A guide for company name approval – RUN

In order to simplify the Company name approval process and changing the name of an existing company, the Ministry of Corporate Affairs introduced a new simple web-based application called RUN (Reserve Unique Name) for registering any organization. Before RUN, all applications were to be made in the Form INC-1 accompanying with a minimum of 2 Director Identification Number and 1 Digital Signature. Any applicant seeking to reserve a proposed company or a change in an existing company should apply for reservation through the RUN service. The application will then be processed by the Central Registration Centre (CRC) and the proposed name applied should not be undesirable as per the relevant provisions of the Act and the rules mentioned in it.

Names which can be reserved under RUN
Below table gives a brief description regarding the type of companies names that can be reserved along with their respective suffixes:

Company Type
Suffix Required
1.

• Private Limited Company
• Limited / Company

2.

• Section 8 company
• Private Limited

3.

• IFSC Company
• IFSC Limited / IFSC Private Limited

4.

• Unlimited Company
• Unlimited Company

5.

• Nidhi Company
• Nidhi Limited

6.

• Producer Company
• Producer Company Limited

7.

• One Person Company
• (OPC) Private Limited

Validity for reserved company names
The CRC on the basis of information and documents provided, reserve the name for a period of 20 days from the date of approving in case of new company name registration. Similarly, it is 60 days from the date of approval in case of change in the name of an existing company.

Rules regarding the proposed names
Certain regulations pertaining to the reservation of the names are to be followed according to the laws governing the RUN form which are as below:

1. Name stated should be different from the name of an existing company registered.
2. The name should not constitute any offence under any law and also should not be undesirable in the opinion of the Central Government.
3. The company name should not have any word or expression which likely gives the impression that the company is connected to the central or state government or any other local authority unless the approval from the respective government authority has been attained.

Requirements to reserve a unique name via RUN
Below is the list of things required for RUN:

1. An MCA (Ministry of Corporate affairs) account
2. Corporate Identification Number (CIN)
3. The proposed name
4. Documents required with the proposed name

Process for using RUN
Below is the process for using RUN with an MCA account:

1. Firstly, creating an MCA account is important before you access this service. Login the account and enter the name you wish to use and check against the MCA database of the company and LLP names for its availability.
2. For an existing company who wishes to change its name, a CIN will be required for the RUN e-form
3. The applicant is required to enter the name in the form, he wants to reserve for the incorporation of a new company or change the name of the existing company.
4. The user is then supposed to enter the objects of the proposed company and other relevant comments or documents supporting the proposed name.

Upon successful submission of the proposed name in the RUN form, a SRN (Service request number) is generated. Also, a challan serving the proof of the payment, email conveying the proposed name acceptance or rejection status, an approval / rejection letter, and finally a resubmission of the e-form is generated.

Concluding this document, the RUN is an easy web form to fill in with no complications. There is no need to provide other details about incorporation like proposed capital, shareholding or promoter details etc. This as a result waived off inherent limitation of e-form filing which included uploading errors or DSC (Digital Signature Certificate) registration.

If you are looking forward to establish your business in India, we can offer a comprehensive range of professional services including approval for company name, DIN application, incorporation certificate, Digital signature certificate, business structuring, advisory services, tax planning and statutory compliances along with other post-incorporation services as per your business requirements.
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Company formation in India

Annual corporate filings

According to the requirements of the Companies Act 2013 and other applicable laws, every company including subsidiaries of foreign companies, joint venture companies while incorporating business in India has to file certain documents with the government authorities. Following are the required documents along with the e-forms with the Registrar of Companies (RoC) with proper jurisdiction over the company:

• Balance Sheet: All companies have to file Form 23AC
• Profit and Loss account: All companies have to file Form 23ACA
• Annual Return: Companies with share capital have to file Form 20B
• Annual Return: Companies without share capital have to file Form 21A
• Compliance certificate: Companies with paid up capital between Rs. 10 lakh to Rs. 2 crore have to file Form 66.

How to do corporate filings?
There are 3 ways for annual corporate filing which a company can follow:

• The most convenient way is that a company can upload the above listed e-forms from the MCA21 portal through the annual filing process link at his convenience from his office/ home.
• Prepare an e-form following the guidelines, copying them in a compact disk (“CD”) and visit nearest temporary facilitation offices. For normal days, staff will help to upload the form and generate a challan but during last 10 days, CDs will be collected and only acknowledgment will be provided. After all the files are being uploaded into the system, the company can download the challan from the link provided at the annual filing corner after 2 working days of the submission.
• Connecting with any certified filing centers by paying the service charges is also a method that a company representative can follow for filing an annual return.

What to remember while doing an annual filing?

• Balance Sheet and the Profit & Loss Accounts are to be filed as two separate documents with different e-forms.
• e-Form along with the relevant attachment should be less than 2.5 MB.
• The Annual Return, the balance sheet and the profit & loss account are filed as attachments to the respective e-Forms
• The MCA21 database in respect of authorized capital and paid-up capital may not be correct. The companies have been requested to apply for correction of master data in this respect. Since this is a time taking process, the ministry will be accepting the authorized capital and paid-up capital figures as declared by the companies in the respective forms pertaining to annual filings.

What are the mandates while annual filing?
As a part of annual filing in India, the below forms are mandatory to be filed with the RoC:

• Form AOC-4 (Financial Statements): Every private limited company is required to file its balance sheet along with profit and loss account statement and director report within 30 days of holding of annual general meeting.
• Form MGT-7 (Annual Return): Every private limited organization is required to file its annual return within 60 days of holding of annual general meeting.

If an organization results in failure to comply with the rules and regulations of the Companies Act, then the company and every officer who is in default shall be punishable with fine for the period which default continues. However, if there is any delay in filing, an additional fee is charged, which keeps increasing as per the time period of non-compliance. Moreover, some of the annual filing forms can also be revised but the fees for subsequently revised filing shall be charged, assuming it as a new filing.

If you are looking up for incorporating any business in India, you need to comply with the annual filing requirement to be filed also with the Roc irrespective of your turnover. Our experts can also provide you assistance for filing your personal income tax returns, corporate tax returns, income tax assessments and a quick response to income tax notices.
Further, we can assist you in setting up your business in India, accounting, bookkeeping, payroll, auditing, taxation, secretarial compliances, and trademark registration, business structuring and advisory services. If you require any assistance in this regard, kindly click here

Cracking the Code – Insolvency and Bankruptcy Code, 2016

Insolvency and Bankruptcy Code (“Code”) in India has gained importance these days to protect the rights and interest of different parties involved with a business setup. However, with each passing day government has received multiple suggestions for making amendments in the already existing Code to fit in the dynamic needs of the business environment. Consequently, the Code has experienced innumerable alterations every now and then.
Previously, we laid emphasis on the meaning, vision and facilitators of the Code. It also highlighted how the Code affects our economy in general. For information on any of the above mentioned, kindly visit Discerning Insolvency and Bankruptcy Code, 2016
Procedure for resolving insolvency
Following steps are proposed for resolving insolvency:

• InitiationIn case of default, debtor or creditor might initiate resolution process which is administered by professionals. Debtor’s financial information is provided by the professional to the creditor from the information utilities and manages the property of debtors. This process is undertaken for 180 days and no legal action can be taken against the debtor during this period.
  
• Decision to resolve insolvencyInsolvency professionals take charge and constitute a committee of financial creditors who lend money to the debtors. This committee will be responsible for taking the decision regarding the future of the outstanding debt owed to them. It is on the option of the committee to revive the debt owed to them by transforming repayment schedule or liquidating the property of the debtor te repay the debts owed to them. If the committee does not reach to a viable conclusion within 180 days then the property of debtors is sold or liquidated.
• Liquidation procedureInsolvency professional is empowered to administer the process of liquidation in case debtor willing goes into liquidation. Proceeds from the sale of property are dispensed in the following arrangement:
• Insolvency resolution cost inclusive of insolvency professional’s remuneration
• Secured creditors whose loans are backed by collateral or any dues to other employees
• Unsecured creditors
• Any outstanding amount to government
• Priority shareholders
• Equity shareholders

Concerns explicitly mentioned in the Code requiring consideration
Following concerns are clearly stated in the Code and are required to be focused for efficient and effective functioning of the Code.

• Situation of competition and conflictInsolvency professionals (“IPs”) are regulated by insolvency professional agencies (“IPAs”), which are further administered by the Bankruptcy Board (“Board”). IPs are members of multiple IPAs who monitor their functioning, instead of a single regulator which is an unsettled situation. This might stir a situation of competition in this domain and may also pose a reason of conflict between the IPAs and regulators. Such a framework is distinct from today’s practice where the regulator directly regulates its registered IPs.
  
• Ambiguous distribution hierarchyThe Code lays down a specific order for distributing property during liquidation which is misty in nature as:

1. Secured creditors will receive their entire outstanding amount rather than upto their collateral value
2. Unsecured creditors have priority over trade creditors
3. Government dues will be repaid after unsecured creditors
   

• Undefined rolesFunctioning of IPs, IPAs and information utilities is responsible for the smooth functioning of the Code. Modifications and alterations are required from time and on for proper functioning of the network. Additionally, National Company Law Tribunal (NCLT) who is responsible for adjudicating corporate insolvency issues has not been constituted yet as a result of which Debt Recovery Tribunal (DRT) is overloaded with pending cases.

To conclude situation of the Code, it seems to be in the elementary stage, backed by a strong structure and framework. The government is working on constantly modifying the provisions of the Code. Supreme Court has also amended it from time and on. This changes if introduced successfully, will enable banks to take early legal actions. The focus of IBC lies on instituting a proper insolvency resolution process, which focusses on efficient resolution mechanism and not a recovery system. Currently, it is an initiative in process with improving future anticipations only if it conquers its present day obstacles, plugs gaps and tackles crucial concerns.
If you have any questions or would like to discuss more about the Code, our experts can ensure right business insights and best practices for you.
We can also assist you in setting up your business in India, accounting, bookkeeping, payroll, auditing, taxation, secretarial compliances, and trademark registration, business structuring and advisory services. If you require any assistance in this regard, kindly click here

Kick-start your business: Paid-up capital essentials

For starting a business, a paid-up capital, also called paid-in capital is usually the amount that an entrepreneur needs to invest in a business. In most cases, this required amount is specified in an economy’s commercial code or company law. It is the amount of money pumped in by shareholders in exchange for shares or stock of an entity. When a company wants to raise equity, it cannot simply sell stock of the company to the highest bidder. Businesses must request permission to issue public shares by filing an application with the agency responsible for the registration of companies in the country of incorporation. Paid up capital is also referred as contributed capital including two funding sources – the par value of stock and excess over par. Deriving equity from balance sheet comes to the following calculation:
Paid up capital = par value of stock + excess over par
Paid-up capital represents the extent to which it depends on equity financing to fund its operations which can be compared with the company’s level of debt to assess for a healthy balance of financing, its operations and industry standards. Mentioned below are some crucial concepts regarding paid-up capital while incorporating your business:

Paid-capital requirement for private and public limited companies
Earlier every private company had a minimum paid-up capital requirement of INR 1 lakh whereas for public limited company minimum INR 5 lakhs were required. However, with effect from May 29, 2015, the limits have been omitted and no minimum amount needs to be invested in the company by the shareholders to commence a business, thereby lowering the costs to entrepreneurs to operate in the formal sector. (Company registration)
Withdrawal of paid-up capital
Once the money is loaded into your company as paid-up capital, it becomes part of your company which can be utilized for valid business purposes only. You cannot withdraw that amount for your non-commercial expenses. If in case you withdraw that amount from the bank account of the company for personal expenses, it will be treated as a loan from the company.
Increasing paid-up capital
Paid-up capital of a company can be increased by following a standard procedure, keeping all the parties concerned in loop and after taking prior approval wherever required.

• Verifying Article of Association (AOA) of the companyVerify AOA to ensure provisions in the AOA explicitly permit increasing paid-up capital of your entity. If no such provisions are available, the entity must first make changes to the AOA of the company.
  
• Convene board meetingConduct a board meeting to fix time, date and place for an extra-ordinary general meeting (EGM) obtaining approval of shareholders for increment of paid-up capital and making changes to Memorandum of Association (MOA).
  
• Extra-ordinary general meetingAs per the provisions of section 61(1) of Companies Act 2013, an ordinary resolution for increment or alterations in authorised share capital is to be passed.
  
• Registrar of companies (ROC) form documentingForm SH-7 is filed with ROC with recommended charges for modifying MOA of the company.

It is believed that minimum capital requirements significantly hinder entrepreneurship which sometime also fail to serve the purpose for preventing customers and creditors from expeditiously establishment and potential insolvent firms. Despite these shortcomings, it continued to be a reality for many economies. But every year more economies slash or eliminate how much money entrepreneurs must deposit to start businesses. Various other relevant steps can be initiated to protect investors and creditors and minimizing bankruptcy risks which safeguards the interests of the consumers.
If you are looking for assistance to kick start your business and wish to gather more information about paid up capital requirements or compliances associated with it to refine your business strategies, our team of experts can assist you throughout the process.
We can also assist you in setting up your business in India, accounting, bookkeeping, payroll, auditing, taxation, secretarial compliances, and trademark registration, business structuring and advisory services. If you require any assistance in this regard, kindly click here

Wrapping up of an existing business

An establishment exists by the legitimate procedure laid down by the laws of land and when it wants to end its life, it is just conceivable through the pre-established lawful mechanism. When a company is in torment, the management team undertakes many competing challenges hampering their ability to recognize what is usually a very stressful and complex transition. Winding is considered as the last stage of an organisation’s existence.

Winding up of any business refers to liquidation of its life and administrating its property for the benefit of its creditors and members. Dissolution of a business includes selling all assets, paying off creditors and distribution of remaining assets to the partners or shareholders. Ultimately, company has no legal existence in the eyes of law. Section 270 of the Companies Act, 2013 governs the procedure of winding up of a company in India which provides two ways of winding up i.e. voluntary winding up and winding up by the tribunal.

Classification of winding up strategies

1. Winding up by the court – Insolvency of a company into a compulsory liquidation when an organization is unable to pay off its debts. Upon the commencement of winding up, the company’s officers have no power to carry on the business of the company. The liquidator takes over reign of the company.
2. Voluntary winding up – A special resolution is initiated by the members or creditors of the company for voluntarily winding up the business.
3. Member’s voluntary wind up – In this case, organisation has to pay its debts in full within 12 months after commencement of winding up proceedings. Consequently, the Board of Director (“Board”) file a declaration of solvency.
4. Creditor’s voluntary wind up – When a company is unable to pay its debts off within 12 months and still wishes to wound up, it may proceed as creditor’s voluntary wind up.

Petition for winding up
According to section 272, a petition is presented by:

• The company;
• Any creditors or creditors including any contingent or prospective creditor or creditors;
• Any contributory (s);
• The registrar; or
• Any person authorised by the Central Government.

If a company is unable to pay its debts, the registrar shall not present a petition unless it appears to him, either from the financial condition of the company as it is divulged in its balance sheet or from the report of an inspector appointed under section 210 articulating the company is unable to pay off the debts. The registrar obtains the previous sanction of the Central Government to the presentation of a petition.

Methodology for winding up a company

1. A meeting of the Board is convened. The company would resolve that there are no debts remaining of the company by passing a resolution that suggests the same.
2. A notice of a general body meeting is issued proposing the resolution of the company.
3. Make sure that there is atleast 3/4th of the votes in favour of closing the company.
4. A meeting is conducted with the creditors of the company next day.
5. File a notice to registrar for appointing a liquidator within 10 days of passing of company’s winding up resolution.
6. Within 30 days of passing the winding up resolution, file certified copies of the special and the ordinary resolutions.
7. Complete the financial affairs of the company with the aid of the liquidator.
8. Summon a final general body meeting.
9. Pass a special resolution to dispose the records and accounts of the company.
10. Within 14 days of passing the special resolution, take the certified copies of the records and accounts to the National Company Law Tribunal (NCLT).
11. NCLT shall then order for company’s dissolution.
12. The liquidator then shall take the order and submit it to the registrar.
13. The registrar shall then publish a notice that the company is dissolved.

The various provisions have been collaterally working for settlement of winding up issues. Despite the progress of winding up of companies, there are several concerns coming in front of the judiciary trying to mitigate the friction in the process of winding up of companies.
Our professionals’ team can render advisory services for your business structuring and can assist you in complying with the statutory requirements to solidify your business standing.
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Company formation in India | Company registration in India

Discerning Insolvency and Bankruptcy Code, 2016

For consolidating the existing framework of bankruptcy and insolvency in India, a single bankruptcy law was created, known as the Insolvency and Bankruptcy Code, 2016 (“Code” or “IBC”). IBC was introduced in December 2015 and passed in May 2016 by Lok Sabha. Subsequently, it received the assent of the President of India and came into effect.

The Code provides 360 degree solution for settling insolvencies which is a lengthy and an economically exorbitant process these days. In India, robust insolvency structure where the time and cost dedicated is curtailed in achieving liquidation has been long overdue. The Code is empowered to protect the small investors and make business processes conducive.

Vision of current Code
IBC is applicable to companies as well as individuals and provides for a time-bound procedure for resolving insolvency issues. In case of default in repayment, creditors secure access and control over debtor’s property and are required to take actions for resolving insolvency within 180 days. To ensure steady resolution process, IBC shields debtors from resolution claims of creditors during this procedure. Also, the Code integrates provisions of contemporary legislative structure, thus establishing a common forum for creditors as well as debtors of all categories to resolve insolvency.

Facilitators of insolvency resolutions
Following are various institutions created by the Code that facilitate insolvency resolution:

• Professional agencies: Exams are conducted by these agencies to test and certify insolvency professionals. A code of conduct is also enforced by these agencies to administer the performance of the professionals. Insolvency professionals are required to be registered with such agencies.
  
• Professionals: The Code proposes creation of a specialized core of licensed professionals. Their role includes administration of resolution process, managing the property belonging to the debtors as well as providing information for creditors to abet them in decision making process.
  
• Adjudicating authorities: For companies, National Company Law Tribunal (NCLT) will arbitrate the proceedings of resolution process whereas Debt Recovery Tribunal (DRT) will adjudicate the proceedings for individuals. Approval for initiating the process of resolution, appointment of insolvency professionals and approval of final decision of the creditors are some of the duties performed by the above mentioned authorities.
  
• Information utilities: Creditors are mandatorily required to report and communicate financial information of the debt owed to them by the debtors. All the records pertaining to liabilities, defaults and debts shall form part of such information.
• Insolvency and Bankruptcy Board (“Board”): The Board is responsible for regulating insolvency professional agencies, professionals and information utilities established under the Code. Representatives of Reserve Bank of India (RBI), Ministries of finance, corporate affairs and law constitute the Board.
  

Any business requires institution of faith and fulfilment of obligations by the transacting parties for best business practices. Many a time’s circumstances hinder the proper discharge of duties undertaken by the parties due to uncertain changes in the environment. Insolvency or bankruptcy conditions obstruct the desired performance of the agreed promises between the parties. Also, the other party to the transaction is left helpless for the losses it may suffer. Since its inception many alterations have been suggested for fabricating the already existing Code, the same are in motion. Successful execution of insolvency and bankruptcy proceedings are a product of favorable steady amendments in the Code.

If you have any questions or would like to discuss more about any of the above provisions our team of experts can guide you.

Our team can assist you in various other services including bookkeeping, auditing, internal audit, trademark registration, tax audit, payroll compliances, management audit, STPI registration, statutory audit, income tax, tax planning, setting up of virtual office, direct taxes, service tax, delhi value added tax, sales tax, company formation, business consultation, company registration / incorporation in India, corporate compliance, foreign branch / liaison office registration. In case of any assistance required in relation to e-assessment filings or other compliance issues, kindly click here

Company Registration | Taxation | Bookkeeping

Challenges faced in e-assessment

With the advent of e-assessment concept in the domain of tax evaluation, things have taken a toll on the conventional tax assessment practices. With day-by-day advancing technology and a cooperative audience, the success of e-assessment does not seem far-fetched. While the progress has been commendable, in order to drive this concept, challenges thrown by the set procedures need to be addressed simultaneously. Some of the challenges are stated as under:

• Perceiving the right technology: Government’s information technology (IT) infrastructure will determine the accomplishment of e-assessment idea. Specifically, the ability to handle data traffic in terms of size as well as volume would be critical. If we look at the past experiences, government servers have often crashed when they experienced high volumes of data traffic, especially closer to filing deadlines. The government cannot afford such similar crashes considering the sensitive nature of assessment operation. Hence, the requirement of a robust IT infrastructure cannot be undervalued.
• Eliminating legal loopholes: From a legal outlook, a bona-fide service of notice is a prerequisite in constituting a valid assessment proceeding. Despite necessary amendments being inculcated in the income-tax law to credit e-mail communication as a valid mode of service, there are times where notices are uploaded on the portal but a parallel e-mail is not directed to the taxpayer. Oddities like these could pave the way to litigation and potentially render the proceedings void. For mitigating such situations, either IT systems must be streamlined to ensure that emails are automatically sent, without exception, as and when notices get uploaded or the law must be amended to emphatically state that uploading a notice on the online portal includes a valid communication service.
• Attaining procedural perfections: While practice leads to perfection, revolutionary plans do not generally provide a large incubation cushion. Therefore, from a methodological perspective, government needs an ‘ace’ before the bets are called. For instance, the current system does not have any provision for granting adjournments. In case of submission taxpayer seeking more time, the portal neither accepts nor rejects the request, leading to uncertainty in the mind of the taxpayer regarding the next date for filing of submission.
• A genuine collaboration: Though not a major threat at the initial stages, this could be a crucial lever in determining the success or failure of this initiative. On-boarding the appropriate abilities with a viable sector, domain proficiency as well as ensuring mechanisms to expedite collaborative working conscientiously would be the segment for the government to concentrate on as it moves into the progressive stages of implementation.

Over the past few years, IT department has taken a lot of steps to go digital. E-filing of income tax returns (ITR), payment of taxes online, processing of tax deduction at source (TDS) electronically, provision of facilities for filing forms electronically, submitting online grievances, online tracking of refunds and matching of credits are a few measures amongst numerous others undertaken to eminently establish a technologically driven IT department. The initiatives taken by the government aim to ensure ease in compliance of IT rules and effective management of the data. The initiatives taken by the government project their intentions loud and clear that India is all set for improving its tax administration services by making the tax system as simple and tech-enabled.
For detailed information on introduction, impact and latest changes in e-assessment, kindly visit Introduction of e-assessment

Our team can assist you in various other services including bookkeeping, auditing, internal audit, trademark registration, tax audit, payroll compliances, management audit, STPI registration, statutory audit, income tax, tax planning, setting up of virtual office, direct taxes, service tax, delhi value added tax, sales tax, company formation, business consultation, company registration / incorporation in India, corporate compliance, foreign branch / liaison office registration. In case of any assistance required in relation to e-assessment filings or other compliance issues, kindly click here