Five Easy Steps to Incorporate a Company in India

Conversion of Private Company into LLP

Procedure for Conversion of Private Limited Company into LLP

Governing Law:

Limited Liability Partnership (LLP) is governed by The Limited Liability Partnership Act, 2008. A LLP is incorporated in the nature of Body Corporate formed and registered under LLP Act, 2008 and is a legal entity separate from its Partners.

Section 56 deals with conversion of Private Limited Company into Limited Liability Partnership (LLP).

Schedule III: A Private Company can convert in to an LLP by following procedure prescribed in schedule III.

Convert in relation to a private company converting in to a limited liability partnership, means transfer of the property, assets interest, rights, privileges, liabilities, obligations and the undertaking of the private company to the limited liability partnership according to this schedule.

STEPS OF CONVERSION OF COMPANY IN TO LLP:

  Ø  Step 1. OBTAIN DIN:

 Earlier there was Concept of DPIN, which has been abolished therefore. Now obtain DIN for those designated partners who don’t posses DIN already.

  Ø  Step 2. BOARD MEETING:

Call meeting of board of Director.

ü  Pass Resolution for Conversion of Company into LLP.

ü  Pass Resolution to authorize any director to Apply for Name of LLP.

  Ø  STEP 3. APPLICATION FOR NAME AVAIBILITY:

File e-form INC-1 with ROC.

Attachments: Board Resolution Board resolution passed by the Company approving the conversion into LLP shall be attached with the aforesaid form.

  Ø  STEP 4. Obtain name Approval Certificate from ROC

  Ø  STEP 5. DRAFTING OF LIMITED LIABILITY PARTNERSHIP AGREEMENT:

Contents of Agreement are:

ü  Name of LLP

ü  Name of Partners & Designated Partners

ü  Form of contribution

ü  Profit Sharing ratio

ü  Rights & Duties of Partners

ü  Proposed Business

ü  Rules for governing the LLP

It is not necessary to have the LLP Agreement signed at the time of incorporation, as the details of the same needs to field in E-form 3 within 30 days of incorporation but in order to avoid any dispute between the partners as to the terms & conditions of the agreement after the conversion into LLP.

  Ø  STEP 6. FILLING OF INCORPORATION DOCUMENTS:

File E-Form- 2 with ROC along with following ATTACHMENTS:

ü  Proof of Address of Registered office of LLP.

ü  Subscription sheet signed by the promoters.

ü  (Notice of Consent & Appointment of Designated Partners with their personal details)

ü  Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner

  Ø  STEP 7. FILLING OF APPLICATION FOR CONVERSION:

File E-FORM- 18 with ROC along with following ATTACHMENTS:

ü  Statement of shareholders.

ü  Incorporation Documents & Subscribers Statements in Form 2 filed electronically.

ü  Statement of Assets and Liabilities of the company duly certified as true and correct by the auditor.

ü  List of all the Secured creditors along with their consent to the conversion.

ü  Approval of the governing council (In case of professional private limited companies)

ü  NOC from Income Tax authorities and Copy of acknowledgement of latest income tax return.

ü  Approval from any other body/authority as may be required.

ü  Particulars of pending proceedings from any court/Tribunal etc.

After all formalities and filings been complied with by the applicants and approved by the Ministry, REGISTRAR OF LLP TO ISSUE A CERTIFICATE OF REGISTRATION in form no. 19 as to conversion of the LLP. The Certificate of Registration issued shall be the conclusive evidence of conversion of the LLP.

  Ø  STEP 8. FILLING OF E-FORM-3:

This form provides information in respect to the LLP Agreement entered into between the partners.

ATTACHMENT: LLP Agreement

  Ø  STEP 9. CERTIFICATE OF INCORPORATION AS LLP FORM ROC.

Thanks and Regards

CS Chetan Bhadouria  

(ACS, B.Com)

Mob: 9899399209

Email id: cschetanbhadouria@gmail.com

Blog: http://cschetanbhadouria.blogspot.in/ 

Removal of Names of Companies under Companies Act, 2013

The Ministry of Corporate Affairs (MCA) through a Circular dated 26^th December, 2016, commenced the section 248 to 252 of Companies ct, 2013 (Chapter XVIII). This chapter deals with “Removal of Names of Companies from the ROC”.

Please find the Link of Notification of the same:

http://www.mca.gov.in/Ministry/pdf/General_Circular_16_2016_26122016.pdf

By introducing these sections, Ministry has replaced the section 560 of Previous Companies Act, 1956.

Now, the process of removing the name of the company from register of Registrar has been simplified. Now instead of sending several notices as required in section 560 of the Companies Act, 1956, the registrar shall after making the necessary publication in the Official Gazette for removing the name, unless cause to contrary is shown to him by the company. Also the company and the directors are required to make their representations on the device within a period of 30 days from the date of notice.

Following are the Provisions for Removal of Names of Companies under Companies Act, 2013:

Ø  Power of Registrar to remove the name of Company (Section 248):

1.      The registrar has power to remove the name of company by sending notices (in form STK-1) to the company and its directors under the following new grounds:

o    Failure to commence its business within one year of its incorporation, or

o    Failure in not carrying on any business or operation for period of two immediately preceding financial years and has not made any application for obtaining status of dormant company under section 455.

2.      If a company extinguishing all its liabilities, by a special resolution, file an application to the Registrar for removing the name of the company and the Registrar shall on receipt of such application, cause a public notice (in form STK-1) and shall published in the official gazette for the information of general public.

Provided that in case, if company regulated under special Act, approval of the regulatory body constituted or established under that act shall also be obtained and enclosed with application.

3.      At the expiry of the time mentioned in Notice, the registrar may, strike off the name of company form the register of companies and on the publication in the Official Gazette, the company stand dissolved.

4.      The liability of every director, manager or other officer exercising any power of management and every member of company dissolved shall continue and may be enforced as if company had not been dissolved.

Ø  Process for getting the name struck off by company:

File duly filled form STK-2 along with fees of Rs. 5000, with the attachment of following Docs:

1.      indemnity bond duly notarised by every director in Form STK 3;

2.      An affidavit in Form STK 4 by every director of the company;

3.      A statement of accounts certified by a CA;

4.      A copy of resolution signed by director of the company

Ø  Following category of companies shall not be removed from the register of companies:

1.      listed companies;

2.      Companies under non compliance of Listing regulations or any other laws;

3.      vanishing companies;

4.      Companies where investigation, inspection and prosecution is pending or carried out;

5.      Companies where notice issued under section 206 or 207 have been issued;

6.      companies whose application for compounding is pending before the competent authority;

7.      Companies, accepted public deposits which are either outstanding or in default;

8.      companies having charges which are pending for satisfaction; and

9.      Companies registered under section 8 of the Act.

Ø  Situations when a company cannot make application to Registrar if, at any time in the previous three months, the company (Section 249):

1.      Has changed its name or shifted its registered office from one state to another;

2.      Has engaged in any other activity except the one which is necessary or expedient for the porpose of making an applicationunder that section, or deciding whether to do so or concluding the affairs of the company.

3.      Has made an application to the tribunal for the sanctioning of a compromise or arrangement and the matter has not been finally concluded; or

4.      Is being wound up under Chapter XX of this Act or under the Insolvency and Bankruptcy code, 2016.

If a company make an application in violation of section 248, it shall be punishable with fine upto 1 lakh.

Ø  Effects of a company notified as dissolved (Section 250).

This section implies that where a company is dissolved under section 248, it shall cease to operate as a Company and the Certificate of Incorporation (COI) shall be deemed to have been cancelled from such date except for the purpose of realizing the amount due to the company and for the payment or discharge of the liabilities of the company.

Ø  Penalties for Fraudulent Application for removal of name. (Section 251)

If a fraudulent application made by a company for removal of it’s name from the register of companies, with the intention to deceive the creditors or to defraud any other persons or with the object of evading the liabilities, the person in charge of the management of the company shall-

ü  Be jointly and severally liable to any person or persons who had incurred loss or damage or result of the company being notified as dissolved; and

ü  Be punishable for fraud as provided in section 447.

The registrar may also recommend prosecution against the persons responsible for the filing of such applications.

Ø  Appeal to Tribunal. (Section 252)

Restoration of Name: If any Person, aggrieved by an order of the ROC, can file an appeal to the Tribunal within 3 years for restoration of the name of the company. If the Tribunal is of the opinion that removal of name is not justified, may order for restoration of it’s name.

If the Registrar believes that the name of the company has been struck off from the register of companies on the basis of incorrect information, which requires restoration, he may also file an application to Tribunal for seeking restoration of the name of the company.  

A Company/member/creditor/workman, if aggrieved by the company having its name struck off, may apply to the Tribunal before expiry of Twenty years from the publication in the official gazette of the notice

Earlier, in Companies Act, 1956, the workman was not considered as an aggrieved party. Now his interest has been taken care.

Thanks and Regards

CS Chetan Bhadouria

(ACS, B.Com)

Mob: 9899399209

Email id: cschetanbhadouria@gmail.com

Blog: http://cschetanbhadouria.blogspot.in/  

All about NIDHI Company

NIDHI

Meaning of Nidhi Company:

“Nidhi” means a company which has been incorporated as a Nidhi with the object of:

ü  cultivating the habit of thrift and savings amongst its members,

ü  receiving deposits from, and

ü  lending to, its members only, for their mutual benefit,

Governing Law:

Nidhi Company is governed by Nidhi Rules, 2014. Nidhi companies are incorporated in the nature of Limited company and hence, they have to comply with two set of norms, one of Public limited company as per Companies Act, 2013 and another is for Nidhi Rules, 2014. No RBI approval is necessary to register the Nidhi Company. RBI has specifically exempted this category of NBFC in India to comply with its core provisions such as registration with RBI etc.

Applicability of these Rules:

ü  Every company which had been declared as a Nidhi or Mutual Benefit Society under sub-section (1) of section 620A of the Companies Act, 1956;

ü  Every company functioning on the lines of a Nidhi company or Mutual Benefit Society but has either not applied for or has applied for and is awaiting notification to be a Nidhi or Mutual Benefit Society under sub-section (1) of section 620A of the Companies Act, 1956; and

ü  Every company incorporated as a Nidhi pursuant to the provisions of section 406 of the Act.

Requirements need to be fulfilled:

ü  A Nidhi  shall be a Public Company,

ü  Nidhi company shall have a minimum paid up capital of Five lakh rupess.

ü  Every Nidhi company shall have the last words ‘Nidhi Limited’ as part of its name.

Every Nidhi company, within a One year of incorporation, Ensure it has:-

ü  Not less than Two hundred members;

ü  Net Owned Funds of Ten lakh rupees or more;

ü  Ratio of Net Owned Funds to deposits of not more than 1:20.

No Nidhi shall:-

Ø  Carry on the business of:

ü  Chit Fund	ü  Insurance
ü  Hire Purchase finance	ü  Acquisition of Securities of other co.

Ø  Issue preference shares, debentures or any debt instruments by any name;

Ø  Open any current account with its members;

Ø  Carry any other business other than borrowing or lending on its own name;

Ø  Accept deposit or lend, other than its members;

Ø  Pledged any assets lodged by its members as security;

Ø  Enter into any partnership arrangement in its borrowing or lending activities;

Ø  Issue or cause to be issued any advertisement in any form for soliciting deposit:

Share Capital and Allotment:

Ø  Every Nidhi shall issue equity shares of the nominal value of not less than Ten Rupees each:

Ø  Every Nidhi shall allot to each deposit holder at least a minimum of Ten equity shares or shares equivalent to One hundred rupees:

Provided that a savings account holder and a recurring deposit account holder shall hold at least one equity share of rupees ten.

Membership:

Ø  A Nidhi shall not admit a body corporate or trust as a member.

Ø  A Minor shall not admitted as a member of Nidhi; (except if they are deposited by the guardian of minor, who is member of Nidhi)

Branches:

Ø  A Nidhi may open branches, only if it has earned net profits after tax continuously during the preceding three financial years and a Nidhi may open upto 3 branches within the district.

Ø  If proposes to open more than three branches then the prior permission of the Regional Director and an intimation is to be given to the Registrar about opening of every branch within thirty days of such opening.

Ø  No Nidhi shall open branches or collection centres or offices or deposit centres, or by whatever name called outside the State where its registered office is situated.

Ø  A Nidhi shall not close any branch unless it-

o   publishes an advertisement in a newspaper in vernacular language in the place where it carries on business at least thirty days prior to such closure, informing the public about such closure;

o   fixes a copy of such advertisement or a notice informing such closure of the branch on the notice board of Nidhi for a period of at least thirty days from the date on which advertisement was published under clause (a) ; and

o   gives an intimation to the Registrar within thirty days of such closure.

Acceptance of Deposits:

Ø   A Nidhi shall not accept deposits exceeding Twenty times of its Net Owned Funds (NOF) as per its last audited financial statements.

Ø  The fixed deposits shall be accepted for a minimum period of Six months and a maximum period of Sixty months.

Ø  Recurring deposits shall be accepted for a minimum period of twelve months and a maximum period of sixty months.

Ø  The maximum balance in a savings deposit account at any given time qualifying for interest shall not exceed one lakh rupees at any point of time and the rate of interest shall not exceed two per cent. above the rate of interest payable on savings bank account by nationalized banks

Ø  A Nidhi may offer interest on fixed and recurring deposits at a rate not exceeding the maximum rate of interest prescribed by the Reserve Bank of India which the Non-Banking Financial Companies can pay on their public deposits.

Loan

Ø  A Nidhi shall provide loans only to its members subject to the following limits, namely:-

Up to Rs. 200,000/-	If deposit is less than 2 Crore Rupees
Up to 7,50,000/-	2 Cr. < If deposit < 20 Cr.
Up to 20,00,000/-	20 Cr. < If deposit < 50 Cr.
Up to 50,00,00/-	If deposit more than 50 Cr. rupees

# Provided that where a Nidhi has not made profits continuously in the three preceding financial years, it shall not make any fresh loans exceeding fifty percent of the maximum amounts of loans specified in above table

# Provided further that a member shall not be eligible for any further loan if he has borrowed any earlier loan from the Nidhi and has defaulted in repayment of such loan.

Ø  A Nidhi shall give loans to its members only against the following securities, namely:-

A.    Gold, Silver and Jewellery	B.     F.D receipts, National saving certificates
C.    Immovable Property	D.    Insurance Policies

Ø  The rate of interest to be charged on any loan given by a Nidhi shall not exceed seven and half per cent.

Directors of Nidhi

Ø  The Director shall be a member of Nidhi and shall hold office for a term up to ten (10) consecutive years on the Board of Nidhi.

Ø  The Director shall be eligible for re-appointment only after the expiration of two (2) years of ceasing to be a Director.

Ø  Section 152 (appointment) and 164 (Disqualification) of Companies Act, 2013 shall be complied by the person to be appointed as Director

Dividend

Ø  A Nidhi shall not declare dividend exceeding twenty five per cent (25%). or such higher amount as may be specifically approved by the Regional Director for reasons to be recorded in writing and further subject to the following conditions, namely:-

(a) An equal amount is transferred to General Reserve;

(b) There has been no default in repayment of matured deposits and interest; and

(c) It has complied with all the rules as applicable to Nidhis.

Returns to be filed by by Nidhi

Ø  NDH-1: Every Nidhi need to be file a return in form NDH-1 with in 90 days from the closure of financial year, duly certified by Practicing CS, CA and CMA.

Ø  NDH-2: If Nidhi failed to comply the above requirements, then it need to apply to RD in for NDH-2 for extension of time.

Ø  NDH-3: Every Nidhi shall file half yearly return with the Registrar in Form NDH-3 within thirty days from the conclusion of each half year duly certified by a Practicing CS, CA and CMA

Penaltyfor Non Compliance

If a Nidhi Co. contravenes any of the provisions of the rules prescribed herein, the company and every officer of the company who is in default shall be punishable with fine which may extend to Five thousand rupees, and where the contravention is a continuing one, with a further fine which may extend to Five hundred rupees for every day after the first during which the contravention continues.

Regards

CS Chetan Bhadouria

(ACS, B.Com)

Mob: 9899399209

E-mail: cschetanbhadouria@gmail.com