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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

 

FACTS:

  • 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

 

OBSERVATIONS BY THE COURT:

  • 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.

 

ADMITTED FACTS:

  • 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. 

CONCLUSION:

  • 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’!

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Accounting, Legal

Once you received the certificate of incorporation, it means, all legal formalities required for company registration is completed. There are certain Compliance required to be done after registering the Company. This blog intends to give you some clarity on the famous question ‘Registered a private limited company. What next?’ Listing down the mandatory legal and accounting compliance for a Private Limited company which are to be done within 100 days of registration.

a)   Filing of Form INC-22 for situation of registered office address

Situation of registered office has to be intimated within 30 days from the date of incorporation to the registrar of companies. This can also be filed at the time of incorporation but if it’s not filed at the time of incorporation then within 30 days from the date of incorporation, you need to file e-form INC22 with the registrar of companies.


b)    Display Company’s Identity and other details:

After incorporation, it’s the duty of the company to display following things outside the company’s registered office and also required to be printed in all business letters, bill-heads and in all other official publications:

·         Name of the company

·         Registered office address of the company

·         Corporate identity number or CIN

·         Telephone number, email ID

·         Website address and fax number if any 


c)   Appointment Of Statutory Auditor:

As per section 139(6) of Companies Act 2013, Company has to appoint its first auditor within 30 days from the date of incorporation in a board meeting. If the board of directors are not able to appoint then it has to be appointed within 90 days in a general meeting of members. Form ADT-1 is required to be filed within 15 days of appointment with RoC.



d)   Opening of Bank Account for the Company:

To transact business the company is required to open and maintain a current account with any bank in India through which all the receipts and payments of banking nature shall be transacted. The mode of operation of the said bank account has to be decided in the first board meeting and a copy of the resolution passed with respect to operation of bank account is required to be given to the banker at the time of opening of bank account. Any subsequent changes in the mode of operation is also required to be intimated to the bank. 


e)       Issue of Share Certificates to Subscribers:

Within a period of two months from the date of incorporation, every company must deliver the share certificates to the subscribers of the memorandum. This means that the subscriber has to remit the agreed subscription amount within 60 days from the date of incorporation in the bank account of the Company.

 

f)    Payment of Stamp Duty on Issuance of Share Certificate:

Every state government has made a law imposing stamp duty on the issue of a share certificate, which is to be paid to the respective state government after such an issue. The rates of stamp duty and the method of its payment differ from state to state. However, in Maharashtra the stamp duty payable is 0.1% of the face value of the shares. The non-payment of stamp duty is a very serious offence for which apart from punishment imprisonment has also been prescribed.

 

g)   Preparing books of accounts:

Section 128 of the Companies Act, requires every company to prepare and keep at its registered office, books of account and other relevant books of account and financial statement of every financial year to give a true and fair view of the state of affairs of the company. The books of account need to be maintain with the double entry system to be preserved for eight financial years. The accounts need to be maintained at the registered address of the company or at any other place where directors decide. 

h)   Filing of financial statements and annual return:

A private limited company is required to file its balance sheet, profit and loss account, auditor’s report and annual return every financial year before the due date with the registrar of companies. Non-compliance to this provision will attract additional fee in addition to the normal fee that are charged while filing the e-Form.


i)    Maintain Statutory Registers, Minutes and other necessary documents:

Every company is under obligation to maintain certain register under Section 85, Section 88 etc. of the Companies Act, 2013 and required to keep and maintain at its registered office in the prescribed form, any failure in maintaining the statutory register is an offence for which company as well as directors may be fined and prosecuted. Company needs to conduct at least 4 Board meetings in a year with the gap between 2 board meeting not exceeding 120 days. Every matter discussed in the meeting needs to be recorded in Minutes.

 

j)    Obtaining PAN & TAN:

Company needs to obtain Permanent Account Number (PAN) and Tax Account Number (TAN) in the name of the Company. GSTIN in case of businesses that are GST eligible.

 

k)   Obtain Registration under Shops and Establishment Act:

Every state needs to pass its own law from the point of view of working hours and basic facilities to be provided to the employees of the companies. Within 30 days of incorporation of a company, it is liable to obtain a registration under the law of shops and establishment as may be applicable in the respective state. The failure of obtaining shops and Establishment registration is a criminal offence.

 

l)     Need based registration and Licenses:

Based on the business activity and the goods in which the company is dealing, there are other licences and registration which are required examples are, Drug Licence, Food Licence etc.


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E-commerce Taxation, Legal, TAXATION

Running a business through e-commerce may seem uncomplicated and economical, there are a variety of legal factors that an e-commerce business must seriously consider and keep in mind before commencing and while carrying out its activities. In this article, we will discuss some of the important legal and Tax compliance for an E-commerce in India.

Legal Compliance:

  • Business Registration: E-commerce businesses, 99% register their business before starting operations mainly because these are tech start-ups that plan to raise funding in near future.
  • Contracts: E-commerce businesses operations are regulated by the contracts that are on the website. Whether it’s a vendor or a customer the user journey is protected by these contracts. Hence contracts are mandatory.
    • Some of the most common forms of e-contracts are clicked wrap, browse wrap and shrink-wrap contracts.
    • The existence of a valid contract forms the crux of any transaction including an e-commerce transaction. Contracts governed by Indian Contract Act, 1872
  • Security Issues: Transactions on the internet, particularly consumer related transactions, often occur between parties who have no pre-existing relationship. This may raise concerns of the person’s identity and authenticity with respect to issues of the person’s capacity, authority, and legitimacy to enter the contract. Hence, Businesses should look after:
    • Authentication and Identification
    • Identity Theft and Impersonation
    • Privacy
    • Data Protection
    • Security of Systems
  • Payment Mechanisms: Electronic payment systems are often more complex than traditional payment methods, as they typically involve many users. It is important that these start-ups or businesses abide by Payment Guidelines.
  • Intellectual Property: E-commerce platforms should use either proprietary technology or validly licensed technology. Please consult your professional or our Wazzeer Professional network for doubts.
  • Content Regulation: For the e-commerce ventures that distribute content or acts as a platform for distribution or exchange of third party information/ content, compliance with content regulations assumes paramount importance. Issues like obscenity and defamation should be avoided.
  • Jurisdiction Issues: In e-commerce transactions, if a business derives customers from a particular country as a result of their website, it may be required to defend any litigation that may result in that country.

 

Taxation Compliance:

  • Direct Taxation: In India, the High-Powered Committee (“HPC”) constituted by the Central Board of Direct Taxes, submitted its report in September 2001. The report considered and contemplated upon the need for introducing a separate tax regime for e-commerce transactions.
    • Tax on turnover generated
    • Tax on Income earned from Licensing Technology
    • Tax on income earned from leasing equipments.
    • Transfer pricing
  • Indirect Taxation:
    • GST: GST will be applicable to businesses based on two factors: a. Annual revenue b. Type of business.

GST eligibility critera

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Legal

Export and Import trade is regulated by the Directorate General of Foreign Trade (DGFT) and its regional offices, functioning under the Ministry of Commerce and Industry. Policies and procedures are announced by the DGFT. This article is dedicated to all startups that are planning to export from India, proud of you guys! Startups planning to Export  here are the Top 3 things to note

Who can Export? The following persons can be an exporter:

  • Proprietorship
  • Partnership firm
  • Government undertaking
  • Public limited company
  • Section 25 Company
  • Registered society
  • HUF
  • LLP
  • Private Limited Company
  • Trust

1. Pre-requisite registrations:
  • Register your company/business organization.
  • Obtain the pan card
  • A current account with the bank.
  • GST Registration

2. Pre-Shipment, you need to have following documents in place:
  • Importer Exporter Code: You need to acquire Import Export Code from the regional authority of DGFT. They will also issue business identification number 15 digits Alphanumeric along with IEC. This BIN is based on PAN Card number.
  • Before the first import or export, you will require obtaining EDI registration with the specific port.
  • To avail export incentives and for a general guidance, registration with EPC/FIEO will be necessary (optional)
  • Terms of Payment and Terms of delivery as agreed with your overseas buyer
  • Pro-forma invoice
  • Export Order
  • Purchase order
  • All export contracts and invoices shall be realized in freely convertible currency. There is no restriction on invoicing of export contracts in Indian Rupees. Indian Rupee is not a freely convertible currency, as on today.
  • Export Declaration Form
  • Obtain necessary inspection certificate from the inspection agency (optional)
  • Certificate of Origin will be provided as per the buyer’s requirement. (optional)

Note:  It is permitted to receive advance payment by the exporter. However, the exporter should follow the regulations laid out by FEMA.


3. Post Shipment:

  • All the exporters have to give a declaration in the shipping bill reading as per FEMA act
  • The exporters shall be liable to realize and repatriate export proceeds as per FEMA Regulations (9 Months AP circular no.37 Dated: 20.11.2014).
  • The exporter is required to collect all the relevant documents and submit the same to his bank within the prescribed time limit (21 Days).
  • Documents presented by the exporter to his bank are forwarded to the importer through the banking channel. Depend upon the payment terms, Indian exporter will receive the payment. The bank will issue necessary e-BRC as per the guideline of DGFT.
  • Participants in international exhibition/trade fair have been granted general permission for opening a temporary foreign currency account abroad. Exporters may deposit the foreign exchange obtained by the sale of goods at the international exhibition/trade fair and operate the account during their stay outside India.

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! 🙂
2

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.


LLP

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!

5

Legal, Start up Lessons
Setting up your startup involves a lot of work and effort. Many things need attention, including developing a proof of concept, finding product/market fit, and hiring the first set of employees. With these many things to be handled, slips are bound to happen. One of the most common areas where most startups make a wrong choice is establishing a solid legal foundation. Some of the most common legal mistakes made by startups:
  1. Wrong legal entity: Choosing the right legal entity right at the outset is important. Some structures to choose from include a Registered Company (Public/Private Limited), LLP, proprietorship, and partnership. The more widely accepted one is a registered company, especially for any deals with foreign clients.
  2. Not tracking expenses: Many try and gather all receipts only when tax returns have to be filed! What is not documented is not deducted, and therefore, it is like leaving money in the open.
  3. Lack of documentation: Each and every interaction, be it meeting minutes or anything else, must be on the record. It is important to have all documents in order at all times. Legal due diligence can make or break an investment deal.
  4. Missing founders agreement: The founders agreement should contain all essential clauses such as ownership, vesting rights, and the roles and responsibilities of each founder, including salaries and terms of employment.
  5. Mixing capital and revenue expenses: What expenses are considered assets /capital expenditure and which ones are called revenue expenses deductible in the P&L A/c. Higher-value items that will last significantly longer than one year are called Capital Expenditure/Assets/Equipment. Things that are consumed over the course of a year come under revenue expenditure. If the equipment or capital items are by accident deducted as revenue expense, the tax department can determine that the expense has been improperly characterized and a deduction does not apply. Hence, be careful in accounting all such expenses.
  6. Mixing personal and business expenses: This can be a source of confusion when taxes are being filed, and in some cases, can lead to deductions being disallowed on an ad-hoc basis by the revenue authorities and higher tax outgo as a result. The company should therefore have a financial account at the onset and separate records as well.
  7. Not protecting intellectual property: Intellectual property (IP) is a startup’s most valuable asset. Trademarks, patents, and copyrights are the three essential components of IP. It is essential to not let anyone claim a right to your IP. Non-disclosure agreements are a way of ensuring this. Startups often neglect the protection of IP and suffer later.
  8. Non-compliance with securities laws: Startup founders commonly issue stocks to angel investors, family, and friends. However, stocks issued without complying with specific disclosure and filing requirements under securities law can lead to serious legal issues at a later stage.
  9. Missing regular tax payments: Businesses, be it sole proprietors or otherwise, are required to pay taxes in advance. This means they need to determine their taxes for the year in advance and pay as prescribed installments.
  10. Not ensuring professional help for tax-related issues: A startup must appoint a tax consultant to ensure all regulations are being followed. This will also give you more time to focus on building your company, forming strategic relationships, and other things.
    It is a summarization of an article from YourStory. For more information, visit http://yourstory.com/2016/03/legal-mistakes-startups/



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0

Legal, Litigation
The legal atmosphere of the country is rising with Amazon recently filing a case against Gujarat state government for imposing Entry Tax. This is a tax which is levied on products or goods which has been purchased online and is delivered from outside the state.


According to a new report by ET, Amazon is only a facilitator, it’s an online portal where buyers and sellers meet, and it itself doesn’t import or consumes any product, and the company as such has nothing to do with the goods.


However,Gujarat government has a different take on thisIt believes that this tax will protect offline retailers from competitive discounts that online sellers offer, thereby taking edge over them. Ecommerce in India is projected to reach $119 Bn in next 4 years. As per Nasscom, creating such barriers will not only impact the financials of the ecommerce companies but also restrain new and foreign players from entering into the market.


The market is already trying to cope with burgeoning losses, low investor sentiments and rising consumer expectations in terms of delivery and quality. It is a summarization of an article from INC42. For more information visit, https://inc42.com/flash-feed/amazon-files-lawsuit-gujarat-government-entry-tax/



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0

Legal
Legal base of your business should be strong enough for it to achieve long term success. Budding entrepreneurs forget about it as they are more focused towards growing their vision, hence making the most common mistakes in the early growth. This is why it is essential for startup businesses to acquire and sign certain basic legal contracts at the early stages of their growth whether it is for hiring, partnerships, proposals and disputes to ensure their business is fully protected. Here are some of the legal contracts that will make sure your business is protected:


  1. Confidentiality Agreements: Non-Disclosure, Non-Compete & Non-Solicitation Agreements If you don?t make confidentiality agreement then you may have to face loss of business, clients and it may overall affect the productivity of your business. Non-Disclosure Agreements (NDA) can be made with parties who are privilege to sensitive information and make sure that they do not use them wrongly. Non-compete or Non-solicitation Agreements are entered into to protect the training, expertise; knowledge imparted to your employees regarding your business and is often included in hiring documents.
  2. Hiring Documents: Employment And Freelance Agreements Drafting well-defined contracts between you and your employees can provide a clear understanding of duties, responsibilities, and obligations both parties expect to achieve. An Employee Agreement governs the terms and conditions of employments, as well as rights and obligations of both parties. Employment contracts have provisions pertaining to salary, bonus, benefits, leave and termination.
  3. Investment Documents: Founders? Agreement, Term Sheet & Share Purchase Agreement As the startups starts operating, the co-founders tends to become busy in day to day running of their business and leave important legal matters for discussion in later stage, this causes road blocks in the future. A Founders Agreement promotes clarity amongst the founding team outlining various roles and responsibilities, the equity vested in each entity, and the ownership of intellectual property to minimize risks in case of a dispute. When you are going for funding you need term sheet, which include the investment amount mode of payment, mode of security invested in, due diligence and pre-emption rights. Lastly you need a Shareholders Agreement, this contract will clarify the powers of your shareholders as well as the rights of your company as an issuer of shares.
  4. Collaborative Documents: MoU?s & Joint Venture Agreements It saves your business a lot of time and effort if you have a framework to negotiate business. When you do business with new party, you need to draft Memorandum of Understanding. It is a document that contains the basic understanding the two parties have reached for any project and captures the intentions of both parties. Another important business collaboration agreement is a Joint Venture Agreement, which can allow your business to access newer markets and resources, while ensuring the sharing of risk.


    It is a summarization of an article from Your Story. For more information, visit https://inc42.com/resources/simple-legal-contracts-put-business-order/



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Legal, Start up Lessons
The finance ministry started consulting with business on the General Anti-Avoidance Rule (GAAR), which is going to be implemented from the next financial year.


For this it wants to know the concerns of industry on board and hence invited comments from stakeholders on the guidelines by June 30. Several stakeholders and industry associations have represented that guidelines for implementation of ‘GAAR’ be issued, so that there is adequate clarity in this regard. The general public and stakeholders are, therefore, requested to provide their inputs on the provisions in respect of which further clarity is required, from its implementation perspective, the ministry stated. The finance ministry started consulting with business on the General Anti-Avoidance Rule (GAAR), which is going to be implemented from the next financial year.


For this it wants to know the concerns of industry on board and hence invited comments from stakeholders on the guidelines by June 30. Several stakeholders and industry associations have represented that guidelines for implementation of ‘GAAR’ be issued, so that there is adequate clarity in this regard.


The general public and stakeholders are, therefore, requested to provide their inputs on the provisions in respect of which further clarity is required, from its implementation perspective, the ministry stated. The ministry has asked the stakeholders to put forward their doubts and concerns regarding the structure and to avoid hypothetical situations. GAAR norms were initially proposed as Direct Taxes Code by then finance minister Pranab Mukherjee in Budget 2012-13. However, it was postponed till next financial year because of lack of preparedness.


GAAR can override tax treaties as well. Sunil D Shah, partner, Deloitte Haskins & Sells, said: It is expected that more clarity will be available once the guidelines are framed setting out what types of arrangements would be impacted by the GAAR provisions. This will enable businesses to better plan their transactions.


  It is a summarization of an article from business standards. For more details, visit http://www.business-standard.com/article/economy-policy/finmin-seeks-suggestions-on-gaar-guidelines-116052701140_1.html



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0

Legal
The corporate affairs ministry has designated eight courts in different states and union territories as “special courts” for speedy trials of serious corporate offences.

Under Companies Acts, 2013 special courts were supposed to set up in every state so that it could deal with Corporate cases in which the punishment for the offence is of at least two years. The eight courts are in Maharashtra, Jammu and Kashmir, Goa, Gujarat, Madhya Pradesh, West Bengal and two in union territories.


The Government got the consent from Chief Justice of respective high courts and the hearings will start soon. There are over 50,000 cases pending with corporate cases but only 5,000 are serious offences in which the punishment will be of two years or more. The government was of the view that the number of special cases won’t be too high after the softening of provisions in the Companies Act so it will be wiser to bring more special courts into existence.


The amendments to the Companies Act have done away with the provision which would have made it impossible for a person accused of violating the law to get bail. Another bill proposing more amendments to the law has been referred to a parliamentary committee.


It’s a summarization of an article Rajat Arora. For more details, visit http://economictimes.indiatimes.com/news/economy/policy/corporate-affairs-ministry-designates-eight-special-courts-to-hear-serious-corporate-cases/articleshow/52369209.cms


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