LLP / CSR / Foreign Company
and e-filing
Lalit Kumar
Partner
J. Sagar Associates
advocates & solicitors
Bengaluru | Chennai | Gurgaon | Hyderabad | Mumbai | New Delhi
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
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
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
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
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
Choosing the right entity
Choosing the right entity
Category
Partnership
Pvt Ltd.
Company
LLP
Capital
Contribution
Nil
Rs. 1 lakh as
paid up share
capital
Nil
No. of members/ Min- 2, Max - 50 Min – 1 (OPC), Min - 2
Partners
Max - 200
Choosing the right entity
Choosing the right entity
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
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
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
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
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
CSR
• CSR activities may be undertaken through a
registered trust or a registered society or a nonprofit 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
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
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
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 e-mail, 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
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
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
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
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
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
Questions?
Thank You
lalit@jsalaw.com