Becoming Dormant Company as per Companies Act 2013

I strike the idea to write about dormant company when one of my client asked can we become inactive company under companies Act 2013 since we are not doing any business and we feel cumbersome having Board meetings preparation of minutes, and then, I advised them that there are some eligibility criteria to fulfill so that you obtain Dormant status but the company has to prepare minutes for one Board Meeting, then he laughed and said that’s ok.

Read below to know more about dormant status and how to obtain active status when operative.

Now Entrepreneurs who want to hold an asset or intellectual property under the corporate shield for its usage at a later stage have excellent advantage to become dormant for a specific period of time.

Let’s understand this with an example, if entrepreneur wants to purchase a fixed asset now for its future project at a comparatively lesser price, he may do the same through dormant company so that he can use the land for its future project.

If entrepreneur have inoperative/ inactive company and wants to retain inactive company for some time and do less compliance then, he/ she can obtain dormant status.

What Companies Act 2013 says about Dormant Company?

Section 455 of the Companies Act 2013,

“where a company is formed and registered under this Act for a future project or a future project or to hold an hold an asset or intellectual property and “has no significant accounting transaction”, such a company or An Inactive Company An may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company.”

Types of entities which can get the status of Dormant;

a.       A public company or

b.      a private company or

c.       one person company

There are many inactive companies, which do not start any business, for a long time from the date of registration as for instance any business for creation of intellectual property or for a future project and has no significant accounting transaction, they can apply for Dormant status and get the benefits of less compliances.

What is Inactive Company?

“Inactive Company” means a company which

A.    has not been Carrying on Any Business or operation, or

B.     has not made any Significant Accounting Transaction During The Last 2 years or

C.     has not filed Financial Statements and Annual Returns during the LAST TWO FINANCIAL YEARS.

What is the meaning of Significant Accounting Transaction?

“Significant Accounting Transaction” means

A.    Any transaction other than- Payment of Fees by a company to the Registrar.

B.     Payments made by it to fulfill the requirements of this Act or any other law.

C.     Allotment of shares to fulfill the requirements of this Act.

D.     Payments for maintenance of its office and records.

Above Mention Transactions are excluded from Significant Accounting Transactions.

Conditions to be fulfilled in order to apply for Dormant Status:

·         No inspection, inquiry or investigation has been ordered or taken up or carried out against the company.

·         The company is neither having any public deposits which are outstanding nor is the company in default in payment thereof or interest thereon.

·         No prosecution has been initiated or pending against the company under any law.

·         The company has not defaulted in the payment of workmen’s dues.

·         The company does not have any outstanding statutory taxes, dues, duties etc. payable to the Central Government or any State Government or local authorities etc.

·         The application has not been made with an objective to deceive the creditors or to defraud any other person.

·         The securities of the company are not listed on any stock exchange within or outside India.

·         The company is not having any outstanding loan, whether Secured and Unsecured- But if company has any Unsecured Loan Outstanding Unsecured Loan

·         There is No Dispute in the Management or Ownership of The Company. A certificate in this regard required to taken from Management. Such Certificate required to be attached in the Form which requires filing with ROC.

If the above conditions are fulfilled only then the company may apply for status of DORMANT only after obtaining NOC from the lender. Such NOC required to be attached in the Form which is required to be filed with ROC.

Steps to be followed to get Dormant Status:

Step 1	Board Meeting- to call EGM covering authorization to Director to make application for Dormant with ROC, issue of notice of EOGM
Step 2	Extra Ordinary General meeting
Step 3	File MGT 14 (attachments; SR, and Notice of EOGM)
Step 4	File MSC 1 Attachments: §  CTC of Board Resolution. §  CTC of Special Resolution. §  Auditor’s Certificate. §  Statement of Affairs duly certified by Chartered Accountant or Auditor(s) of the company. §  Latest Financial Statement and Annual Return of the Company is mandatory to attach In Case The Same Is Filed To Registrar. §  Certificate regarding no dispute in the management or ownership. §  Consent of lender, if any loan is outstanding.

After getting certificate of Dormant Company, the company is required to file certain mandatory forms with the Registrar of Companies:

·         A dormant company shall file a declaration annually in Form No. MSC-3 within thirty days from the end of each financial year.

·         Company shall continue to file the return or returns of allotment and change in directors in the manner and within the time specified in the Act.

·         If company wants to get Active status to be file e-form MSC-4 with ROC, then gets active company status.

·         If company carrying any “Significant transaction” “during the dormant period, the directors shall within 7 days from such event, file an application with ROC in e-form MSC-4, for obtaining the status of an active company.

 The company may carry following business transaction in the period of Dormant:

(a) Payment of fees by a company to the Registrar.

 (b) Payments made by it to fulfill the requirements of this Act or any other Law.

 (c) Allotment of shares to fulfill the requirements of this Act and

 (d) Payments for maintenance of its office and records.

OTHER PROVISONS:

·         A dormant company shall have such Minimum Number of Directors. {A dormant company shall have a minimum number of three directors in case of a public company, two directors in case of a private company and one director in case of a One Person Company}

·         File such documents and pay such annual fee as may be prescribed to the Registrar to retain its dormant status.

·         A Dormant Company need not enclose cash flow statements in its annual accounts.

·         A Dormant Company is required to convene at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days. Section 173(5)

 A Dormant Company formation can prove useful when an individual wishes to stop trading for a specific period of time.

For more details, contact CS Neha Seth at csnehaseth@gmail.com or call us at 9871903449

Delegation of powers in case of alteration in memorandum of section 8 companies

MCA notification no. S.O. 1353 (E) dated May 21, 2014 (copy at mca website) wherein the Central Government has delegated the powers and functions vested in Central Government, amongst others, under section 13 (2) to the Registrar of Companies. Section 13 deals with Alteration of Memorandum.

In this regard, we would like to clarify that the professionals/ companies are filing RD-1 seeking approval to alter the Memorandum of Association.  As the power for approving change in Memorandum has been delegated to ROC, Members  are advised to file application for alteration of Memorandum of Association in correct form i.e. e-form GNL-1.

Correct form to file for alteration in MOA of Sec 8 company is eForm GNL 1

For more details, contact cs neha seth at 9871903449

Trademark registration in just one month by 2017

The Cabinet has approved India’s first National Intellectual Property Rights (IPR) Policy. The Finance Minister said the policy is guided by seven objectives, including IPR public awareness, generation of IPRs, human capital development and strong law enforcement. Further, the window for trademark registration will be reduced to one month by 2017. The National Intellectual Property Rights (IPR) Policy will endeavour for a “Creative India; Innovative India”. The policy will now cover music, films and industrial drawings along with books.

The Policy lays down the following seven objectives:

1. IPR Awareness: Outreach and Promotion: To create public awareness about the economic, social and cultural benefits of IPRs among all sections of society.
2. Generation of IPRs: To stimulate the generation of IPRs.
3. Legal and Legislative Framework: To have strong and effective IPR laws, which balance the interests of rights owners with larger public interest
4. Administration and Management: To modernize and strengthen service-oriented IPR administration.
5. Commercialization of IPRs: Get value for IPRs through commercialization.
6. Enforcement and Adjudication: To strengthen the enforcement and adjudicatory mechanisms for combating IPR infringements.
7. Human Capital Development: To strengthen and expand human resources, institutions and capacities for teaching, training, research and skill building in IPRs.

These objectives are sought to be achieved through detailed action points. The action by different Ministries/ Departments shall be monitored by DIPP which shall be the nodal department to coordinate, guide and oversee implementation and future development of IPRs in India.

For further details, contact us at 9871903449 or drop email at csnehaseth@gmail.com

LLP Annual Filings 2016

LLP Annual Filing Requirements 2016

(A) LLP (Annual Return) Due Date is 31st May 2016 in Form -11

(B) LLP ( Statement of Accounts ans Solvency) Due Date is 30th October 2016    in FORM-8

(C) LLP Income tax return

REGISTRAR OF LLP	Last Date for Filing
1) Annual Return (Form-11)	31-May-16
2) Accounts (Form-8)	30-Oct-16
INCOME TAX RETURN	Last Date for Filing
1) In case Audit is not required	31-Jul-16
2) In case Audit Is required	30-Sep-16

(A) LLP Annual returns

It is mandatory for every LLP registered on mca portal  to file returns for the year ending 31.03.2016 (within 60 days from the date of closure of Financial year i.e. 31st may'16) whether the LLP has done any business or not.

(B) LLP (Accounts)

The Statement of Accounts (Form 8) is the summary of Financial Transactions such as Assets / Liabilities and Income and Expenditure details of LLP. Every LLP has to close its books of accounts as on 31st March every year and prepare a Statement of Accounts (Profit and Loss Account and Balance Sheet) and has to file the same with Registrar of LLP and Income Tax Authorities. So, the statement of Accounts is to be filed on or before 30th October every year.

(C) Income tax Returns

An LLP has to close its financial year as on 31st March every year and has to file the returns with Income Tax Department. In case of LLP whose annual turnover is more than Rs.100 Lakhs, the accounts have to be audited as required under Income Tax Act as well.

Penalty for Non-Compliance

Please take note that delay in filing the forms would lead to heavy penalty. As per LLP Act, 2008, you would be penalised Rs.100 each day of default.

So if you don’t file on time, your LLP turns into unlimited statutory liability till the day it is complied.To avoid all the dangerous consequences of heavy penalty, it would be advisable to comply on time within stipulated due date of filing.

For more details, contact CS Neha Seth at csnehaseth@gmail,com

MSME Registration in India

Registration under MSMED Act, 2006

MSME stands for micro, small and medium enterprises, and these are the backbone of any developing economy. To support and promote MSMEs, the Government of India through various subsidies, schemes and incentives promote MSMEs through the MSMED Act. To avail the benefits under the MSMED Act from Central or State Government and the Banking Sector, MSME Registration is required. The registration scheme has no statutory basis. Units would normally get registered to avail some benefits, incentives or support given either by the Central or State Govt

BENEFITS OF MSME/SSI REGISTRATION

1. Easy finance availability from Banks, without collateral requirement.
2. Protection against delay in payment from Buyers and right of interest on delayed payment.
3. Preference in procuring Government tenders.
4. Stamp duty and Octroi benefits.
5. Concession in electricity bills.
6. Reservation policies to manufacturing / production sector enterprises.
7. Time-bound resolution of disputes with Buyers through conciliation and arbitration.
8. Reimbursement of ISO Certification Expenses.
9. Credit prescription (Priority sector lending), differential rates of interest etc.
10. Excise Exemption Scheme.
11. Exemption under Direct Tax Laws.
12. Stamp duty and Octroi benefits.
13. Statutory support such as reservation and the Interest on Delayed Payments Act.
14. Subsidy on ISO Certifications.
15. Subsidy on NSIC Performance and Credit ratings.
16. Participation in Govt. Purchase registrations.
17. Registration with NSIC.
18. Counter Guarantee from Govt. of India through CGSTI.
19. Waiver in Earnest Money (Security Deposit) in Govt. tenders.
20. Stamp duty and Octroi benefits.
21. 15% weightage in price Preference.
22. Reduction in rate of Interest from banks (Subject to ratings).
23. Free of Cost Govt. tenders.

Eligibility criteria for MSME/SSI Registration

All classes of enterprises, whether Proprietorship, Hindu undivided family, Association of persons, Co-operative society, Partnership firm, Company or Undertaking, by whatever name called can apply for the registration and get qualified for the benefits provided under the Act.

For Enterprises engaged in the manufacture or production, processing or preservation of goods, the definition is as follows:

- Micro Enterprise: An enterprise where investment in plant and machinery does not exceed Rs. 25 lakh.

- Small Enterprise: An enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore.

- Medium Enterprise:  An enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.

In case of the above enterprises, investment in plant and machinery is the original cost excluding land and building and other items as specified by the Ministry of Small Scale Industries.
For Enterprises engaged in providing or rendering of services, the definition is as follows:

- Micro Enterprise: An enterprise where the investment in equipment does not exceed Rs. 10 lakh.

- Small Enterprise: An enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore.

- Medium Enterprise: An enterprise where the investment in equipment is more than Rs. 2 crore but does not exceed Rs. 5 crore.

For more details, contact CS Neha Seth at 9871903449 or drop email at csnehaseth@gmail.com