All posts by eLagaan

eLagaan offers end to end CA, CS, Business Legal & Payroll services for businesses in India. It specialises in formulating investor friendly structures & terms, staying compliant, setting up best practices desired by founders, investors & employees. This facilitates businesses to grow & scale with ease and stay fundable, saleable and compliant.

Hiring An Intern, A Legal Perspective [Whiteboard Friday]

Almost every company hire interns. They provide a great way of identifying talent, luring them, handling temporary work loads, save costs, propagating company culture and values among upcoming generations etc. The Law, however, recognises a certain set of people only as Interns and extends facilities to promote their hiring. It also offers relaxations on multiple taxes and compliances.

In this episode of eLagaan Whiteboard Friday, the eLagaan team talks what set of people can only be treated as Intern from legal perspective. You are free to designate anyone as Intern in your company, but then the relaxations and advantages extended by Law cannot be applied on these cases. It also covers, what steps you should follow to permanently hire allowed Interns in your company.

Explained : Different Types of Company Directors & Their Appointment Details [Legal Resources]

There are multiple classes of Director with different roles and expectations. Most of the time, we speak only being a Director in the Company (which is the most common form) but are not aware of the other types. This is specially true when induct any new person during normal course of business.

In this episode of eLagaan Whiteboard Friday, the eLagaan team talks about various types of Director that is available as per Company Law, the roles and expectations with each of the positions and how appointments should be made for specific roles. Not following right process or defining the roles in a proper fashion may lead to heavy penalties and non compliance.

How To Draft Employee Handbook [Whiteboard Friday]

As the Company grows they bring in more structured processes and policies to ensure higher employee satisfaction and better compliance to defined systems and process for better tracking and control.

Employee Handbook has been a popular piece of document which helps employees to understand various facilities, processes, systems and culture of the company.

101 For Early Stage Entrepreneurs : Roles & Responsibilities of a Director [Whiteboard Friday]

Being a Director in a Company is a responsible position. Many Entrepreneurs are clueless about the role and responsibilities of the Director from Company Law’s viewpoint. This leads to greater non compliance and can also lead to litigations and penalties.

In this episode of eLagaan Whiteboard Friday, the eLagaan team talks about various activities that a Director is expected to perform while they hold office. It also looks at major and most common of instances of non compliance that could arise and tentative penalties associated with them.

Running a Private Limited Company Under New Companies Act : What Has Changed

The new Company Law has brought many changes in the way a Private Limited Company is structured, how various day to day activities are conducted, newer reporting norms, liberalisation and well as restriction on various areas in order to bring more transparency and incorporate few global best practices in managing companies.

In this episode of eLagaan Whiteboard Friday, the eLagaan team talks about various these changes, what promoters and Directors should be aware of if they are either incorporating a new company or running an existing business.

Allotment of Shares/ Securities for Startups [Whiteboard Friday]

The new company law has brought important changes to share allotment process. Now most of the allotments need to follow a specific process, information about allotment should be filed with RoC in certain timeframes.

In this episode of eLagaan Whiteboard Friday, the eLagaan team talks about various options available if a company is planning to raise investments from investors or allot stocks to employees. Non compliance to specified process can turn out really expensive either in terms of too much diluation or heavy penalties.

Converting a LLP into Private Limited Company [Whiteboard Friday]

Since the time Limited Liability Partnerships were introduced in India, many businesses went to incorporate as LLP (for the initial hype) without being aware of its limitations and advantages in true sense. These business have been looking to convert to a Private Limited Company as LLP does not support many agendas like raising professional investments, differential class of stocks, ESOPs etc. Although conversion from LLP to private Limited was always allowed, the exact process was specified recently.

In this episode of eLagaan Whiteboard Friday, the eLagaan team talks about how to go about converting an LLP into a Private Limited Company. It also looks at various tax and compliances that need to be complied with, various restrictions the law imposes post conversion and possible areas which need to be examined before taking a call to convert.

Demystified: One Person Company For Entrepreneurs

elagaan

The new Company Law has introduced a new business entity called One Person Company, which has limited liability and can be started by a single person. This is an important step and will boost lot of small businesses to move to a limited liability structure.

In this episode of eLagaan Whiteboard Friday, the eLagaan team talks about various features, scope, restrictions associated with a One Person Company along with what factors should be considered (both short and long term) before you decide to start a One Person Company.

Everything You’d Like to Know About the New Companies Act 2013

The New Companies Act 2013 came int effect from April 1. The act replaces the old Companies Act of 1956 and has brought in new measures for investor protection, better corporate governance and corporate social responsibility. We’d posted earlier, on the Highlights of the Companies Bill. This post by Pankaj Agarwala  of eLagaan, looks at some of the new clauses that one needs to be aware of.

Sign Term Sheet

New Clauses in Companies Act, 2013

1. Clause 2(68) A private company can have a maximum number of members of 200 in place of earlier existing limit of 50.

2. Clause 2(41) defines the financial year of each company to be kept as April to March each year except where the company incorporated after 1st January can have first accounting year closed in March of following financial year and in case of holding or subsidiary of a foreign company, the Tribunal may allow for a financial year different from April to March as may be required for consolidation of financials. Existing companies should follow this within a period of two years.

3. KMP is defined to include – CEO or MD, CS, WTD, CFO and such other officer as prescribed.

4. Clause 5 – The Articles may contain provision for entrenchment to the effect that specified provisions of the Articles may be altered only if the conditions or procedures as that are more restrictive than those applicable in the case of a special resolution are met or complied with. These entrenchment clauses needs to be mentioned in the form at the time of Incorporation or can be made restrictive by Special Resolution of the members by amending the AOA.

5. The company to have a communication address at the time of incorporation but registered office needs to be established within a period of 15 days of Incorporation and should be intimated to MCA within 30 days of Incorporation.

6. Clause 11 requires every companies (both private and public) to obtain a Certificate of Commencement of Business. This can be obtained after a declaration is filed in Form INC-21 with MCA. This declaration is to be filed after filing form for notification of registered office and after funding of Rs.1 lac / 5 lac to company bank account. Failure to file this within 180 days of incorporation may lead to MCA strike off the name of the company.

7. Clause 149 requires every company to have at least one director who has stayed in India for a period of atleast 182 days in the previous calendar year. A director can hold directorship in 15 companies in place of earlier limit of 12.

8. Clause 173 – Atleast 7 days notice to be given for Board Meeting. Board to meet 4 times within a year. There should not be a gap of more than 120 days between two consecutive meeting.

9. Clause 110 – Private companies also allowed to transact business by means of Postal Ballot.

10. Internal Audit is not required for private companies. It is required only for listed companies and public companies meeting certain criteria.

11. Clause 180 requires the Board to act only by special resolutions at general meeting for: – i) sell, lease or dispose of the whole or substantially whole of the undertaking ii) investment in trust securities as a result of merger or amalgamation iii) borrow an amount (including the amount already borrowed excluding temporary loans) more than paid up capital plus free reserves.

12. Clause 186 requires Investment not to be made through two layers of investment companies. Rate of interest on ICDs to be rate of interest on dated G-Secs.

13. Clause 188 Related party disclosures increased to cover sale, purchase, supply of goods or materials, selling/ disposing / buying of any property, leasing of property, availing or rendering of services, appointment of agent for purchase or sale of goods, materials, services or property, appointment of any related party to place of profit.

14. Clause 185 Company cannot grant loan to directors made applicable to private companies as well.

15. Clause 128 Company can keep books of accounts in electronic form.

16. Clause 196 read with Clause 203 – Every company having paid up capital of Rs.5 CR or more to appoint a whole time KMP. MD or WTD in any company cannot be appointed or reappointed for more than 5 consecutive years.

17. Clause 134 – Disclosures in Board Report made more elaborate.

18. Clause 140 – Auditor to file a statement with the Company and ROC within 30 days of resignation indicating reasons and other facts relevant for resignation.

19. Clause 19 – No subsidiary company to hold any shares in its holding company. This was already existing vide Section 42 of 1956 Act.

20. Clause 4(i) MOA not to contain the Other Objects of the Company.

21 Clause 56 – Share certificates to be delivered within a period of two months from initial subscription or allotment and within one month from date of transfer.

22. Clause 53 – Company cannot issue shares at discount except other than on issue on equity shares.

23. Clause 42 – All monies towards share subscription should be received by cheque or DD or thorough other banking channels and not in cash. All the shares subscription should be allotted within a period of 60 days from date of receipt of application money. If allotment is not made, it needs be refunded within 15 days from the expiry of 60 days. Any failure to repay will attract interest @ 12% p.a. from the expiry of 60 days. If refund is not made it will be treated as deposits.

24. Depreciation to be computed based on useful life of the Assets as given in Schedule II of Companies Act, 2013 instead of minimum depreciation as currently provided in Companies Act, 1956.

25. Clause 247 Valuation of shares, stocks, properties etc. has to be done based on the methods defined.

26. New type of company called OPC has been introduced with relaxed rules to be followed (For more, read One Person Company Explained).

Got questions? Check out the NextBigWhat forum.

[About the Author: Pankaj Agarwala is with e-Lagaan, a services company which offers CA, CS, business legal & payroll services for businesses in India.]

Tax on Share Premium When Raising Investments [Whiteboard Friday]

Companies raising funding from resident (resident in India) investors should now be cautious as a new tax on excess share premium has been implemented. This has mainly been done in order to curb the black money transactions in the market. Any amount received in excess of fair market value is treated as Income from Other Sources and hence liable to tax.

In this episode of eLagaan Whiteboard Friday, the eLagaan team talks about various aspects of the above tax and some possible work around which may help startups defer the tax liability or help reduce it to a great extent.

You can subscribe to our YouTube channel ‘NEXTBIGWHAT.TV’  here.

What Startups Should Know about Discounted ESOPs & Tax [Whiteboard Friday]

In a recent ruling, the Income tax department has been advised to treat discounts offered to employees for ESOPs as a valid expense. This is a big relief for startups as it will help encourage the practice of issuing ESOPs to key employees and help retain the talent by sharing wealth with them over a period of time.

In this episode of eLagaan Whiteboard Friday, the eLagaan team talks about details of how the discounts are calculated and treated, what factors the Company should consider before offering ESOPs and how the change of events like employees quitting before vesting schedules etc. impacts the Company.

You can subscribe to our YouTube channel ‘NEXTBIGWHAT.TV’  here.

Startup Insurance Explained [Whiteboard Friday]

There are lots of insurance plans and policies available for various purposes e.g. employees health insurance, key man policy etc.

In this episode of eLagaan Whiteboard Friday, the eLagaan team talks about various insurance options available to Startups, overview of these options and how it can help make difference to your Startup either by way of Employee Satisfaction/ Security or by avoiding huge costs by taking insurance for most vulnerable areas of your business.

You can subscribe to our YouTube channel ‘NEXTBIGWHAT.TV’  here.

Understanding Due Diligence For Startups [Whiteboard Friday]

Due diligence is a term immensely popular among startups and something which most of us look forward to (mainly because it is linked to raising investments). Entrepreneurs are often baffled by the term as to what it means, what all areas it covers, will this impact them/ Company in any way etc. In today’s era of eGovernance, there are many instances where it also becomes challenging to take corrective actions if any non compliance is discovered late.

In this episode of eLagaan Whiteboard Friday, the eLagaan team talks about Due Diligence process in detail like the areas it covers, level of due diligence, what could impact the process most and various compliance requirements.

You can subscribe to our YouTube channel ‘NEXTBIGWHAT.TV’  here.

Five Most Important Indian Tax Laws Every Startup Must Know Of [Whiteboard Friday]

Through this series, our friends at eLagaan have been explaining various legal and compliance issues for entrepreneurs in India. In this edition of whiteboard Friday, we bring you a curated list of five most important tax laws startups in India must be aware of.

1. Understanding VAT (Value Added Tax) & CST (Central Sales Tax) in India

This video covers what Value Added Tax & Central Sales Tax is. Why, when and how one must pay these taxes. It also covers tax exemptions and returns.

2. Understanding TDS – Tax Deducted At Source & TAN for Indian Businesses

TDS or best known Tax Deducted at Source is one of the modes of collecting Income-tax from the assessees in India. This is governed under Indian Income Tax Act, 1961, by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian Revenue Service (IRS), Ministry of Finance, Govt. of India.

In this episode of “eLagaan Whiteboard Friday”, the eLagaan team explains various factors you should know to understand TDS. The video will talk about what is TDS, why TDS was created. What is TAN number. Defines major categories of TDS, how to calculate it. When to make the TDS payments, file TDS returns as well as when you can get TDS refunds. Also it talks about consequences of not deducting proper TDS and what NRI’s should know about it.

3. Service Tax in India

In this video understand : What is Service Tax, why do you have to pay it , when should you pay it , exemptions and other things related to it.

4. Professional Tax for Businesses in India

Professional Tax is a tax levied by State Government for profession, trade or employment. In this video the eLagaan team explains, how every company which transacts business and every person, who is engaged actively or otherwise in any profession, trade, calling or employment is liable to register and then pay professional tax.

5. Understanding Advance Tax [Whiteboard Friday]

Any individual or company who is doing business (not having salary income) need to pay income tax in advance couple of time during the year else they need to pay interest for delay in paying taxes.  In this episode of Whiteboard Friday,we talk about who all are eligible for making advance tax payments, what is the schedule of these payments and related concepts.

Constructive Ways To Fund Your Startup [Whiteboard Friday]

Most startups need cash and are short on it most of the time. The reasons could be many. Like lack of bootstrapping funds, the timing is not right to raise investments from investors, the product is not ready and the idea is not fundable etc. Irrespective of the reasons, every startup needs cash to run the business and make sure it gets more time to prove its concept or attain success. Startup funding in India is an art.

In this episode of eLagaan Whiteboard Friday, the eLagaan team talks about some other means of finance that a startup can look at (apart from raising money from investors) and which can help the company go a long mile before running out of cash.

You can subscribe to our YouTube channel ‘NEXTBIGWHAT.TV’  here.