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Approval for FDI in LLP’s

The Cabinet Committee on Economic Affairs (CCEA) on the 11th of May 2011 approved the proposal to amend the policy on allowing Foreign Direct Investment (FDI) in Limited Liability Partnership (LLP) firms.

This approval however comes with some restriction and will be initiated in the “open sector” where no monitoring is required. However, here too certain conditions have been laid. The following is a brief on the restrictions and condition.

1.    Sector and Activities

i.    FDI in an LLP will be permitted only in those sectors/ activities where 100% FDI is permitted and there are no FDI-linked performance related conditions.

ii.   Agricultural/plantation activity, print media or real estate business are certain areas where LLPs with FDI cannot operate

iii.  Downstream investments cannot be made by LLPs with FDI.

2.    Funding in LLP’s

i. An Indian company, having FDI, will be permitted to make downstream investment in LLPs only if both the company, as well as the LLP are operating in sectors where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance related conditions.

ii.Foreign Capital participation in the capital structure of the LLPs will be allowed only by way of cash considerations, received by inward remittance, through normal banking channels, or by debit to NRE/FCNR account of the person concerned, maintained with an authorized dealer/authorized bank; and

iii.Foreign Institutional Investors (Flls) and Foreign Venture Capital Investors (FVCIs) will not be permitted to invest in LLPs. LLPs will also not be permitted to avail External Commercial Borrowings (ECBs.)

3.     Ownership and management of LLPs

i. The designated partners in respect of LLPs with FDI, has to be a "resident in India"  and such person should fulfill the requirement for this term as set out in Section 2(v) (i) (A) & (B) of the Foreign Exchange Management Act, 1999;

ii.Only a company registered under the Companies Act can be designated partner. LLPs, trusts or any other legal entities are not permitted.

iii. Designated partners will be responsible for all compliance pertaining to these aspects and all penalties imposed on the LLP for contravention.

4.    Prior approval of the FIPB/ government is required for a Company with FDI to convert into an LLP.


Presently, FDI is allowed in Indian companies, firm or a proprietary concern, subject to certain conditions. FDI in a trust is also allowed with prior Government approval, provided it is a Venture Capital Fund (VCF).

Note 7 of Form 1 under LLP Rules, 2009 amended vide notification dated 20-01-2010 that ” in principle approval" of RBI is required for NBFC activities. As per RBI Act, 1934 trading in shares/securities is a NBFC activity irrespective of public borrowing/deposits and for these activities only company as business format is permitted. In LLP you can do this business only when RBI grants in-principle approval that it will regulate the NBFC activities of LLP after incorporation.

Once the RBI clears its stand and provides due recognition to LLPs as a corporate structure coupled with this amendment to the FDI policy and the taxing structure prescribed, LLPs will become a comfortable corporate entity for Venture Capitals to invest in.

Blog posted on 15 June 2011

Online incorporation of companies within 24 hours wef: 11 August 2011

Here is the good news for all Startups!


Ministry in its endeavour to facilitate corporate business in India has been simplifying the procedures under the Companies Act, 1956. In this direction, the Ministry is modifying the incorporation procedures to enable promoters to get their companies incorporated online within 24 hours.


As corollary to the above, the Ministry has already facilitated the automatic online approval of,

1.    Director’s Identification Number (DIN) with effect from June 12, 2011

2.    Name of the proposed company with effect from July 24, 2011.

Also, the digital certificate of incorporation is already being issued online by the Registrar of Companies.


After the implementation(likely to be in effect from 11th August, 2011) of Circular 49, the e-forms 1, 18, 32 and e-form for Memorandum of Association(MOA) and Articles of Association (AOA) can be certified by the practicing professional regarding the correctness of the information and declarations given by the subscribers, the application shall be processed electronically and the digital certificate of incorporation shall be issued immediately online by the Registrar of Companies.


Like everything in life comes with ifs and buts, practicing professionals would have to tread the line carefully. To be onshore and compliant and meet upto the clients expectation of completing a 24 Hour incorporation, it is absolutely essential that we do not miss the following process / documents.


Steps 1:- Obtaining Director Identification Number (DIN):-

File DIN -1 for each of the proposed Directors with the below documents (document should be visible one)

a.    Passport size photograph of the proposed Directors

b.    Address proof of the proposed Directors 

c.    Pan card copy (for Indian citizen) and Passport for Foreign Citizen as ID proof

d.    Verification by the applying director as per the latest format in Annexure I under DIN rules.


Step 2: Adhere to the pretty extensive NAME AVAILABILITY GUIDELINES, 2011.


Step 3: Filing of incorporation documents with ROC and obtain certificate of incorporation:

1.    Pls pls Carefully draft the Memorandum and Articles of Association of the company to be in line with the business activities of the intending Company

Blog posted on 29 July 2011


Fast Track Exit mode for defunct companies under Section 560 of the Companies Act, 1956 (Applicable from 3 July 2011)

Ministry has introduced Fast Track Exit mode for defunct companies under Section 560 of the Companies Act, 1956 to strike off the name from the concerned Registrar of Companies. (Applicable from 3 July 2011)

“defunct company” is the Company which has

·         nil asset and liability and

·         not commenced any business activity since incorporation or

·         not carrying over any business activity for last one year

Any defunct company which has active status or identified as dormant by the Ministry of Corporate Affairs, may apply for getting its name strike off from the Register of Companies. The Procedure for filing under FTE is as follows:

1.     Application in the Form FTE, annexed electronically on the Ministry of Corporate Affairs portal namely www.mca.gov.in accompanied by filing fee of Rs. 5,000/-

2.     If application  is not digitally signed a physical copy of the signed Form duly filled in shall be attached with the application Form at the time of its filing electronically.

3.     FTE shall be certified by Chartered Accountant in whole time practice or Company Secretary in whole time practice or Cost Accountant in whole time practice( Form 32, DIN 3 need not be filed)

4.     If applicant name is not available with database of ministry a certificate of CA/CS/ICWA certifying that applicants are present directors of the Company.

5.     Pending litigations shall be disclosed.

6.      Affidavit as per Annexure A which should be sworn by each of the existing director(s) of the Company.

7.     Indemnity Bond annexed at Annexure B to be given by every director individually or collectively, to the effect that any losses, claim and liabilities on the company, will be met in full by every director individually or collectively, even after the name of the company is struck off the register of Companies.

8.     In case of foreign nationals and NRIs, Indemnity Bond and Affidavit may be notarized as per their respective country’s law.

9.     Statement of Account annexed at Annexure C, prepared as on date not prior to more than one month preceding the date of filing of application in Form FTE duly certified by Statutory Auditor.

10.  In the case of 100% Government companies, if no Board is in existence, an officer not below the rank of Deputy Secretary may be authorized to enter his name and other details in Form FTE and in Annexure A, B and C in place of name and other details of the directors and also to sign the said documents before filing.

http://www.mca.gov.in/Ministry/pdf/Circular_36-2011_07jun2011.pdf

 

Blog posted on 30 June 2011

Income tax exemption for the salaried employee’s upto 5 lakh (FY - 2010-2011)

The Central Board of Direct Taxes has notified the scheme exempting salaried taxpayers with total income up to Rs.5 lakh from filing income tax return for assessment year 2011-12 (financial year 2010-2011) which will be due on July 31, 2011.

There are 5 conditions applicable for this scheme:-

 

1)    Employee’s are worked under one employer in the year (i.e. 2010-11)

2)    Employee must have PAN No.

3)    Employer has deducted the TDS and paid to the Govt. on behalf of employee.

4)    Employee should not have any other income and income from bank deposits up to 10,000/-

5)    Employee should have the form 16 issued by his employer.

6)    Employee has to provide the PAN number and Bank interest details to the employer and pay the entire tax by way of tax deducted at Source and obtain form 16.

 

 

Posted on 24 June 2011

NO E -FILING ACCESS FOR COMPANIES EVADING ANNUAL REPORTING WITH MCA

It has been found that majority of Companies skip annual reporting by not submitting statutory Annual reports and audit reports and file only event based updates on the e governance database. It has been decided by the MCA that such defaulting companies who  have not filed their statutory  annual reports   ( i.e. Balance sheets and Profit and loss accounts) with Registrar of Companies, will not be allowed to file their other forms except the following ones till the Company makes good the default. The Forms which will be allowed are Form 32, Form 20 B, Form 21 A, Form DIN 3, Form 21, Form 1AA, Form 23 AC, Form 23 ACA, Forms related to Deposit of Money into IEPF and Forms related to cost audit Branch.

The Ministry has also said the key officials of the Company i.e. its Directors, its Company Secretary and also the Auditors will not be allowed to sign any document for filing with MCA after default. This arrangement is a drive to bring more discipline into the process of Compliance. In this regard the ministry has invited comments from its Regional Directors, registrar of Companies and official liquidators. Non Compliance in filing has defeated the purpose of MCA to create electronic records of the companies which are easily accessible and also a quick way to check into the creditworthiness of the Company.

18 May 2011

Nod for Foreign Director Investment (FDI) in Limited Liability Partnerships


The Government today approved a framework for allowing foreign direct investment in Limited Liability Partnership (LLP) firms. FDI in LLP will be implemented in a calibrated manner, beginning with “open sectors” where monitoring is not required. However the Foreign Investment Promotion Board's nod is necessary for bringing in FDI in LLPs. FDI will not be allowed in LLPs that operate in agricultural/plantation activity, print media or real estate businesses. Also, LLPs cannot use the FDI to make downstream investments. The Government has also barred foreign institutional investors and foreign venture capital investors from investing in LLPs. Besides, LLPs will also not be permitted to avail themselves of external commercial borrowings.

 Blog posted on 12 May 2011.

 

Cut of date for filing Annual Accounts and Returns for all the LLPs for the financial year 2010-11

Annual Accounts and return filing is mandatory in case if the LLPs registered/incorporated on or before 30 September 2010. Any LLPs registered/ incorporated on or after 01 October 2010 have the optional to close the financial year ending as on 31 March 2011 or 31 March 2012 and file annual return and accounts with the Registrar accordingly.

 

SN

Description

E-form type

Timeline/cut of date to file the return

Penalty for delay in filing

1

Annual Accounts return filing

E-form 8

30 October 2011

Rs.100/- per day

2

Annual Return of Limited Liability Partnership

E-form 11

30 May 2011

Rs.100/- per day

Blog posted on 11 May 2011


NEW DIN ALLOTMENT PROCESS:

Here is good news for you guys!!!

The Ministry of Corporate Affairs (MCA) has removed Physical submission of DIN (Director Identification Number) application and made it online. The online application is not available now. You may have to wait for another few days to access online application.

According to the new circular (General Circular No.5/2011) issued by the Ministry of Corporate Affairs (MCA) for changing the DIN application submission process. Earlier there was only physical submission of DIN application, the process is cumbersome and time consuming. The Ministry has modified the process in order to accelerate and simplify the process to obtain a DIN u/s 266B of the Companies Act, 1956.

According to the new circular, the application for DIN will be made on DIN 1 eForm along with scan documents of ID and address proof certified by the professionals (CA or CS).  The required fee payable for submission of DIN can be made only through online and no challan payment will be allowed.  The “MCA DIN Cell” the will examine the application and allot the DIN within one or two days. For change of address of Directors, the same procedure of online filing of DIN 4 will be followed.

In case of providing and certifying false information in the DIN application, professional misconduct and penal action will be taken against such applicant and professionals certifying the DIN application.

Blog posted on 1 May 2011

Subpages (1): Finally, a new website
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May 3, 2011, 10:28 PM
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