[ESTABLISHING A BUSINESS ENTITY IN INDIA]
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appointment of a MD, WTD or Manager, CEO, CS or CFO; D. Filing of Income Tax returns is required to be done every year by the entity operating in India in addition to the TDS return which is also required to be submitted with the tax authorities annually; E. Filing of returns with the Goods and Services Tax Department is required to be done periodically by the Indian entity in addition to deposit of the Goods and Services Tax with the tax authorities; F. Other periodical filings under different legislations such as labour laws, professional tax and municipal laws. Relatively, the operational on-going and maintenance requirements with respect to companies incorporated under Indian laws are quantifiably more than LLPs as well as Liaison Office/Branch Office/Project Office. That said compliances for companies also defer based on their classifications. For example: Public Limited companies have more compliance in general as compared to Private companies. Small companies and one-person companies do not have so many compliances, as compared with the larger/more traditional forms of companies etc. 3.4 Requirements for local shareholding/directors: It is mandatory for every company and LLP to have at least 1 (one) resident director or designated partner, respectively, i.e., a person who has stayed in India for a total period of not less than 182 (one hundred and eighty-two) days during the financial year/immediately preceding 1 (one) year, as specified by the law. However, there is no such requirement in the case of shareholders, and all the shareholders can be non-resident. However, if the
shareholder is a non-resident, then the FDI rules and regulations are to be complied with and appropriate FDI reporting is required to be done before RBI. 3.5 Minority shareholders’ rights and protection: Companies Act, 2013 has sought to empower the minority shareholders in many ways including the class action suit. Under the concept of a class action suit, a suit may be instituted against the company as well as the auditors of the company by the minority shareholders. The Companies Act, 2013 further provides for provisions relating to oppression and mismanagement which empowers minority shareholders to file an application for relief to the Tribunal in case of oppression and mismanagement. Under Companies Act, 2013, the Tribunal may also waive any or all the requirements given under Companies Act, 2013 and allow any number of shareholders and/or members to apply for relief, though this power to waive is rarely exercised by the Tribunal. 3.6 Mandatory Dematerialization of Securities : The Ministry of Corporate Affairs on October 27, 2023, notified Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023 (“ Prospectus Amendment Rules ”) vide notification no. G.S.R. 802(E) mandating private companies, other than small companies, to issue the securities only in dematerialized form and facilitate the dematerialization of all its existing securities. While dematerialization of securities is being mandated under the Prospectus Amendment Rules, it does not bar the security holder from continuing to hold his/her existing securities in a physical form. However, after September 30, 2024, when the security holder decides to transfer these securities, dematerialization would be mandatory prior to initiating the transaction. Further, the shareholders will be able to
ILN Corporate Group – Establishing a Business Entity Series
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