Tag Archives: legal documents

A short note on the FDI in MSEs

A Micro & Small Enterprise, in terms of MSMED Act, 2006 can now go ahead and issue shares imagesor convertible debentures to a person resident outside India (PROI), exceeding 24% of its paid -up capital. The only conditions which need to be fulfilled is w.r.t the sectors prohibited and the maximum limits in Schedule 1 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000. Nonetheless, it should comply with FDI Policy, as notified by Ministry of Commerce & Industry, G.O.I., from time to time.

Further, any Industrial Undertaking, which is not an MSE and having an industrial license under the provisions of Industries (Development & Regulation) Act, 1951 for manufacturing items reserved for MSE sector, can issue shares exceeding 24% of its paid up capital with prior approval of FIPB.

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REVISED FORMAT FOR THE AUDITOR’S REPORT

A company’s auditor is required to report on the accounts of branch office, if the same have been audited by a person other than the company’s auditor, according to section 227(3)(bb) of Companies Act, 1956. The section requires the company’s auditor to state in the auditor report on whether the branch office auditor has forwarded audit report on the accounts of the branch office and how the same has been dealt by the company’s auditor in preparing his audit report.

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Further, Standards of Auditing (SA) 700 is required to be followed by the auditors, which deals with “FORMING AN OPINION AND REPORTING ON FINANCIAL STATEMENTS”. Appendix of SA 700 prescribes “Formats of Auditors’ Reports on Financial Statements”, whereby the requirement under Section 227(3)(bb) was missing. Now SA 700 has been revised to be in-sync with the section. The comparison of the Auditor’s Report is shown below. The insertion is marked in bold.

SA 700

Revised SA 700

As required by section 227(3) of the Act, we report that:b. in our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those booksc. the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account As required by section 227(3) of the Act, we report that:b. in our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by usc. the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from branches not visited by us

Disclaimer : This is not a legal opinion and should not be construed as one. Please speak with your attorney for any advice.

Registering a society

If you are contemplating starting a not for profit business, one of the options available is registering a Society under Societies Registration Act 1860.

This is a Central Act, but registrations are jurisdictional, depending on the location of the office.

Registration is simple and so is dissolving the society.  There are a few compliances and very little monitoring from the Registrar.

Purpose.

A Society can be formed for the following purposes:

Charitable societies, the military orphan funds or societies established at the several presidencies of India, societies established for the promotion of science, literature, or the fine arts for instruction, the diffusion of useful knowledge, the diffusion of political education, the foundation or maintenance of libraries or reading-rooms for general use among the members or open to the public or public museums and galleries of paintings and other works of art, collections of natural history, mechanical and philosophical inventions, instruments, or designs.

Registration Process.

Any seven or more people subscribing to the Memorandum and filing the same with the Registrar along with a fee. Usually the process takes about 15 days. The Registrar would provide a Registration Certificate.

The Memorandum contains:  Name of the Society, Objects for which the Society is being registered, the rules and regulations of the Society, Governing Council Members.

Legal Status.

Separate legal entity.  Society can sue and be sued in its own name. A registered Society can hold property (moveable or immoveable), if not vested in the trustees, shall be deemed to be vested with the governing council.

Compliances.

Annual General Meeting shall be held annually.  Accounts shall be presented to the Members and approved.  The same along with the list of governing / management committee members shall be filed with the Registrar. 

Dissolution / Winding up.

Any number not less than three-fifths of the members of any society may determine that it shall be dissolved.  Property and liabilities gets disposed / settled.  Intimation shall be filed with the Registrar.

There are other legal avatars for starting a not for profit business, i.e. Trust or a Section 25 company under the Companies Act.  Hope to write about them sometime.

Disclaimer : This is not a legal opinion and should not be construed as one. Please speak with your attorney for any advice.