Post incorporation ROC compliances of Private Limited Company in India

Every year, thousands of Private limited company registration takes place in India. Further, these are registered both as normal private limited company as well as in the form of wholly owned subsidiary of foreign parent company.

In this write up, we would understand various taxation, regulatory and other compliance which needs to be completed post company formation in India. 

ROC Compliance:-

1.      Appointment of first auditors of the Private Limited company 

First auditors of the company shall be appointed within 30 days of private limited company registration in India. This is not applicable in case of Government Company. The first auditor will hold office till end of first annual general meeting.

 

2.      Holding of First Board meeting of the Private Limited company

Every private limited company has to hold first board meeting of its directors within 30 days of company formation in India. Further, atleast 4 board meetings shall be held every year and gap between two board meetings shall not be more than 120 days.

3.      Applying for Certificate of Commencement of Business 

Within 180 days of private limited company registration, every company shall apply for certificate of commencement of business by filing necessary forms with ROC. This is an acknowledgement of the fact that all the subscribers have contributed towards their share application money.

4.      Disclosure of interest of the Director 

Every director shall disclose in the first board meeting, his interest in any company or firm or body corporate or association of individuals as prescribed under companies Act. This disclosure needs to be made every year in the first board meeting or as and when there is change in disclosure. Form MBP-1 needs to be filed with ROC for disclosing interest of such directors.

5.      Holding of Annual General Meeting of the Company 

Post company formation in India, it is mandatory to hold Annual General Meeting every year within end of 6 months from close of financial year. Further, the gap between two AGM shall not be more than 15 months. Also, the first AGM shall be held within 9 months from close of the financial year. The agenda of AGM is normally discussion and adoption of financial statements, appointment or reappointment of statutory auditors, declaration of remuneration and dividend etc.

6.      Filing of annual return in form AOC-4 before ROC 

Within 30 days of end of AGM, every company is required to file annual ROC return in form AOC-4 along with copies of balance sheet, statement of profit and loss account, notice of AGM, MGT-9 and Director’s report.

7.      Filing of annual return in form MGT-7 before ROC 

Within 60 days of end of AGM, every company is required to file annual ROC return in form MGT-7. In case of companies having Turnover of Rs 50 crore or more or in case of companies having paid up capital of Rs 10 crore or more, form MGT-7 need to be certified by company secretary in practice in form no. MGT-8.

8.      Filing of  form DPT-3 before ROC 

Every company having outstanding amount or loan as on 31^st March has to file form DPT-3 mentioning details of such outstanding amount. This form needs to be filed even if amount outstanding is falling under definition of deposit or not. Due date of filing is 30^th June.

9.      Filing of  form MSME (Half yearly) before ROC 

Form MSME needs to be filed by every company which has outstanding dues payable to MSME beyond 45 days. This form need to be filed half yearly basis. For first 6 months, due date is 31^st October and for last 6 months, due date is 30^th April.

10.  Director KYC by filing form DIR-3KYC 

Every director of the company, who has obtained DIN before 31^st March 2020, needs to do director KYC every year by filing form DIR-3KYC. Failure to do so may lead to deactivation of DIN as well as penalty of Rs 5000 for each DIN.

11.   Statutory registers and records 

Every company is required to maintain statutory registers prescribed under companies act along with minutes of board meetings, minutes of AGM at the registered office of the company. 

12.  Share certificates 

Every company shall issue share certificates to its shareholder within 60 days of company formation in India. Further, whenever additional shares are issued and allotted, share certificates need to be issued within 60 days of such allotment.

13.  Subsidiary Company needs to report share subscription money

In case of subsidiary company registration in India, share subscription money received in Indian bank account from foreign shareholders in the form of FDI needs to be reported to RBI by filing form FCGPR etc.

 

Joint Venture Registration in India

When a foreign company wants to set up business in India in the form of incorporated entity, one of the options available for doing so is in the form of Joint Venture Registration in India. Other options available for foreign company registration in Indiaare:

 

•  Subsidiary company registration in India and 
•  Limited liability partnership.

 

Foreign companies can  establish a Joint Venture with Indian companies and make investment in same. Foreign companies can also contribute capital, infrastructure, knowledge, technology etc. It can be set up as an entirely new company in India with an Indian partner or it may involve investing in a company which is already existing in India. Joint venture registration can be in the form of Private limited company registration or public limited company registration. 

Permissible activities for Joint Ventures in India

 

1. Subject to FDI guidelines, Joint Ventures (JVs) can do all the business activities mentioned in itsMemorandum of Association. However, there is some prohibited list of business in FDI guidelines which cannot be done by JVs in India. 
2. Normally, JVs are a temporary partnership, established for a definite purpose and for a stipulated period, to fulfill a specific purpose such as accomplishing a task, activity or project. 
3.  FDI in JVs are allowed only in those sectors where 100% foreign investment is permitted under automatic route with no FDI-linked performance conditions. There are certain other conditions also, as specified by Government, which needs to be fulfilled. 
4.  There are some prohibited lists of business in FDI guidelines. It means JVs cannot be engaged in prohibited business activities. 

Therefore, this is an important aspect to be kept in mind before setting up of JVs in India.

 

Conditions required for setting up JVs

 

JVs in India can be formed in 2 ways.

 

•  First in form of new company where both Indian company and foreign company has fixed percentage shareholding or ownership right in new company. This is similar to opening wholly owned subsidiary in India.
• Second way of forming JVs in India is that foreign company can invest in shares of existing Indian company by way of allotment or transfer of shares already allotted.

 

What is the Legal Status of JVs in India?

 

•  Legal status of JVs is Indian Companies.
• A Joint Venture company can be set up as a separate legal entity, distinct from both, the foreign entity & Indian entity.

 

 

What approvals are required for setting up business in form of JVs

 

• For setting up JVsin India, prior approval of ROC/MCA is required. Also, approval of RBI, AD Banker and FIFP may be required in case of government approval route.
•  Further, if the activities of the JVs fall under Government approval route, then the approval from the Government has to be obtained. Government approval can be taken by filing online application with Foreign Investment Facilitation Portal (FIFP)

 

 

Tax Applicability in case of JVs

 

JVs are similar to Indian companies and therefore is liable to tax on global income at different tax rates like 15%, 22%, 25% and 30% depending upon case to case. Also, Subject to MAT @ 15% of book profits.

 

Repatriation of Profits of JVs

 

Profits of JVs can be freely repatriable. For repatriation of profits out of India, there are no restrictions. No approvals required. However, necessary taxes need to be paid in India, also subject to filing of form 15CA and 15CB and fulfillment of some other procedural compliance.

 

Winding up or closure of JVs

 

It is a complex procedure. Also, time consuming. Depend upon exit strategy adopted. Exit can be either by sale of shares or by liquidation. 

 

Thus JVs are very good option for foreign company registration in India where foreign partner and Indian partners collaborate for a common purpose and bring their own expertise, resource, technical knowledge, experience, technology and capital.

How to Incorporate Subsidiary of Foreign Company in India

Indian Subsidiary:
 
When another Indian company or foreign company holds 50% or more of the shares of an Indian company, an Indian company whose shares are so held becomes a subsidiary company.

Indian subsidiary company has a separate legal identity as compared to the parent entity.
 
Subsidiary company registration in India is one of the most popular forms of business set up in India.

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The following conditions must be fulfilled for subsidiary company registration in India.
 
A minimum of two directors is required. One of the directors in the company must be an Indian Citizen and an Indian resident having a permanent address in India, which is necessary for the incorporation of the company.

A minimum of two shareholders is required. The shareholders can be an individual or an entity, or a combination of both.

There is no minimum limit for authorized and paid-up capital. The foreign company must own more than 50% shares in an Indian subsidiary company and have significant control over it.

A person must be appointed as an authorized representative on behalf of the foreign company in India who will hold shares on behalf of the parent company.

If the parent company holds 99.99% shares, the Indian company becomes a wholly owned subsidiary of the parent company. In this case, at least one share must be held by the nominee shareholder.

A registered office for the place of business of the company is required. All the directors in the company must have a Director Identification Number (DIN).  

The procedure of Subsidiary Company Registration in India:
Following steps are involved in subsidiary company registration-
 
Apply for Digital Signature Certificate (DSC): The proposed subsidiary company in India is required to apply for the DSC of all the directors for online filing of documents with ROC/MCA. 

Name approval: Once the directors' DSC is prepared, the company must apply for a reservation of the proposed company's name. It has to choose a unique name for the subsidiary company and is to be filed through the RUN facility of the Ministry of Corporation (MCA) in due time. 

Drafting of MOA and AOA and applying for Director Identification Number (DIN): After name approval, charter documents must be drafted, i.e. MOA and AOA need to be drafted. Further, the DIN of all the appointed directors of the proposed subsidiary company is applied.

Application for receiving PAN and TAN: Simultaneously, PAN and TAN, ESI, PF of the company is also applied. Also, the name of the proposed banker of the company needs to be provided.

Finally, a certificate of incorporation would be granted, and a subsidiary company registered in India. Obtaining a Goods and Services Tax Identification Number (GSTIN): 

To business operations, a subsidiary company must have GST Registration in India.

Commencement of the business operations: Lastly, within 180 days of incorporation of a subsidiary company in India, it must apply for a certificate of commencement of business.  

Documents required for Subsidiary Company Registration in India:
 
The following documents are required to be submitted by the foreign company while registering the subsidiary company in India-

For the foreign director: These must be duly notarized or apostilled, or verified by the Indian embassy in their home country. Passport of the individual Identity proof of the country of their stay Address proof in the home country  

For the representative of the foreign company: These must be duly notarized and apostilled or verified by the Indian consulate in their home country (in case the representative is a foreign national and not an Indian resident)  Passport of the person Identity proof of the country of their stay Driving license  

For the Indian director 
AADHAAR Card.
PAN Card.

Any utility bill for address proof such as electricity bill, water bill, telephone bill etc.