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Secretarial Compliance, Share Certificate

What are ‘Shares’? Shares are units of ownership interest in a company that provides for an equal distribution of any profits, if any are declared, in the form of dividends. This blog typically is going to walk you through the stuff that is Just the right things to know about Shares.


Two major types of shares are


(1) Ordinary shares (common stock), which entitle the shareholder to share in the earnings of the company as and when they occur, and to vote at the company’s annual general meetings and other official meetings.


(2) Preference shares (preferred stock) which entitle the shareholder to a fixed periodic income (interest) but generally do not give him or her voting rights.



Different Kind of shares


  1. Equity share


Equity shares will get dividend and repayment of capital after meeting the claims of preference shareholders. There will be no fixed rate of dividend to be paid to the equity shareholders and this rate may vary from year to year. This rate of dividend is determined by directors and in case of larger profits, it may even be more than the rate attached to preference shares. Such shareholders may go without any dividend if no profit is made. The investors of equity shareholder are the risk taker. Equity shareholder has stake in the company and control in terms of voting power in their hand, they can change the decision of the management if they think that the decision will not give benefit to them in long term.


  1. Preference share


Preference shares, more commonly referred to as preferred stock, are shares of a company’s stock with dividends that are paid out to shareholders before common stock dividends are issued. If the company enters bankruptcy, the shareholders with preferred stock are entitled to be paid from company assets first. Most preference shares have a fixed dividend, while common stocks generally do not. Preferred stock shareholders also typically do not hold any voting rights, although under some agreements these rights may revert to shareholders that have not received their dividend. Preferred shares have less potential to appreciate in price than common stock.


Some preferred stock is convertible, means it can be exchanged for a given number of common shares under certain circumstances. The board of directors might vote to convert the stock, the investor might have the option to convert, or the stock might have a specified date at which it automatically converts. Whether this is advantageous to the investor depends on the market price of the common stock. Preference shareholder enjoys the preferential rights as to dividend and repayment of capital in the event of winding up of the company over the equity shares are called preference shares. The holder of preference shares will get a fixed rate of dividend.


There are four types of preference shares:


(a) Cumulative Preference Share


If the company does no earn an adequate profit in any year, dividends on preference shares may not be paid for that year. But if the preference shares are cumulative such unpaid dividends on these shares go on accumulating and become payable out of the profits of the company, in subsequent years. Only after such arrears have been paid off, any dividend can be paid to the holder of quality shares. Thus a cumulative preference shareholder is sure to receive the dividend on his shares for all the years out of the earnings of the company.


(b) Non-cumulative Preference Shares


The holders of non-cumulative preference share no doubt will get a preferential right in getting a fixed dividend it is distributed to quality shareholders. The fixed dividend is to be paid only out of the divisible profits but if in a particular year there is no profit as to distribute it among the shareholders, the non-cumulative preference shareholders, will not get any dividend for that year and they cannot claim it in the next year during which period there might be profits. If it is not paid, it cannot be carried forward. These shares will be treated on the same footing as other preference shareholders as regards the payment of capital is concerned.


(c) Redeemable Preference Shares


Capital raised by issuing shares, is not to be repaid to the shareholders (except buyback of shares in certain conditions) but capital raised through the issue of redeemable preference shares is to be paid back to the company to such shareholders after the expiry of a stipulated period, whether the company is wound up or not. A company cannot issue any preference shares which are irredeemable or redeemable after the expiry of a period of 10 years from the date of its issue. It means a company can issue redeemable preference share which is redeemable within 10 years from the date of their issue.


(d) Participating or Non-participating Preference Shares


The preference shares which are entitled to a share in the surplus profit of the company in addition to the fixed rate of preference dividend are known as participating preference shares. After the payment of the dividend, a part of surplus is distributed as dividend among the quality shareholders at a particulate rate. The balance may be shared both by equity shareholders at a particular rate. The balance may be shared both by equity and participating preference shares. Thus participating preference shareholders obtain the return on their capital in two forms (i) fixed dividend (ii) share in excess of profits. Those preference shares which do not carry the right of share in excess profits are known as non-participating preference shares.


  1. Bonus share


Bonus shares are additional shares given to the current shareholders without any additional cost, based upon the number of shares that a shareholder owns. These are company’s accumulated earnings which are not given out in the form of dividends but are converted into free shares.


The basic principle behind bonus shares is that the total number of shares increases with a constant ratio of a number of shares held to the number of shares outstanding. Companies issue bonus shares to encourage retail participation and increase their equity base. When the price per share of a company is high, it becomes difficult for new investors to buy shares of that particular company. Increase in the number of shares reduces the price per share. But the overall capital remains the same even if bonus shares are declared. A bonus issue is usually based upon the number of shares that shareholders already own. Bonus shares are issued:-


  • to capitalize a part of the company’s retained earnings


  • for conversion of its share premium account, or


  • distribution of treasury shares.


  1. Sweat Equity share


Sweat equity shares refer to equity shares given to the company’s employees on favorable terms, in recognition of their work. It is one of the modes of making share-based payments to employees of the company. The issue of sweat equity allows the company to retain the employees by rewarding them for their services. Sweat equity rewards the beneficiaries by giving them incentives in lieu of their contribution towards the development of the company. Further, it enables greater employee stake and interest in the growth of an organization as it encourages the employees to contribute more towards the company in which they feel they have a stake.


  1. Employee stock option


An employee stock option (ESO) is a stock option granted to specified employees of a company. ESOs offer the options holder the right to buy a certain amount of company shares at a predetermined price for a specific period of time. An employee stock option is slightly different from an exchange-traded option because it is not traded between investors on an exchange.


Ways to issue shares:


Some of the major methods of issuing corporate securities are as follows:


  1. Public Issue or Initial Public Offer (IPO):

Under this method, the company issues a prospectus to the public inviting offers for a subscription. The investors who are interested in the securities apply for the securities they are willing to buy. Advertisements are also issued in the leading newspapers. Under the Company Act, it is obligatory for a public limited company to issue a prospectus or file a statement in lieu of prospectus with the Registrar of Companies.


Once subscriptions are received, the company makes allotment of securities keeping in view the prescribed requirements. The prospectus must be drafted and issued in accordance with the provisions of the Companies Act and the guidelines of SEBI. Otherwise, it may lead to civil and criminal liabilities.


Public issue or direct selling of securities is the most common method of selling new issues of securities. This method enables a company to raise funds from a large number of investors widely scattered throughout the country. This method ensures a wider distribution of securities thereby leading to diffusion of ownership and avoids concentration of economic power in a few hands.


However, this method is quite cumbersome involving a large number of administrative problems. Moreover, this method does not guarantee the raising of adequate funds unless the issue is underwritten. In short, this method is suitable for reputed companies which want to raise large capital and can bear the large costs of a public issue.


  1. Private Placement:

In this method, the issuing company sells its securities privately to one or more institutional brokers who in turn sell them to their clients and associates. This method is quite convenient and economical. Moreover, the company gets the money quickly and there is no risk of non-receipt of minimum subscription.


The private placement, however, suffers from certain drawbacks. The financial institution may insist on a huge discount or other conditions for the private purchase of securities. Secondly, it may not sell the securities in the market but keep them with it.


This deprives the public a chance to purchase securities of a flourishing company and there may be a concentration of the company’s ownership in a few hands. The private placement is very suitable for small issues, particularly during a depression.


  1. Offer for Sale:

Under this method, the issuing company allots or agrees to allow the security to an issue house at an agreed price. The issuing house or financial institution publishes a document called an ‘offer for sale’. It offers to the public shares or debentures for sale at a higher price. The application form is attached to the offer document. After receiving applications, the issue house renounces the allotment in favor of the applicants who become direct allottees of the shares or debentures.


This method saves the company from the cost and trouble of selling securities directly to the investing public. It ensures that the whole issue is sold and stamp duty payable on the transfer of shares is saved. But the entire premium received is retained by the offerer and not the issuing company.


  1. Sale through Intermediaries:

In this method, a company appoints intermediaries like stock brokers, commercial banks, and financial institutions to assist in finding the market for the new securities on a commission basis. The company supplies blank application forms to each intermediary who affixes his seal on them and distributes it among prospective investors. Each intermediary gets the commission on a number of security applications bearing his seal. However, intermediaries do not guarantee the sale of securities.


This method is useful when a company has already offered 49 percent of the issue to the general public which is essential for a listing of securities. The pace of sale of securities may be very slow and there is uncertainty about the sale of a whole lot of securities offered through intermediaries. But this method saves the administrative problems and expenses involved in direct selling of securities to the public.


  1. Sale to Inside Coterie:

A company may resort to subscription by promoters and directors. This method helps to save the expenses of a public issue. Generally, a percentage of the new issue of securities is reserved for subscription by the inside coterie who can in this way share the future prosperity of the company.


  1. Sale through Managing Brokers:

Sale of securities through managing brokers is becoming popular particularly among new companies. Managing brokers advise companies about the proper timing and terms of the issue of securities. They assist companies in pre-issue publicity, drafting and issue of the prospectus and getting stock exchange listing. They also enlist the support and cooperation of share brokers.


  1. Privileged Subscriptions:

When an existing company wants to issue further securities, it is required to offer them to existing shareholders on prorate basis. This is known as ‘Rights Issue’. Sale of shares by rights issues is simpler and cheaper as compared to sale through the prospectus.


But the existing shareholders will subscribe to the new issues only when the past performance and future prospects of the company are good. An existing company may also issue Bonus Shares free of charge to the existing shareholders by capitalizing its reserves and surplus.



Wazzeer is vouched by Entrepreneurs as the most reliable Legal and Accounting Partner. We would be super excited to help you. Let’s Connect! 🙂


Legal, Share Certificate

Ideally Shareholders should keep this document safe, but things going missing is rare but plausible. This article talks about how entrepreneurs should act when your share certificates goes missing. The certificates act as physical proof of the ownership of the shares and transfer of a share certificate generally was legally recognized as transfer of the equivalent amount of company stock.


Learning from a real case: Smt. Kulwant Kaur vs Unitech Ltd on 13 October, 2015



  • Kulwant kaur is a original allottee of 100 shares
  • Kulwant claimed that in June, 2006, the original sharecertificate were misplaced by her
  • Kulwant informed the police about the misplacing of the sharecertificate.
  • Kulwant made repeated requests to the company board for issuance of duplicate sharecertificate,
  • However, the company paid no heed to her request,
  • The present suit is filed for directions that the company board be directed to issue the duplicate  sharecertificates to Kulwant.
  • Kulwant also prayed that the company board shall be restrained from the alienating, selling or transferring the 100 shares certificatesto any other indented purchaser.
  • Kulwant had details of document registered folio no. 9354



  • After hearing the submissions of both the parties and after going through the pleadings, documents and evidence, it is observed by the Court that the main ground for seeking the direction from the Court is that the original sharecertificate have been lost.
  • As per Section 84(2) of Company Act, 1956 is the relevant provisions which deal with the issuance of duplicate share certificate.



  • It was clear that the Share holders usually trade shares through share broker and after receiving the consideration amount from share broker share holder hands over the share certificate to the share broker along with signed blank transfer deed. 
  • It was also admitted by Kulwant that she was not aware as to whom the share broker further sell share certificate
  • The abovementioned admission on the part of the plaintiff comes within the ambit of existence of course of business under Section 16 of Indian Evidence Act. 


  • The combined effect of facts that the police complaint is very vague and has not provided anything as to at what time or on what date or as to where the documents have been lost, Kulwant has admittedly not made any further complaint to any police or any authority when admittedly a person called her and conveyed that he had original share certificates with him .
  • Kulwant has suppressed the same fact from the court and also has not made that person as party to the suit despite the fact that the defendants revealed the name of that person who is having the original share certificates with him, gives a prima­facie indication that the share certificates might have been handed over to some share broker after taking consideration and the present suit has been filed against the company to obtain duplicate share certificate without any basis.

We at Wazzeer have been helping entrepreneurs in dealing with many such complications for years now. We would be happy to serve you and support you in any legal or accounting or compliance matters. Remember to ‘Get a Wazzeer’!


Agreements, Copyright, IP

Startups should consider several factors when designing a data protection plan for storing and protecting digital data. In all cases, companies should develop a data protection plan that protects disclosure or inappropriate use of confidential data. Even in the worst cases like data theft, you could protect your business if and only if the business abides by legal precautions to protect data. In this blog we will talk about the 12 Ways Startups can protect digital data


Startups can protect digital data in 12 Ways:

  1. Add firewalls, anti-virus software and other layers of protection to your business servers and computers.

There’s no such thing as too much protection.  Add redundancy to your business’ security systems. Hackers, and other black hats who roam the Internet, are looking for easy targets. Using multiple layers of security software makes accessing client information more difficult, so hackers quickly move on to the next website – the easier target.

  1. Choose a web host that values your business security.

There are hundreds of web hosts. These businesses provide customer and client access to your company website. They host your website on giant servers, and provide varying degrees of server-side protection.

Server-side protection is based in the web host’s operations centre, and includes things like hard-wired firewalls, security cameras focused on the server room, anti-virus and anti-spyware software, and other forms of protection. However, you may still find your business under attack from black hats mining for data on your host server.

How? If your company uses shared hosting services, your website may share the same server as a few thousand other websites. This leaves your website vulnerable to cross-side server attacks – attacks in which a hacker opens an account to gain access to other websites that share the same host server.  Responsible web hosts protect your business from cross-side server attacks using software to monitor server activity. However, as a business owner, you may opt for higher levels of security.

A virtual private server (VPS) partitions your website, creating a wall between you and the other websites that share the same server. VPS costs a little more than shared hosting, but your clients’ sensitive data is also a lot safer.

Another alternative? Instead of a shared hosting account, or VPS account, your company can open a private server account – an account in which your website and your data is maintained on a separate server, all by itself. Private servers are pricier, but a lot safer than a shared hosting account.

When shopping for a web host, ask about security measures. Sync up your office-based security software with server-side software to get maximum benefit.

  1. Limit employee access to customer data.

Password-protect office computers and servers to limit the number of people who have access to client data. Change passwords when employees leave the company. This protects against unhappy ex-employees accessing your customers’ sensitive data, stealing it, trashing it, or causing other problems that harm your company’s reputation.

  1. Lockdown all computers.

Laptops, desktops, tablets, PDAs, servers – all store information that can be stolen and used by competitors or hackers to ruin your reputation. If you use a cleaning service for the office, all it takes is a knowledgeable hacker to slide an unlocked laptop into a trash bin and smuggle it out of the office with all your data intact. Lock up your hardware or chain it in place to prevent this form of analog data theft.

  1. Keep up with upgrades.

The software used to block unauthorized access to digital data is routinely updated and upgraded to protect against the latest computer virus. You can purchase the best anti-hacker software available, but if you don’t update that software regularly, the bad guys may be able to find a back door with a new hacker program. Hackers are always looking for new ways to access data. Keep your security software up-to-date to get the most protection.

  1. Notify clients and customers when data has been compromised.

If you know your office server has been hacked, and data stolen, notify customers and clients ASAP. Often, customers can take steps to protect themselves. They can notify their banks, for example, close accounts that have been jeopardized, and open new accounts with new access codes.  It’s just good business. It’s also the law.

  1. Hire a professional.

You may know someone who has a little experience with computer security, but chances are, they won’t be current on the latest methods used by hackers and crackers. Hire an IT security professional to monitor your office server and business activity to ensure that customer information remains safe.  These security professionals are highly-trained professionals who may charge a lot, but can you put a price on the trust of your loyal customer base?

  1. Restrict Access to Shared Data

When you create a read-only shared data page to share your results with others, you can password-protect the page to restrict access to only those that know the password.

If you’re on a team plan, you can share surveys with people on your team to give them access to the survey and results, which they can only view when they’re logged in to their account. You can also use the Library feature to securely store and share brand assets, like images and survey templates, with everyone on your team plan.

  1. Exporting survey results

If you download survey results to your own computer, please ensure that those downloaded files are handled appropriately since they contain protected information. We suggest that you secure those files by encrypting them and only transferring them under an encrypted connection.

  1. Sharing surveys with collaborators

When you share a survey with others, the users with whom you decide to collaborate will have access to view and edit that survey, including any survey responses you’ve collected. Remember to use this feature with people who are authorized to work on that survey.

  1. Transferring a survey to another account

If you must transfer a survey to a different Survey account, ensure that you are certain that the receiving account is the one you intend to send it to. To transfer a survey, you must enter the exact username of that account. The transfer process cannot be undone without action by the receiving account holder.


  1. Data Protection under Copyright Act

                                                                                                                                                                                                                    Indian Copyright Act, 1957 provides for database protection under Section 2(o) which defines “Literary Work”. Therefore, any data which comes under the scope of Section 2(o) is protected under the Copyright Act. Some of the leading cases related to data protection under copyright laws pertains to holding copyright in ‘client list’.


Examples of organizations that faced issues under data protection- Burlington Home Shopping Pvt. Ltd. vs. Rajnish Chibber [1995 PTC (15) 278] and Diljeet Titus, Advocate vs. Alfred A. Adebare and Ors.[130 (2006) DLT 330].

In Burlington case, the issue was whether a database consisting of compilation of mailing address of customers can be subject matter of a copyright to hold the defendant liable for infringement of the Plaintiff’s Copyright. The Court answered the question in affirmative and held that compilation of addresses developed by anyone by devoting time, money, labour and skill amounts to a literary work wherein the author has a Copyright. Accordingly, the Defendant was restricted from using the list of clients/customers included in the database exclusively owned by the Plaintiff.

Summary of the case law

Burlington Home Shopping Pvt. Ltd. v. Rajnish Chibber & Anr.

Before the Hon’ble High Court of Delhi at New Delhi

1995 PTC (15) 278

Decided on: 20.10.1995

Plaintiff was a mail order service Company. The business of the Plaintiff was to publish mail order catalogues dealing with consumer items which were posted to the select list of Plaintiff’s clients. A major investment in this regard was compilation of client list/customer database. Plaintiff had developed a list of clientele/customers database over a period of three years which was always in the gradual process of compilation. The Defendant was an employee in the Plaintiff Company. After leaving the employment of the Plaintiff, Defendant started his own business like as that of the Plaintiff. He had also managed to get a copy of database of the Plaintiff and started to use the same for his own purpose.

Plaintiff’s Case

The database is an original literary work within the meaning of Section 2(o) of the Copyright Act, 1957 and the Copyright in the same vests with the Plaintiff and therefore any unauthorized use or substantial reproduction of the same is an act of infringement of Copyright of the Plaintiff under the Copyright Act, 1957.

Defendant’s Case

The database which the Plaintiff is referring to has been developed by the Defendant and therefore there is no infringement of Copyright.

The Questions, that came up for consideration before the Court was:

  1. Whether a database consisting of compilation of mailing address of customers can be subject matter of a copyright; and
  2. Whether the defendant can be said to have committed infringement of the Plaintiff’s Copyright.

Both the questions were answered by the Hon’ble Court in affirmative. The Court held that compilation of addresses developed by anyone by devoting time, money, labour and skill amounts to a literary work wherein the author has a Copyright. On comparison of the floppies seized from the Defendant it was found that substantial number of entries were comparable word by word, line by line, space by space. The database available with the Defendant was found to be substantially a copy of the database available with the Plaintiff. The Defendant was restricted to utilize the list of clients/customers included in the database exclusively owned by the Plaintiff.

In coming to the answer to the first question, the Hon’ble Court relied on Section 2(o) which defines ‘literary work’, Section 2(y) which defines ‘work’, Section 14 (Exclusive Rights), Section 17(c) (First ownership in a contract for service) of the Copyright Act, 1957 and on the following authorities about Copyright which reiterated the legal proposition that the Compilations, like brochures, trade catalogues, client lists are capable of protection as literary works. Other than this, client list is also protected under the law relating to confidential information and trade secret.

Wazzeer is vouched by Entrepreneurs as the most reliable Legal and Accounting Partner. We would be super excited to help you. Let’s Connect! 🙂


Agreements, MoU, MoU

Before we talk about MoU, I will quickly help you distinguish between Contract and MoU. A contract is a legally enforceable agreement between two or more parties that creates a legal obligation to do (or not do). Most commonly, contracts involve the exchange of promises. Another key characteristic of a contract is that if one of the parties breaches the contract they are legally punishable. For example, an LLP Agreement is one such Agreement, there are clauses in this agreement that abides the partners to legally abide by. Without a further due, this article will help you in required planning to enter a MoU.

Memorandum of understanding (MOU), similar to Contract, is an agreement between two or more parties. Unlike a contract, however, an MOU need not contain legally enforceable promises.

For Example, Company X is negotiating with company Y on a business deal, company XZ does not want to loose the deal but needs time to do due-diligence. Both the parties enter an MOU.

MOU may outline the terms of an agreement but state that each party’s responsibilities are only enforceable “in the event that the parties’ governing boards decide to enter a joint use agreement.”

For Example, Company X has responsibility of enforcing the MOU by September 2018

MoU typically addresses expectations and responsibilities of each of the parties such as: (1) who bears responsibility for the costs of maintenance and repairs, (2) insurance and liability, (3) staffing and communications, and (4) conflict resolution (5) Confidentiality

For Example, Directors of Company X cannot withdraw from the agreement, if it did the conflict may be resolved by described means.

A MoU can be exclusive or non-exclusive:

  • Exclusive MoU, parties are restrained from entering similar MoUs with any other entity during the term of that MoU.
  • Non-exclusive MoU, parties are free to enter discussions with other entities dealing with the same subject.

For Example, to avoid any competition of Company X approaching the company Y under negotiation, you can enter a MoU on an exclusive basis.

MoU Agreements ideally should consist:

  1. Title

The title of the MoU should reflect the nature of transactions between the parties.

  1. Identification of the Parties

The introduction of drafting a MoU and Agreement is same. Before discussing the structure and content of MoU, it is important to discuss the following principles:

(a) There is a mutual desire of both the parties of equal commitment to work together.

(b)The provisions of MoU should not be in conflict with any existing MoU or agreement entered by the organization between the parties and the third party.

(c)The language of MoU should be simple, unambiguous and open to review.

(d) MoU is a living document so it should be kept alive for review.

(e)Since MoU is a formal document it should be drafted with legal, technical and financial experts.

  1. Background/Recitals

A brief summary of circumstances leading to the MoU

  1. Legislative Context

The MoU should contain the legislative context i.e. the statement to the extent it is legally binding as well as relevance to any law to which the parties are subjected to.

  1. Purpose of MoU

This broadly defines what a particular MoU actually covers i.e probable outcome of MoU and societal benefits. It defines every area that both the parties are going to cover in the MoU.

  1. Consideration of an Agreement

The consideration of an agreement should be clearly stated. The agreement must mention of exchange of dollars/rupees or goods or mutual promises. If it is an international agreement, it would be good to mention the currency in which the consideration would be paid to avoid hassles including the conversion date as well.

  1. Joint Undertaking and Responsibilities

A statement describing the joint responsibilities and action of each party including the description of cooperative activities, description of the exchange of resources. Reference to relevant timelines, milestones, protocols of communication between the parties.

  1. Other Clauses
  • Termination of MoU
  • Cancellation Provisions
  • Dispute Resolution
  • IP Rights
  • Confidential information
  • Address for Notices
  • Review and Amendments
  • Indemnification Clause

 Wazzeer is vouched by Entrepreneurs as the most reliable Legal and Accounting Partner. We would be super excited to draft MoU for you. Let’s Connect! 🙂



Agreements, LLP Agreement

Before an LLP could start its operations, an LLP agreement is should be entered between partners. LLP agreement covers how members can be expelled, and other critical issues, to avoid unfair prejudice claims. This Limited Liability Partnership Agreement will also consist of the date and month of the year it was entered between the partners. Complete address of the partners will be quoted in the agreement, this address would be used for future emails. This blog will answer your question on ‘What does an LLP Agreement consist that partners should know?’

‘Statement of Background’ section:

  • Date of submission of form 2
  • The RoC in which the firm will be registered with.
  • The principal activity of the LLP: A brief note on the purpose of the business and laws that will abide by.

‘LLP Name and status details’ section:

  • LLP’s Name section: This will have the LLP name and a provision for LLP to change its name in future (after voting process).
  • Then comes the ‘Identification of initial partners’ section: This section will consist of rules under which addition of partners can be made.
  • Status of LLP and LLP Assets’ section: This would state that LLP shall be a legal entity separate and distinct from its Partners. The LLP shall own all its assets in its own name.
  • LLP’s Principal Business Activities’ section will consist additional note to the brief description on the activities that the LLP would undertake.

LLP’s Powers ‘section:

  • LLP’s Duration: The duration of the LLP can be indefinite and can wind according to LLP Act
  • LLP’s Registered Office’ Section: will state the address as mentioned on Form 2 and the criteria for it to change the address.
  • ‘Reservation of LLP’s Management’ section: The management of the LLP shall be reserved to the Partners.

What does an LLP Agreement consist that partners should know?

LLP’s Annual Accounting’ sections: This section will look something like this

  • LLP should prepare profit and loss account and balance sheet including statement of accounts and solvency in accordance with the provisions of Income tax Act, 1961
  • Auditing,
  • Partners’ Contributions to the LLP in Exchange for Their Partnership Rights
  • In deciding income, the LLP shall use the accrual basis or cash basis as decided by majority of partners
  • LLP’s Accounting Method: As per Indian Accounting Standards and Income Tax Act, 1961 unless otherwise required under the LLP Act.
  • The LLP’s annual accounting period for financial and tax purposes shall be the financial year as defined in the LLP Act.

‘LLP Partners contribution’ section: This section will look something like this

  • Documentation of Contribution.  Promptly after any Partner contributes to the LLP, the LLP shall file in the LLP’s records
  • Initial Contributions. Partners shall, in exchange for their Partnership rights, make contributions to the LLP of the cash, property, services, and promises of cash, property, and services.
  • No Capital Calls. No Partner shall be obligated to contribute to the LLP except as mentioned in the agreement.
  • Subsequent Partner Contributions.  Partners admitted to the LLP after execution of this agreement shall make contributions in exchange for their Partnership rights only b making amendments to
  • The Partners shall earn 10% interest on their contributions as specified in the agreement.

LLP Record Keeping and Banking: This section will look something like this

  • Compile and Maintain Records and Information in Compliance with the LLP Act
  • Compile and Maintain Books of Account and Other Records Required for the Sound Management of the LLP, LLP’s business and for its internal affairs.
  • Compile and Maintain Certain Records Concerning Contributions
  • Compile and maintain records evidencing that its Partners have made to the LLP the contribution.
  • The LLP shall open and operate one or more bank accounts either current account or overdraft with one or more banks as may be agreed upon by affirmative vote of all partners

LLP’s allocation and distribution to the partners:

  • Allocation of its profit or loss between the Partners in proportion to the Partners’ partnership interest in LLP.
  • Interim Distributions criteria

Capital account and a Current account of the partners:

  • Capital Account
    1. Maintenance of Capital Accounts. A Partner’s capital account should be credited or debited whenever there are contributions made.
    2. Distributions in Liquidation of the LLP. In connection with the LLP’s liquidation, the LLP shall make distributions that leave each partner with a capital account of zero.
  • Current Account: A Partner’s current account shall at the relevant time have credit or debit to each of them as the case may be any;
    • any share or profit or loss allocated under section 5.1 or
    • any interim or liquidation distribution under section 5.2 or
    • any interest on capital or loan from a partner.

LLP Partner Dissociation and purchase of shares: This section will look something like this

  • Events of Dissociation—In General (rights after dissociation will also be listed down)
  • Dissociation upon Resignation
  • Dissociation upon death
  • Dissociation upon disability
  • Dissociation upon partner insolvency
  • Dissociation upon expulsion
  • Redemption and Cross Purchases of Partnership Rights post dissociation
  • Option of LLP to Redeem and Other Partner to Cross-purchase the Partnership Rights of Dissociated Partner
  • Option of Disabled or Deceased Partner to Require Redemption or Cross-purchase of the Partner’s Partnership Rights
  • Buy out Terms

LLP Grants of Partnership Rights: This section will look something like this

  • LLP Grants of Partnership Rights to Third Parties, done after execution of agreement and affirmative vote of all partners
  • LLP Grants of Additional Partnership Rights to Partners, After the execution of this agreement, shall be decided by the affirmative vote of all partners
  • Partners sales and other transfers of their partnership rights to 3rd parties require the affirmative vote of all partners .
  • The requirement of Consent of Other Partner for Pledges of Partnership Rights.

LLP Partner meeting:

This section will lay down the frequency in which the meeting shall be held.

LLP Partner Voting:

Each material matter relating to the day to day LLP’s business and internal affairs (a ‘partner matter’) will be decided by affirmative vote of all partners. Each partner shall cast one vote on each partner matter.

LLP partners rights to LLP records and confidential information:

  • Right of Access, Etc. Each partner will have right to access, copy and use LLP records and information.
  • Each partner shall maintain the confidentiality of confidential LLP records and information.

LLP Management: This section will look something like this
  • Partners’ Responsibility for Managing the LLP
  • Partners’ Agency Authority; Restriction on Exercise of Agency Authority like contract signing
  • Partners’ Compensation and Fringe Benefit
  • Partners fiduciary duty of care and loyalty

Mandatory Arbitration mechanism:

Any arbitration under or relating to this Agreement or relating to the LLP will be conducted by a single arbitrator, in accordance with Arbitration and Conciliation Act, 1996.

General Provisions:

Amendment of Agreement: Provision for amendment of the Agreement will be valid unless it is approved by affirmative vote of all partners, and is in writing, and is signed by partners as decides.

Signature and Dates:

In witness of their acceptance of the terms and conditions of this LLP agreement, the parties, by themselves have duly signed this Agreement the day, month and year.

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Agreements, Contracts and Agreement, Joint Venture Agreement

For an Indian company can partner with a Foreign Company, Joint Venture is the solution. This article will talk on the lines of eligibility criteria, power distribution, and taxations involved.

Indian joint ventures usually comprise two or more individuals or companies, one of whom may be nonresident, who come together to form an Indian private or public limited company, holding agreed portions of its share capital. A joint venture agreement primarily provides rules by which the shareholders of the joint venture company may transfer or dispose of their shares. It is also commonly referred to as a shareholder’s agreement.

Remember, In order to protect sensitive business information from being divulged to others, confidentiality and non-disclosure agreements are entered into, prior to commencing negotiations of Joint Venture. Which we Wazzeerians think is the best practices of negotiation.

Key Eligibility Criteria:

  1. In certain areas such as telecommunications, drugs & pharmaceuticals, hotel & tourism, or advertising foreign investment up to 50%, 51% and/or 74% in the Joint venture without RBI approval.
  2. For more than 74% of the total equity in a joint venture company or to establish a Wholly Owned Subsidiary (WOS), permission must be obtained either from the Foreign Investment Promotion Board (“FIPB”) or the Secretariat of Industrial Approvals (“SIA”). Foreign companies not wanting to tie up with an Indian partner may establish liaison, branch or project offices, or WOS.

Entity options to form a Joint Venture as:

  1. Companies limited by shares (public and private)
  2. Companies limited by guarantee (limited to the amount pledged)
  3. Companies having unlimited liability (liability of each member is unlimited)

Control in the joint venture company:

After passing the either of the following resolutions, the control and roles are decided. Note, your Joint Venture Agreement will state which one to be followed.

  1. Special Resolutions: Passed only by shareholders having 75% shares with voting rights in the company. Or,
  2. Ordinary Resolutions: Passed by shareholders having 50.01% shares with voting rights in the company.

A special resolution is inter alia required to amend the MOA and AOA of the company, to issue further shares through a rights issue, to give loans or guarantees to other companies, etc. 51% majority ensures control of the day to day working of the company. Therefore, much depends on the level of control the foreign investor seeks.

The articles of association, incorporating the key provisions in shareholders agreement, provide for control of the joint venture company. The exercise of control is done at two levels: 1. Board of directors 2. Shareholders

Tax considerations and subsidies:

India has double taxation avoidance agreements (“DTAAs”) with many countries. In many instances, companies route their investments into an Indian joint venture company through an offshore destination.

Joint venture companies do not per se get advantageous tax treatment. However, the Indian Income Tax Act gives certain benefits to industries set up as 100% export oriented units, or in export processing zones. In addition, infrastructure industries in the areas of power, telecommunications, ports, etc., get tax breaks and rebates. Persons investing in the bonds of such companies do not pay tax on the interest received.

To make the joint venture agreement valid in law:

The requirements prescribed by the Indian Contract Act and the Cos Act needs to be met. Some of the important criteria to be fulfilled are:

  1. Offer and acceptance,
  2. Consideration,
  3. The intention to form a company,
  4. Signature of the parties
  5. Constitution of the board of directors,
  6. Termination clause,
  7. The binding nature of the agreement,
  8. Share transfer provisions,
  9. Dilution clause,
  10. Dispute resolution clause

Parties have to pay stamp duty on the joint venture agreement and have to register either with the RBI or the SIA, depending on which authority gives clearance for the project. No registration is required under the Indian Registration Act unless the joint venture agreement deals with the transfer of immovable property rights.

Wazzeer is vouched by Entrepreneurs as the reliable Legal and Accounting Partner. We would be super excited to help you. Let’s Connect! 🙂





Agreements, Contracts and Agreements, Franchise
Starting a Franchise in India is an old hat but that always work, Franchising, since the economic liberalization of 1991, many foreign companies with strong brand names have established a presence in India through franchising like Hertz, Radisson, Kentucky Fried Chicken (KFC), Domino’s Pizza, Thank God it’s Friday (TGIF), Pizza Hut etc., In fact, Indian companies with strong brand recognition are also using the franchising route like MRF, NIIT, Apollo Hospitals.

Yo bro, What’s franchising?
The Blacks Law Dictionary defines a franchise as a license from the owner of a trademark or trade name permitting another to sell a product or service under that name or mark. There are at least two parties involved: (a) the franchisor, who lends his trademark; and (b) the franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor’s.

Breaking down the Characteristic Features of business like this type:
(a) A franchise arrangement
(b) The franchisor should have developed a business system or format.
(c) The franchisee makes a substantial initial capital
(d) The franchisor trains the franchisee
(e) Once the franchisee’s business commences, the franchisor support available to the franchisee
(f) The franchisor also regularly supervises the franchisee’s business operations.
(g) Consideration is paid by the franchisee to the franchisor for the rights licensed

Enriching em with types of Franchising Agreements:
(a) Invention Licensing Agreement: Inventor (Franchisor) firstly patents the invention and license the patent and design rights and the manufacturing and marketing of the invention.
(b) Trademark Licensing Agreement: Franchisor (the owner) of a trademark can grant a license to another Franchisee to use the trademark on goods, which are associated with that trademark. This type of an agreement may be for the manufacture, preparation, marketing, presentation, and sale of goods.
(c) Character Merchandising Agreement: In such an agreement, the name of a famous entertainment or sports personality or probably a fictional or graphical character is licensed to be used on certain products.
(d) Dealer or Distributor or Marketing arrangements: Franchisee adopts the business operations model of the franchisor. Examples; in cases of dealerships with automobile companies, food and consumer goods, petrol pumps and gas stations.

What are the good to take stuffs in doing a business on franchise model?
Capitalizing and benefiting from the Franchisor brand name. Elimination of unnecessary expenses. Support from the franchisor while operating the business. Benefit from the franchisor’s advertising campaigns. Benefit from the franchisor’s negotiating and bulk purchasing power.

Alrighty, Any Trade-offs?
Imposition of controls and supervision by the franchisor. Heavy initial capital investment, in addition to consideration for using the franchisor’s brand. Franchisor’s policies that would be a directly applicable. 

Wazzeer is vouched by Entrepreneurs as the most reliable Legal and Accounting Partner. We would be super excited to see your startup kick starts seamlessly. Let’s Connect! ?

Agreements, Legal, Uncategorized
When entrepreneurs decide on the key things to be taken care of while starting up a venture, he or she would find varied notions around the globe, but certainly, one thing that the founding members should figure out is to know how you can draw the salary?

Pvt Ltd Company

For a Co-founder to withdraw salary from his Private Limited Company, there are basically 3 situations:
1. you decide to act as the employee of the company, then the way you can be paid is a salary. Here you would, like any other employee, need to enter an employment contract with the company and receive remuneration. In addition to this remuneration, based on this Employment Contract, and a specific clause for bonuses, you may be paid a bonus at either regular intervals or on the achievement of certain goals.
2. You act as a consultant; Consultancy fees are paid for your expertise in management and your time.
3. Shares are a good way of driving remuneration in the form of dividends.

Partnership firm 

The partners (co-owners) share the profit or loss. Based on each partner’s individual share of the results, a standard deduction is made to calculate the surplus. The Partners can share the surplus as their salary, Rather, the partners do pay income tax on the money withdrawn. Profits and liabilities are split evenly between partners or, if partners have differing investment percentages, per what was agreed in the initial legal partnership agreement.


Options are similar to that of Pvt Ltd Company. Dependent upon their percentage of investment, partners will receive a salary.

Sole Proprietorship

As a sole proprietor, how much money you take out of your business is entirely up to you. You are still liable for taxes and, because the government does not distinguish between you and your business, you are also liable for all business losses, liabilities and debts. You can draw everything that you are making out he company, but you will be liable for taxations on the whole amount.

One Person Company

One Person Company is a separate Legal Entity and OPC will have a separate PAN. Hence the Director of OPC can get the salary from the company. This salary is taxed under Income Tax rules for a salaried individual.

We at Wazzeer have helped quite a number of startups in Contracts and Agreement drafting for the same purpose, why not we jump on a call to discuss the details?

Let’s connect!


Agreements, Funding Compliance, Uncategorized
Every Venture wanting to Raise Funds has to invest a lot of time and effort to raise money to scale and keep the business going. All the effort and time invested can go for a toss, if you miss one important but under-estimated aspect. Every VC/Angel investor, before pumping in their money, will perform a due-diligence process. This process varies in tenure and complexity based on the industry, nature of the transaction, and also the stage of investment. Any deal is successfully closed, only after satisfactory-completion of due-diligence, failing which, the deal drops dead. Sometimes, they get a legal opinion, before proceeding. Here are a few points for startups to focus on when setting their house in order:

  • Incorporation (legalization): The most basic mistake that most entrepreneurs commit is their failure to legalize their entity and because of this has been the bane and downfall of many a startup. A legal entity adds professionalism to the startup as well as the confidence to the other transacting party.

  • Revenue registration/dues: The one thing that every person hates is Tax. Yes, that obligation to pay the government whenever due, no matter what. But it is prudent that startups get their revenue registrations in place first, as even non-filing/registration, attracts the long arm of the law.
  • Founders Agreement: Founders agreement is really important for any startup. No one remembers what they have typed in their mail the previous night, let alone verbal agreements that are the norm during the startup phase. Putting things in words is not a reflection of the lack of trust, it’s just prudence.

  • Legal issues: No matter how frivolous, real, or imaginary; all it requires to scare away potential investors is to utter lawsuit. Let your legal health do the talking, rather than trying to convince someone to put their money in a place, which is replete with legal landmines.
  • Organization: After you have incorporated your startup, you need start striving to put relevant processes, procedures, etc., in place from the moment you set up shop.
  • Accounting: Pull up your socks and start keeping account of all your income and expenditure. Maintain Income and Expenditure statement, P&L Accounts, other Financial statements.
  • Employee agreements: Every employee who works must be contracted with basic clauses to protect the interests of both the parties. Also, records of past employees to be maintained. Basic compliances like Labour law, PF etc., to be met.
  • Intellectual property: Ownership of Intellectual Property, including non-exclusive licenses, infringement, inappropriate use and potential action, have to be dealt and agreed upon.
  • Third-party agreements: The same rules apply for every third-party that transacts with the enterprise. Vendors, associates, affiliates, contractors, and other partners need to sign proper agreements, with non-disclosures, how the relationship is defined, responsibilities, and IP assignment.
  • Previous fundraising documents: If you have already raised funds, then future investors would like to know the details of fundraising, utilization, its impact, etc. Put these in order so they can understand them thoroughly. It is a summarization of an article from Your Story.

Wazzeer is vouched by Entrepreneurs as the reliable Legal and Accounting Partner. We would be glad to provide you with Funding Due-Diligence and Compliance part. Let’s Connect!

Agreements, Export Import Registration, Uncategorized
Importer Exporter Code (IEC) is mandatory for anyone who is Importing in India or exporting out of India. IEC Code is a unique 10 digit code that would be issued Director General of Foreign Trade, Ministry of Commerce, Government of India. No person would be allowed to import or export anything without IEC Code Number.  This article will walk you quickly through the registration process for Import Export Code.

The procedure of Acquiring Importer Exporter Code Firstly an Authorized Employee from the Company, in person, needs to go to the office and fill the application form or it can be sent through Post/Courier. On receiving the application, an acknowledgment will be generated in form of a receipt having File Number. This file number can be used at the time of any query regarding the application submitted. The application is then sent to IEC section where it is processed. IES is generated if the application is found to be complete as per the prescribed requirements). If not then a deficiency letter is generated stating the reason for deficiency and sent to the applicant. Replies are awaited in cases where deficiency letter is issued and after due compliance by the applicant, the IEC is allotted.  

Documents Required:
  • MoA, AoA and Certificate of Incorporation
  • List of Directors with residential address, Pin Code, Phone Number on letterhead
  • List of Directors of Company Letterhead
  • PAN card of Director
  • Covering Letter in Company Letterhead
  • Bank statement of the Company
  • 4 photographs of signing authority
  • Type of Exporter (Merchant/ Manufacturer/ Service/ Others/ Merchant cum Manufacturer)

Wazzeer is vouched by Entrepreneurs as the most reliable Legal and Accounting Partner. We would be super excited to see your startup kick starts seamlessly. Let’s Connect! 🙂