Corporate Law Archives - Page 3 of 3

Category: Corporate Law

02 MayComplianceCorporate LawTaxationUncategorized

Understanding Audit & Assurance Services: Their Significance and Role

In the dynamic world of business, where financial transactions are the lifeblood of organizations, ensuring accuracy, transparency, and compliance is paramount. This is where audit and assurance services come into play. From scrutinizing financial statements to evaluating internal controls, these services are indispensable for maintaining trust among stakeholders and fostering confidence in the integrity of financial information. Let’s delve into what audit and assurance services entail and why they are crucial for businesses.

What are Audit & Assurance Services?

Audit Services: Audit services involve the systematic examination of an organization’s financial records, transactions, and processes to determine their accuracy and compliance with applicable laws, regulations, and accounting standards. The primary objective of an audit is to provide an independent opinion on the fairness and reliability of financial statements, which are crucial for stakeholders, including investors, creditors, and regulators, in making informed decisions.

Assurance Services: Assurance services encompass a broader spectrum, extending beyond financial statements to include various aspects of organizational performance, risk management, and governance. Unlike audits, which focus primarily on financial data, assurance engagements may involve evaluating internal controls, information systems, sustainability practices, or compliance with specific industry standards. The goal is to provide stakeholders with assurance regarding the reliability, relevance, and integrity of information.

Why are They Important?

Enhancing Transparency and Accountability: Audit and assurance services promote transparency by verifying the accuracy and completeness of financial information. This transparency enhances accountability, as organizations are held accountable for their financial performance and adherence to regulatory requirements.
Protecting Stakeholder Interests: Investors, creditors, and other stakeholders rely on audited financial statements to assess the financial health and performance of an organization. By providing independent assurance on the reliability of these statements, audit services help protect stakeholders’ interests and mitigate the risk of financial misstatements or fraud.
Facilitating Informed Decision-Making: Reliable financial information is essential for making informed business decisions. Audited financial statements provide stakeholders with a credible basis for evaluating an organization’s performance, assessing its financial position, and identifying potential risks and opportunities.
Detecting and Preventing Fraud: Auditors play a crucial role in detecting and preventing fraud by assessing internal controls, identifying control weaknesses, and investigating unusual transactions or discrepancies. Through their independent scrutiny, auditors help deter fraudulent activities and safeguard the integrity of financial reporting.
Ensuring Compliance: Compliance with legal and regulatory requirements is fundamental for organizations operating in any industry. Audit and assurance services help ensure compliance with accounting standards, tax regulations, industry regulations, and corporate governance principles, thereby reducing the risk of penalties, litigation, or reputational damage.
Improving Corporate Governance: Effective corporate governance relies on transparency, accountability, and ethical conduct. Audit and assurance services contribute to the overall governance framework by providing independent oversight, evaluating the effectiveness of internal controls, and promoting ethical behavior within organizations.

In conclusion, audit and assurance services play a vital role in maintaining the integrity, transparency, and credibility of financial information. By providing independent assurance on the accuracy, completeness, and reliability of financial statements and other organizational disclosures, these services instill trust among stakeholders and support informed decision-making. In today’s complex business environment, where risks and uncertainties abound, the importance of audit and assurance services cannot be overstated. They serve as a cornerstone of corporate governance, financial transparency, and stakeholder confidence, ultimately contributing to the long-term sustainability and success of organizations.

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13 AprAllAnalysisBusinessComplianceCorporate LawTaxation

Understanding Tax Planning: Meaning, Objectives & How It Works

Tax planning is a vital aspect of financial management that individuals and businesses must undertake to optimize their tax liabilities while remaining compliant with legal requirements. In this article, we’ll delve into the meaning, objectives, and mechanisms of tax planning, shedding light on how it can benefit you or your business.

What is Tax Planning?

Tax planning is the process of organizing your finances in a way that minimizes your tax liability. It involves various strategies and techniques aimed at legally reducing the amount of taxes owed without violating tax laws. Effective tax planning requires careful consideration of financial decisions throughout the year to maximize tax efficiency.

Objectives of Tax Planning:

Minimization of Tax Liability: The primary objective of tax planning is to reduce the amount of taxes payable by taking advantage of available deductions, credits, exemptions, and other tax-saving opportunities.

Ensuring Compliance: While minimizing taxes is important, tax planning also aims to ensure compliance with tax laws and regulations. By staying abreast of tax laws, individuals and businesses can structure their transactions and operations in a manner that is both tax-efficient and legally sound.

Optimizing h Flow: Strategic tax planning can help optimize cash flow by timing income and expenses to minimize tax obligations in any given year. By managing cash flow effectively, individuals and businesses can improve their financial stability and reinvest savings into growth opportunities.

Wealth Preservation: Tax planning plays a crucial role in wealth preservation by implementing strategies that protect assets and minimize the erosion of wealth due to excessive taxation. This includes estate planning strategies aimed at minimizing estate taxes and facilitating the smooth transfer of assets to heirs.

How Tax Planning Works:

Tax planning involves a variety of strategies tailored to individual circumstances and financial objectives. Some common techniques include:

Income Deferral: Deferring income to future years can lower your current tax liability, especially if you expect to be in a lower tax bracket in the future.

Expense Acceleration: Conversely, accelerating deductible expenses into the current tax year can help reduce taxable income and lower your tax bill.

Investment Planning: Investing in tax-advantaged accounts such as IRAs, 401(k)s, or 529 plans can provide tax benefits while helping you build wealth for retirement, education, or other goals.

Strategic Use of Deductions and Credits: Maximizing deductions and credits, such as those for charitable contributions, mortgage interest, education expenses, and business expenses, can significantly reduce your tax liability.

Business Structure Optimization: For businesses, choosing the right legal structure, such as a corporation, partnership, or limited liability company (LLC), can have significant tax implications. Structuring business transactions and operations in a tax-efficient manner can lead to substantial savings.

Tax planning is an essential component of financial management that can help individuals and businesses minimize their tax burden while achieving their financial goals. By understanding the objectives and strategies of tax planning, you can make informed decisions that optimize your tax situation and preserve your wealth.

At Cogent Professionals, we specialize in helping individuals and businesses navigate the complexities of tax planning. Contact us today to learn how our expert tax advisors can assist you in developing a customized tax strategy tailored to your unique needs and objectives.

Maximize your tax savings and secure your financial future with our professional tax planning services. Contact us now for a consultation!

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Navigating Tax Law Changes in India: A Comprehensive Guide for Businesses

The taxation landscape in India undergoes continuous evolution, with new tax rules in 2023 introducing numerous updates that can challenge businesses to keep pace. This dynamic environment requires adaptability from both the government, responding to economic shifts and technological advancements, and businesses, ensuring compliance with evolving laws and regulations. To effectively navigate these changes, here are key strategies for businesses to consider:

I) Engage Professional Expertise: Partnering with a reputable accounting or tax advisory firm can provide invaluable guidance. These professionals offer timely alerts on pertinent law changes and clarity on any ambiguities, aiding businesses in staying compliant.

II) Establish Effective Amendment Dates: Identifying the effective date of amendments is crucial. Establishing a soft deadline well in advance allows for adequate preparation to ensure compliance by the effective date.

III) Determine Tax Type and Adjustments: Understanding whether amendments pertain to direct or indirect tax laws informs the timing of necessary adjustments. Direct tax changes often require post-financial year adjustments, while indirect tax amendments may necessitate immediate action, such as updating point-of-sale systems for GST rate changes.

IV) Assess Departmental Impacts: Evaluate and communicate the impact of changes across various departments within the organization. Clear communication ensures that relevant departments, such as Accounts Payable or Cashiers, are informed of changes affecting their responsibilities.

V) Develop Optimal Tax Strategy: Significant amendments may prompt the need to devise a tax strategy that optimizes liability while ensuring compliance. Collaboration with external professionals can aid in crafting effective strategies to address emerging tax challenges.

Adaptability and proactivity are essential qualities in navigating tax amendments. Businesses must remain vigilant, particularly during critical periods like the Union Budget announcement in February, where tax changes are typically unveiled. While tax laws may continue to evolve, proactive preparation and strategic planning empower businesses to effectively manage tax risks.

For further insights on tax preparedness, contact Cogent Professional, a leading chartered accountant firm based in Hyderabad, at [email protected].

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Understanding the Tax Implications of Technical Services: Section 9(1)(vii) Explained

In the dynamic realm of international commerce, the taxation of technical services delineated in Section 9(1)(vii) serves as a crucial link between economic activities, legal frameworks, and fiscal responsibilities, intricately weaving together the complexities of cross-border transactions with the imperative need for regulatory clarity and compliance.

Fees for technical services [Section 9(1)(vii)]

Fees for technical services [Section 9(1)(vii)]
Any fees for technical services will be deemed to accrue or arise in India if they are payable by –
(i) the Government.
(ii) a person who is resident in India

Exception: Where the fees is payable in respect of technical services utilized in a business or
profession carried on by such person outside India or for the purpose of making or earning any
income from any source outside India.

(iii) a person who is a non-resident, only where the fees are payable in respect of services
utilised in a business or profession carried on by the non-resident in India or where such services
are utilised for the purpose of making or earning any income from any source in India.
Fees for technical services mean any consideration (including any lumpsum consideration) for
the rendering of any managerial, technical or consultancy services (including providing the
services of technical or other personnel).

However, it does not include consideration for any construction, assembly, mining or like project
undertaken by the recipient or consideration which would be income of the recipient chargeable
under the head ‘Salaries’

According to this section, any income received in India by a non-resident for fees for technical
services rendered in India or outside India is taxable in India, irrespective of whether the nonresident has a business connection or permanent establishment in India.

The term “technical services” typically refers to any consideration for rendering managerial,
consultancy, or technical services. This could include services such as:

Engineering services
Technical consulting
Software development services
Technical testing and analysis
Technical assistance in setting up plants or machinery
Any other services of a technical nature

As per India-UK Treaty:
As per para (4) of the Article-13, the term “fees for technical services” means payments of any
kind to any person in consideration for the rendering of any technical or consultancy services
(including the provisions of services of technical or other personnel) which:

(a) are ancillary and subsidiary to the application or enjoyment of the right, property
or information for which a payment described in paragraph (3)(a) of this Article is
received; or
(b) are ancillary and subsidiary to the enjoyment of the property for which a payment
described in paragraph (3)(b) of this Article is received; or
(c) make available technical knowledge, experience, skill, know-how or processes, or
consist of the development and transfer of a technical plan or technical design.

As per India-US Treaty:
As per Para – 4 of Article – 12, fees for included services” means payments of any kind to any
person in consideration for the rendering of any technical or consultancy services (including
through the provision of services of technical or other personnel) if such services :
a) are ancillary and subsidiary to the application or enjoyment of the right, property or
information for which a payment described in paragraph 3 is received ; or
b) Make available technical knowledge, experience, skill, know-how, or processes, or
consist of the development and transfer of a technical plan or technical design.

Significance of Make Available Clause:
In treaties there is make available clause in Article 12/13 which mandates that services should
“make available” technical knowledge, experience, skill, know how or processes.
The term make available has far reaching significance since it limits scope of FTS. This clause
want to retain the exclusive rights for taxing the transaction where there is no transfer or
dissemination of knowledge or skill involved.

The expression “make available” is used in the sense of one person supplying or transferring or
imparting technical knowledge or technology to another.

Technology is considered made available when the service recipient is enabled to absorb and
apply the technology contained therein without the help of service provider in the future. In
other words, technology, know-how, knowledge etc. is considered to be made available when the
service receiver is able to use such technology, know-how, knowledge etc. as owner
independently in future work.

Analysis of above provisions
➣Should be rendition of services.
➣Includes provision of services of technical and other personnel
➣The terms managerial, technical and consultancy are not defined anywhere in the
Income Tax Act, 1961. In the absence of definition under Income Tax Act the common
and general meaning of these terms should be taken into consideration (GVK Industries
Ltd. [2015] 371 ITR 453 (SC)).

In General – Consultation means an act of asking for “advice or opinion” .

Supreme Court observed that consultation means a meeting in which a party consults
or confers and eventually it results in human interaction that leads to rendering of advice.

As per Delhi ITAT in Le Passage to India Tours & Travel (P) Ltd. [2014] 369 ITR 109,
it is held that not all kinds of advisory qualify as technical services. For any consultancy
to be treated as technical services, it would be necessary that a technical element is
involved in such advisory. Thus, the consultancy should be rendered by someone who
has special skills and expertise.

➣The expression “managerial service” needs to be considered in a commercial parlance.
It has been interpreted as follows:

It signifies service for management of affairs or services rendered in performing
management functions.
It involves controlling, directing or administering the business.
It means managing the affairs by laying down certain policies, standards and
procedures and then evaluating the actual performance in light of the procedures
so laid down

➣Services are of technical nature when special skills or knowledge or education related to
a technical field are required for the provision of such services. A mere use of a standard
facility does not result into availing of technical services although such facility has been
developed with the usage of technology. (E-bay International AG vs ADIT (2012) 25
taxmann.com 500 (Mum))
➣Technical services are not limited to the professional services referred to in Article 14,
paragraph 2. Services performed by other professionals, such as pharmacists, and other
occupations, such as scientists, academics, etc., may also constitute technical services if
those services involve the provision of specialized knowledge, skill and expertise.
➣The ordinary meaning of “consultancy” involves the provision of advice or services of a
specialized nature. Professionals usually provide advice or services that fit within the
general meaning of consultancy services although they may also constitute management
or technical services.
➣The terms “management,” “technical” and “consultancy” do not have precise meanings
and may overlap. Thus, for example, services of a technical nature may also be services
of a consultancy nature and management services may also be considered to be services
of a consultancy nature.

Judicial Precedents:

➣The term managerial services, ordinarily means handling management and its affairs.
As per the concise oxford dictionary, the term managerial services means rendering of
services which involves controlling, directing, managing or administering a business or
part of a business or any other thing. (Endemol South Africa (Proprietary) Ltd. vs
DCIT [2018] 98 taxmann.com 227 (Mum ITAT))

➣The word technical is involving or concerning applied and industrial sciences.
Consultancy is generally understood to mean advisory services. Further, it may be fair to
state that not all kind of advisory could qualify as technical services. For any consultancy
to be treated as technical services, it would be necessary that a technical element is
involved in such advisory. Thus, the consultancy should be rendered by someone who
has special skills and expertise in rendering such advisory. (Skycell Communication
Ltd. vs DCIT [2001] 251 ITR 53)

➣The expression technical service would have reference to only technical service rendered
by a human being. It would not include any service provided by machines or robots.
(DDIT (International Taxation) vs Avavya Global Connect Ltd. [2011] 43 SOT 439)

➣Consultancy Services would mean something akin to advisory services pursuant to
deliberation between parties. (CIT vs Grup Ism (P) Ltd. [2015] 278 CTR 194 (Delhi))

➣The term consultancy services, in common parlance, means providing advice or advisory
services by a professional. Usually consultancy services are professional services
requiring specialized qualification, knowledge, expertise of a professional person, and
are more dependent on skill, intellect and individual characteristics of the person
rendering it. (Endemol South Africa (Proprietary) Ltd. vs DCIT [2018] 98
taxmann.com 227 (Mum ITAT))

Are you navigating the complexities of technical service taxation? Whether you’re a business owner, consultant, or taxpayer, understanding the nuances of Section 9(1)(vii) is crucial.

Stay informed and ensure compliance with the latest regulations. Reach out to us for expert guidance and assistance in managing your tax obligations effectively.

Let’s simplify the process together.

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SIGNIFICANT BENEFICIAL OWNER (SBO): A Comprehensive Overview

Governing Laws:

Section 90 of the Companies Act, 2013
Companies (Significant Beneficial Owners) Rules 2018
Companies (Significant Beneficial Owners) Second Amendment Rules, 2019

Overview of Section 90:

Section 90 and associated Rules were notified on June 13, 2018.
Individuals must file a Declaration of SBO (Form BEN-1) within 90 days of Rule commencement (by September 12, 2018).
Companies must file the return of SBO (Form BEN-2) within 30 days of Form BEN-1 declaration (by October 12, 2018).
E-form BEN-2 deployment on July 1, 2019, with filing deadline on July 31, 2019.

Criteria for Significant Beneficial Owner (SBO) under Section 90:

An individual, acting alone or together, directly or indirectly, must meet one of the following criteria in a reporting company:

Holds not less than 10% of shares.
Holds not less than 10% of voting rights.
Has the right to receive or participate in not less than 10% of total distributable dividends.
Has the right to exercise or actually exercises significant influence or control (at least 20% of total share capital or business decisions).

Direct Holding:

Individual’s name appears in the Register of Members.
Declaration in Form MGT-5 must be made to the reporting company.

Indirect Holding:

Individual’s name is not in the Register of Members.
Criteria for indirect holding include:
- Holding majority stake in a corporate member.
- Being the Karta of a Hindu Undivided Family.
- Being a partner or holding majority stake in a partner entity for partnership members.
- Being a trustee, beneficiary, or author/settlor for trust members.
- Holding specific positions for Pooled Investment Vehicle members.

2. Hindu Undivided Family (HUF) Structure:

If the Member of the Reporting Company is a Hindu Undivided Family (HUF) represented by its Karta, the individual serving as the Karta of the HUF falls under the ambit of Significant Beneficial Owner (SBO).

3. Partnership Entity Involvement:

In scenarios where the Member of the Reporting Company is a Partnership Entity, the individual is considered an SBO if they:

Are a partner in the partnership.
Hold a majority stake in the body corporate, which is a partner within the partnership entity.
Possess a majority stake in the ultimate holding company of the body corporate, which is a partner within the partnership entity.

4. Trust Structure Considerations:

For cases where the Member of the Reporting Company is a Trust, the individual is classified as an SBO based on their role in the trust:

If the individual is a trustee, in the case of a Discretionary Trust or a Charitable Trust.
If the individual is a beneficiary, in the case of a Specific Trust.
If the individual is the author or settlor, in the case of a Revocable Trust.

These provisions ensure that individuals holding key roles in various organizational structures, such as HUFs, partnership entities, and trusts, are identified and treated as Significant Beneficial Owners in accordance with Section 90 of the Companies Act, 2013.

5. Involvement with Pooled Investment Vehicles:

If the Member of the Reporting Company is either:

A Pooled Investment Vehicle (e.g., Mutual Fund, Venture Capital Fund), or
An Entity Controlled by the Pooled Investment Vehicle,

and it is based in a member state of the Financial Action Task Force (FATF) on Money Laundering, with the regulator of the securities market in that member state being a member of the International Organization of Securities Commissions (IOSCO), then certain individuals are identified as Significant Beneficial Owners (SBOs). For individuals related to the Pooled Investment Vehicle:

If the individual serves as a General Partner,
If the individual is designated as an Investment Manager,
If the individual holds the position of CEO when the Investment Manager of the pooled vehicle is a Body Corporate or a Partnership Entity.

Reporting Company Definition:

A Reporting Company, as per section 2(20) of the Companies Act, 2013, is a company obligated to comply with the provisions of Section 90 and identify Significant Beneficial Owners. This includes causing compliance with the relevant provisions related to SBOs.

Significant Influence Clarification:

Significant Influence, in this context, refers to the power to participate, either directly or indirectly, in the financial and operating policy decisions of the reporting company. It is distinct from control or joint control of these policies. Note: Provisions of Significant Beneficial Owner (SBO) are triggered only by Indirect holding or a combination of Direct and Indirect holding.

PROCEDURAL REQUIREMENTS FOR SIGNIFICANT BENEFICIAL OWNER (SBO) UNDER SECTION 90 & RULES:

Every company is obligated to take necessary measures to identify individuals deemed as Significant Beneficial Owners (SBOs) in relation to the company. The company must then compel these identified individuals to submit a declaration in Form BEN-1 to the reporting Company.

The SBO is required to submit Form BEN-1 within 90 days from the initiation of the Companies (Significant Beneficial Owners) Second Amendment Rules, 2019. Additionally, if an individual attains SBO status subsequently, they must file the Form within 30 days of acquiring such ownership or any relevant changes.

Upon receiving the aforementioned declaration, the reporting company must expeditiously file a return in Form No. BEN-2 with the Registrar within 30 days, accompanied by the requisite fees. Simultaneously, the company is mandated to maintain a comprehensive register of Significant Beneficial Owners (SBO) in Form No. BEN-3.

Without prejudicing the overall procedural framework outlined above, each reporting company must issue notices, specifically in Form No. BEN-4, to any individual (regardless of their membership status within the company) in cases where the company believes or has reasonable cause to believe:

The individual is a Significant Beneficial Owner (SBO) of the company.
The individual possesses knowledge of the identity of an SBO or another person likely to have such knowledge.
The individual has been an SBO of the company at any time during the immediately preceding last three years from the date the notice is issued.

Additionally, should the individual in question not be enlisted as a Significant Beneficial Owner with the company, as stipulated in section 90, they are obligated to provide the necessary details within 30 days upon receiving the notice from the reporting company. Adhering to these procedural measures and utilizing the prescribed forms is essential for companies and Limited Liability Partnerships (LLPs) to guarantee conformity with the regulations delineated in Section 90 and the corresponding rules.

S.No	Particulars	Company	LLP	Due Date
01	Declaration by individual	Form BEN-1	LLP-BEN-1	Within 30 days of acquiring such significant vebeficial ownership or any chnage therein
02	Return to the Registrar in respect of declaration under section 90	Form BEN-2	LLP-BEN-2	30 days from the date of receipt of such declaraion
03	Register of significant beneficial owners (SBO)	Form BEN-3	LLP-BEN-3	--
04	Notice by the Company	Form BEN-4	LLP-BEN-4	--

18 AugAllCorporate Law

Registration of an Indian Company by Foreign Entities or Foreign National or Non Resident Indian (NRI’s)

Registration of an Indian Company by Foreign Entities or Foreign National or Non Resident Indian (NRI's)

Why India:

India stands as a prime choice for investment, attracting Non-Resident Indians (NRIs), foreign nationals, and foreign companies. This allure is attributed to its burgeoning economy and abundant resources. Positioned among the world’s swiftest expanding economies, India is poised for substantial growth in the upcoming decades, brimming with ample business prospects. With regulatory reforms and a welcoming atmosphere for investors, foreign investments into India have reached unprecedented levels, with expectations of further ascent.

In this context, we look at the process and procedure for a NRI or Foreign National or Foreign Company to invest or start, manage and grow a business in India.

The Government has always tried to make it easy for not only Indian residents but also for the Non Resident Indians, Foreign Entities and Foreign Nationals. The Ministry of Commerce and Industry created the Foreign Investment Promotion Board to bypass all the difficulties of doing business in India and ensure smooth sailing to all potential foreign investors.

Types of Entities for Registration of Foreign Companies in India

Before registering a foreign company in India, it’s essential to understand the different types of business entities available. The most common structures for foreign companies are:

1) Wholly Owned Subsidiaries ie WOS., 100% Indian Subsidiary

2) Joint Ventures with other Indian Companies subjected to Foreign Direct Investment rules.

3) Liaison Office: An LO serves as a representative office for the foreign parent company in India. It’s primarily responsible for promoting the parent company’s business interests, providing information about its products and services, and facilitating communication between the parent company and Indian customers. However, an LO is not permitted to engage in any profit-making activities in India.

4) Branch Office : A BO is an extension of the foreign parent company and can engage in a wider range of business activities, including marketing, import and export, and technical support services. However, a BO is generally restricted from manufacturing and processing activities in India. Profits earned by a BO are subject to Indian taxation.

5) Other options for foreign companies include setting up a Project Office, a wholly-owned subsidiary, or a joint venture with an Indian partner. The choice of entity depends on the foreign company’s business objectives, investment plans, and risk appetite.

Shareholders & Directors:

Type of Company	Minimum Shareholders	Maximum Shareholders	Minimum Directors	Maximum Directors
Private Limited	2	200	2	15
Public Limited	7	Unlimited	3	15

According to Companies Act, 2013 there must be at least One Resident Director i.e. who is a citizen of India and stays in India for a minimum of 180 days in a calendar year. Reserve Bank of India allows 100% FDI in many of the sectors in India under the automatic route.

Minimum Capital:

There is no minimum required Paid up share capital that a NRI, Foreign Entity or Foreign National is required to invest in a company in India.

Procedure for Incorporation of an Indian Company:

Keeping in view the ease of doing business, new form SPICe+ (Simplified Proforma for Incorporating Company electronically Plus) is notified for the incorporation of a company and incidental registrations. All the new company incorporations have to be done by the online filing of SPICe+ form. The other forms that need to be filed along with SPICe+ are AGILE-PRO, SPICe+AoA, SPICe+MoA and INC-9

Governing the web form:

Sections 4, 7, 12, 152 and 153 of the Companies Act, 2013 read with rules made thereunder.

Governing the web form:Purpose of the Web form:

Web form SPICe+ deals with the single application for reservation of name, incorporation of a new company, application for allotment of Director Identification Number ie.,DIN, application for PAN and TAN. This eForm is accompanied by supporting documents including details of Directors & subscribers, MoA, AoA and Consent of Directors. Once the eForm is processed and found complete, the company would be registered and CIN would be allocated. DINs are issued to the proposed Directors who do not have a valid DIN.

Maximum three Directors are allowed to use this integrated form for filing application for allotment of DIN while incorporating a company. Also PAN, TAN, GST registration, EPFO, ESIC and Opening of Bank account would get issued to the Company.

SPICe+ has been divided into two parts viz., SPICe+ Part A and SPICe+ Part B. SPICe+ Part A represents the section wherein all details with respect to name reservation for a new company has to be entered. Name reserved shall be valid for 20 days from the date of allotment.

SPICe+ Part B represents the section wherein all remaining details required for incorporation of a company have to be entered.

Documents Required for Registration by Foreign Entities:

Below are the documents required while registering a foreign company in India:
1) Proof of the foreign company’s existence, such as a Certificate of Incorporation or equivalent document
2) MoA and AoA of the foreign companies.
3) Board resolution authorizing the establishment of the Indian entity.
4) Name of Nominee’s in case of incorporation of WOS
5) Identity proof and address proof of the directors and authorized representative
6) Digital Signature certificate of authorized representative
Note: that all foreign documents must be notarized and apostilled in the country of origin, and translated into English if they are not in English.

Documents Required by Foreign National/Non Resident Indian:

Documents Required by Indian Director

1.KYC of Member and Nominee ie., PAN and AADHAR
2.Address Proof ie., any one of Latest Bank Statement/ Latest Electricity Bill/ Latest Mobile Bill/ Telephone Bill which is Not older than 60 days
3. Identity proof: Voter ID Card/ Driving License/ Passport Copy
4. Photograph of the promoters/ Directors
5. Email ID and Contact Details.
6. Digital Signature certificate (DSC)

Other Requirements:

1. Main Object or activities carried out by the Company.
2.Proof of Registered office address – Rent agreement/ Conveyance deed/Lease agreement.
3.Utility Bills of registered office address- Electricity Bill/ Water Bill/Telephone Bill which is not older than two months.
4. No Objection certificate from owner of the premises, if property is rented/ leased.

Process for Apostille and Notary of Documents:

The Companies Act, 2013 requires the signatures of subscribers and identity or address proof to be notarized before a Notary public of that country and then apostilled as per the Hague Convention if both foreign nationals provide documents issued by the country.

All the original documents shall be Notarized before apostille.
Notarized documents shall be submitted with the Embassy or Consulate (Issuing office) of the Country for apostille.
The issuing office shall validate the documents after making payment.
After Validation of documents, issuing office shall issue apostilled documents

Post-Registration Compliance

Once foreign company is registered in India, it’s essential to
maintain compliance with the country’s regulatory requirements, such as:
1) Declaration for the Commence of business in Form INC-20A is to be filed with Registrar of Companies within 180 days of the date of incorporation of the company.
1) Filing annual financial statements and returns with the MCA
2) Complying with Indian tax laws and filing tax returns on time
3)Maintaining proper accounting records and statutory registers
4) Complying with labor laws, environmental regulations, and other sector-specific requirements.

FEMA Compliances:

Procedure for receiving Foreign Direct Investment in an India Company

An Indian company may receive Foreign Direct Investment under the two routes as given under:

i) Automatic Route:
FDI up to 100% is allowed under the automatic route in almost all the activities/sector. FDI in sectors /activities to the extent permitted under the automatic route does not require any prior approval either of the Government or the Reserve Bank of India. Sectors or Activities not permitted under automatic route have to take approval from FIPB ie., Government Route for investing in India.

ii) Government Route: FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board Department of Economic Affairs, Ministry of Finance.

Indian companies having foreign investment approval through the FIPB route do not require any further clearance from the Reserve Bank of India for receiving inward remittance and for the issue of shares to the non-resident investors.

The Indian company having received FDI either under the Automatic route or the Government route is required to report in the Form FCGPR, the details of the receipt of the amount of consideration for issue of equity instrument viz. shares or fully and mandatorily convertible debentures or fully and mandatorily convertible preference shares through an AD Category –I Bank, together with copies of the FIRC evidencing the receipt of inward remittances along with the Know Your Customer report on the non-resident investors from the overseas bank remitting the amount, to the Regional Office concerned of the Reserve Bank of India within 30 days from the date of receipt of inward remittances.

However, Companies Act, 2013 specifically provides for allotment of shares within 60 days from the date of inward remittance. Thus, it may be inferred that allotment shall be made within 60 days of inward remittance and FCGPR shall be filed within that duration.

After issue of shares ie., fully and mandatorily convertible debentures or fully and mandatorily convertible preference shares, the Indian company has to file the required documents in Form FCGPR with the bank in which funds were received. Bank will forward the FCGPR and the documents to the Regional office of Reserve Bank of India.

Sectors for which FDI is not allowed in India under the Automatic Route as well as under the Government Route: FDI is prohibited under the Government Route as well as the Automatic Route in the following sectors: 1)Lottery Business including Government, private lottery, online lotteries, etc. 2)Gambling and Betting including casinos etc. 3)Chit funds 4)Nidhi company 5)Trading in Transferable Development Rights 6)Real Estate Business or Construction of Farm Houses 7)Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes 8)Activities or sectors not open to private sector investment

Atomic energy and
Railway operations (other than permitted activities mentioned in entry 18 of Annex B).

Note: Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities.

Procedure after investment is made under the Automatic Route or with Government approval

a) On receipt of share application money:
Within 30 days of receipt of share application money/amount of consideration from the Foreign Entities or Foreign National or Non Resident Indian, the Indian company is required to report to the Regional Office concerned of the Reserve Bank of India, under whose jurisdiction its Registered Office is located, through bank in which funds have been received in Form ARF ie., Advanced Remittance Form.

b) Issue of shares:
Within 30 days from the date of issue of shares, a report in Form FCGPR should be filed with the Regional Office concerned of the Reserve Bank of India through the bank in which investment has been received.

Refund of Investment amount: In case, equity shares are not issued within 60 days of receipt of funds, the amount shall be refunded immediately to the non-resident investor.

Filing FLA Return: Every Indian company receiving FDI has to file Annual Return of Foreign Liabilities and Assets by 15th July of the relevant year. Non-filing of the return before the due date will be treated as a violation of FEMA and a penalty clause may be invoked for violation of FEMA.

Consequences of failure to comply with the above requirements
If any person contravenes any provision of this Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorization is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable, or up to two lakh rupees where the amount is not quantifiable, and where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues.

Process for Notary and Apostille of documents:

The Companies Act, 2013 requires the signatures of subscribers and identity or address proof to be notarized before a Notary public and apostille with Secretary of State’s office of that country as per the Hague Convention if both foreign national provides documents issued by the country.

Steps for Notary and Apostille of Documents:

Step 1: Obtain a certified true copy of the document: Before getting apostille, all the original documents shall be verified as a true copy by a government agency or Notary public.
Step 2: Contact the Secretary of State’s office in the state where the document was issued with all the certified true copy of the document. The Secretary of State’s office is responsible for issuing apostilles.
Step 3: Submit the document and pay the fee. The apostille Fee Varies by State to State.
Step 4: Once the apostille has been issued, it will be attached to the certified copy of the document and collect the apostille documents.

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SIGNIFICANT BENEFICIAL OWNER (SBO): A Comprehensive Overview

SIGNIFICANT BENEFICIAL OWNER (SBO): A Comprehensive Overview

Governing Laws:

Overview of Section 90:

Criteria for Significant Beneficial Owner (SBO) under Section 90:

Direct Holding:

Indirect Holding:

2. Hindu Undivided Family (HUF) Structure:

3. Partnership Entity Involvement:

4. Trust Structure Considerations:

5. Involvement with Pooled Investment Vehicles:

Reporting Company Definition:

Significant Influence Clarification:

PROCEDURAL REQUIREMENTS FOR SIGNIFICANT BENEFICIAL OWNER (SBO) UNDER SECTION 90 & RULES:

Registration of an Indian Company by Foreign Entities or Foreign National or Non Resident Indian (NRI’s)

Registration of an Indian Company by Foreign Entities or Foreign National or Non Resident Indian (NRI's)

Why India:

Types of Entities for Registration of Foreign Companies in India

Shareholders & Directors:

Minimum Capital:

Procedure for Incorporation of an Indian Company:

Governing the web form:

Governing the web form:Purpose of the Web form:

Documents Required for Registration by Foreign Entities:

Documents Required by Foreign National/Non Resident Indian:

Documents Required by Indian Director

Other Requirements:

Process for Apostille and Notary of Documents:

Post-Registration Compliance

FEMA Compliances:

Procedure for receiving Foreign Direct Investment in an India Company

Procedure after investment is made under the Automatic Route or with Government approval

Process for Notary and Apostille of documents:

Steps for Notary and Apostille of Documents:

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