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Clarification on Form ADT 1 Form for Appointment of Auditor filed through GNL 2

Relaxation from payment of additional fees

The Ministry of Corporate Affairs (the MCA) had received representation from various stakeholders seeking for relaxation from payment of additional fee specifically with respect to filing e-form ADT-1 which was filed through Form GNL-2 during the period from 1 April 2014 to 20 October 2014 for appointment of Auditors for the period 2014 to 2019 as the e-form ADT-1 was not available for filing during the said period and consequent to this, companies were facing difficulties in filling the details of Auditor in e-form INC-22A Active (One time return to be filed by companies on details of registered office of the Company).

Fee waived for e-form ADT-1 for the appointment of Auditor in certain cases

MCA has considered the matter and issued a General Circular on 13 May 2019 clarifying that the companies which had filed Form ADT-1 through form GNL-2 during non-availability of e-form ADT-1 i.e, from 1 April 2014 to 20 October 2014 may file e-form ADT-1 for appointment of Auditor for the period up to 31 March 2019 without any fee till 15 June 2019.

Additional fee applicable

Further, the Companies which had filed form ADT-1 through e-form GNL-2 even after the deployment of e-form ADT-1 will have to file the e-form ADT-1 now with an additional fee.

Source: http: //www.mca.gov.in/Ministry/pdf/GeneralCircular13052019.pdf

Step by step approach to Private Equity deals

The first step in a private equity deal would be to assemble potential investors interested in the desired company. This may prove to be the most difficult step as most companies are ambiguous with their decisions regarding whether they wish to contribute to the said Private Equity deal. 

Once this step is completed, the next step would be to approach a banker. In most probability, the amount required to buy said company would be more than the accumulated sum from all the investors.

As soon as the investors have discussed upon the various aspects of the P.E., they must decide upon its execution.

On acquisition of the desired company, they have the option of stripping it down completely and building it up from scratch. This process is called ‘buying out’ and may include employing new staff and selling off assets.

After a certain period of time, they have the option of selling the built company for a potential profit. This helps in repayment of any bank loans previously taken.

2018 was a record-setting year, with P.E. exits reaching $26 billion, almost equal to the value of exits in the previous three years combined. The sharp rise was mainly due to the mega deal of Walmart buying a controlling stake in Flipkart for $16 billion from investors including Tiger Global. Other highlights include record deal value pushed by large investments, strong tech flow and very large exits.

Both open markets exists and P.E.-backed initial public offerings (IPOs) saw significant declines due to unstable stock markets. 2018 recorded $1.7 billion in open market exits across 56 deals- more than 70% decline by value and over 56% drop by volume.

A series of laws govern P.E. deals in India. The important laws include-

The Companies Act, 2013

Where an investor approaches a company, questions regarding the procedure of the investment and in what manner rights can be granted to the investor come to surface. Depending on the manner as mutually agreed upon between the Company and the Investor, the P.E. Investment is made in a company. Accordingly, statutory compliances that the companies need are ascertained. These statutory compliances can further be subdivided into those which relate to a) the transaction related to the investment and b) other conditions precedents to the investment.

 Section 42 and Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014

Where a Company is willing to raise funds through a private placement of securities, the provisions of Section 42 need to be complied with. Private Placement means any offer of securities or invitation to subscribe to securities made to a group of persons selected by the company (other than by way of public offer) through the issue of a private placement offer letter and which satisfies the conditions specified in section 42.

References


  • 2018 was the best year for PE/VC exits in India: Report, LiveMint – https://www.livemint.com/Companies/c6DalEPnDt9bfW7xI0xiEI/2018-was-the-best-year-for-PEVC-exits-in-India-Report.html
  • Private Equity in Asia-Pacific 2019, Bain & Company  – https://www.bain.com/insights/apac-pe-2019-infographic/
  • Private Equity in India: The Legal Perspective, Apurv Sardeshmukh, LegallyIndia – https://www.legallyindia.com/private-equity-unleashed/private-equity-in-india-the-legal-perspective-20180327-9205

Startup Legal Guide: Get upto 5% Incentives of your foreign income under Service Export from India Scheme (SEIS)

About Service Export from India Scheme (SEIS)

SEIS is one of the Service Exports from India Scheme launched by DGFT in Chapter 3 of Free Trade Policy 2015-20. This scheme aims to incentivize service exporters of India with the objective to encourage and maximize export of notified Services from India Under the scheme, service providers, located in India, would be rewarded under the SEIS scheme, for all eligible export of services from India.

How the net foreign exchange earnings are calculated?

Net foreign exchange earnings for the SEIS scheme is calculated as:

Net Foreign Exchange = Gross Earnings of Foreign Exchange – Total Expenses or payment or remittances of Foreign Exchange.

Can we claim the incentive as cash?

Unfortunately, No. The rewards under the scheme are not given in the form of money but in the form of Duty Credit Scrips. Duty Credit Scrip is a scrip issued by the DGFT and can be used to pay various duties/taxes to the Central Govt. Split certificates of such Duty Credit Scrip may also be issued, at the time of application and are freely transferable.

List of notified services along with the rate of reward

The following services and rates of rewards were applicable for services export made between 1-4-2015 to 30-09-2015:

  • Professional Services – 5% Rate of Reward
    • Legal services
    • Accounting, auditing and bookkeeping services
    • Taxation services
    • Architectural services
    • Engineering services
    • Integrated engineering services
    • Urban planning and landscape architectural services
    • Medical and dental services
    • Veterinary services
    • Services provided by midwives, nurses, physiotherapists, and paramedical personnel
  • Research and Development Services – 5% Rate of Reward
    • R&D services on natural sciences
    • R&D services on social sciences and humanities
    • Interdisciplinary R&D services
  • Rental/Leasing Services without Operators – 5% Rate of Reward
    • Relating to ships
    • Relating to aircraft
    • Relating to other transport equipment
    • Relating to other machinery and equipment
  • Audiovisual Services – 5% Rate of Reward
    • Motion picture and video tape production and distribution service
    • Motion picture projection service
    • Radio and television services
    • Radio and television transmission services
    • Sound recording
  • Construction and Related Engineering Services – 5% Rate of Reward
    • General construction work for building
    • General construction work for civil engineering
    • Installation and assembly work
    • Building completion and finishing work
  • Educational Services – 5% Rate of Reward
    • Primary education services
    • Secondary education services
    • Higher education services
    • Adult education
  • Environmental Services – 5% Rate of Reward
    • Sewage services
    • Refuse disposal services
    • Sanitation and similar services
  • Health and Social Services – 5% Rate of Reward
    • Hospital services
  • Tourism and Travel Services – 3% or 5% Rate of Reward
    • Hotel (3% Rate of Reward)
    • Restaurants (3% Rate of Reward)
    • Travel agencies and tour operators services (5% Rate of Reward)
    • Tourist guides services (5% Rate of Reward)
  • Recreational, Cultural and Sporting Services – 5% Rate of Reward
    • Entertainment services (including theatre, live bands, and circus services)
    • News agency services
    • Libraries, archives, museums, and other cultural services
    • Sporting and other recreational services
  • Transport & Auxiliary Services – 5% Rate of Reward
    • Passenger transportation
    • Freight transportation
    • Rental of vessels with crew
    • Maintenance and repair of vessels
    • Pushing and towing services
    • Supporting services for maritime transport
    • Rental of aircraft with crew
    • Maintenance and repair of aircraft
    • Airport Operations and ground handling
    • Rental of commercial vehicles with the operator
    • Maintenance and repair of road transport equipment
    • Supporting services for road transport services
    • Cargo-handling services
    • Storage and warehouse services
    • Freight transport agency services
  • Other Business Services – 3% Rate of Reward
    • Advertising services
    • Market research and public opinion polling services
    • Management consulting service
    • Services related to management consulting
    • Technical testing and analysis services
    • Services incidental to agricultural, hunting and forestry
    • Services incidental to fishing
    • Services incidental to mining
    • Services incidental to manufacturing
    • Services incidental to energy distribution
    • Placement and supply services of personnel
    • Investigation and security
    • Related scientific and technical consulting services
    • Maintenance and repair of equipment (not including maritime vessels, aircraft or other transport equipment)
    • Building- cleaning services
    • Photographic services
    • Packaging services
    • Printing, publishing
    • Convention services

Can startups apply for this SEIS scheme?

Yes. If you are providing an export of services and your foreign exchange remittances falls under ‘earned for rendering of notified services’, then you can get benefit from the Service Export from India Scheme (SEIS).

Who are not eligible under the SEIS scheme?

Those foreign exchange remittances or earnings that fall outside the scope of notified services, then such services will not be taken into consideration.

How to apply?

An Online Application needs to be filed on the DGFT Server and the relevant fields of information need to be entered in the SEIS ECOM Module. All the relevant forms which are ANF3B and Annexure to ANF3B are available online. You may also refer the link http://dgft.gov.in/links/appendices-and-anf-ftp2015-2020 on the DGFT Server to view the Forms applicable for SEIS Application.

  • Online filing: An application for grant of duty credit scrip for eligible services rendered shall be filed online for a financial year on an annual basis in ANF 3B using a digital signature.
  • Last date: The last date for filing application shall be 12 months from the end of the relevant financial year of the claim period.
  • Jurisdiction: Applicant shall have the option to choose Jurisdictional Registering Authority on the basis of Corporate Office/ Registered Office/ Head Office/Branch Office address endorsed on IEC for submitting application/applications under SEIS.
  • Start of the financial year: This option needs to be exercised at the beginning of the financial year.
  • No changes: Once an option is exercised, no change would be allowed for claims relating to that year.
  • Scrutiny of documents: RA shall process the application received online after due scrutiny.

[IMPORTANT] RoC Compliances for LLP

Registrar of Companies (RoC) Compliances for LLP

Three mandatory compliances for LLP

  • Annual Return – Form 11
  • Statement of the Accounts/Financial Statements – Form 8
  • Income Tax Returns Filings

Form 11 – LLP Annual Returns

Annual Returns or you can say Form 11 is a Summary of LLP's Partners like whether there are any changes in the management of the LLP. Every LLP is required to file Annual Return in Form 11 to the Registrar within 60 days from the closure of financial year i.e before 30th May every year.

Form 8 – Statement of the Accounts for LLP

All LLPs are required to maintain the Books of Accounts and have to prepare a Statement of Solvency (Accounts) every year ending on 31st March. Form 8 is to be filed with the Registrar of LLPs on or before 30th October every year.

Income Tax Returns Filing for LLP

Every LLP has to file the Income Tax Returns using form ITR 5. The deadline for LLP ITR filing is July 31st if tax audit is not required. LLP whose turnover exceeded Rs. 40 Lakh or whose contribution exceeded Rs. 25 Lakh are required to get their accounts audited by a practicing Chartered Accountant. The deadline for tax filing for LLP required to obtain an audit is September 30th. 

Legal and Financial Consequences of GDPR for Indian Startups

The General Data Protection Regulation, abbreviated as GDPR, was introduced on May 25, 2018. The regulation applies to every entity – big or small that has operations in the European Union in processing the data in an automated manner. This means that even if you are an Indian company having EU customers and process their data, then you will need to comply with this new data protection regulation. 

What is Personal data?

The new regulation slightly changes the definition of personal data, as it also extends it to ID numbers, location information, property, and social status, as well as indicators relating to physical and mental health. What's more, even genetic and biometric data that could identify the chosen person will be considered personal data. This may lead to some kind of revolution in this field. Data owners will gain new permissions, and administrators will be forced to perform further duties. This means that it will be necessary to introduce numerous safety mechanisms on many levels, including administrative and technical. 

The need for GDPR

Personal data leakage has become a routine phenomenon these days. Such data leaks is a threat to millions of individuals as their personal identity, financial details are made public. The new GDPR law may put an end to these crimes whether intentional or system failure. A heavy financial penalty may be a deterrence for large companies to strengthen their systems and processes in accordance with the law. Every aspect of data processing needs to be well-planned out without a room for any error. 

In addition, the basis for their processing must be determined, which is connected with the preparation of an information clause for all persons whose data will be obtained. However, this is not all. The most important change concerns the purpose for which personal data is to be obtained. It should be legally justified. Data that are outdated or incorrect must be removed immediately. This provision may be problematic for entities that collect personal data for many years and have not yet verified them. Updating such a database will certainly take a lot of time, but it is obligatory.

The GPDR also involves setting the maximum time at which personal data will be stored. The base should enable achievement of the previously assumed goal, and when it is completed – it should be removed. Therefore, the data processors have a lot of responsibility because they will be obliged to verify them. They must also check whether the data is used for specific pre-defined purposes.

Legal consequences for non-compliance with the GDPR

Each entity that owns and manages a personal database must assess the risk of undesirable disclosure of personal data before taking any action. The changes also apply to the formal consent that must be given to the person whose data will be processed. In the beginning, all these changes may turn out to be a bit problematic, especially due to the amount of work and time spent on the database verification or its current update. Non-compliance with the regulation introduced soon will, however, be associated with legal consequences in the form of high financial penalties.

Ensuring an adequate level of data protection is a priority and should be treated as such. Thanks to GDPR, it is possible to effectively fight cybercrime and data leaks. It seems, therefore, that the changes introduced will have a positive effect on everyone.

Private Equity Deal: A Step-By-Step Approach

Contributed by Ishani Chakrabarty, Symbiosis Law School, Pune

Private Equity (PE) Basics

The first step in a private equity deal would be to assemble potential investors interested in the desired company. This may prove to be the most difficult step as most companies are ambiguous with their decisions regarding whether they wish to contribute to the said Private Equity deal.

Once this step is completed, the next step would be to approach a banker. In most probability, the amount required to buy said company would be more than the accumulated sum from all the investors.

As soon as the investors have discussed upon the various aspects of the P.E., they must decide upon its execution.

What is Buying out in a PE Deal?

On acquisition of the desired company, they have the option of stripping it down completely and building it up from scratch. This process is called ‘buying out’ and may include employing new staff and selling off assets.

After a certain period of time, they have the option of selling the built company for a potential profit. This helps in repayment of any bank loans previously taken.

Growth of PE Deals

2018 was a record-setting year, with P.E. exits reaching $26 billion, almost equal to the value of exits in the previous three years combined. The sharp rise was mainly due to the mega deal of Walmart buying a controlling stake in Flipkart for $16 billion from investors including Tiger Global[1]. Other highlights include record deal value pushed by large investments, strong tech flow, and very large exits.[2]

Both Open Market Exits and P.E.-backed initial public offerings (IPOs) saw significant declines due to unstable stock markets. 2018 recorded $1.7 billion in open market exits across 56 deals- more than 70% decline by value and over 56% drop by volume.

A series of laws govern P.E. deals in India. The important laws include-

  • The Companies Act, 2013: Where an investor approaches a company, questions regarding the procedure of the investment and in what manner rights can be granted to the investor come to surface. Depending on the manner as mutually agreed upon between the Company and the Investor, the P.E. Investment is made in a company. Accordingly, statutory compliances that the companies need are ascertained. These statutory compliances can further be subdivided into those which relate to a) the transaction related to the investment and b) other conditions precedents to the investment.[3]
  • Section 42 and Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014: Where a Company is willing to raise funds through private placement of securities, the provisions of Section 42 need to be complied with. Private Placement means any offer of securities or invitation to subscribe to securities made to a group of persons selected by the company (other than by way of public offer) through issue of a private placement offer letter and which satisfies the conditions specified in section 42.

[1] 2018 was the best year for PE/VC exits in India: Report, livemint – https://www.livemint.com/Companies/c6DalEPnDt9bfW7xI0xiEI/2018-was-the-best-year-for-PEVC-exits-in-India-Report.html

[2] Private Equity in Asia-Pacific 2019, Bain & Company – https://www.bain.com/insights/apac-pe-2019-infographic/

[3] Private Equity in India: The Legal Perspective, Apurv Sardeshmukh, legallyindia – https://www.legallyindia.com/private-equity-unleashed/private-equity-in-india-the-legal-perspective-20180327-9205

GST return filing date extended for Taxpayers in Kerala, Mahe and Kodagu

Extended Due Dates for Filing of GST Returns

The Central Board of Indirect Taxes & Customs (“CBIC”) has issued a Press Release dated August 21, 2018, which extends the due dates for filing of the following GST returns by registered taxpayers in the following areas as per appended table, due to severe floods in Kerala, Mahe (Puducherry) and Kodagu (Karnataka).

Sl.No. Return Class of taxpayers registered in Kerala, Mahe (Puducherry) and Kodagu (Karnataka) Extended due date
1 FORM GSTR-3B for the month of July 2018 All taxpayers 5th October 2018
2 FORM GSTR-3B for the month of August 2018 All taxpayers 10th October 2018
3 FORM GSTR-1 for the quarter July to September 2018 Taxpayers having turnover up to Rs. 1.5 crore 15th November  2018
4 FORM GSTR-1 for the month of July 2018 Taxpayers having a turnover above Rs. 1.5 crores 5th October 2018
5 FORM GSTR-1 for the month of August 2018 Taxpayers having a turnover above Rs. 1.5 crores 10th October 2018

A Guide to Non-Banking Financial Company (NBFC)

The Indian economy over the past few decades has gone through a period of rapid financialization and economic development. This has resulted in the growth of many different types of financial institutions in the country that act as agents of savings and deposits or suppliers of credit and finance. However, the activities that financial institutions engage in differ significantly from their non-financial counterparts.

By simple comparison, financial institutions largely deal with the handling of financial assets such as deposits, loans and securities among others, while non-financial firms deal with a variety of other real assets such as machinery, consumer goods, real estate and so on. It is, however, clearly evident that financial institutions will naturally rely on services than real assets for their operations. Hence if we were to simply define or classify financial institutions, they can be divided into the following classes –

  • Regulatory
  • Intermediaries
  • Non – intermediaries
  • Others

Both banking and non-banking institutions fall under the group of financial intermediaries. Simply put, the term intermediaries refer to the institution’s role as an intermediate between savers and investors. They lend and mobilize funds at the same time. However, to achieve the purpose of this article it is necessary to differentiate between banking and non-banking institutions under the umbrella of financial institutions.

Distinguishing between banking and non-banking institutions

Banking and non-banking institutions share certain similarities on some fronts. The distinction between the two arises mainly from the nature of the liabilities they hold and the structure of their assets.

A non-banking financial company (NBFC) is a normal business entity registered under the Companies Act, 1956 1 which functions for the purpose of providing financial services which are distinct and separate from standard banking services. In other words, NBFCs are those institutions that accept nonchequeable deposits so it can be used for purpose of lending or investing. NBFCs do not have a banking license and is not supervised by national or international banking regulatory agencies.

Relevant Legal Definitions

Clause – e of Section 45 – I of the RBI Act, 1934 2 lays down the definition of non-banking financial companies as –

“Non-banking institution” means company, corporation or Co-operative society. The definition is looking at every detail as it starts with the word “means”.

The definition is hence, very simple in its nature. It considers only three kinds of entities as NBFCs, as it can be interpreted from the definition. This hints at the fact that other forms of entities such as sole proprietorships, partnerships or Hindu businesses are beyond the scope of the given definition.

Role of Non-Banking Financial Companies

Below mentioned are some of the important roles a non-banking financial company plays in the economy.

  • Mobilization of Funds – NBFCs play a major role in the economy of converting sales into investments. If NBFCs are not present in the financial sector, doing this will become extremely improbable. Hence a major role played by these institutions is also stimulating economic development rather than just generate profits for themselves.
  • Employment Generation – Every country’s government will have the macroeconomic aim of increasing jobs in the country. NBFCs play a major role in this premise as they often work in coordination with the government and successfully disburse funds to private sectors who in turn generate a lot of employment opportunities in the country.
  • Long-Term Credit – Traditional banks are generally not keen to hand out long-term loans or other forms of credit to industries easily. This is due to banks holding a larger volume of shorter repayable deposits which can’t be used by the bank for long-term lending purposes. However, NBFCs play a major role by making long-term credit more readily available. This, in turn, helps finance large scale projects with heavy financial requirements, hence boosting economic development as well.
  • Developing the Financial Sector – NBFCs are crucial players of the financial sector in any country. They perform a wide array of financial functions, ranging from providing credit to large-scale project runner to even providing capital to smaller start-up firms. The economy hence relies on NBFCs to a large extent to provide liquidity in the market.
  • Raising the standards of living – NBFCs are a useful tool for the government to improve standards of living as they are often in possession of large grants from foreign players. These funds not only stimulate economic growth themselves, but it can also be used to further pass on the funds to industries and stimulate business, in turn improving the standards of living.

Having developed an understanding of the definition and role of non-banking financial companies in the economy, it can be said without doubt that they play a pivotal role in providing stability, liquidity and vibrancy to the same. Though their mandate differs from that of a traditional bank, NBFCs reprise their importance by being a more stable, flexible and consistent source of funds. Hence, the financial sector has and continues to rely on NBFCs even in the current global economic platform.

References

  • Companies Act, 1956 – Act No. 1 of 1956
  • Reserve Bank of India Act, 1934 – Act No. 2 of 1934
  • The given clause is the original phrase from the act.

Rules for Independent Directors under Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2018

The Companies (Appointment and Qualification of Directors) Rules 1 came into effect in 2014 when they were officially published in The Gazette of India.  For the purpose of providing consistent context, the rules lay down specific definitions of basic and essential terms like an act, annexure, digital signatures, Director Identification Numbers, electronic records and registries, fees, forms and e-forms, regional directors and sections. Most of these definitions have been based on past Acts such as the Companies Act, 2 the Informational Technology Act 3 or other Ministry of Corporate Affairs codified rules.

Before attempting to understand the 2018 Second Amendment rules specifically, it is necessary to understand the provision of the 2014 Rules with respect to independent directors itself. As per the original Rules, the following are the codifications regarding independent directors –

1. Number of Independent Directors – As per Rule 4 of the Companies (Appointment and Qualification of Directors), Rules Public companies having a paid-up capital of ten crores or more, or having a turnover of 100 crores or more, or having outstanding debt exceeding fifty crore rupees are required to have at least two of its directors as independent directors. Further rules regarding the qualification of the independent directors have also been elucidated.

2. Qualifications of the Independent Director – As per Rule 5 of the same document, independent directors are expected to hold appropriate qualifications and experience in the field of business directing or other relevant fields such as management, marketing, finance or law. These skills lend to his or her technical capabilities and make them more suitable for holding the position of a director.

3. Databank of Persons offering to be Independent Directors – As per Rule 6 of the document, bodies or associations that have government authorization are to maintain a databank of individuals who have offered to take up the role of independent directors and shall also place the said databank on the Ministry of Corporate Affairs website or any other relevant Central Government approved website. The databank shall contain a variety of information notably the Director Identification Number (DIN) of the individual, personal details, income tax PAN, permanent address and history of any legal cases.

Having developed an understanding of the provisions regarding independent directors in the 2014 Rules, it is now necessary to understand the 2018 Second Amendment Rules. The provisions of the amendment are as follows – 4

Rule 5 of the 2014 Rules shall be numbered as sub-rule (1) and after it, a new sub-rule shall be inserted which states that:

 no family members or relatives of an independent director

1. will be indebted to the company or its subsidiaries, stakeholders, promoters or directors; or

2. would have given any guarantee or promised security in connection with the indebtedness of any third person to the firm or its subsidiaries, management or stakeholders of such holding company, for an amount of fifty lakh rupees at any time during the two immediately preceding financial years or the current financial year. 5

Furthermore, with respect to Rule 16 in the Principal Rules 6, the word “shall” will be replaced with the word “may”.


1. Companies (Appointment and Qualification of Directors) Rules, 2014.

2. The Companies Act,2013 – Act No.18 of 2013

3.  Information Technology Act, 2000 – Act 20 of 2000

4. The numbering of the provisions in this article is not to be confused with the clause numbers of the official Amendment Rules.

5. As per the Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2018 – 7th May, The Gazette of India – mca.gov.in

6. The Principal Rules refer to the Companies (Appointment and Qualification of Directors) Rules published in the Gazette of India Extraordinary, Part II, Section 3, Sub-section (i) vide notification number G.S.R. 259(E), dated the 31st March 2014

MCA to revise SPICe MoA & SPICe AoA

The Ministry of Corporate Affairs (MCA) had brought forward a motion in 2017 to introduce the SPICe 1 Form INC-32, which is a Simplified Proforma for the purpose of incorporating companies electronically in pursuant to the Companies (Incorporation) Fourth Amendment Rules, 2016.

A company can be incorporated with a single application for reservation of name by using the SPICe Form. Furthermore, application for the allotment of a DIN 2 is also possible using the Form. The INC-32 is similar to the INC-29, whose purpose is also to fast-track the incorporation of companies in India. However, the Integrated Form INC-29 has been replaced with the SPICe Form and the INC-29 has been put out of practice by the MCA.

Having understood what the SPICe Form is in itself, it is necessary to understand the purpose of the Form. In simple terms, the Form deals with the application for reservation of name, incorporation of new companies, application for allotment of DIN, PAN or TAN. The Form is further supported by a vast range of documents which includes details of the subscribers, directors, Memorandum and Articles of Association. When the Form has been processed and deemed to be complete, the company would be legally registered and the CIN would be allocated.

Accordingly, the DINs also get issued to the relevant directors. A maximum of three directors is allowed to apply for their DINs using the SPICe Form itself at the time of incorporation. The remaining directors would have to go through the standard application process as codified by the MCA, and published as Rules in the Gazette of India. The Company would also be eligible for the allotment of a PAN and TAN.

It is evident by now that the SPICe Form can ensure the speedy incorporation of a company by integrating multiple steps into a single process. Given below are the types of companies that can be incorporated in India:

  1. Public Limited Company
  2. Private Limited Company
  3. Producer Company
  4. Section 8 Company
  5. One Person Company

The revisions as addressed in the title of this article is in light of the Central Government attempting further the ease of doing business in India. Some of the notable changes are as follows – 3

1. Zero Fees for Incorporation – To promote the ease of doing business, especially for younger businesses and startups, the MCA has announced that no fees will be required for incorporation for SPICe Forms, e-MoAs and e-AoAs. This saves young start-ups multiple thousand rupees, encouraging them to register their companies.

2. Introduction of Reserve Unique Name – The name reservation process has been simplified by the MCA by introducing the Reserve Unique Name Form (RUN). Prior to this, the company name had to be reserved in advance through an INC-1 form or directly through the incorporation application (SPICe Form). These have now been replaced by the RUN form.

3. Director Identification Number (DIN) – The initial procedure for the application of DIN was via the e-Form DIR 3 or at the time of incorporation through the SPICe Form itself. However, as per the new rules, the SPICe Form shall become the primary application portal, along with their proof of identity and address. Existing companies can still use the DIR-3 Form for the purpose of adding directors.

There have also been efforts to simplify the PAN and TAN allocation process for companies. Steps have also been taken to improve Corporate Governance in the country by amending the Companies (Amendment) Act of 2017 4 and the Insolvency and Bankruptcy Code. 5 There also been efforts to improve the status of commercial arbitration in the country on similar lines. These efforts have increased India’s position in the Global Ease of Doing Business List by 30 spots. 6

Hence, ever since the Start-up initiatives launched by the government, there have definitely been some concrete steps taken to not only make business easy for startups but also bring about mobility and vibrancy to the sector as a whole. The new amendments to the Company Rules in pursuant to the Companies Act, not only simplify the legal procedures businesses have to go through but also make the system free of any loopholes and limitations.


1. Simple Form for Incorporating Company – Ministry of Corporate Affairs

2.Director Identification Number (DIN) – Section 266A and 266B of Companies Act, 1956

3. Government announces company incorporation with zero fees: Yourstory Media – yourstory.com

4. The Companies (Amendment) Act, 2017 – Act No. 1 of 2018

5. Insolvency and Bankruptcy Code, 2016 – Act No. 31 of 2016

6. Economy Profile – India – doingbusiness.org