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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.


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.


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!”





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!” 


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
  • 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.






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





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





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)







Start up Lessons

There are about 23% of aspiring entrepreneurs who shy off from starting up due to legal complexities. In fact, on Wazzeer Counsel application, we have heard many war stories of startups that had to spend hugely to compensate for ignoring compliance. And with the growing idea of “any legal problems can be solved later”, some entrepreneurs decide to take a risk by not executing compliance works duly. Most entrepreneurs who do not give enough time to fundamental stuff like accounting and bookkeeping in place, have ended up spending thousands to go back and fix the issues. To give another example, any startup would agree that finding the right co-founders for the business is extremely difficult, there are quite a number of startups that do not vest equity for a reasonable duration of time and are forced to file lawsuits against that co-founder who drops out.

Through this series of blog, we at Wazzeer are trying to comfort young and aspiring entrepreneurs with legal, accounting, and compliance ecosystem. On a voyage to help entrepreneurs understand how law is also a tool that can help one to create and capture value. In this episode, we will do our learning from the friend of farmers, happily funded, and successfully growing – BigHaat.

BigHaat (2015), a fast-growing startup that has created an online marketplace that provides a wide choice of quality inputs to farmers at their doorstep.

Raj Kancham, Cofounder of BigHaat is here with us to share his experiences in dealing with one of the tough subjects in startup career. Raj, JNU Alum ever since his graduation has been directly or indirectly contributing to the society, and BigHaat is the dedicated one. He has over 19 years of experience in Operations, Business Development, and Software development.

What inspired you to start BigHaat?

To answer that, I need to go back to my college days, it was late 80s and early 90s, I studied in the rural part of Andhra Pradesh, I can say that the worry for rain persisted then too, but farmers had other serious problems like lack of seeds, pesticides availability, and accessibility. It was in 2012, that dots started to connect. I was working for Nokia Life as a Program Manager, Nokia Life – a platform which gives information on many domains. One of the main domains is agriculture. Farmers can subscribe to this service to get information on market price for the crops or other farm commodities and weather information. If you remember, Newspapers and TV channels used to provide this information across their platforms too, the very same information was a paid service in Nokia life. We think that everybody including Farmers read Newspaper and watches TV, but it doesn’t happen that way, reason is they go to work at 5 am come back by 8-8.30pm and go to sleep, news channels broadcast news after 9 pm in the night or after 6 am in the morning, though these channels provided accurate information that went of no use to farmers. This made me realize that this is a serious problem that nobody really cares about, with that thought I left to Singapore to carry my corporate job. My last corporate job was in Singapore, 2013 Dec to 2015 May, my thought process developed persistently in my mind, In the meantime, one of my classmates, Sateesh Nukala was trying to solve a problem in irrigation aspects of agriculture, we jointly started working on the research.

Sateesh and I were convinced that we had to do an extensive research, so we decided to go to the University of Agriculture and talked to professors. By last qtr. of 2014, we inferred that there are issues in the input space, starting from sowing to harvest. I was still in Singapore and had a team of 2 people. Every 3 months I used to come to India and visit rural Karnataka and did a lot of talking to farmers. With all the experience and learning that we were gaining, we decided to take the next big leap, startup.

Then we made a list of companies to whom we can talk to, we nailed down one. We thought digital platform may not be a complete solution, so we thought we will put up a missed call CRM system. Our missed call system seemed to be a hack for us, we had customers call us and the customer support team would call back to these farmers and arrange the inputs. People can reach us through direct phone, missed call and people can go to any internet center and they can order, they can even install the Android mobile app to place the order.  

In May 2015, within 4 months of launch, we did sales of around INR 6L. Profit was approximately in the range of 10%-12%. Our very first partner was Pioneers, they are number one in maize and hybrid rice seeds, likewise, one by one I started cracking. Ankur has invested around half a million and right now we are about to close CDCA funding of 3.5 million. As far as the growth is concerned, we could actually pull out a good growth which was essential for faster business expansion, in the last financial year we made a revenue of around INR 10 Crores. 

Can you describe the challenges you faced as the company grew big?

If you see the challenges, challenges are not less, it is more about the growth. Everybody thinks that agri-business is something that anybody can do. At one point of time in 2006 – 2007, everybody wanted to become a software engineer. Everybody thought that they can do software engineering, Similarly, every startup thinks that okay I don’t have any idea so let me do something in agriculture. That culture has started which is again a dangerous thing. But one important thing luckily I can say is, venture capitalist companies are scrutinizing startups, especially when it comes to agritech. There is a good number of entrepreneurs who think that sitting in the boardroom one can see entire India, which is not true. You have to make your hands dirty and you have to go talk to people, work on the ground. Until and unless you work with farmers, nothing really happens. Recently one of my companies got rated as the best value chain agri startup in India and we received the award from Mr. Suresh Prabhu, Minister of Commerce and industry.

One of my advice to entrepreneurs planning to start up in Agriculture sector is, spend time with farmers, stay with them for 4-5 days, and then if you think you can do something, then come back and put your business plan, otherwise, don’t do anything just go back and do your job. If you want to work on issues anything related to the bottom of the pyramid, you have to stretch it out. You have to know what the farmer thinks.

Did you ever think of a plan B or was there already a plan B when you started BigHaat?

Honestly, I don’t believe in plan B. I do my risk assessment when I take up any job. If at all there was one, my plan B would have something to do in Agriculture. Maybe instead of doing it for too many people, I would have done something on a 500 acres farm because I know what is good.  I would have produced all organic and then export it.. You can say my plan B is also agriculture, nothing else.

While incorporating your business, what all legal challenges did you face?

In India, there is a misconception of single window or one day or two days kind of a thing, which is not true. I have exposure to compliance required to start companies in the US, Singapore, and Australia, in Singapore, if you have all the documents, if you apply for incorporation in the morning, by evening you’ll have all your papers. Next day you can even put up the board and start your business. In the US, it takes less than a week to have the company registered. In Australia, within 48 hours you can have the company registered. In India, there is no timeline like that, which really pinches.

Stating my own experience, a Retail wing of BigHaat is called as AgroHaat LLP. We tried to register this company in Rajasthan, the entire process took 65 days. I got fed up and moved to Bangalore, I hired a CA referred by a local friend of mine. The CA got the company registered in 4 days. On the 4th day, I had PAN number in my hand, I had paid only Rs. 4000/- extra when compared to Rajasthan, it was 14000, in fact, I paid him 2000 more because I was very happy with the professionalism he portrayed. These examples show that there is a huge difference in how same work is delivered by different people in different parts of the country. The entire ecosystem is unorganized.

People say the availability of information is abundant online, you can follow this or that and what not, but the fact is there is no reliable guidance at all. Every entrepreneur must reinvent a way. That is the bitter truth. Legality wise there are so many issues, say you can’t start a company in a day, to get a PAN card you have a hundred things to be done. Due to all the uncertainties involved, entrepreneurs are struggling to start their business as and when decided.

Do you think the CA that you hired in both the cases were very different, the approach, the way they handled the project?

Accountability is the biggest thing, which is something I observed to be missing in most cases. To give you an example, I had outsourced a work to a CA firm, the CA was a well-experienced one that had a team of interns working under him, he had given it to them. His objective was that the interns will learn out of the project, but I don’t agree with them doing at the cost of customer’s time, that’s lethargic, very lethargic. I might sound rational, maybe that’s the way things work in Rajasthan and in remote also, many things don’t work the way we thought.

I have noticed the same attitude with some lawyers, when they get a case they will enthusiastically collect take the first round of installment and they will be very happy, they will put 3-4 days effort and then their interest slowly it dilutes. I have seen the pain, every day I had to call and follow-up, most of the times I received something negative. Especially during the days of fundraising, there is a huge dependency on legal and accounting compliance part, because investors invest only if you have a legal entity to sign up with.  And if you say that I don’t have a legal entity, they reply to you saying things like ‘why did you initiate the discussion without having your compliance requirement met?’

Not just that, to give you another example, one of my very close friend, she was also my colleague in GE and went to Harvard to carry higher studies, wanted to something for the children in India. She and her husband who also holds an impeccable career – IIT, Harvard, and holds 6 patents, decided to teach people on STEM. In fact, they were the first one to think about it. In 2016, the couple came to India, leaving behind their handsome paying job and luxurious house in the US, they wanted to teach STEM to the people and because of all these legal tangles and local politics, they got fed up and gave up everything in 9 months and went back to US.

My next question is when you had all the funding flowing in did you have an idea of the list of compliances?

Over the years you generally get an idea of how things work, when it must be done and from whom it must be done.  During the first round of funding, though we were compliant with statutory compliance, we faced some big compliance hurdles due to these hurdles instead of getting funds in one month we got the money after four months. What really happened was, the way we maintained the books was different from what our investors wanted, So, we took lot of time. The due diligence needed 3 months. Finally, we could complete it the way they wanted, but it was tough.

I would advise young entrepreneurs, no matter what maintain your books, small amount or big amount, anything that’s going out from the firm and anything that’s coming into the firm, make an entry, proper entry of all the bank transactions that you do. When you are raising funding, you can’t tell investors that on 2016 November you paid 100 to somebody for whatever reason. So, you need to have a disciplined accounting entry made on a daily or weekly basis. Make sure that you update it. Don’t give a chance or room for a one-month update or two-month update, it will just not happen.

That was a lesson I learned, now, for my new company as soon as I registered first thing I did was to hire an HR and Finance personnel. So that all the statutory compliance is dealt with a continuity.

What is your message for aspiring entrepreneurs who shy off from starting due to legal hitches?

First thing is, if you believe in your idea, just go for it, it could be hundreds of things that come in the way that might demotivate you, but always remember the very reason why you started, why you are there. If you keep reminding yourself why you are there and why you started, many, many things will go off from your way.

Second thing is, always question yourself and use the theory of negation. Why can’t you? Why some other guy? When you ask these questions, you will find a way, or you’ll find a solution to yourself. Just ask yourself, the answer will be there within you and it’s like either you did a mistake and there is a systematic problem.

If there is a systematic problem, head down, try to solve it and go. If it’s your problem, you fix it fast. But find it out if it is controllable or not controllable. Say today central government comes with a rule that startups should have Aadhar card. This situation is uncontrollable, it is a compliance issue. You may think that why I need Aadhar card for my company, I am giving my directors’ card. You might crib, cry for it, because you know how much effort you had put to get your own card, waiting in a long queue, but there is no point thinking over it that’s what I want to tell. The takeaway from this example is very simple, things that you can control and what matters is only 4%. You work only on that. That 4% will account for you to be successful. And when you are working on it, keep your focus and persistence up. That’s it.


Thanks for your valuable time, Raj. Starting from the story, though the experiences you shared, and the advice you offered. I am sure the objective behind these interviews is justified.

Absolutely, I am with you. Let me know if you need any other details also I don’t mind contributing to this cause. I like this. I know this. As I told you, many guys who are capable are shying away for this main reason. Let me know if you need any further help or something. Sure, may the best happen to you and your startup. 





“Failure to implement good governance procedures has a cost beyond mere – regulatory problems. Companies that do not employ meaningful governance procedures will have to pay significant risk premium when competing for scarce capital in today’s public markets…” – Chairman Committee on Corporate Governance, SEBI

Can businesses focus on value creation by taking care of compliance obligations? Well, the answer is yes, every move with a strategy is the best foot forward – formal compliance frameworks with well structured, documented and demonstrable compliance structures. In this blog, we will be looking into mandatory compliances that businesses, based on the entity type should adhere to.

Private Limited Company:

  1. Audit of Accounts: Every Private Limited Company is required to prepare its accounts and get it audited by a Chartered Accountant at the end of the Financial Year. The auditor will provide an Audit Report and the Audited Financial Statements which is supposed to be filed with a registrar.


  1. Filing of Annual Return (Form MGT-7): Every Private Limited Company is required to file its Annual Return within 60 days of holding of Annual General Meeting(AGM). Annual Return will be for the period 1st April to 31st


  1. Filing of Financial Statements (Form AOC-4): Every Private Limited Company must file its Financial Statements (Balance Sheet and statement of Profit and Loss Account) and Director Report in Form AOC-4 within 30 days of holding of Annual General Meeting.


  1. Tax Audit: Audit is required in case of the Private Limited Companies having turnover more than 2 Crore.


  1. Income Tax Returns: The due date for filing income tax return in case of a company where an audit is required is September 30th, 2018 and where the audit is not required, the due date is July 31st

Limited Liability Partnership (LLP):

  1. Filing of Annual Return in Form 11: Every LLP must file its Annual Return to ROC by 30th May of every year. If the firm fails to file the same, it will have to pay a penalty of INR 100 per day until it is filed.


  1. Filing of Annual Accounts and Solvency in Form 8: Every LLP must file its Annual Accounts with ROC by 30th Oct 2018. If the firm fails to file the Annual Accounts, it will have to pay a penalty of INR 100 per day until it is filed.


  1. Tax Audit: A LLP is not required to get its accounts audited unless in case of an LLP whose annual turnover exceeds INR 40 lakhs or whose contribution exceeds INR 25 lakhs. In this case, the accounts must be audited by a Chartered Accountant.


  1. Income Tax Returns: The due date for filing income tax return in case of an LLP where an audit is required is September 30th, 2018 and where the audit is not required the due date is July 31st


One Person Company (OPC):

  1. The Annual Return in Form MGT-7: Just like a Private Limited Company, an OPC is also required to file Form MGT-7. This form contains current information about the directors and shareholders of the OPC. The due date of filing the annual return with the relevant ROC is within 60 days from the date of Annual General Meeting.


  1. The Financial Statements in Form AOC-4: This is to be filed with relevant ROC, on or before 30th October 2018. This form contains information about all monetary transactions and finances made by the OPC in that particular financial year. The annual financial reports contain only the following particulars in case of OPC – Balance Sheet, Profit and Loss Account, Auditor’s Report, and the Consolidated Financial Statement.


  1. Income Tax Returns in Form ITR-VI: This is to be filed with the Income Tax Department, on or before 30th September2018. Tax audit will be required if the annual turnover of the OPC is more than INR 1 Crore.

Partnership Firm:


  1. Tax Audit: In case of partnership firm that has a sales turnover exceeding INR 2 Crore, a tax audit is required and it should be performed by a practicing Charted Accountant.


  1. Income Tax Returns: Income tax return should be filed by a partnership firm by 31st July 2018 if the audit is not required and by 30th Sep 2018 if the audit is required.


Sole Proprietorship:


  1. Tax Audit: Even for Sole Proprietorship tax audit is required if the firm’s turnover exceeds INR 2 Crore.


  1. Income Tax Returns: Sole proprietorship must file income tax return before 31st July 2018(where the audit is not required) and before 30th Sep 2018(where the audit is required).