1. LLP / CSR / Foreign Company
and e-filing
Lalit Kumar Partner
J. Sagar Associates advocates & solicitors
Bengaluru | Chennai | Gurgaon | Hyderabad | Mumbai | New Delhi

2. Choosing the right legal entity
Members/Shareholders – Number, Resident status
Extent of Liability – moot question limited or unlimited liability
Incorporation Costs
Tax related
Flexibility
Scalability
Brand Value
Employee incentives like ESOPs
Transferability of Ownership Rights
Separation of Ownership and Management

3. LLP LLP is a body corporate 2 or more partners can incorporate
At least individuals designated as Designated Partners
Separate legal entity
Mutual rights and duties of partners governed through LLP agreement
Limited liability of partners except in cases of acts done with intent to defraud creditors or for any fraudulent purpose
Mandatory maintenance, audit and filing of annual accounts
Existing firms, companies can be converted into LLPs

4. One Person Company
One “natural” person being an Indian citizen resident in India incorporates only one OPC as member
One Nominee who shall succeed and become a member on the death or incapacity of the single member
Deemed conversion: Where paid up capital exceeds Rs. 50 lakh or annual average turnover exceeds Rs. 2 crore for 3 preceding years
Normal Conversion: At least 2 years must have elapsed from incorporation
Business of OPC
OPC cannot:
Be a Sec. 8 company
Carry on NBFC business
Invest in securities of bodies corporate

5. Conversion to OPC Applicability
Private company (not a Sec. 8 Company) having:
Paid up share capital must be Rs. 50 lakh or less
Average annual turnover must be Rs. 2 crore or less
Procedure
No objection from members and creditors.
Special resolution in general meeting.
File Form MGT 14 with RoC within 30 days.
Application to RoC in Form INC 6

6. Small Company A private company
Paid-up capital does not exceed Rs. 50 lacs
Turnover as per its last profit and loss account does not exceed Rs. 2 crore
One Nominee who shall succeed and become a member on the death or incapacity of the single member
Some exemptions and reliefs under Companies Act, 2013

7. Choosing the right entity

8. Choosing the right entity
Category
Partnership
Pvt Ltd. Company
LLP
Capital Contribution
Nil
Rs. 1 lakh as paid up share capital
No. of members/ Partners
Min- 2, Max - 50
Min – 1 (OPC), Max - 200
Min - 2

9. Choosing the right entity

10. Choosing the right entity

11. Conversion from Co. to LLP
Conversion from Private Company to LLP – Section 56 read with Third Schedule of the LLP Act, 2008
Conversion from Unlisted Public Company to LLP – Section 57 read with Fourth Schedule of the LLP Act, 2008
Rule 39 and 40 of LLP Rules, 2009
If the security interest subsists on the assets of the eligible company then it cannot be converted into LLP. Company which has taken secured loan of any nature which is outstanding as on the date of conversion cannot be converted into LLP

12. CSR
Mandatory for companies with (i) net worth Rs.500 crores; or (ii) turnover Rs.1,000 crores; or (iii) net profit Rs.5 crores
Companies to constitute CSR Committee
Private companies do not require 3 directors and no independent directors
The board of directors’ report will have to disclose the composition of the CSR committee
CSR committee to frame a CSR policy recommending the amount to be incurred on CSR activities

13. CSR The CSR policy to be approved by the board of directors
Contents of such policy have to be disclosed in the board of directors’ report in the format as prescribed in annexure to the CSR Rules and on company’s website, if any
Expenditure incurred in India will only qualify
Preference to be given to local areas of operation

14. CSR
While calculating the profit for the purposes of CSR contribution, neither the profits earned from overseas branch of an Indian company nor the dividend received from other Indian companies be included provided those Indian companies are covered and comply with Section 135
Expenditure incurred exclusively for the benefit of employees of the company and their families is excluded

15. CSR
Not only the Indian companies but even foreign companies having a branch office or project office in India will need to comply with the CSR requirements if they fall within any of the criteria under section 135
The CSR activities to be undertaken by the companies have to be within the purview of Schedule VII, which lists all the permitted CSR activities
Companies to spend 2% of the average net profits for preceding 3 years to one or more of the listed CSR activities

16. CSR
CSR activities may be undertaken through a registered trust or a registered society or a non-profit company established by the company or its holding or subsidiary or associate company. However, trust, society or company not established by the company or its holding or subsidiary or associate company should have a minimum track record of 3 years in undertaking CSR programs
Political contribution shall not be considered as CSR activity

17. CSR
Collaboration on CSR activities with other companies is permitted provided the CSR committees of respective companies separately report their CSR projects or programs
Companies can build CSR capacities of their own personnel provided the expenditure shall not exceed 5% of the total CSR expenditure of the company in a financial year
Tax treatment not clear yet

18. Foreign Companies
Means any company or body corporate incorporated outside India:
(a) has a place of business in India by itself or through an agent, physically or through electronic mode;
(b) conducts any business activity in India in any other manner
Problem created because of the definition of “electronic mode” under Companies (Specification of Definition Details) Rules, 2014

19. Foreign Companies
“Electronic mode” includes carrying out electronically any business to business or business to consumer transactions, web marketing, advisory and transactional services whether by , mobile devices, social media, voice or data transmission or otherwise, a wide range of activities may amount to a foreign company having a place of business in India
Great concern to foreign companies doing any business transaction in India through electronic means
No such company would want to end up having to register a place of business in India and to run the compliances required
Impact on other laws – FEMA – Would it require RBI approval?

20. Compliances by Foreign Companies
Delivery of documents to ROC
Preparation of balance sheet and profit and loss account and delivery with other documents with the ROC
Audit of accounts by CA or firm of CA
Filing of list of places of business in India as on the date of balance sheet
Filing of annual return
Display of name and other details

21. e-filing of forms / returns & certification
Filing of applications, documents, forms governed by Section 398 read with Companies (Registration Office and Fees) Rules, 2014 as amended by April 28, 2014 notification
Rule 8(3) provides that the authorised signatory and the professional, if any, who certifies e-form shall be responsible for the correctness of the enclosures attached with the e-form
Rule 8(7) provides that it is the sole responsibility of the person signing the form and the professional who certifies the form to ensure that all the required attachments relevant to the form have been attached completely and legibly

22. e-filing of forms / returns & certification
MCA Notification dated April 28, 2014 prescribes the manner of certification of the forms
Certification to be by CA, CS and CWA who are in whole-time practice
Small Companies and One Person companies are exempted from certification
Also refer to Circular No. 9/2014 dated April 25, 2014 listing out e-forms and general forms

23. e-filing of forms / returns & certification
Circular No. 10 / 2014 dated May 7, 2014
- Professionals to authenticate correctness and integrity of documents being files by them with MCA
- Where any instance of filing of documents, application or return or petition etc. containing false or misleading information or omission of material fact or incomplete information is observed, the Regional Director or the Registrar as the case may be, shall conduct a quick inquiry against the professionals who certified the form

24. e-filing of forms / returns & certification
Circular No. 10 / 2014 dated May 7, 2014
- Report to the submitted by RD / ROC to the e-Governance Cell of the Ministry within 15 days with recommendation if any action under Section 448 and 449 needs to be taken and matter to be reported to the professional institute for initiating disciplinary proceedings
- e-Governance Cell to process each report and issue necessary instructions to RD / ROC for acting under Section 448 and 449 and to conduct disciplinary proceedings against the member and debar the concerned professional from filing any document

25. Questions?

26. Thank You lalit@jsalaw.com