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Funding Compliance

Equity funding is the famous source of funding for early-stage businesses in India. Equity funding is the exchange of partial ownership of the company for an amount of funding. We at Wazzeer advice our clients to give a serious thought on advantages and disadvantages associated with Equity funding reason being the compliances involved in this funding source invites the dilution of ownership of the company for the company’s founders. Now, had you assessed this source of funding, let’s look at the compliances involved in processing such funds for company’s use.


As you know receiving equity funds requires an exchange of shares in return, now the process of Issue of shares can be done in two ways Rights Issue, and  Private Placement.


Rights Issue comes into picture If the Shares are to be issued to existing shareholders. Basically, the right to invest further in the company according to their existing shareholding has been incremented.


Private Placement comes into picture when the shares are to be issued to an investor who does not hold any shares in the company. According to Companies Act, at least shares worth Rs.20,000 in face value must be issued to one investor to do this. For e.g. if the face value of shares is Rs.10, at least 2,000 shares need to be issued to the investor to carry out Private Placement. If this is not the case, the shares can be issued through rights issue.


Compliance involved in processing equity funding:


Step 1: Authorized Share Capital Requirement


Authorized share capital: It is a limit up to which shares can be issued by the company. For eg. if the company issues shares at face value Rs.10 and the Authorized share capital of the company is Rs.10 Lac, the company can issue a maximum of 1 Lac equity shares


Paid Up Capital: It is the actual capital invested in the company in terms of face value i.e, while starting up, the company issues shares at face value and a paid up capital of 1 Lac in such a case means that 10,000 shares has been issued (If the face value is Rs.10)


Paid up capital cannot be more than Authorized share capital of the company. Hence if the Authorized share capital of the company is not sufficiently high it is required to be increased first before doing any other compliance to issue fresh shares

Step 2: Prepare draft of offer letter


In case of Private placement, offer letter (PAS-4) is sent either through post or electronic mode within thirty days of recording names of such people, along with the application form addressed to the person to whom the offer is made. In case of rights issue, offer letter must be dispatched to the shareholders at least three days before the opening of issue.


Step 3: Board Meeting


Board meeting must be conducted for approving ‘Letter of Offer’. According to Section 173(3) of Companies Act, a notice should be issued to every director at least seven days before conducting the meeting.

An Extraordinary General Meeting (EGM) is to be conducted in case of private placement. Also, a complete record for private placement must be prepared in form PAS-5. PAS-4 and PAS-5 must be filed with ROC within 30 days of issue of offer letter in GNL-2.  


Step 4: Receive Application money


In case of rights issue, the application money can be paid in the form of cash also. In case of a Private placement though, the share application money should come to a separate Investment account of the company through banking channels only. After receiving application money, the second board meeting is held for approving allotment and issue of shares.



Step 5: Allotment of shares


In the case of Rights issue, the money can be transferred to either company’s main account or a separate investment account but in the case of Private placement, the fund should be transferred to a separate investment account of the company. File with Registrar a return of allotment in E-Form PAS-3 within 30 days of allotment of shares.


Step 6: Issue Share certificate


The company must issue share certificate to the investor within 60 days of allotment of shares. It cannot use the money until the certificate is issued. If the company doesn’t issue share certificate within the specified time, it will have to return the money to investors.



Note, Following documents need to be submitted to RBI in case of Foreign Investors:

  1.  Advance Reporting Form: This form is to be filed within 30 days of receiving funds. This contains information relating to funds as KYC of Investors.
  2. FC-GPR Form: This form is required to be filed within 30 days from the date of issue of shares. In this form Certifications regarding the procedure, compliance needs to be certified from a CS. Along with this, valuation certificate certified by a CA must be submitted. Two documents are required to file this form-FIRC issued by the company’s bank and KYC issued by investor’s bank.
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GST, GST, TAXATION

On 21st July 2017 India bought out its most significant reforms in taxation by implementing GST (Goods and Services Tax). A GST Council was formed for framing rules and regulations governing GST compliance in India. This council is headed by Union Finance Minister of India. The Council has been very responsive to the difficulties faced by traders and have been coming up with reforms making it easy for the traders to comply with GST regulations. To understand the changes of the council meetings we need to understand the structuring of GST Registration and filing in the beginning


Old Rules

  • GST Registration Criteria

It was compulsory for any trader with an annual turnover of INR 20 Lac or more to register for GST. If you are providing service to other than your home state it was mandatory to get registration irrespective of your revenue. If you are selling products on e-commerce platform it was compulsory to get GST registration even if your annual revenue has not crossed INR 20 Lac. These rules made it compulsory for almost all traders to get GST Registration and consequently follow the complex filing process.


  • GST Filing

Govt. envisaged 3 parts of filing and had 3 deadlines every month for the traders to follow. The sales and purchase details were to be filed through GSTR-1 before the 10th day of every month. Input credits as entered by vendors (recipients) was to be updated by the department through GSTR-2 which can be edited by the traders between the 11th and 15th day of every month. Then a final form GSTR-3 which was updated by the department was to be approved by traders either with or without editing between the 16th and 20th day of every month.


Due to some technical difficulties, the govt., could not come up with the forms GSTR-1,2 and 3 on time for the first filing of GST returns. Hence Govt. had to come up with an intermediate form called GSTR-3b in which the traders had to declare their sales and purchases for the month and pay the outstanding GST for the month before 20th day of every month. Govt. extended the deadline for other forms to be filed.


This created lots of confusion and the compliance burden on small traders was extremely high which created chaos in small traders community. The collective feeling of the trading community was that of confusion and desperation since compliance for GST rules created a heavy financial burden on them.


Rules proposed in October 2017

GST council on its 22nd meeting on October 6, 2017, implemented few landmark reforms which went a long way in simplifying the compliances for GST.


  • GST Registration Criteria 

For a service sector it was made optional to go for GST Registration until they reach a revenue of Rs.20 Lac irrespective of them having sales in states other than their home state. The council also made it optional for traders having inter state sales through e-commerce platform only. They also increased the maximum limit for composition registration from annual turnover of 75 Lacs to 1 Crore


  • GST Filing

Council proposed a quarterly filing for GST registered firms with annual turnover less than 1.5 crores. These firms constitute around 90% of the GST registered entities and hence provided great relief to small traders. Govt. Proposed a monthly filing of GSTR-3B (which was to be scrapped eventually) and make GST payment to govt. The returns through GSTR-1, 2 and 3 was to be made quarterly for these small firms. However, different last dates for different forms and heavy penalty still continued to create lot of confusion and financial burden on these small traders


New Rules 

The meeting on May 04 2018 has proposed a returns filing methodology which can be considered as future ready. The council has also taken a decision to implement these changes in 2 phases to avoid any confusion and inconvenience to traders


  • GST Filing


Initially for the next 6 months, until the new software gets ready the current system of GSTR-3B (Monthly) and GSTR-1 (Quarterly for small firms). After 6 months, the seller will upload the invoices in GSTN portal which needs to be acknowledged by the buyer. This enables the buyer to get input credit. If there is any gap in the tax paid and credit claimed, the buyer will be notified and the buyer will have to correct the excess claim made, if any.  This phase is proposed to be in place for only 6 months after implementation.


After this by around June 2019, there will  be facility for the sellers to upload the invoice on the portal on real time so that the input credit for the buyer is not stuck. In both the second and third phases, taxpayers will have to file details of total turnover in case of business-to-consumer transactions. For business-to-business transactions, a four-digit Harmonised System of Nomenclature (HSN) code would have to be mentioned besides all invoice and turnover details.


If the seller fails to pay the tax, the tax authorities will recover it from the seller, unlike in the current system where the buyer is asked to reverse the credit availed along with interest. If the seller is untraceable, the tax will be recovered from the buyer following due course of law. In case of missing invoices, the buyer will not be able to avail the credit.

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Funding Compliance, Start up Lessons, Startup Funding Paperworks

At different stages of startup lifecycle, namely – startup and early-stage development, growth and expansion, and maturity, the requirement for funds inevitably comes up. As the meeting of such requirements comes to the mind, entrepreneurs tend to consider various options for sourcing funds. In this blog, we will be looking into such sources for raising funds from.

 

 

Seed Capital and Early Stage Funding stage:

Seed funding when the business is pre-revenue and it may still be developing an MVP. This funding is used by the startup to: cover the initial costs of starting, to invest on the R&D and to sustain the venture. The funding that happens is close to having or already has some revenue but remains unprofitable. Sources of funding in this stage is:

 

 

  • Personal Investment/Bootstrapping: Also, referred to as bootstrapping or self-financing or some call it having “Skin in the game” traditionally available options under this are:
    1. Investment from savings
    2. Borrowing against real estate assets
    3. Liquidating personal assets
    4. Using personal assets as collateral for a loan

 

 

  • Funding by Friends and Family: Though the personal relationship comes handy while raising funds from these parties, potential conflicts can be avoided by securing these investments after performing supporting legal compliance. We suggest you prepare funding contracts that fully discloses the terms of the financing.

 

 

  • Private or Governmental grant funding options: Grants are funds that need not be paid back. Grants usually carry stipulations as to how the grant money can be spent over a specific time period. Qualifying to become a beneficiary of grants is time-consuming and tedious.

 

 

  • Crowdfunding: This fund is raised online by the collective efforts and cooperation of a network of many individuals. There are two types of crowdfunding:
    1. Reward crowdfunding: Startup reward (by offering company’s product or services to the investor for free or at a reduced rate) their investors for making investment
    2. Securities crowdfunding: Startup sells securities in the company in exchange for capital from investors.

 

Equity Funding:

Most common source of funding for early-stage businesses wherein investor gets a partial ownership of the company for the investment made. Various options under this source are:

 

  • Angel investors: These are affluent individuals who are interested in investing privately in small businesses during early stage of growth. Angel investors fund in exchange for convertible debt or ownership equity.

 

  • Venture Capital: VC funds are typically derived from a pool of professionally managed funds contributed by an individual venture capitalist or institutional investors. Funds are invested for exchange for an interest stake in the venture, for the directorship, the right to approve the loan on behalf of the business, the authority of hiring or firing, involvement in business decisions etc.

 

Debt Funding:

Funds are borrowed with the intent to be repaid within a fixed period, with interest. Interest paid on the loan is tax deductible for the borrower.

 

Mezzanine Financing:

Mezzanine financing is a form of debt with warrants or convertible debt, which begins as a loan and later converts to equity if the loan is not repaid or a certain return on investment has not been achieved.


Note, compliance associated with each of these sources of funding is different, in case you are interested we at Wazzeer can offer a consultation on the compliance requirement -> “Get Started!”

 

 

 

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Agreements, Employment Contracts

Employment training bond is an agreement entered by the employee and the employer stating that the employee is required to serve the agreed period, and there are restrictive covenants that subject the employee to pay a said amount for any loss incurred due to voluntary resignation. Well, that’s the brief part of the scenario. Majority of the employable population in India go with a feeling that the agreement is legally valid, and alarmingly employers take a downloadable copy of the agreement from online without any knowledge of the legal validity. The Indian Contract Act, 1872 and various judgments made by High Court and Supreme Court of India govern the aspect of the legality of such employment contracts which will be covered in this blog.

 

Legal enforceability of the Employment  Bonds:

 

  1. Employee by signing a contract of employment does not sign a bond of slavery and therefore, the employee always has the right to resign even if he has agreed to serve the employer restrictive covenants
  2. Restrictive covenants may be considered valid if they are reasonable.
  3. Restrictive covenants have to be proved that these are meant for the freedom of trade.
  4. Agreement must be signed by the parties with free consent
  5. The conditions stipulated in the bond must be reasonable
  6. The conditions imposed on the employee must be proved to be necessary to safeguard the interests of the employer.
  7. Agreement has to executed on a stamp paper of Appropriate value
  8. In the event of breach of contract by the employee, the employer shall be entitled to recover the damages only if a considerable amount of money has been spent on training

 

Real life examples:

 

  1. S. Gobu V The State of Tamil Nadu

Major takeaway: if the employee leaves the service before the stipulated period and has been invested on by the employer, then as per the agreement is bound to pay to the organization for the damages.

 

  1. Satyam Computer Services Limited V Ladella Ravichander

Major takeaway: Though employer showed that it incurred a loss of INR 2L on the employee who abruptly left the job, the  Andhra Pradesh High Court held that such claim by the employer is unreasonable, and after verification gave a judgment that an amount of INR 1L was the reasonable amount which employee would pay the firm.


We at Wazzeer have developed legally enforceable employment contracts which entrepreneurs can use in India. In case you are interested to get access to, then drop your query at “Get Started!” 

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Business Formation

Estonia’s business regulation is very flexible, in fact, some call it as the perfect solution for entrepreneurship, for reasons like a flat income tax and no annual corporate tax. The country has been capturing Indian entrepreneur’s attention for its low starting-up and running costs. Recently, we at Wazzeer have notices this pattern – startups working in futuristic areas such as Bitcoins, Internet of Things (IOT), Privatization of Outer Space, Drones, Robotics, Virtual Reality, Med-Tech and Medical Devices, and Nanotechnology are considering incorporating parent company in Estonia and thereafter operate from their desired countries. In this blog, we will be looking into different factors that differentiate Estonia, and compliance involved in starting a business. PS: We will be looking only into Private Limited Company incorporation in Estonia.

 

Why do entrepreneurs consider incorporating a business in Estonia?

 

  1. Profit of an Estonian entity is not taxed until distribution
  2. Flat tax system
    1. Corporate Income tax on profit distribution is 21%
    2. Capital gains tax (paid on distribution) is 21%
    3. Branch tax is 21%
    4. Personal Income Tax is 21%
    5. Royalties paid to non-residents are subject to 10% tax at source
    6. VAT is 20%
    7. Land tax varies between 0.1% and 2.5%
  3. No Annual Corporate Tax
  4. Easy and Quick Company registration process
  5. No need to hire a third-party representative or hire a local director
  6. Digital signing is sufficient to execute compliance requirements remotely
  7. Minimum Capital requirement – EUR 2,500
  8. Estonian workforce speaks both English and Russian
  9. Specific support programs for women entrepreneurs – Quin, ETNA
  10. Strong public and university research system
  11. Protection for minority investors
  12. Ease of cross-border trading
  13. Ease of resolving insolvency
  14. Ease of enforcing Contracts

 

How to Incorporate a company remotely?

 

Step 1: Apply for an e-resident identity – Estimated cost is around EUR 100, and takes about 1 day

  • Apply for e-resident status
  • Get digital ID card

Step 2: Check company name availability –  Estimated cost is around EUR 145, and takes 0.5 days

  • Name availability can be checked on rik.ee
  • The name should be unique and distinguishable
  • Apply to Commercial Register

Step 3: Preparation of incorporation documents – Cost effective procedure that might take 2-3 days

  • Acquiring of required documents
    • Founders Documents – identity proofs and address proofs; Minimum 1 Shareholder (any nationality); Minimum 1 director (any nationality)
    • Details of office location and postal code
    • Company’s email address
  • Details of business activities
  • Drafting of Articles of Association
  • Memorandum of Association
  • Notary of operations

Step 4: Open Bank Account – Minimum cost procedure which will take upto 1 day

  • Bank account is opened in the name of the company
  • Make initial contribution of subscribed shares

Step 5: Register for VAT at Estonia National Tax Board – No cost procedure which will take 3 days

  • Applicable only if taxable turnover of the company exceeds EUR 16K
  • Otherwise, it is not required

Step 6: Register employees with the Employment Register – No cost procedure which will take 0.5 days

  • Register employees with Estonian Tax and Customs Board
  • Should be done simultaneously with previous procedure

We at Wazzeer have developed a tested process which enables us to help Indian entrepreneurs to start and run their business in Estonia seamlessly from India. We have helped startups in virtual currency space in registering a business in Estonia. Our solution is one of a kind reason being we are in your neighborhood and we know we are accountable. We would be happy to help you.

 

 

 

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TAXATION

Tax havens are defined as countries that provide foreign investors with low or zero tax rates and attractive regulatory policies. They are typically small,
and often not the final destination of foreign direct investment. Instead, they tend to serve as conduits for investment in foreign subsidiaries located in other
countries. Tax havens have often been viewed as providing bank secrecy and thereby allowing tax evasion to occur. In this blog, we will look into the Top 9 Tax Havens in the world that opens up an opportunity for Indian entrepreneurs to incorporate business and save on taxes. 

PS: You can’t find UAE and Saudi Arabia on this list as they decided to charge income tax from Jan 1st, 2018.

 

  1. Bahamas

  • There is no income tax, capital gains tax, capital transfer tax or estate tax.
  • Employed people pay national insurance contributions. 3.9% of the salary is paid by the employee and 5.9% paid by the employer. Those who are Self-employed have to pay the whole amount by themselves.
  • A value-added tax (VAT) of 7.5% was introduced on 1 January 2015.  Stamp duty is payable on property and mortgage transactions, and there is a tax on real estate.
  • Duties are high on most imported goods.

 

  1. Bahrain

 

  • The taxes that are paid in Bahrain are minimal and there is no income tax system. However, a small tax has been imposed on workers as a ‘social insurance tax’. This tax is applicable to all workers and amounts to 1% of the total salary earned.
  • An additional 5% contribution has to be paid by workers as a social security contribution.
  • Municipal tax is one that must be paid by all those in rented property and expats will have to pay a 10% fee (based on the value of the property) to the local authorities.
  • There is no equivalent of Value Added Tax except on the sale of fuel, and a charge of 12% is made.

 

  1. Bermuda

 

  • There is no direct income tax or capital gains tax in Bermuda. There is a system of payroll tax where employees pay a minimum of 4.75% of their salary.
  • Employed people have to pay Social security contributions of $30.40 each week. This amount is then matched by the employer.
  • There is no sales tax in Bermuda.
  • There is also no VAT applied to goods and services.

 

  1. Cayman Islands

 

  • There is no direct tax imposed on residents and companies.
  • Duty is levied against most imported goods, which basically falls in the range of 22% to 25%. Some items are taxed at 5% and some are exempted from taxation such as baby formula, books and cameras.
  • The government charges flat licensing fees on financial institutions that operate in the islands and there are work permit fees on foreign labour.
  • There are no taxes on corporate profits, capital gains, or personal income.

 

  1. Kuwait
  • Basically, there are no personal taxes, not even for expats working in Kuwait.
  • Only foreign companies working in Kuwait are liable to pay income tax. The corporate income tax rate for foreign businesses currently is a flat 15%. Kuwaiti-owned businesses are exempted from this tax.
  • As of now there is no value-added tax, either. However, there are discussions going on about introducing it.

 

 

 

  1. Monaco

 

  • There is no direct taxation as such in Monaco. However, two exceptions are there:
    • Companies earning more than 25% of their turnover outside of the Principality and companies, whose activities consist of earning revenues from patents and literary or artistic property rights, are subject to a tax of 33.33 % on profits.
    • French nationals who cannot prove that they resided in the country for 5 years before October 31, 1962 also need to pay tax.
  • There is no income tax for people residing in Monaco (except French nationals).
  • There is no direct tax on companies apart from the tax on profits mentioned above.

 

  1. Oman

 

  • There is no income tax for salaried or self employed people.
  • There are deductions made from salaries for social security contributions. People working in the private sector have to make contributions of 6.5% of their salary. Employers add 9.5% to these contributions.
  • Stamp duty is charged when purchasing real estate at a standard rate of 3% of the sale price.
  • Oman’s major taxation revenue comes from corporate tax. Companies are subject to all the taxes that do not apply to individuals such as capital gains, income and on dividends.

 

  1. Qatar

 

  • Qatar has no system of personal income tax, value-added tax (VAT) or capital (wealth) tax.
  • The only taxes payable are:
    • Corporation Tax which is applicable mainly to foreign companies.
      Import duties are imposed on essential items mostly at a rate of 4% of the value of the products.
    • There are service tax of 10% and government levy of 5% on restaurant and hotel bills.
  • Corporation tax is payable on a progressive scale for income above QAR 100,001, from 10% up to a maximum rate of 35% for income above QAR 5 million. There are a number of allowable deductions including interest payments, salaries, rentals, depreciation etc.
  • Self-employed foreign persons working in Qatar also need to pay tax on their income.

 

  1. Brunei

 

  • No Personal Income Tax system is present in Brunei.
  • There are no social security taxes. However, all citizens must contribute 5% of their salary to a state-managed provident fund.
  • The tax rate for resident and non-resident companies is 18.5 percent.
  • Tax and investment privileges are provided to SMEs. The following types of business are eligible for the tax exemption:
    • imported raw materials and machinery for SMEs,
    • food industry for the export and domestic market
    • industries that use marine resources

 

           

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Agreements

Let me give you a real-life example that inspired me to write on this topic, A is a vendor of B and agrees to sell to B thousand pieces of carton boxes every month for B’s logistic service. There were no specifications of the carton boxes in this contract. This agreement is a void one. B had to send series legal notices to B for quality deterioration, but B couldn’t win the case since the agreement was void. In this blog, we will quickly look into different scenarios under which an agreement is considered not a void one, and is legally enforceable.

 

A legally valid Agreement be:

  • it is expressed in writing and registered under the law
  • it is a promise to compensate, wholly or in part, by the parties
  • Agreement should not restrain parties from exercising a lawful profession, trade or business of any kind.
  • Clauses should be certain and understandable
  • Agreement should not restrict parties from enforcing his or her rights

 

To give a couple more instances, where agreement in consideration is void:

  • A promises, for no consideration, to give to B Rs. 10,000. This is a void agreement.
  • A promises to give his son, B, Rs. 10,000. A puts his promise to B into writing and registers it. This is a contract.
  • A finds B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract.
  • A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a contract.
  • A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. This is a contract.
  • A agrees to sell a house worth Rs. 1C for Rs. 10L. A’s consent to the agreement was freely given. The agreement is a
  • contract notwithstanding the inadequacy of the consideration.
  • A agrees to sell a house worth Rs. 1C for Rs. 10L. A denies that his consent to the agreement was freely given. The inadequacy of the consideration is a fact which the Court should take into account in considering whether or not A?s consent was freely given
  • A agrees to sell to B a hundred tons of oil. There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.
  • A agrees to sell to B one hundred tons of oil of a specified description, known as an article of commerce. There is no uncertainty here to make the agreement void.
  • A, who is a dealer in cocoanut-oil only, agrees to sell to B “one hundred tons of oil”. The nature of A’s trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of cocoanut-oil.
  • A agrees to sell to B “all the grain in my granary at Ramnagar”. There is no uncertainty here to make the agreement void.
  • A agrees to sell B “one thousand maunds of rice at a price to be fixed by C”. As the price is capable of being made certain, there is no uncertainty here to make the agreement void.
  • A agrees to sell to B “my white horse for rupees five hundred or rupees one thousand”. There is nothing to show which of the two prices was to be given. The agreement is void

 

 

 

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Accounting, Annual Returns, RoC Filing

“Annual Declaration” means a declaration required to be lodged by a Limited Liability Partnership (LLP) under section 68 of LLP Act. Annual returns statement contains of the book of accounts accompanied by documents as required in the declaration. Given that the dates are getting closer, we have written this blog to guide you LLPs with the annual returns filing.

 

Conditions for Compulsory Auditing of Accounts

What is this? Well, LLPs, if records a turnover exceeding INR 40L or whose contribution exceeds INR 20L  need to get their accounts audited.

How should it be done? LLPs are required to follow these procedures:

  • Only a CA can be appointed as auditor
  • Appointment should be made anytime before the end of the first financial year
  • Remunerations or role played by partners in appointing or removing a partner is guided by the LLP Deed

Note: If LLP annual turnover is more than INR 5C or contribution is more than INR 50L, the annual return should be certified by a company secretary too.

Filing Annual Return – Form 11

What is this? Within 60 days of the end of financial year, LLPs registered till the 30th September 2017 are subject to file annual return statement with Registrar in Form 11. An LLP which fails to comply with annual returns filing will be fined of not less than INR 20K but which may extend to INR 5L. If your LLP is registered on or after the 1st October 2017 then you do not require to file LLP Annual Return in the year 2018.

How should it be done? Annual return reporting in form 11 accompanied by a certificate from a CS in practice should be filed, only if LLP turnover exceeds INR 5C  or contribution exceeds INR 50L. In all other cases, partners can file the form themselves.

When should it be done? By 30th May, 2018

Filing of Statement of Account and solvency – Form 8

What is this? LLPs are required to file form 8 with the registrar, within 30 days from the end of six months of the financial year. Form 8 or Annual Statements for the year 2018 is applicable to those LLP which is registered until the 30th September, 2017.

How should it be done? Annual return reporting in form 8 accompanied by a certificate from a CS/ CA in practice should be filed.

When should it be done? By 30th October, 2018

Note: Digital Signatures of any 2 Designated Partners would be required for filing both forms purposes.

Penalty for non-filing of annual returns:

  • Delay in Form 8 filing – INR 100 per day till it is filed
  • Delay in Form 11 filing – INR 100 per day

Penalty for the false statement:

  • Imprisonment up to 2 years
  • Fine up to INR 5L, not less than INR 1L
  • The registrar may summon partners to appear in the court

Quick FAQs:

Q1. Do LLPs that did no business in the previous financial year have to file annual returns?

Ans: Yes, file Nil-Returns.

 

Q2. Can an LLP be closed without completing annual returns?

Ans: No, to wind up an LLP you need to file the pending returns accompanied by the accumulated fine.

 

Q3. What are the documents required?

  • Incorporation Certificate
  • Books of Account
  • Minute Book
  • Details of Change in Partners
  • Supplementary LLP Agreement (optional)
  • DSC of two directors
  • Certificate by Company Secretary (optional)

 

 

 

 

 

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