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Merger and amalgamation are restructuring tool which helps companies in expansion and diversification of their business and to achieve their underlying objectives. Merger means an arrangement whereby one or more existing companies merge their identity into another to form a new entity which may or may not be one of those existing entities.

The Companies Act, 2013 has introduced the concept of ‘Fast Track Merger’ (FTM) for Small Companies and merger of Holding companies with its wholly owned Subsidiary Companies.  Section 233 of Companies Act, 2013 read with Rule 25 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 deals with the procedure of FTM.

Applicability of FTM provisions

Notwithstanding the provisions of section 230 and section 232, a scheme of merger or amalgamation may be entered into between two or more small companies or between a holding company and its wholly owned subsidiary company or such other class or classes of companies as may be prescribed.

Section 233 of the Companies Act, 2013 dispenses with the cumbersome and time consuming process for mergers and lays down a simple, fast track merger procedure for the merger of certain companies like holding and subsidiary companies, and small companies.  

Small Company [Section 2(85) of the Companies Act, 2013]

“Small Company” means a company, other than a public company,—

  • Paid-up share capital of which does not exceed Rs. 50 lakh or such higher amount as may be prescribed which shall not be more than Rs. 10 Crore; or

  1. Turnover of which, as per profit and loss account for the immediately preceding financial year, does not exceed Rs. 2 Crore or such higher amount as may be prescribed which shall not be more than Rs. 100 Crore:

Provided that nothing in this clause shall apply to—

  • A holding company or a subsidiary company;
  • A company registered under section 8; or
  • A company or body corporate governed by any special Act;

Preliminary Steps before FTM

Check whether each Transferor and Transferee Companies Article of Association permits for mergers and amalgamation. If not, then alter AOA first.

Appoint at least 2 valuers for valuation of shares of each Transferor and Transferee Companies. (Not Mandatory Requirement)

Prepare draft scheme of merger, exchange ratio based on valuation, 

Steps or Procedural Aspects of Fast Track Merger

  • Convene Board Meeting by each Transferor and Transferee Companies:

  • To approve the draft scheme;
  • To fix date, time and place for convening of shareholders meeting;
  • To fix date, time and place for convening of creditors meeting;

  • Notice of proposed scheme

After the approval of Board of Directors of each Company, the notice of the proposed scheme inviting objections or suggestions, if any, shall be sent by each transferor and transferee company in form CAA-9 to the Registrar of Companies (“ROC”) and Official Liquidators where registered office of the respective companies are situated or persons affected by the scheme along with a copy of the Scheme.

  • Filing Declaration of Solvency with ROC

Each of the transferor and transferee companies involved in merger must file a declaration of solvency, in form CAA-10, with the ROC where the registered office of the companies are situated, before convening the meeting of members and creditors for approval of the scheme.

  • Notice of EGM

The notice of the meeting required to be sent to the members before 21 clear days and it shall be accompanied by –

  • Copy of proposed scheme;
  • Statement disclosing the details of merger;
  • Declaration of solvency made in Form No. CAA.10;
  • Copy of latest audited financial statements of each company;
  • Copy of valuation report, if any;
  • Any other relevant and material information.

Alternatively, approval in writing from majority representing 90% of the total number of shares may be taken without conducting general meeting. 

  • Members Approval

The objections and suggestions received by the ROC, Official Liquidator and persons affected by the scheme are considered by the companies in their respective general meetings and the scheme must be approved by the respective members or class of members at a general meeting holding at 90% of the total number of shares.

  • Creditors Approval

Both Transferor and Transferee Company required to take approval from creditors either by way of written approval OR at meeting of creditors specifically called for these purpose.

The notice of the meeting required to be sent to the creditors before 21 clear days and it shall be accompanied by –

  • Copy of proposed scheme;
  • Statement disclosing the details of merger;
  • Declaration of solvency made in Form No. CAA.10;
  • Copy of latest audited financial statements of each company;
  • Copy of valuation report, if any;
  • Any other relevant and material information.

The scheme is to be approved by majority representing 9/10th in value of the creditors or class of creditors of respective companies indicated in a meeting.

  • Filing of the Scheme

The draft scheme involving merger must be filled within 7 days of conclusion of meeting of members and creditors to the following:

  • A copy of Scheme and report of the result of each of the meetings with the Regional Director (R.D) having jurisdiction of Transferee Company.
  • A copy of the scheme along with Form CAA 11 shall also be filed with:
  • ROC in Form GNL 1;
  • Official Liquidator through hand delivery or by registered post or speed post.

  • Approval of Scheme by R.D

On the receipt of the scheme, if the ROC or the Official Liquidator has no objections or suggestions to the scheme, the Regional Director shall register the same and issue a confirmation thereof to the companies.

If the ROC or Official Liquidator has any objections or suggestions, he may communicate the same in writing to Regional Director within a period of 30 days. If no such communication is made, it shall be presumed that he has no objection to the scheme.

If the Regional Director after receiving the objections or suggestions or for any reason is of the opinion that such a scheme is not in public interest or in the interest of the creditors, it may file an application before the Tribunal in Form No. CAA.13 within a period of 60 days of the receipt of the scheme under sub-section (2) stating its objections and requesting that the Tribunal may consider the scheme under section 232.

On receipt of an application from the Regional Director or from any person, if the Tribunal, for reasons to be recorded in writing, is of the opinion that the scheme should be considered as per the procedure laid down in section 232, the Tribunal may direct accordingly or it may confirm the scheme by passing such order as it deems fit.

If the Regional Director does not have any objection to the scheme or it does not file any application under this section before the Tribunal, it shall be deemed that it has no objection to the scheme.

Where no objection or suggestion is received to the scheme from the ROC and Official Liquidator or where the objection or suggestion of ROC and Official Liquidator is deemed to be not sustainable and the Regional Director is of the opinion that the scheme is in the public interest or in the interest of creditors, the Regional Director shall issue a confirmation order of such scheme of merger or amalgamation in Form No. CAA. 12.

  • Filing of confirmation order with the ROC

A copy of the order confirming the scheme by the Regional Director shall be filled with the ROC, within 30 days, in form INC-28, having jurisdiction over the Transferor and Transferee Company and the ROC shall register the scheme and issue a confirmation to the companies and such confirmation shall be communicated to the ROC where transferor company or companies were situated.

Effect of Registration of Scheme

The registration of the scheme shall have the following effects:

Dissolution of Transferor Companies

Upon The registration of the scheme, Transferor Company shall be deemed to have the effect of dissolution without process of winding-up.

Transfer of property or liabilities

Assets and Liabilities of the Transferor Company will be transferred to the Transferee Company. Any charge created on the properties of Transferor Company will be transferred to Transferee Company and Transferee Company is liable for repayment of any loans.

Legal Proceeding

Legal proceedings by or against the transferor company pending before any court of law shall be continued by or against the transferee company.

Additional Liability

Where the scheme provides for purchase of shares held by the dissenting shareholders or settlement of debt due to dissenting creditors, such amount, to the extent it is unpaid, shall become the liability of the transferee company.

Authorized Capital of Transferee Company

The Transferee Company shall file an application with the Registrar along with the scheme registered, indicating the revised authorized capital and pay the prescribed fees due on revised capital. The fee paid by the transferor company on its authorized capital prior to its merger with the transferee company shall be set-off against the fees payable by the transferee company on its enhanced authorized capital due to merger or amalgamation.


The simplification of process will encourage corporate entities to undertake corporate restructuring activities and help them in achieve their underlying objectives. The time taken to complete the merger through court process and the cost involved in it is saved substantially through these route. 

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What is NFRA?

National Financial Reporting Authority (NFRA) is a single independent authority proposed in Companies Act, 2013 for the establishment and enforcement of accounting and auditing standards and oversight of the work of auditors.

Why the Need for NFRA?

  • Restructuring or introducing new regulating authorities across the globe has been carried out in response to financial scams owing to the feeble regime of corporate governance and weak disclosure requirements in accounting and auditing. In India, the idea of floating the NFRA came about in the aftermath of the Satyam scam and its need was further highlighted after witnessing the more recent episodes involving Nirav Modi.

  • The non-performing assets (NPA) situation arose since last decade put the question mark of auditors and auditing standards. Although banks are subject to different kinds of Audit yet NPAs are at increasing at alarming levels. 

  • Tax evasion has played major roles in bringing the NFRA into existence. 

  • Most of the major economies of the world have independent audit regulators and therefore, India also needs to match up with them as well. 

  • Current regulator of auditors and auditing firms i.e ICAI had liberal approach against auditors involves in malpractices in past and this can be very well known to PM (He mentioned alongwith figures in his speech in CA day program in 2017)

Which Companies will be covered by NFRA?

The NFRA shall have power to monitor and enforce compliance with accounting standards, auditing standards, oversee the quality of service and undertake investigation of the auditors of the following class of companies and bodies corporate, namely:-

  • Companies whose securities are listed on any stock exchange in India or outside lndia;

  • Unlisted Public Companies having
    • Paid up Capital is Rs. 500 CR or More; OR
    • Turnover is Rs. 1000 CR or More; OR
    • Aggregate of Outstanding Loans, Debentures and Deposit is Rs. 500 CR or More in immediately preceding F.Y.

  • Insurance companies, Banking companies, Companies engaged in the generation of supply of electricity;

  • Companies governed by any special Act like
  • Reserve Bank of India under Reserve Bank of India Act, 1934;
  • State Bank of India under State Bank of India Act, 1955;
  • Life Insurance Corporation of India under incorporated under Life Insurance Corporation Act, 1956;
  • Unit Trust of India under The Unit Trust of India Act, 1963;

  • Associate/subsidiary of the aforesaid company/body corporate incorporated outside India, income/net worth of which is more than 20% of the consolidated income/net worth of the aforesaid company/body corporate.

  • Any Company, Body Corporate or Person referred to NFRA by the Central Government; 

Once a Company/Body Corporate covers under the NFRA Rules, will be covered by NFRA for 3 more years such Company/Body Corporate falls outside NFRA Rules in later stage.

Filing of NFRA-1

Accordingly, while three kinds of class of entities will be regulated by NFRA viz “companies”, “body corporates” and “persons”, however, only “body corporates” of such regulated entities will be required to do filing of NFRA-1 once within 30 days from the commencement of the Rules i.e within 13.12.2018; and thereafter within 15 days of appointment of the auditor.

Exemption from NFRA-1

  • Companies Covered under NFRA rules (Because they had already filled ADT-1)
  • Private company or any other company which is not regulated by NFRA. (Because they are completely exempt from NFRA rules) 

There is no logic of filing NFRA-1 by all companies appointing auditor because they will have to anyway file e-Form ADT-1 informing the details about the auditor.

Functions and Duties of NFRA

  • Maintain details of particulars of auditors appointed in the companies and bodies corporate specified in rule 3;
  • Recommend accounting standards and auditing standards for approval by the Central Government;
  • Monitor and enforce compliance with accounting standards and auditing standards;
  • Oversee the quality of service of the professions associated with ensuring compliance with such standards and suggest measures for improvement in the quality of service;
  • Promote awareness in relation to the compliance of accounting standards and auditing standards;
  • Co-operate with national and international organizations of independent audit regulators in establishing and overseeing adherence to accounting standards and auditing standards; and
  • Perform such other functions and duties as may be necessary or incidental to the aforesaid functions and duties.

Annual return by Auditor

Every auditor covered under NFRA rules shall file a return with the NFRA on or before 30th April every year in such form as may be specified by the Central Government.

Role of ICAI 

ICAI can give recommendations to NFRA on proposals for new accounting standards or auditing standards or for amendments to existing accounting standards or auditing standards on being asked and such recommendations are not binding to NFRA.

Still, Proprietorship concerns, Firms, LLPs, Charitable Trust, AOP/BOI, Societies, etc. along with Private Companies and Unlisted Public Companies which are not covered under rules would still be governed by ICAI and ICAI would have the sole discretionary power to provide rules and regulation for them.


Success of NFRA would depend upon the bureaucracy consist in it and powers vested in it otherwise it would be simply just transfer of the power from one authority to the other. Only time will tell whether NFRA will become a powerful independent body or just remain government department like SFIO.

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The Reduction of Share Capital means reduction of issued, subscribed and paid up share capital of the company. Previously, reduction of share capital was governed by section 100 to 104 of the Companies Act, 1956, now it is governed by section 66 of the Companies Act, 2013. As per old act, it was subjected to the confirmation of high court, but under new Act, the said powers of high court has been transferred to National Company Law Tribunal (NCLT).

Buy back of shares and redemption of Preference Shares are also reduction of share capital but governed by specific provisions prescribed under Act. Such reductions in the form of buy back and redemption do not require sanction/approval from Tribunal (NCLT).

Need of Reduction of Share Capital

  • Returning of surplus to shareholders;
  • Eliminating losses, which may be preventing the payment of dividends;
  • As a part of scheme of compromise or arrangements;
  • simplify capital structure;
  • When the company is making losses, the financial position does not present a true and fair view of the company. The assets are overvalued and the balance sheet consists of fictitious assets with debit balance in profit and loss account. In order to reduction of capital will write-off that portion of capital which is already lost and will make the balance sheet look healthy.

Modes of Reduction of share capital

  1. Extinguish or reduce the liability 

Company may reduce share capital by reducing or extinguishing the liability on any of its partly paid up shares. For e.g:  if the shares are of face value of Rs. 100 each of which Rs. 50 has been paid, the company may reduce them to Rs. 50 fully paid-up shares and thus relieve the shareholders from liability on the uncalled capital of Rs. 50 per share.

  1. Cancel any paid-up share capital 

Company may reduce share capital by cancelling any shares which are lost or is unrepresented by available assets. For e.g: if the shares of face value of INR 100 each fully paid-up is represented by Rs. 75 worth of assets. In such a case, reduction of share capital may be effected by cancelling Rs. 25 per share and writing off similar amount of assets.

  1. Pay off any paid-up share capital 

Company may reduce share capital by paying off fully paid up shares which is in excess of the wants of the company. For e.g: shares of face value of Rs. 100 each fully paid-up can be reduced to face value of Rs. 75 each by paying back Rs. 25 per share.

Prohibition on Reduction 

No reduction of share capital shall be made if the company is in arrears in the repayment of any deposits accepted by it either before or after the commencement of this Act or the interest payable thereon.

Special Resolution and Approval of NCLT

A company limited by shares or limited by guarantee and having a share capital may reduce the share capital by passing a special resolution, subject to the confirmation by the Tribunal (NCLT).

Notice to Regulators & Creditors

NCLT shall give notice of application for reduction of capital to the following: 

  • Central Government 
  • Registrar of Companies 
  • Securities and Exchange Board, in the case of listed companies, and 
  • Creditors of the company 

and shall take into consideration the representations, if any, made to it by that C.G, ROC, SEBI and the creditors within a period of 3 months from the date of receipt of the notice. If no representation has been received within the said period, it shall be presumed that they have no objection to the reduction.

Accounting Standard to be followed

No application for reduction of share capital shall be sanctioned by the Tribunal unless the accounting treatment proposed by the company is in conformity with the accounting standards specified in section 133 or any other provision of this Act and a certificate to that effect by the company's auditor has been filed with the Tribunal.

Order of Tribunal

The Tribunal may, if it is satisfied that the debt or claim of every creditor of the company has been discharged or determined or has been secured or his consent is obtained, make an order confirming the reduction of share capital on such terms and conditions as it deems fit.

Order of Tribunal to be filled with ROC

The company shall deliver a certified copy of the order of the Tribunal and of a minute approved by the Tribunal showing—

  • amount of share capital;
  • number of shares into which it is to be divided;
  • amount of each share; and
  • amount deemed to be paid-up on each share at the date of registration.

to the Registrar within 30 days of the receipt of the copy of the order, who shall register the same and issue a certificate to that effect.

Action under Section 447 i.e Punishment for Fraud

If any officer of the company

  • knowingly conceals the name of any creditor entitled to object to the reduction;
  • knowingly misrepresents the nature or amount of the debt or claim of any creditor; or
  • abets or is privy to any such concealment or misrepresentation as aforesaid,

He shall be liable under section 447.


If a company fails to comply with the provisions, it shall be punishable with fine which shall not be less than Rs. 5 lakh but which may extend to Rs. 25 lakh.


  • Convene a Board Meeting

  • To approve the reduction of share capital; 
  • To fix the date of general meeting of the company to get approval of members.

  • Dispatch notice of general meeting to all the shareholders at least before 21 days.

  • Hold the general meeting and pass Special Resolution approving reduction of share capital.

  • If you have secured creditors, take NOC from them in writing.

  • File Special Resolution alongwith e-form MGT-14 with ROC within 30 days of passing. 

  • Apply to NCLT by filing an application in Form RSC-1 to confirm reduction. The application shall be accompanied with the following attachments:

  • List of creditors 
  • Certificate of auditor to the effect that list of creditors is correct
  • Certificate of auditor that Company is not having any arrears of repayment of deposit and interest thereon; 
  • Certificate of auditor that Accounting Treatment proposed by the company for reduction of share capital is in conformity with the Accounting standards.
  • Any other relevant documents.

  • The NCLT shall within 15 days of submission of the application give a notice to ROC, SEBI in Form RSC-2and to every creditors of the company in Form RSC-3.

  • The NCLT shall also give direction for the notice to be published in Form RSC-4within 7 days of such direction in a leading English and vernacular language newspaper and for uploading on the website of the company.

  • The company shall file an affidavit in Form RSC-5 confirming the dispatch and publication of the notice within 7 days from the date of issue of such notice.

  • The NCLT may dispense with the requirement of giving notice to the creditors or publication of notice, if every creditor has been discharged or secured or given his consent in writing.

  • Representation by ROC, SEBI and creditors shall be sent to NCLT within 3 months of receipt of notice and copy of which shall also be sent to the company. If no such representation has been received by NCLT within the said period, it shall be presumed that they have no objection.

  • Company shall send the representation or objections so received alongwith responses of the company thereto within 7 days of expiry of period upto which objections were sought.

  • NCLT may hold any enquiry on adjudication of claim and/or give direction for securing the debts of the creditors.

  • The order confirming the reduction of share capital shall be in Form RSC-6.

  • The company shall deliver a certified copy of the order of the NCLT under sub-section (3) and of minute approved by the Tribunal to the ROC and file E-form INC-28 within 30 days of the receipt of order.

  • The ROC shall issue a certificate to that effect in Form RSC-7.


When any company reduces the share capital by way of reducing the face value of shares or by way of paying off part of the share capital, it amounts to extinguishment of the rights of the share holder to the extent of reduction of share capital. Therefore it is regarded as transfer under section 2(47) of the IT Act and would be chargeable to tax.

The income received on capital reduction would be taxable as under:

  • Amounts distributed by the company on capital reduction to the extent of its accumulated profits will be considered as deemed dividend under section 2(22)(d) and the company will have to pay dividend distribution tax on the same,
  • Distribution over and above the accumulated profits in excess of original cost of acquisition of shares would be chargeable to capital gains tax in the hands of the share holders.
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Private Placement under the Companies Act, 2013


Section 42 of the Companies Act, 2013 read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014 contains provisions of private placements of securities. Recently, both Section 42 and Rule 14 have undergone amendments by way of the Companies (Amendment) Act, 2017 and the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2018.

Private Placement” means any offer of securities (Not Only Shares) or invitation to subscribe securities to a select group of persons by a company through issue of a private placement offer letter and which satisfies the conditions specified in section 42 of the Act.


To How Many People?

The offer of securities or invitation to subscribe securities, shall be made to not more than 200 persons in the aggregate in a financial year (excluding qualified institutional buyers and employees of the company being offered securities under ESOP). This restriction would be reckoned individually for each kind of security that is equity share, preference share or debenture. 

Special Resolution 

The offer should be previously approved by the shareholders of the company, by a Special Resolution, for each of the offers or invitations. 

In case of offer or invitation for non-convertible debentures, it shall be sufficient if the company passes the Board Resolution each time if such issue is within the borrowing limit specified under Section 180(1)(c) of the Companies Act. However, borrowing limits are to be approved by the shareholders of the issuer company first.

A company shall issue private placement offer cum application letter only after the relevant special resolution or Board resolution has been filed in the ROC.

Private Placement Offer Letter (PPOL)

A PPOL in form of PAS-4 shall be accompanied by an application form serially numbered and addressed specifically to the person to whom the offer is made and shall be sent to him, either in writing or in electronic mode, within 30 days of recording the names of such persons. PPOL shall not contain any right to renunciation.

Payment through Banking Channel 

The payment to be made for subscription to securities shall be made from the bank account of the person subscribing to such securities and the company shall keep the record of the Bank account from where such payments for subscriptions have been received. 

Separate Bank Account in scheduled Bank

Issuer Company must open a separate bank account in a scheduled bank for receiving amount against issuance of securities under private placement.

No Advertisement

No Company offering securities under this section shall release any public advertisements or utilize any media, marketing or distribution channels or agents to inform the public at large about such an offer. 

Allotment must be within 60 days

Issuer Company shall allot its securities within 60 days from the date of receipt of the application money for such securities and if the company is not able to allot the securities within that period, it shall repay the application money to the subscribers within 15 days from the date of completion of sixty days and if the company fails to repay the application money within the aforesaid period, it shall be liable to repay that money with interest at the rate of 12% per annum from the expiry of the sixtieth day. 

Return of Allotment

A return of allotment of securities shall be filed with the Registrar within 15 days of allotment in Form PAS-3 along with a complete list of all the allottees containing-

  • The full name, address, permanent Account Number and E-mail ID of such security holder;
  • The class of security held;
  • The date of allotment of security ;
  • The number of securities herd, nominal value and amount paid on such securities; and particulars of consideration received if securities were issued for consideration other than cash.

ROC filing must before utilization

The Companies Amendment Act, 2017 refrain issuers from utilizing monies raised through private placement until allotment is made and the return of allotment is filed with the ROC. So, Return of Allotment in form PAS-3 needs to be filled immediately after allotment for an issuer to be able to utilize proceeds from the private placement. 

Record of Private Placement

The Company shall maintain a complete record of private placement offers in Form PAS-5.


Any private placement issue not made in compliance of the provisions of section 42 shall be deemed to be a public offer and all the provisions of this Act and the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act and Regulations will apply. 

Contravention of Section 42 attracts penalty which may extend to the amount involved in the offer or invitation or Rs. 2 Crore whichever is higher, and the company shall also refund all monies to subscribers within a period of 30 days of the order imposing the penalty.

Private Placement – In Nutshell

  • It shall be made only to the selected group of persons who are identified by board first and such number of persons must not 200 in a financial year.
  • Issuer Company must issue Private Placement Offer Letter (PPOL) to identified persons. Such PPOL shall not contain any right to renunciation.  
  • PPOL must be issued only after filing of Special Resolution or Board Resolution as the case may be.
  • Application money shall require to be paid through banking channel only. 
  • Issuer Company must open separate bank account in a scheduled bank for receiving money against allotment of securities.
  • Issuer Company shall allot its securities within 60 days from the date of receipt of the application money and if the company is not able to allot within 60 days, it shall repay the application money within 15 days from the expiry of 60 days.
  • Issuer Company must file form PAS-3 for return of allotment within 15 days.
  • Issuer Company can’t utilize the money till return of allotment is filled with ROC.
  • Issuer Company must maintain complete record of private placement in PAS-5.
  • No fresh offer or invitation shall be made unless the allotments with respect to any previous offer or invitation have been completed. 

Changes done through Companies (Amendment) Act, 2017

Dispensation with minimum investment size requirement

The CAA, 2017 have dispensed with the earlier requirement of the value of offer or invitation per person to be of an investment size of not less than Rs. 20,000 of the face value of the securities.

No Renunciation right

Where earlier the Act was silent on the right of renunciation in the hands of the investor, the CAA 2017, explicitly provides clarity on the fact that the private placement offer letter and the application shall not carry any renunciation rights. Private placement being an issuance of securities to a specific pre-identified person only, this was implied that the offer would not carry the right of renunciation unlike rights shares which are offered to the existing shareholders.

Relaxation in passing of shareholders’ resolution in case of private placement of non-convertible debentures (NCDs)

Earlier, a shareholders’ resolution was required to be passed once a year for private placement of NCDs during that year. The Recent Amendments permit private placement of NCDs pursuant to board resolution without obtaining shareholders’ resolution so long as the proposed amount to be raised does not exceed the borrowing limit specified under Section 180(1)(c) of the Companies Act, 2013. However, borrowing limits are to be approved by the shareholders of the issuer company.

Discontinuation of filing GNL-2

Earlier the Company was required to file private placement offer letter and complete record of private placement with the Registrar within 30 days of circulation of the offer letter. However, the requirement of the same has been done away with. This will surely reduce the compliance burden of the companies. 

Reduced timeline for filing Return of Allotment in PAS-3

The Amendment Act 2017 provides for filing the return of allotment within 15 days from the date of allotment compared to earlier 30 days. 

No utilization of money received from private placement unless PAS-3 filed

A very significant change in CAA, 2017 is   that  the company  making   the  offer  or   invitation  for  subscription   of  securities  through private  placement   is  not  allowed   to  utilize  the   money raised  through  private placement unless the return of allotment is filled with ROC. 

Procedural aspect of Private Placement

  1. Hold Board Meeting:

  • To grant in-principle approval for issue of securities on private placement basis;
  • To identify persons to whom securities be allotted; 
  • To approve draft private placement offer letter and record of private placement;
  • To open separate bank account for receiving money;
  • To approve notice of GM for approval of members;

  1. Confirm whether Letters from all proposed allotees giving consent to subscribe the issue are received or not.
  2. Prepare the List of allotees along with all the required details as per the format prescribed under the Form PAS-5.
  3. Hold General Meeting and pass special resolution along with resolutions to approve the offer letter and authorize an officer of the company to give effect to the Private Placement.
  4. File MGT-14 alongwith special resolution and explanatory statement.
  5. Dispatch private placement offer letter alongwith application form to the proposed allotees.
  6. Receive application money against issue of securities in bank account opened in scheduled bank. 
  7. Hold Board Meeting for Allotment of Securities and allot securities within 60 days of receiving application money.
  8. File Form PAS-3 within 15 days of the allotment of securities alongwith Special Resolution and List of allotees.
  9. Issue corresponding Share Certificates; make respective entries in Register of Members along with confirming the Distinctive numbers and Certificate Numbers of the Shares allotted.
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Establishment of Foreign Business in India

India is currently going through unprecedented growth trajectory. With the coming up of NDA Government in 2014 with optimistic P.M Mr. Narendra Modi, Businesses across the globe is attracted towards India for starting their business here. GoI is implementing initiatives that not only will facilitate investments into India but will also make India a better and easier place to do business in. Some of the initiatives that the current government has started are Make in India, Startup India, Digital India, Skill India, Smart Cities among others. 

Why to start business in India?

Before going into how to start business, We should know why to start business here: 

1. Unique features of India

  • India with its 1350 million population is the second biggest market in the world after china for any goods and services. 
  • India has a very good demographic dividend because it has more than 800 million young and working population which is not available in any country of the world. 
  • India is growing 7% per year since 1998 which is the fastest growing economy in the world after china.
  • India has coastline of 7500 KMs which is connecting Asia to the south Asia and South-east Asia. 
  • India has abundance of natural resources. 

2. Future Prospects 

  • India will have 69 cities with a population of more than one million each by 2025. Economic growth will center on them, and the biggest infrastructure building will take place there. 
  • Average wealth per person increased from $900 in 2000 to $2,800 in 2015. 
  • Internet users to double to 829 million from 373 million in 2016. Online consumers are expected to cross 100 million by the end of 2017 from 69 million in 2016.
  • 41% Indian parents funding kids' education more important than retirement saving. So, more and more educated mass will be coming out.
  • India targets 500 million skilled workers by 2022.

3. Business friendly environment 

  • India offers open investment regime with majority of sectors under automatic route. 
  • The financial and the capital market in India is also very deep and mature, offering investors and other entities a very effective and competent infrastructure. BSE and NSE are largest stock exchanges in India. 
  • The Government of India is also constantly working towards rationalizing the process of setting up business in India and has undertaken several notable steps to improve the ease of setting up and doing business in India. 
  • The recent legal and taxation reforms like coming into effect of the Insolvency and Bankruptcy Code and the Goods & Services Tax clearly demonstrate India’s resolve to emerge as one of the most business friendly jurisdictions in the world. 
  • The start-up culture in India is also witnessing a tremendous boom. This offers immense investment opportunities for investors who wish to be part of this new phenomenon wherein young ventures are changing the way businesses are run and are creating great value for all the stakeholders.
  • India is on the path of being an economic superpower and therefore it is imperative for global entrepreneurs and investors to have pie of the India’s growth story.

4. Open Foreign Direct Investment Policy

  • Except for few strategic and core sectors, almost all the sectors have been opened up for foreign investment. In several sectors foreign investment upto to the extent of 100% is allowed, thereby making it possible to set up completely foreign owned ventures in India. 
  • Under the FDI Policy, foreign investors can invest into Indian business using various investment instruments like equity shares, convertible preference share, convertible equity shares etc. 

5. Lower operational cost

  • The cost of starting business is very low in India as compared to setting up a company in the U.S, the U.K, or Singapore.
  • The cost of the basic amenities required for businesses is lower in India, whether it is investing in infrastructure, labour, food, transportation, Internet, or even taxes. 

6. Low Tax Rate

Corporate Tax Rate in India for companies having turnover upto Rs. 250 crore is 25%. The following are the tax rates of different developing and developed countries across the globe.





























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How to Start Business in India?

Entry Options for Foreign Businesses in India

There are mainly two types of entry options for foreign businesses in India i.e First, Registration of a company/LLP in India and Second, Establishing a Branch/Liaison/Project office in India.

1. As an Indian Company or Limited Liability Partnership

A Foreign Company can commence operations in India by incorporating either a Company or LLP. LLP is a new form of business structure in India that combines the advantages of a Company (a separate legal entity having perpetual succession) with the benefits of organizational flexibility associated with a partnership. Such a Company or LLP may enter into Joint Venture with Indian party or incorporate as a Wholly Owned Subsidiary of foreign Company. Foreign equity in such Indian companies or LLPs can be up to 100%, subject to equity caps under the Foreign Direct Investment Policy.

Joint Venture with an Indian Partner

Foreign Companies can set up their operations in India by forging strategic alliances with Indian partners. Joint Venture may entail the following advantages for a foreign investor:

  • Established distribution/marketing set up of the Indian partner.
  • Available financial resource of the Indian partners.
  • Established contacts of the Indian partners which help smoothen the process of setting up of operations.

Wholly Owned Subsidiary Company

Foreign companies can also to set up wholly owned subsidiary in sectors where 100% foreign direct investment is permitted under the FDI policy.

2. As a Foreign Company

Foreign Companies can set up their operations in India through Liaison Office, Project Office or Branch Office. Such offices can undertake any permitted activities. Companies have to register themselves with Ministry of Corporate Affairs, Govt. of India within 30 days of setting up a place of business in India.

Liaison office

  • Liaison offices (LOs) are a popular option for foreign investors exploring the Indian market for the first time, and unsure of how the country’s liberalizing F.D.I cap will affect their business.
  • The Foreign Exchange Management Act (FEMA) governs the application and approval process for the establishment of a liaison or branch office in India. The approval for establishing a liaison office in India is granted by the Reserve Bank of India (RBI).
  • Liaison office acts as a channel of communication between the principal place of business or head office and entities in India. 
  • Liaison office cannot undertake any commercial activity directly or indirectly and cannot, therefore, earn any income in India. 
  • Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers. 
  • It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India.

Project Office

  • Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in India. 
  • RBI has now granted general permission to foreign entities to establish Project Offices subject to specified conditions. 
  • Such offices cannot undertake or carry on any activity other than the activity relating and incidental to execution of the project. 
  • Project Offices may remit outside India the surplus of the project on its completion, general permission for which has been granted by the RBI.

Branch Office

  • Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:

  • Export/Import of goods.
  • Rendering professional or consultancy services.
  • Carrying out research work, in which the parent company is engaged.
  • Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
  • Representing the parent company in India and acting as buying/selling agents in India.
  • Rendering services in Information Technology and development of software in India.
  • Rendering technical support to the products supplied by the parent/ group companies.
  • Foreign Airline/shipping Company.

  • A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer. 
  • Branch Offices established with the approval of RBI may remit outside India profit of the branch net of applicable Indian taxes and subject to RBI guidelines. 
  • Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).

Minimum requirements before starting business in India

Number of Shareholders and Directors

  • Minimum 2 shareholders for a Private Limited Company and Minimum 7 shareholders for a Public Limited Company.
  • Minimum 2 Directors for a Private Limited Company and Minimum 3 Directors for a Public Limited Company.
  • There must be 1 Indian Resident Director i.e person who have stayed in India for 182 days or more in previous calendar year.

Foreign Ownership

  • 100% Foreign Direct Investment, subject to equity sectoral cap of R.B.I.
  • Do check if your business required prior approval from Reserve Bank of India.

Initial Share Capital

  • No minimum capital requirement for starting company in India.
  • Do plan for initial capital based on initial expenses, until the business reaches at Break Even Point (BEP).

Registered Office

  • A registered office address in India is required for correspondence and AGM purpose.
  • Option will be there to arrange within 30 days of incorporation.


India is a land of opportunities. A per EY report, India is the most attractive market by international investors, ranking India as the premier choice for investors worldwide. India’s outlook among investors has improved, that India would be among the top three economies by 2020, is the view of 37%, against 29 percent last year. Existing investor experience has been encouraging, with 70 percent of businesses, which already operate in India extending support to that idea.

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Voluntary Liquidation under Insolvency and Bankruptcy Code, 2016


The Provisions of voluntary winding up have been removed from the Companies Act, 2013 and are now governed by the IBC, 2016. Ministry of Corporate Affairs vide notification dated 30th March, 2017 notified Section 59 of the Code which is relating to Voluntary Liquidation of Corporate persons. On the very next day, the Insolvency and Bankruptcy Board of India (IBBI) vide its notification dated 31st March 2017, notified the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 which will come into effect from 1st April 2017.

Who may apply for voluntary liquidation? 

A corporate person who intends to liquidate itself voluntarily which has not committed any default may initiate voluntary liquidation proceedings under the provisions of this Chapter. [Section 59(1)] So, Any Company or LLP which has not defaulted in payment and have a full capacity to repay debt can apply for voluntary liquidation. 

Pre-liquidation Process

  • Declaration of Solvency 

A declaration from majority of the directors of the company verified by an affidavit stating that:

  • They have made a full inquiry into the affairs of the company and they have formed an opinion that either the company has no debt or that it will be able to pay its debts in full from the proceeds of assets to be sold in the voluntary liquidation; and
  • The company is not being liquidated to defraud any person;

The above declaration shall be accompanied with the following documents:

  • Audited financial statements and record of business operations of the company for the previous 2 years or for the period since its incorporation, whichever is later;
  • A report of the valuation of the assets of the company, if any prepared by a registered valuer;

  • Members Approval

A special resolution of the members of the company in a general meeting requiring the company to be liquidated voluntarily and appointing an insolvency professional to act as the liquidator must be passed within 4 weeks of declaration of solvency;

  • Creditors Approval

If the company owes any debt to any person, Creditors representing two thirds in value of the debt of the company shall approve the resolution passed for voluntary liquidation within seven days of such resolution.

  • Intimation to ROC and IBBI

The company shall notify the ROC and the IBBI about the resolution passed to liquidate the company within 7 days of such resolution or the subsequent approval by the creditors, as the case may be. [Section 59(4)]

  • Voluntary Liquidation Commencement Date

The voluntary liquidation proceedings in respect of a company shall be deemed to have commenced from the date of passing of the special resolution, subject to the approval of the creditors. [Section 59(5)] 

Voluntary Liquidation Process

  • Public Announcement

Liquidator shall make public announcement within 5 working days of his appointment to submit claims within 30 days. It must be published in one english daily and one regional daily newspapers wherein registered office of the corporate person is situated. It must also be posted in the website of corporate persons, if having. It must be sent to the IBBI via e-mail public.ann@ibbi.gov.in for posting it in board’s website.

Public Announcement must contain the following:

  • Liquidation commencement date;
  • Name, Address, Contact number, Registration number of liquidator;
  • Mode of submission of claim; 
  • Last date of submission of claim;  

  • Opening of Bank Account 

A new bank account with scheduled bank must be opened with the word ‘In Liquidation’ at last after the name of corporate person for receiving and paying settlement amount. Each and every financial transaction must be settled through these account.

  • Claims Collection, Segregation, Acceptance And Rejections

Claim means

  • A right to payment whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured;
  • A right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured;

There are 4 categories of creditors who can claim in liquidation proceedings which are as follows: 

Claim by Operational Creditors

Operational Creditor other than workman or employee shall submit proof of claim to the liquidator in person, by post or electronic means in Form B of schedule 1 of Voluntary Liquidation Process Regulation.

Claim by Financial Creditors

A person claiming to be a financial creditor of the corporate person shall submit proof of claim to the liquidator in electronic means in Form C of Schedule I.

Claim by Workmen and Employees

A person claiming to be a workman or an employee of the corporate person shall submit proof of claim to the liquidator in person, by post or by electronic means in Form D of Schedule I. Where there are dues to numerous workmen or employees of the corporate person, an authorized representative may submit one proof of claim for all such dues on their behalf in Form E of Schedule I.

Claim by Other Stakeholders

A person, claiming to be a stakeholder other than those above, shall submit proof of claim to the liquidator in person, by post or by electronic means in Form F of Schedule I.

Formats Prescribed in Schedule 1 of IBBI (Voluntary Liquidation Process) Regulations, 2017

Form  Name


Form  A

Public Announcement

Form  B

Proof of claim by Operational creditors except by workmen & employees

Form  C

Proof of claim by financial creditors

Form  D

Proof of claim by workmen & employees

Form  E

Proof of claim by authorized representative of workmen & employees

Form  F

Proof of claim by any other stakeholder

Process flowchart of Voluntary Liquidation

1. Convening a Board Meeting

  • To Approve Voluntary Winding up;
  • To Approve Declaration of Solvency to be filled with ROC and IBBI;
  • To Appoint Insolvency Professional to act as Liquidator and Registered Valuer, Subject to Shareholder’ approval;
  • To Approve notice calling General Meeting for consideration of Voluntary winding up, appointment of Liquidator and Registered valuer; 

2. Filing a Declaration of Solvency

Filing of ‘Declaration of Solvency’ with ROC in form e-GNL-2 verified by an Affidavit signed by majority of Directors alongwith following attachments:

  1. Latest 2 years audited financial statements;
  2. Valuation Report, if any, prepared by Registered Valuer;

3. Sending Notice of EGM to all Shareholders

4. Convening EGM within 4 weeks of filing Declaration of Solvency

  • To Approve Voluntary Winding up;
  • To Appoint Insolvency Professional to act as Liquidator and Registered Valuer and fix their remuneration;

5. Creditors Approval

Approval from Creditors’ representing 2/3rd value of debt is required either by way of holding meeting or NOC from each creditors.

6. Public Announcement

P.A must be made within 5 working days from the date of appointment of Insolvency Professional. Format of Public Announcement is prescribed in regulation.

7. Intimation to IBBI and ROC

Within 7 days of public announcement, Intimation must be sent to IBBI and ROC.

8. Opening of 'In Liquidation' Bank Account

A new bank account with scheduled bank must be opened with the word ‘ABC Private Limited-In Liquidation’ for receiving and paying settlement amount.

9. Collection and Verification of Claims

All claims must be made within 30 days of public announcement. Liquidator must verify the correctness of each claim and prepare a list of stakeholders.

10. Preparation of Preliminary Report

Based on claims received, liquidator needs to prepare Preliminary Report within 45 days from the date liquidation commencement date containing capital structure, assets and liabilities, claims received etc. 

11. Distribution of Proceedings

Liquidator needs to sell all the assets by auction or through direct party, realize amount from creditor and distribute proceedings among all the stakeholders. 

12. Submission of final report

Liquidator must prepare a final report containing liquidation proceedings and submit it to the ROC, IBBI and NCLT. Based on final report and application for dissolution, NCLT pass an order for dissolution of corporate entity.

13. Filing of dissolution order with ROC

Copy of order received from NCLT needs to be filled with ROC in e-form INC-28 for dissolution of a corporate entity.

Role of Adjudicating Authority i.e NCLT in whole Process


The Adjudicating Authority i.e NCLT is competent to declare the corporate person as dissolved after due liquidation and distribution of its assets. The NCLT comes into the picture only at the final stage of liquidation after application for Dissolution of Corporate Person is made by Liquidator after distribution of Liquidation assets of the Corporate Person by following the procedure stipulated under the Code.

Roles and Responsibilities of Liquidator in whole Process

Liquidator of corporate person is assigned with the following task

  • To verify claims of all the creditors;
  • To carry on the business of the corporate debtor for its beneficial liquidation as he considers necessary;
  • To value, sell, recover and realize all assets of and monies due to such corporate person in a time bound manner?
  • To open a bank account for the purpose of receiving all moneys due to the corporate person?
  • To pay and settle with the creditors of the corporate person;
  • To obtain any professional assistance from any person or appoint any professional, in discharge of his duties, obligations and responsibilities;
  • To maintain registers specified under regulation 10 of schedule 2;
  • To distribute proceeds to the stakeholders within a period of 6 (six) months of receipt of the proceeds? and
  • To preserve a physical or an electronic copy of the reports, registers and books of account for at least 8 (eight) years after the dissolution of the corporate person, either with himself or with an information utility.

Unclaimed Proceeds of Liquidation (Regulation 39)

The liquidator shall apply to the NCLT for an order to transfer into the Companies Liquidation Account to the Public Account of India, any unclaimed proceeds of liquidation or undistributed assets or any other balance payable to the stakeholders on the date of the order of dissolution.

A person claiming to be entitled to any money paid into the Companies Liquidation Account may apply to the Board for an order for payment of the money claimed; which may, if satisfied that such person is entitled to the whole or any part of the money claimed, make an order for the payment to that person of the sum due to him, after taking such security from him as it may think fit.

Any money paid into the Companies Liquidation Account, which remains unclaimed thereafter for a period of fifteen years shall be transferred to the general revenue account of the Central Government.

Thank You.

For any queries or suggestions, feel free to write us @ dvg.pcs@gmail.com

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