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Producer Company

Majority of farmers and primary producers in India are small and marginal with fewer resources. Indian farmers are poor and uneducated. They don’t know latest technology and even they can’t bargain with the merchants to get fair price of their produce. That is the reason why the concept of producer companies came into existence.

Producer Companies are legally recognized body of farmers/agriculturists/primary producers with the aim to improve the standard of their living, and ensure a good status of their available support, incomes and profitability. By organization them into producer companies, economies of scale can be unlocked and their livelihood can be improved. 

Producer Company is a company registered under the Companies Act which has the objective of production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the Members or import of goods or services for their benefit. 

‘Primary produce’ means:

  • Produce of farmers, arising from agriculture (including animal husbandry, horticulture, floriculture, pisciculture, viticulture, forestry, forest products, re-vegetation, bee raising and farming plantation products), or from any other primary activity or service which promotes the interest of the farmers or consumers; or
  • Produce of persons engaged in handloom, handicraft and other cottage industries;
  • Any product resulting from any of the above activities, including by-products of such products;
  • Any product resulting from an ancillary activity that would assist or promote any of the aforesaid activities or anything ancillary thereto;
  • Any activity which is intended to increase the production of anything referred above or improve the quality thereof;

Therefore, a Producer Company deals primarily with agriculture and post harvest processing activities.

Objects or Activities of the Producer Company 

  • Production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary production of the Members or import of goods or services for their benefit, provided that the Producer Company may carry on any of the activities specified in this clause either by itself or through other institution.
  • Processing including preserving, drying, distilling, brewing, vinting, canning, and packaging of the produce of its Members
  • Manufacture, sale or supply of machinery, equipment or consumables mainly to its Members.
  • Providing education on the mutual assistance principles, to its Members and others.
  • Rendering technical services, consultancy services, training, research and development and all other activities for the promotion of the interests of its Members.
  • Generation, transmission, and distribution of power, revitalization of land and water resources, their use, conservation and communication relatable to primary produce.
  • Insurance of producers or their primary produce.
  • Promoting techniques of mutuality and mutual assistance.
  • Welfare measures or facilities for the benefit of Members as may be decided by the Board.
  • Any other activity, ancillary or incidental to any of the activities referred above which may promote the principles of mutuality and mutual assistance amongst the Members in any other manner.
  • Financing of procurement, processing, marketing or other activities referred above which include extending of credit facilities or any other financial services to its Members.

Procedure for Producer Company Registration

Things to be kept in mind before registration

  • 10 or more Individual producers can join together to form a production company but there is no upper limit on the number of members OR any 2 or more producer institutions can form a producer company.
  • There should be minimum 5 directors and maximum of 15 in a producer company.
  • No person, who has any business interest which is in conflict with business of the Producer Company, shall become a Member of that Company.
  • The name of the Company shall end with “Producer Company Limited” which shall be stated in the Memorandum.
  • The AOA and MOA of Producer Company shall be prepared in accordance with the provision under section 581F and 581G of Companies Act, 1956.
  • One-fourth of the total membership shall constitute the quorum at a General Meeting.
  • Share Capital of a producer company shall consist of equity shares only.

Incorporation Process

Name Availability 

A Producer Company name must follow suffix ‘Producer Company Limited’. The word private isn’t used in the name and the absence of which does not indicate that the company is a public. For e.g: Maahi Milk Producer Company Limited. You can file 2 names in “RUN” facility of MCA for name availability. Attach activity letter stating main object of proposed company while filing name availability. 

Obtain Digital Signature

Apply for Class 2 Digital Signature of proposed first Directors. Id Proof, Address Proof, Photo, Email Id, Phone No. etc. will be required for Digital Signature. 

Drafting of Memorandum and Articles of Associations

MOA and AOA are basically the charter and internal rules and regulations of the Company. Thus, it is essential to be drafted with the greatest care and with the guidance of the experts. MOA and AOA must be signed by the requisite subscribers, i.e. 10 or more individuals, each of them being a producer or 2 or more producer institutions or a combination of ten or more individuals and producer institutions. Each subscriber to the memorandum shall write in his/her own hand, his/her father/husband’s name, occupation, address and the number of shares subscribed for by him/her. The signature of all the subscribers shall also be witnessed. The witness shall also sign and write in his own hand, his name, his father’s name, occupation, and address.

Filing of Documents and Forms electronically with Registrar of Companies

File e-form SPICe-32 attaching following documents:

  • Memorandum of Association
  • Article of Association
  • An self declaration in form INC-9 signed by all the subscribers and first directors of the proposed company; (On Plain Paper)
  • Consent and Declaration by first Directors in form DIR-2; (On Plain Paper)
  • A latest utility bill of registered office; (Telephone/Gas/Electricity Bill)
  • NOC from the owner whose address is to be used as the registered office of the company. If it is not owned, a lease agreement will be attached to the form;
  • Id Proof and Address Proof of first Directors;
  • If the subscriber is a body corporate, Certified True Copy of Board Resolution authorizing a person to sign the Memorandum & Articles on its behalf.

On proper verification, the ROC will issue a Certificate of Incorporation and the company can start its business operations.

Certificate of Incorporation of the Producer Company

Once the registrar fully gratified, that all the necessities of this Act have been obeyed with in respect of registration & matters precedent and incidental thereto, he shall within 30 days of the receipts of documents required for registration, register the memorandum, articles and other documents, if any, and issue a Certificate of Incorporation under this Act. The Registrar will issue the Certificate of Incorporation bearing a Corporate Identification Number (CIN) consisting of 21 digits within 30 days of the receipt of the documentation required for registration.

Benefits to the Members of Producer Companies

Value of Produce

The members of the producer company will pool their produce together to sell in the market. The members of the producer company will receive the value for the produce pooled and supplied as determined by the directors. This amount will be given out later in the form of cash/ kind/ equity shares.

Bonus Share

The members of the producer company will be entitled to get bonus shares in the same proportion to the shares held by them.

Patronage Bonus

The surplus after providing provision for payment of limited return and reserves may be given as patronage bonus to the members of the producer company. Patronage bonus signifies a distribution of the surplus income to the members of the producer company in proportion to their respective patronage. Patronage, on contrary, is the participation by members in their business activities by using the services offered by producer company.

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What is Nidhi Company?

Nidhi Company is governed by Section 406 of the Companies Act, 2013 and Company Nidhi Rules, 2014 which has a sole objective of cultivating the habit of thrift and savings amongst its members. Nidhi companies are allowed to take deposit from its members and lend to its members only. Therefore, the funds contributed for a Nidhi company are only from its members (shareholders) and used only among the shareholders of the Nidhi Company.

Nidhi Company is a class of NBFCs and RBI is empowered to issue directions to them in matters relating to their deposit acceptance activities. However, in recognition of the fact that these Nidhis deal with their shareholder-members only, RBI has exempted the notified Nidhis from the core provisions of the RBI Act and other directions applicable to NBFCs. Therefore, Nidhi Company is an ideal entity to take deposit from and lend to a specific group of people.

Pre-Registration Requirements 

  • Minimum 7 Members;
  • Minimum 3 Directors; 
  • No Minimum Capital Requirement; 
  • No Preference Shares allowed to issue; 
  • The object of the company shall be receiving deposits from and lending to its members only for their mutual benefits.

Post-Registration Requirements 

  • Minimum 200 Members within 12 months of registration 

A Nidhi company must add at least 200 members to comply with this requirement of law. Further, it has to maintain this during the course of time. If the total members falls less than 200 at anytime thereafter, it will leave the company at default. However, if you are not able to reach the limit of 200 members, then you must apply for time within 30 days of closure of financial year in Form NDH-2 with Regional Director, Ministry of Corporate Affairs. 

  • Minimum Net Owned Fund (Paid Up Share Capital + Free Reserves) of 10 lakh or more

  • Unencumbered term deposits of not less than 10% of the outstanding deposits.

  • A Nidhi Company shall not admit a body corporate, trust or minor as a member. 

  • Net owned funds to Deposits should be 1:20 i.e if you have net owned funds of 10 lakh, then your total deposit limit would be INR 2 Crore.

Process of Registration

1. Name Approval in ‘RUN’ facility 

The Applicants are required to file name availability in RUN facility of MCA portal. Every Company proposed to be incorporated as a “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name. Now, one doesn’t require digital signature of applicant for name availability.

2. Obtaining Digital Signature Certificate (DSC)
The proposed Directors who may also be the Promoters/Applicants of Nidhi Company have to obtain Class 2 DSC. 

3. File form SPICe32

After the name approval, File form SPICe 32 with following attachments for incorporation of Nidhi Company.

  • Memorandum of Association
  • Articles of Association
  • PAN Card of subscribers
  • Id Proof of First Directors
  • Address Proof of First Directors
  • Address Proof of Registered Office (Rent Agreement/Sale Deed)
  • Latest Utility Bill of Registered Office (Electricity/Telephone/Gas)
  • NOC of Owner of Registered Office
  • Consent and Declaration from first Director in form DIR-2
  • Self Declaration from First Directors and Subscribers in form INC-9

4. Approval and Certificate of incorporation

It will take 15-20 days to get the incorporation certificate of Nidhi Company once all the documents have been filed and registration fee and stamp duty paid. Incorporation certification is a proof that all the formalities regarding the incorporation have been complied with. 

Documents Checklist for Incorporation of Nidhi Company

Following Documents require from Members/Directors

  • Copy of PAN Card
  • Passport size photograph
  • Copy of Aadhaar Card
  • Bank Statement/Electricity Bill/Telephone Bill

Proof of Registered office

  • Copy of Rent agreement of office premises executed on the name of Company.(If rented property)
  • Copy of latest Electricity/Water/Gas/Telephone bill of registered office
  • NOC from Landlord that he has no objection for using his premises as the registered office of Company.

Other Declarations and Affidavits from proposed 1st Directors of Nidhi Company in the prescribed Format. 


Nidhi Company can’t enter into following transactions:

  • Continuing business of chit fund, leasing finance, insurance, hire purchase or acquisition of securities issued by any corporate body;
  • Business other than borrowing and lending in its own name. Nidhi Company offers lockers on rent to its members subjected to rental income from such facilities not exceeding 20% of the gross income of the Nidhi at any time during the ongoing financial year;
  • Accept deposits from any other members, other than its own members;
  • Pledge any of assets lodged by its own members as security;
  • Lend or deposit money to any corporate body;
  • Enter into partnership in its activities of lending and borrowing;
  • Pay any brokerage or incentives for mobilizing deposits from members;

Annual Compliance

NDH-1: Return of Statutory Compliances

Nidhi shall file a return of statutory compliances in Form NDH–1 within 90 days from the closure of the financial year with the Registrar duly certified by a Company Secretary in practice or a Chartered Accountant in practice or a Cost Accountant in practice. 

NDH-2: Apply to the Regional Director for extension of time

If the company is not complying with the minimum member criteria, it shall within 90 days from the close of the first financial year, apply to the Regional Director in Form NDH -2 for extension of time and the Regional Director may consider the application and pass orders within 30 days of the receipt of the application. 

NDH-3: Half yearly return with the Registrar

Nidhi has to file form NDH-3 within 30 days from the conclusion of each half year, duly certified by a company secretary in practice or chartered accountant in practice or cost accountant in practice. 

Whether Nidhi has to take RBI License or RBI Act applicable on it?

No. Nidhi’s are not required to take RBI license for incorporation. RBI has exempted the Nidhi’s from the core provisions of the RBI Act and other directions applicable to NBFCs. As on date, RBI does not have any specified regulatory framework for Nidhi’s. The provisions of Section 45-IA (Compulsory Registration with RBI), Section 45-IB (Maintenance of Liquid Assets), Section 45-IC (Creation of Reserve fund) have been exempted for Nidhi Companies. However, R.B.I can issue direction to Nidhi’s. 

Benefits of Nidhi Company 

  • It’s easy for Nidhi Company to get funding or borrow capital from or lend money to group members.
  • No Minimum Share Capital Requirement
  • Easy to Manage
  • No External Involvement in Management
  • Relaxation in Compliances
  • Easy Transfer of Ownership
  • Low Rates of Interest
  • Secured Investments
  • Clear Objectives for easy donations and loans
  • Exemptions and Privileges under Companies Act, 2013
  • Least intervention of R.B.I
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Ministry of Corporate Affairs (MCA) by way of its Gazette notification dated 18th December, 2018 amended Companies (Incorporation) Rules, 2014. Rule 41 of the said rules provides for conversion of Public Company into Private Company. Earlier, for conversion, application was require to be made before NCLT bench and it is quite time consuming process. Now, the said power of approval of conversion has been transferred to Regional Director with a view to de-clog the tribunals thereby to focus more on insolvency cases and speedy resolution of the distress companies.  

Process of Conversion – Legal Provisions

An application for the conversion of a Public Company into a Private Company shall be filed with Regional Director (RD) in e-Form No. RD-1, within 60 days from the date of passing of special resolution along with the following documents:

  • A draft copy of Memorandum of Association and Articles of Association, with proposed alterations; 

  • A copy of the minutes of the General Meeting at which the special resolution authorising such alteration was passed together with details of votes cast in favour and or against with names of dissenters; 

  • A copy of Board resolution or Power of Attorney dated not earlier than 30 days, authorising to file application for such conversion;

  • A Declaration by a KMP/Directors that pursuant to the provisions of sub-section (68) of section 2, the company limits the number of its members to 200 and also stating that no deposit has been accepted by the. company in violation of the Act and rules made thereunder; 

  • A Declaration by a KMP/Directors that there has been no non-compliance of sections 73 to 76A, 177, 178, 185, 186 and 188 of the Act and rules made thereunder; 

  • A Declaration by a KMP/Directors that no resolution is pending to be filed in terms of Section 179(3); 

  • A Declaration by KMP/Directors that the company was never listed in any of the Regional Stock Exchanges and if was so listed, all necessary procedures were complied with in full for complete delisting of the shares in accordance with the applicable rules and regulations laid down by Securities Exchange Board of India.

The following information must be filled in e-form RD-1, namely:- 

  • Date of the Board meeting at which the proposal for alteration of Memorandum and Articles was approved; 
  • Date of the General meeting at which the proposed alteration was approved; 
  • Date of filing of e-form MGT-14 and SRN of it;
  • Reason for conversion into a private company, effect of such conversion on shareholders, creditors, debenture holders, deposit holders and other related parties; 
  • Details of any conversion made within last five years and outcome thereof along with copy of order; 
  • Details as to whether the company is registered under section 8. 

List of Creditors

There shall be attached to the application, a list of creditors, debenture holders, drawn up to the latest date preceding the date of filing of application by not more than 30 days, setting forth the following details, namely:- 

  • the names and address of every creditors and debenture holder of the company; 
  • the nature and respective amounts due to them in respect of debts, claims or liabilities; 
  • In respect of any contingent or unascertained debt, the value, so far as can be justly estimated of such debt: 

Provided that the company shall file an affidavit, signed by the Company Secretary of the company, if any, and not less than two directors of the company, one of whom shall be managing director, where there is one, to the effect that they have made a full enquiry into affairs of the company and, having done so, have formed an opinion that the list of creditors and debenture holders is correct, and that the estimated value as given in the list of the debts or claims payable on contingency or not ascertained are proper estimates of the values of such debts and claims that there are no other debts, or claims against, the company to their knowledge.

Newspaper Advertisement (Format Given)

The company shall, at least 21 days before the date of filing of the application;

  • Advertise, notice of conversion in the form No. INC.25A, in a vernacular newspaper in the principal vernacular language in the district and in English language in an English newspaper, widely circulated in the State in which the registered office of the company is situated; 

  • Serve, by registered post with acknowledgement due, individual notice on each debenture holder and creditor of the company; and 

  • Serve, by registered post with acknowledgement due, a notice to the Regional Director and Registrar and to the regulatory body, if the company is regulated under any law for the time being in force. 

Where no objection has been received from any person in response to the advertisement and the application is complete in all respects, the same may be put up for orders without hearing and the concerned Regional Director shall pass an order approving the application within 30 days from the date of receipt of the application. 

Re-submission on Objections

Where the Regional Director on examining the application finds it necessary to call for further information or finds such application to be defective or incomplete in any respect, he shall within 30 days from the date of receipt of the application, give intimation of such information called for or defects or incompleteness, on the last intimated e-mail address of the person or the company, which has filed such application, directing the person or the company to furnish such information, to rectify defects or incompleteness and to re-submit such application within a period of 15 days in e-Form No. RD-GNL-5 provided that maximum of two re-submissions shall be allowed. 

In cases where such further information called for, has not been provided or the defects or incompleteness has not been rectified to the satisfaction of the Regional Director within the period allowed, the Regional Director shall reject the application with reasons within 30 days from the date of filing application or within 30 days from the date of last re-submission made as the case may be. 


Where an objection has been received or Regional Director on examining the application has specific objection under the provisions of Act, the same shall be recorded in writing and the Regional Director shall hold a hearing or hearings within a period 30 days and direct the company to file an affidavit to record the consensus reached at the hearing, upon executing which, the Regional Director shall pass an order either approving or rejecting the application along with reasons within 30 days from the date of hearing, failing which it shall be deemed that application has been approved and approval order shall be automatically issued to the applicant. 

In case where no consensus is received for conversion within 60 days of filing the application while hearing or otherwise, the Regional Director shall reject the application within stipulated period of 60 days. 

The conversion shall not be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under the Act. On completion of such inquiry inspection or investigation as a consequence of which no prosecution is envisaged or no prosecution is pending, conversion shall be allowed. 

Time Bound Disposal

One of the important provision of new framework is time bound disposal of matter by RD. Rules provides 30 days time to raise query or else approve the conversion. Where no order for approval or re-submission or rejection has been explicitly made within 30 days, it shall be deemed that the application stands approved and an approval order shall be automatically issued to the applicant. 

Filing of Order with RoC

The order conveyed by the Regional Director shall be filed by the company with the Registrar in Form No. lNC-28 within 15 days from the date of receipt of approval. 


Form No. INC-25A

Advertisement to be published in the newspaper for conversion of public company into a private company

Before the Regional Director

Ministry of Corporate Affairs


In the matter of the Companies Act, 2013, section 14 of Companies Act, 2013 and rule 41 of the Companies (Incorporation) Rules, 2014 


ln the matter of M/s.................. (company name) having its registered office at_____________ Applicant 

Notice is hereby given to the general public that the company intending to make an application to the Central Government under section 14 of the Companies Act, 2013 read with aforesaid rules and is desirous of converting into a private limited company in terms of the special resolution passed at the Annual General Meeting/ Extra Ordinary General Meeting held on ____________to enable the company to give effect for such conversion. 

Any person whose interest is likely to be affected by the proposed change/status of the company may deliver or cause to be delivered or send by registered post of his objections supported by an affidavit stating the nature of his interest and grounds of opposition to the concerned Regional Director (complete address of the Regional Director to be given), within fourteen days from the date of publication of this notice with a copy to the applicant company at its registered office at the address mentioned below: 

For and on behalf of the Applicant 


Name of Director 


Address of registered office 

Date: __________

Place: ___________

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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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