This issue of LexCognito, which in Latin means 'awareness about law', seeks to provide you an insight into significant legal and regulatory developments that have taken place very recently in India.
Date: 14 November 2018
Doing Business in India - What has changed?
With persistent efforts and steps taken by the Government of India, the country has made a big leap at the World Bank's ease of doing business ranking to reach at 77th position. The Government is still thriving to bring about further changes to further climb the ladder to make it at the Top 50. Here is what you need to know about changes which have come into force very recently.
Before A Company Commences Business
The Government of India has now made it mandatory for every company having share capital to file a declaration that the subscribers have paid the value of shares subscribed by them within 180 days from the date of incorporation along with a verification of its registered office. No company is now permitted to commence its business or exercise its borrowing powers without complying with this requirement.
At present, there is no minimum paid-up capital requirements for incorporating the private as well as public companies in India. Therefore, the requirement of filing this declaration will apply to such companies which have share capital and the subscribers of such companies will accordingly have to pay the money against the subscription of the shares within the stipulated time frame.
A company incorporated in India is required to have a registered office in India within 30 days from the date of incorporation and at all times thereafter. Such address should be capable of receiving and acknowledging all communications and notices as may be addressed to it. The verification of such address is also required to be sent to the Registrar of Companies ("RoC") in the prescribed manner. The verification is required to be filed in the prescribed form along with copies of title documents, lease/rent agreement/authorization from owner for using the premises as registered office and latest utility bill.
Default in complying with these requirements will attract penal consequences. RoC may even initiate action for the removal of name of the company from the register of companies where no declaration has been filed and RoC has reason to believe that the company is not carrying on any business or operations. For such purpose, RoC may cause physical verification of the registered office.
These changes have been brought into force to check on the shell companies and companies operating from fake addresses.
While industry is still waiting for clarifications on the correct applicability of the norms disclosure of significant beneficial interest in an Indian company and practical issues related thereto, the Government has amended Section 90 to enhance the punishment for contravention of section 90(1) to include imprisonment for a term which may extend to one year or with fine which shall not be less than Rs one lakh but which may extend to Rs 10 Lakhs or with both. Earlier, it was punishable with fine only.
It is mandatory for a company to register the particulars of charges created by it with the RoC in the prescribed manner within 30 days of creation. In case of failure to do so, the law earlier provided an additional time period of 300 days to register by making an application to the RoC. The period has now been reduced to only 60 days of creation with a further 60 days after payment of the prescribed advalorem fees.
Disqualification from Directorship
In India, a person is not allowed to be appointed as director in more than 20 companies (which is 10 in case of public companies). For reckoning the limit of private companies, directorship in dormant private companies are not included. For reckoning the limit of public companies, directorship in private companies that are either holding or subsidiary of the public company are also included. Contravention of such maximum limit will now attract disqualification under Section 164 and such person shall not be eligible to be appointed as a director of a company.
The Indian companies are required to follow the financial year which ends on 31st March every year. However, if a company holding company/subsidiary company/associate company of a company incorporated outside India intends to follow different financial year for consolidation of Balance Sheet, the National Company Law Tribunal/NCLT was earlier authorized to allow any period as a financial year on application made by such a company. The said power has now been transferred to the Central Government.
Amongst others, the Government has also made changes to reduce the burden of the NCLT. The recent amendment have also increased penalties for certain offences under the Companies Act, 2013 while providing for penalty instead of imprisonment for certain offences which has the effect of de-criminalizing certain offences such as non-filing of annual returns and financial statements with RoC, issuance of shares at a discount, etc.
Chambers of Rajan & Indraneel
T: +91 11 41000224, 41030225| Fax:+91 11 29239074
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N 103 Greater Kailash - I, New Delhi - 110048, India.
Chambers of Rajan & Indraneel is a premier full service law firm headquartered at New Delhi, India. The Firm represents amalgamation of vast experiences and practices of two eminent lawyers. Indranil Ghosh is highly reputed as a disputes lawyer. He was a senior partner and head of litigation practice in one of the oldest Indian law firm Fox Mandal for several decades before setting up his own practice. Rajan D Gupta is a rank holder Chartered Accountant turned Corporate Lawyer. He is also a licensed Insolvency Resolution Professional. He has been associated with internationally renowned big law firms in past and has held senior level positions in firms like PwC, Fox Mandal, Khaitan & Co. and SRGR Law, etc. before starting the Firm.
We have a team of experienced Lawyers, Chartered Accountants, Company Secretaries and Insolvency Resolution Professionals with access to network of high quality experienced lawyers in all major commercial cities of India.
The Firm offers a wide range of expert legal services in the areas of corporate and commercial laws and specializes in representing major foreign and domestic corporations with diverse business interests in India. The Firm is professionally equipped to handle large sized and complex corporate transactions like Mergers & Acquisitions, Corporate Restructuring, Joint Ventures, Inbound & Outbound Investments, Private Equity and Venture Capital Investment Transactions, Real Estate Transactions, Infrastructure Projects, Project Finance, Power Projects, Non-Conventional Energy Projects, Highways & Road Projects and Corporate Taxation as well as GST, etc. The Firm also offers proven capabilities in litigation and dispute resolution practice areas, especially in handling international and domestic arbitrations as well as litigation in Supreme Court, various High Courts of India and various judicial and quasi-judicial tribunals/forums including at National Client Law Tribunal, Appellate Tribunals, Tax Tribunals, Competition Commission, Electricity Tribunal, Telecom Disputes Tribunal, Designated Authorities and other adjudicatory bodies.
We have set up a Japan Business Desk (JBD) in order to serve our Japanese clients in a better way. The endeavour of the JBD is to act as a bridge between our professionals and clients from Japan so as to ensure that there are no barriers as to linguistic and cultural differences. This will indeed facilitate Japanese corporates doing business in India.
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