order with RD / ROC along with Form 21

ACTIVITIES FROM COURT ORDER TILL RECORD DATE

Ø  Acknowledgement of receipt from ROC and certified true copy of court order to be filed with the Stock Exchange.
Ø  Notice to Stock Exchange for Record Date to determine eligibility to receive shares of the Resulting Companies and voluntarily give advertisement of the Record Date in National Dailies ( 30 day notice)
Ø  Agreement with CDSL and NSDL for admitting its securities
Ø  Printing of stationery – Allotment Advice, Share Certificate, Envelopes
Ø  Application seeking exemption for relaxation of Rule 19(2)(b) from SEBI through the designated Stock Exchange
Ø  Application to Stock exchange for in – principle approval for listing of shares
Ø  Designated Stock exchange to forward the application to
Ø  SEBI for approval under Rule 19 (2)(b) of SCRA Rules
Ø  Prepare Information Memorandum (IM)
Ø  Compliance with clause 49 – prerequisite For Listing
Ø  File Information Memorandum with BSE and NSE
Ø  Stock Exchange to receive SEBI Approval and give In-Principle approval for listing of shares of the resulting companies.
Ø  Keep share certificates, covering letter, envelop of the resulting companies ready for over printing.

FORMATION OF A WHOLLY OWNED SUBSIDIARY COMPANY IN INDIA/ CHECKLIST FOR INCORPORATING WHOLLY OWNED SUBSIDIARY COMPANY


Company Registration in India

This Article is provides information about the stages and documents required for incorporation of a private limited company in India which is subsidiary of a foreign company in India. The procedure for registering a subsidiary company in India is very simple and will take around a maximum of 15 days to complete. The followings are the detailed requirements, procedure and system for subsidiary formation in India:

A private company is defined under Section 3(1)(iii) of the CA Act  as a company which -

  • Has a minimum paid up share capital of INR 100,000 or a higher paid-up capital as may be prescribed by its articles of association

  • Restricts the right to transfer shares by its articles of association.

  • Prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company.

  • Prohibits any acceptance of deposits from persons other than members, directors or their relatives.

  • Can be formed with a minimum of two members and two directors.

  • Limits the number of its members (shareholders) to fifty not including (i) persons who are in the employment of the Company and (ii) persons who, having been formerly in the employment of the Company, were members of the Company while in that employment and have continued to be members after the employment ceased. 

Therefore, minimum capital required for incorporation of a private company is Indian Rupees 1(one) lakh and there should be at least one two members (shareholders) and two directors).

Incorporation of a private limited company in India broadly involves the following stages:
STAGE - I

OBTAINING DIRECTORS IDENTIFICATION NUMBER (DIN) & DIGITAL SIGNATURES

Directors Identification Number (DIN)

Prior to incorporation of a company, the proposed directors of the company are required to obtain Directors Identification Number (“DIN”) from the Ministry of Company Affairs by making an online DIN application in Form DIN 1. Form DIN 1 is approved by the DIN Cell of the Ministry of Corporate affairs.

The said Form DIN 1 is to be filed with the scan copies of the applicant’s photograph, identity proof, a valid residential proof and a verification/ declaration in the prescribed format to be given by the applicant (who is applying for the DIN). Upon online submission of the Form DIN 1 and online payment of the fee, a permanent DIN to the director will be allotted immediately.

The following documents are required to make a DIN application for each of the proposed director(s):

(i)                       Identity proof

For identity proof, a copy of passport or copy of permanent account number card (PAN card) is required to be provided. Please note that in case of a foreign national only passport is acceptable as identity proof and in case of an Indian national copy of PAN card is must.

(ii)                     Residence proof

For residence proof, a copy of voter’s identity card or valid driving licence or latest bank statement duly certified by the respective bank or utility bill (not older than two months) is required to be provided.

(iii)        One passport size color photograph in jpeg format. In addition one more photograph is required which should be separately pasted on a plane paper.

(iv)       Verification/ Declaration in the prescribed format on a 10 Rupees stamp paper, duly notrized by a notary public. 

All the aforementioned documents should be attested by a notary public in the country of residence of the applicant.

Digital Signature Certificate (“DSC”)

Any one of the proposed directors is required to obtain digital signature certificate (“DSC”) in India for online filing of e-Forms with the concerned Registrar of Companies (“ROC”). For obtaining DSC an application is made under the signatures of the director who intends to obtain DSC along with the copy of his identity proof and a copy of his residence proof.  The following documents are required to make a DSC application for each of the proposed director(s):

(i)                       Identity proof

For identity proof, a copy of passport or copy of permanent account number card (PAN card) is required to be provided. Please note that in case of a foreign national only passport is acceptable as identity proof and in case of an Indian national copy of PAN card is must.

(ii)                     Residence proof

For residence proof, a copy of voter’s identity card or valid driving license or latest bank statement duly certified by the respective bank or utility bill (not older than two months) is required to be provided.

(iii)                   One passport size color photograph. Please note that the photograph should be pasted on the application form and cross signed by the director (applicant).

(iv)                   DSC application form duly signed by the director (applicant)

The identity and residence proof of the applicant as aforesaid should be attested by a notary public in the country of residence of the applicant.

STAGE - III

APPLICATION FOR NAME APPROVAL OF THE PROPOSED COMPANY WITH THE ROC

After obtaining the DIN and DSC as aforesaid, an online application for availability of the proposed name (in the prescribed Form 1A), along with six proposed names in order of preference (may be less than six), each one indicating, as far as possible, the main objects (principal activities) of the company, shall be submitted to the ROC. The name of a private company should end with the words “Private Limited”.

If the proposed company is a subsidiary of body corporate incorporated outside India, Form 1A is required to be e-filed along with the following attachment at the website of Ministry of Company Affairs, India:

(a)   Board Resolutions by the parent company (separately from each subscriber to the proposed entity) indicating its intention to incorporate a subsidiary in India and authorizing a director to issue specific power of attorney. 

(b)   Power of Attorney(s) (separately from each subscriber to the proposed entity) authorizing someone to represent the subscribers before the concerned ROC to liaise with  all concerned authorities and officials in the matter of incorporation.

(c)    No Objection Letter from the parent company (separately from each of such   entity whose name or part thereof will be used in the name of the proposed entity) for use of the name of the parent company or part thereof in the name of the proposed company. 

(d)   Charter Documents of the parent company i.e. Certificate of Incorporation of the  parent company.

Please note that all of the aforementioned documents should be notarized by a Notary Public in the country where the registered office of the entity (which has issued the said document), is situated and further Apostilled/ endorsed at the Indian Consulate in the country where the registered office of the entity (which has issued the said document) is situated. 

(e)    A brief writ-up on the main objects proposed to be carried out by the Company.

(f) Proof of ownership of the registered office of the company. In case the property is not taken on lease by the Company himself, a no objcetion certificate would be required 


STAGE IV

DRAFTING AND STAMPING OF MEMORANDUM & ARTICLES OF ASSOCIATION (“MOA AND AOA”)

MOA and AOA are to be drafted in compliance with the provisions of the Act. Adequate stamp duty would be required to be paid thereupon based on the authorised capital of the company. The stamp duty on MOA and AOA shall be paid along with the filing fee payable at the time of filing of incorporation related documents.


STAGE V

INCORPORATION DOCUMENTS TO BE FILED WITH THE ROC

After the name approval, the following forms have to be e-filed with the ROC after having been digitally signed by any of the proposed directors. The lists of documents are as follows:

(i)  Form 1 -   Declaration of compliance of all the requirements of the Act along with the memorandum of association of the company;

(ii)   Form 18 - Situation of the registered office of the Company; and

(iii) Form 32 - Particulars of Directors of the Company along with the consent of directors.

All the aforesaid incorporation documents (scanned copies of the executed version) have to be submitted with the ROC as attachments to the E form 1 alongwith:

(i)                 The original copies of MOA and AOA with the subscriber pages duly executed by or on behalf of the subscribers and witnessed.

(ii)               Power of Attorneys from the subscribers to the MOA and AOA appointing representatives to incorporate the company and to make corrections in the MOA and AOA. The said powers of attorneys are required to be notarized and attested by Indian embassy abroad.

The ROC then scrutinizes the above-mentioned documents and if necessary, directs the authorized person to make necessary corrections therein. The ROC after being satisfied that all the documents are complete, issues the certificate of incorporation of the Company, which is the conclusive proof of registration of the company in India.

      Thank you    
      Devesh Pandey 
       +91 9811237186
      csdeveshpandey@gmail.com