Overseas Investment by Core Investment Company (CIC)

As per Master Direction on Core Investment Companies (Reserve Bank) Directions, 2016, CICs;

 

a)        With an asset size of less than Rs. 100 Crore, irrespective of whether accessing public funds or not

 

b)        With an asset size of Rs. 100 Crores and above and not accessing public funds

           are not required to register with the Bank under 45IA of the RBI Act, 1934

Investment in non-financial sector

Exempted CICs making overseas investment in non-financial sector shall not require registration from the Bank and hence, these Directions are not applicable to them. Further, a CIC-ND-SI need not obtain prior approval from Department of Non-Banking Supervision (DNBS), RBI, for overseas investment in non-financial sector. However it shall report to the Regional Office of DNBS where it is registered within 30 days of such investment in the stipulated format and at the prescribed periodicity.

The eligibility criteria for investments abroad and other conditions prescribed for CICs are given in the following paragraphs:

Eligibility Criteria

i. The Adjusted Net Worth (ANW) of the CIC shall not be less than 30% of its aggregate risk weighted assets on balance sheet and risk adjusted value of off-balance sheet items as on the date of the last audited balance sheet as at the end of the financial year. The CIC shall continue to meet the requirement of minimum ANW, post overseas investment. For this purpose, the risk weights applicable shall be as provided for in these directions.

ii. The level of Net Non-Performing Assets of the CIC shall not be more than 1% of the net advances as on the date of the last audited balance sheet.

iii. The CIC shall generally be earning profit continuously for the last three years and its performance shall be satisfactory during the period of its existence.

General Conditions

i. Direct investment in activities prohibited under FEMA shall not be permitted.

ii. The total overseas investment shall not exceed 400% of the owned funds of the CIC.

iii. The total overseas investment in financial sector shall not exceed 200% of its owned funds.

iv. Investment in financial sector shall be only in regulated entities abroad.

v. Entities set up abroad or acquired abroad shall be treated as wholly owned subsidiaries (WOS) /joint ventures (JV) abroad.

vi. Overseas investments by a CIC in financial /non-financial sector shall be restricted to its financial commitment. However with regard to issuing guarantees/Letter of Comfort in this regard the following shall be noted:

1. The CIC can issue guarantees / letter of comfort to the overseas subsidiary engaged in non-financial activity;
2. CICs must ensure that investments made overseas shall not result in creation of complex structures. In case the structure overseas requires a Non-Operating Holding Company, there shall not be more than two tiers in the structure. CICs having more than one non-operating holding company in existence, in their investment structure, shall report the same to the Bank for a review.
3. CICs shall comply with the regulations issued under FEMA, 1999 from time to time;
4. An annual certificate from statutory auditors shall be submitted by the CIC to the Regional Office of DNBS where it is registered, certifying that it has fully complied with all the conditions stipulated under these Guidelines for overseas investment. The certificate as on end March every year shall be submitted by April 30 each year;
5. If any serious adverse features come to the notice of the Bank, the permission granted shall be withdrawn. All approvals for investment abroad shall be subject to this condition.

 

Opening of WOS/JV Abroad by CICs

In the case of opening of a WOS/JV abroad by a CIC, all the conditions as stipulated above shall be applicable. The NoC to be issued by the Bank is independent of the overseas regulators’ approval process. In addition, the following conditions shall apply to all CICs:

(a) The WOS/JV being established abroad shall not be a shell company i.e "a company that is incorporated, but has no significant assets or operations." However companies undertaking activities such as financial consultancy and advisory services shall not be considered as shell companies;

(b) The WOS/JV being established abroad by the CIC shall not be used as a vehicle for raising resources for creating assets in India for the Indian operations;

(c) In order to ensure compliance of the provisions, the parent CIC shall obtain periodical reports/audit reports at least quarterly about the business undertaken by the WOS/JV abroad and shall make them available to the inspecting officials of the Bank;

(d) If the WOS/JV has not undertaken any activity or such reports are not forthcoming, the approvals given for setting up the WOS/JV abroad shall be reviewed;

(e) The WOS/JV shall make disclosure in its Balance Sheet the amount of liability of the parent entity towards it and also whether it is limited to equity / loan or if guarantees are given, the nature of such guarantees and the amount involved;

(f) All the operations of the WOS/JV abroad shall be subject to regulatory prescriptions of the host country.

Ease of doing business after Deposit rules amended in September 2020

 

RECENT AMENDMENTS IN COMPANIES (ACCEPTANCE OF DEPOSITS) RULES, 2014

 

Attention all Start-up Companies, it’s time to hear good news on ease of doing business. There is amendment in deposit rules which permits the start ups to raise funds through corporate bonds or other convertible instruments for 10 years

 

1)    References

·         Rule 2 of the Companies (Acceptance of Deposits) Rules, 2014

·         Rule 3 of the Companies (Acceptance of Deposits) Rules, 2014

·         Companies (Acceptance of Deposits) Amendment Rules, 2020 vide MCA Notification dated 07^th September, 2020

 

2)    Transaction not be considered as Deposit

·         Rule 2 (1) (c) of the Companies (Acceptance of Deposits) Rules, 2014 gives the definition of the term DEPOSIT as “deposit includes any receipt of money by way of deposit or loan or in any other form, by a company”

·         At the same time, it also provides for a number of exceptions i.e. transactions which shall be not be considered as deposits.

·         Recently, MCA vide a notification dated 07^th September, 2020, amended one of such exceptional transaction.

·         Which states that:

an amount of twenty five lakh rupees or more received by a start-up company, by way of a convertible note (convertible into equity shares or repayable within a period not exceeding Ten Years from the date of issue) in a single tranche, from a person would not be regarded a deposit.

·         Prior to this amendment, the time period was of five years, which has now been amended to TEN YEARS.

·         It is a big relaxation because it means that now a start-up company can repay the convertible note even within 10 years and it would not be considered as deposit.

 

3)    Maximum limit for acceptance of Deposit

·         Rule 3 (3) of the Companies (Acceptance of Deposits) Rules, 2014 specifically mention a condition to accept a deposit that:

 

No company referred to in sub-section (2) of section 73 shall accept or renew any deposit from its members, if the amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance or renewal of such deposits exceeds thirty five per cent of the aggregate of the Paid-up share capital, free Reserves and securities premium account of the company.

·         Provided that, a Specified IFSC Public company and a private company may accept from its members monies not exceeding one hundred per cent. of aggregate of the paid up share capital, free reserves and securities premium account and such company shall file the details of monies so accepted to the Registrar in Form DPT-3.

·         As per the amendment, a private company, which is a start-up, for TEN YEARS from the date of its incorporation, is not required to comply with this condition of maximum limit for acceptance of deposit.

·         Earlier to this notification, a private company, which is a start-up, for FIVE YEARS, is not required to fulfill this condition. But now, the scope has been widened.

 

4)    CONCLUSION

After carefully considering the above two amendments, it is quite clear that they are specifically targeted to the start-up companies. And, it is a quite good and appreciable step to boost their business and also to hold the hands of the entrepreneurs of every start-up in this pandemic of Covid-19. This amendment has been step forward when DPIIT introduced new definition of Start up in the month of February 2019

 

Acceptance of certifications by using DSC instead of physical sign: Circular by SEBI

 

1)    REFERENCES:

a)    SEBI Circular No. SEBI/HO/CFD/CMD1/ CIR/P/2020/63 dated 17^th April, 2020

b)    SEBI Circular No. SEBI/HO/CFD/CMD1/ CIR/P/2020/145 dated 31^st July, 2020

 

2)    BACKGROUND:

Situation of Covid 19 has shaken the world and due to this, Company Secretaries on the one hand and companies and its management personnel on the other hand, were continuously facing the operational challenges in carrying out certification and authentication of documents in physical form which are to be submitted to the govt authorities including Stock exchanges.

 

3)    REPRESENTATIONS BY ICSI:

Keeping in view the above operational challenges in terms of unworkable physical signing of documents, ICSI made number of representations to SEBI, so that it would look into this matter and came up with a feasible solution so as to file the certifications/authentications by using digital signatures instead of signing it physically.

 

4)    OUTCOME:

SEBI after looking into the matter thoroughly, accepted the representations of ICSI and thereafter releases the following two circulars:

(i)            Circular No. SEBI/HO/CFD/CMD1/ CIR/P/2020/63 dated 17^th April, 2020, permitted the use of digital signature certifications for authentication/certification of filings/submissions made under the SEBI(Listing Obligations and Disclosure Requirements) Regulations, 2015 to the Stock Exchanges, till 30^th June, 2020

(ii)          Circular No. SEBI/HO/CFD/CMD1/ CIR/P/2020/145 dated 31^st July, 2020, permitted the use of digital signature certifications for authentication/certification of filings/submissions made under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 to the Stock Exchanges, from “1^st July, 2020 onwards till 31^st December, 2020”.

 

eForm PAS-6 : New eForm at MCA New compliance by companies

 Attention unlisted Public companies in India, this new compliance is for you.

References/ Applicable Provisions:

1)  The Companies (Prospectus and Allotment of Securities) Third amendment Rules, 2018 dated 10^th September 2018

2)  The Companies (Prospectus and Allotment of Securities) Amendment Rules, 2019 dated 22^nd January 2019

3)  The Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2019 dated 22.05.2019  dated 30th September 2019

4)  MCA Circular No. 16/2019 dated 28^th November, 2019

5)  Sub Rule (8) of Rule 9A  of Companies (Prospectus and Allotment of Securities) Rules, 2014

 

What is PAS-6?

6)  eForm PAS-6 is an e-form under the Companies Act, 2013 which is filed to the Registrar of Companies (ROC) under whose jurisdiction the registered office of the company is situated.

7)  This form is filed on half-yearly basis i.e. twice a year.

8)  This form is needed to be signed by either a CA or CS in practice in addition to the Director of the company

9)  The purpose of this form is to file an audit report with respect to the reconciliation of the share capital of a company.

WHAT WAS THE NEED TO INTRODUCE eForm PAS-6?

10)               There were some unlisted public companies engaged in the malpractice of filing back dates forms to the concerned ROC. And it was necessary to bring a full stop to such practices and a need to introduce a form which re concile the information relating to share capital every half yearly. The stakeholders are now able to get the correct and true information on securities allotted by a company especially securities which are in demat form during a Financial Year

11)               Moreover, certification of this e-form by professionals like CA or CS makes the information contained in it more reliable for all the stakeholders.

What details are to be filled in PAS-6 ?

12)               Basic details of the company

13)               Issued capital of the company

14)               Number of shares held in dematerialized form

15)               Reasons for difference, if any, between the issued capital and the shares held in dematerialized form

16)               Details of changes in share capital during the half-year under consideration

17)               Details of shares held by Directors , Promoters and KMP

18)               Whether the register of members is updated or not

19)               Total number of demat requests, request pending and confirmed

20)               Details of the Company Secretary of the company

21)               Details of CA/CS certifying the form

 

Which companies are applicable to file eForm PAS-6 ?

22)               EVERY UNLISTED PUBLIC COMPANY” is required to file this form along with the prescribed fees

23)               Following companies are not required to file eForm PAS 3 even if they are unlisted public companies:

a.    Nidhi Company

b.    Government Company

c.    Wholly owned subsidiary company

 What is the Timeline for filing PAS-6 ?

1)  Firstly it is to be noted that this e-form is filed on half-yearly basis and therefore it is Not an annual compliance.

2)  This e-form is required to be filed within  60 days from the end of each half year (30^th September/31^st March)

What is the Synopsis/ Summary for Rule 9A read with sub-rule 8 and 8A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 ?

This rule states that:

1)    Every Unlisted Public Company shall-

·         Issue the securities only in dematerialized form,

·         facilitate dematerialization of all its existing securities

 2)    Every unlisted public company making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer shall ensure that before making such offer, entire holding of securities of its promoters, directors, key managerial personnel has been dematerialized in accordance with provisions of the Depositories Act 1996 and regulations made there under.

 3)    Every unlisted public company shall facilitate dematerialization of all its existing securities by making necessary application to a depository and shall secure International security Identification Number (ISIN) for each type of security and shall in-form all its existing security holders about such facility.

 4)    Every unlisted public company governed by this rule shall submit Form PAS-6 to the Registrar with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 within sixty days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice.

 5)    The company shall immediately bring to the notice of the depositories any difference observed in its issued capital and the capital held in dematerialized form.

What is the recent update regarding PAS-6 ?

1)    MCA vide circular No. 16/2019 dated 28^th November, 2019 had stated that the time limit for filing Form PAS-6 without additional fees for the half-year ended on 30^th September, 2019 will be 60 days from the date of deployment of this form on MCA-21 portal.

2)    Recently, on 15^th July 2020 the form has been deployed on MCA-21 portal.

3)    Accordingly, the last date for filing the Form PAS-6 for the half-year ended on 30^th September, 2019 and 31^st March,2020 will be 13^th September, 2020

                                                                                       

 

Company registration in Haryana

Chief Minister of Haryana offered incentives to the young entrepreneurs for setting up MSME unit and company in Haryana. He said that he will ensure that MSME function seamlessly despite ongoing pandemic COVID-19.

Read the article below;

https://auto.economictimes.indiatimes.com/news/industry/khattar-assures-support-to-entrepreneurs-for-setting-up-msme-units/76847216

Reference: Economic Times

How to set up company in Haryana?

1) Get Digital Signatures of the proposed Directors from vsign or emudhra

2) Search and identify the company name. Make sure that the company name is not undesirable

3) File for name approval in Spice+ Part A at the authorities (CRC)

4) Name approved. Now file incorporation documents including MOA AOA alongwith application for PAN TAN GST EPF and opening of Bank account with the authorities (CRC) in Spice+Part B

5) Complete the formalities of opening of Bank account with Bank

6) Conduct first Board Meeting of the company within 30 days of registration

7) Invest the subscription money by the subscribers of the company

8) File commencement of business with the Registrar of companies

9) Now you can start your business

Let us know if you have any queries in regard to this.

RELAXATION IN THE TIME LINES FOR FILINGS THE CHARGE FORMS

References:  

1)    Circular No 23/2020 dated 17^th June, 2020

2)    Circular No.12/2020 dated 30^th March, 2020

3)    Section 77 and 78 of Companies Act, 2013 read with Companies (Registration of Charges) Rules, 2014 

 

The Ministry of Corporate Affairs (MCA) in response to the representations from various stakeholders launched the FRESH START SCHEME through the circular dated 30th March, 2020.

As per  this scheme, all the defaulting companies would get an opportunity to file belated documents (such as Annual Return, Financial Statements etc ) on the MCA21 Electronic registry without being subject to a higher additional fees on account of any delay.

But this scheme does not solve the purpose of filing belated charge related documents.

Therefore, the stakeholders once again made the representations to MCA to provide relaxations with regard to charge related documents as well as this are tough time in COVID 19. Then, MCA vide a circular dated 17^th June , 2020 come up with a scheme  for relaxation of time for filing forms related to creation or modification of charges under the Companies Act,2013.

APPLICABILITY  OR AVAILABILITY  OF  THE SCHEME:

The scheme is available to file two forms i.e. CHG-1 and CHG-9 i.e. for creation and modification of Charge

If a particular company had created or modified any charge before 01.03.2020 and the due date for filing the forms also lies before 01.03.2020. Then, it would not be eligible for any relaxations provided in the concerned circular.

But, if a company has created or modified any charge between 01.03.2020 to 30.09.2020 and the due date for filing the forms also lies after 01.03.202.Then, it would be eligible for the relaxations provided in the concerned circular.

CHARGE CREATED OR MODIFIED BEFORE 01.03.2020	CHARGE CREATED OR MODIFIED BETWEEM 01.03.2020 TO 30.09.2020
ACTION AVAILABILITY OF RELAXATION Charge created before 01.03.2020 NO Due date comes before 01.03.2020 NO Due date comes after 01.03.2020 YES	ACTION AVAILABILITY OF RELAXATION Charge created after 01.03.2020 YES Due date comes after 01.03.2020 YES

 

Tax rates under Private Limited and LLP in India

Tax Under LLP	Tax Under Private Companies
1.  Rate of Tax For the Assessment Year 2020-21 & 2021-22, LLP is taxable at 30%. The Rate of tax applicable to LLP is flat 30%. For income tax purpose, LLP is treated at par with partnership firms. If the total Income of LLP has exceeded Rs 1 Crore, amount of Income Tax shall be increased by a surcharge at the rate of 12%. Health and Education Cess @4% on income tax shall be chargeable	·         1. Rate of Tax ·         For the Assessment Year 2020-21 & 2021-22, where its total turnover or gross receipt during the previous year 2018-19 does not exceed Rs. 400 crore, Rate of tax applicable will be 25%. ·         In all other cases- Rate of tax applicable, will be 30% ·         The amount of income-tax shall be increased by a surcharge at the rate of 7% of such tax, where total income exceeds one crore rupees but not exceeding ten crore rupees and at the rate of 12% of such tax, where total income exceeds ten crore rupees Health and Education Cess @4% on income tax shall be chargeable
2. Dividend Distribution Tax There is no such Dividend distribution tax applicable to LLPs.	·         2. Dividend Distribution Tax ·         In the budget 2020, the Dividend Distribution Tax (DDT) has been removed and the dividend income had been made taxable in the hands of investors. ·         However, Investors will now receive dividend after tax deducted at source (TDS) at rate of 10 percent by the organizations distributing dividend irrespective of the tax slab rate in which investors fall.

 

 

Taxation on Domestic Company

Income-tax rates applicable in case of domestic companies for assessment year 2020-21 and 2021-22 are as follows:

 

Domestic Company
	Assessment Year 2020-21	Assessment Year 2021-22
♦ Where its total turnover or gross receipt during the previous year 2017-18 does not exceed Rs. 400 crore	25%	NA
♦ Where its total turnover or gross receipt during the previous year 2018-19 does not exceed Rs. 400 crore	NA	25%
♦ Any other domestic company	30%	30%

Add:

(a) Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 7% of such tax, where total income exceeds one crore rupees but not exceeding ten crore rupees and at the rate of 12% of such tax, where total income exceeds ten crore rupees. The surcharge shall be subject to marginal relief, which shall be as under:

 (i)  Where income exceeds Rs. 1 crore but not exceeding Rs. 10 crore, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

 (ii)  Where income exceeds Rs. 10 crore, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs. 10 crore by more than the amount of income that exceeds Rs. 10 crore

(b) Health and Education Cess : The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of four percent of such income-tax and surcharge.

1. Special Tax rates applicable to a domestic company

The special Income-tax rates applicable in case of domestic companies for assessment year 2020-21 and 2021-22 are as follows:

 

Domestic Company
	Assessment Year 2020-21	Assessment Year 2021-22
♦ Where it opted for Section 115BA	25%	25%
♦ Where it opted for Section 115BAA	22%	22%
♦ Where it opted for Section 115BAB	15%	15%

Surcharge : The rate of surcharge in case of a company opting for taxability under Section 115BAA or Section 115BAB shall be flat 10% irrespective of amount of total income.

Health and Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of four percent of such income-tax and surcharge.

MAT : The domestic company who has opted for special taxation regime under section 115BAA & 115BAB is exempted from provision of MAT. However, no exemption is available in case where section 115BA has been opted.

In that case, the provisions of Minimum Alternate Tax (MAT) applies, tax payable cannot be less than 15% (+HEC) of "Book profit" computed as per section 115JB. However, MAT is levied at the rate of 9% (plus surcharge and cess as applicable) in case of a company, being a unit of an International Financial Services Centre and deriving its income solely in convertible foreign exchange. For provisions relating to MAT refer tutorial on "MAT/AMT" in tutorial section.

 

Taxation on LLP

For the Assessment Year 2020-21 & 2021-22, a partnership firm (including LLP) is taxable at 30%.

Add:

(a) Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 12% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).

(b) Health and Education Cess : The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of four percent of such income-tax and surcharge

Reference: https://www.incometaxindiaefiling.gov.in/home