SOME FAQ ON SEARCH & SEIZURE PROVISIONS UNDER INCOME TAX

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3 SOME FAQ ON SEARCH & SEIZURE PROVISIONS UNDER INCOME TAX CA. Rajesh Mehta Q.1 What is the document as per Income Tax Act? A.1 "document" includes an electronic record as defined in clause (t) of sub-section (1) of Section 2 of the Information Technology Act, Definition in I.Tech. Act "electronic record" means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche. Passport cannot be seized. As per s. 104 of CrPC, which categorically deals with power of the Court to impound documents, document does not include a passport. If by an interpretative process the apex Court has held that even a Court cannot impound a passport, then, it would be highly inappropriate to interpret the term "documents", so as to enable the executive authorities to impound the passport. It is not possible to hold that power of seizure could be extended to validate impounding of passport. Avinash Bhosale vs. Union of India & Ors. (2010) 322 ITR 381 (Bom) Q.2 Who else can be searched in addition to person searched? A.2 The authorized officer can search any person who has got out of, or is about to get into, or is in, the building, place etc., if the authorized officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing. Q.3 Can an authorized officer enter any place which is not within his jurisdiction? A.3 Where any building, place etc. to be searched is within the area of jurisdiction of any Pr. CCIT etc. but such Pr. CCIT etc. has no jurisdiction over the person to be searched, then, notwithstanding anything contained in Sec. 120, it shall be competent for him to exercise the powers in all cases where he has reason to believe that any delay in getting the authorization from the Pr. CCIT etc. having jurisdiction over such person may be prejudicial to the interest of the revenue. Q.4 A person was carrying cash of Rs. 50 Lakh with him during lok sabha election, in absence of any evidence, police took this in custody, and later on U/s 132A authorized officer made process of requisition. Whether provisions of Sec. 132 also applicable to such requisition U/s 132A? A. 4 In case of such requisition provisions of Sec. 132(4A to 14) and Sec. 132B shall, so far as may be, apply as if such seizure has been made U/s 132(1). Q.5 Will the assessment in case of requisition U/s 132A, as referred to in Q.4 above, be made U/s 153A/153C or U/s 143(3)/148? A.5 Since provisions of Sec. 132(4A to 14) are applicable to requisition U/s 132A, therefore assessment will be made U/s 153A/153C. Q.6 Will the assessment U/s 153A/153C be made for all 6 assessment years in case of requisition U/s 132A made during loksabha election? A.6 As per Income Tax rule 112F, if search or requisition U/s 132A has been made in the territorial area of an assembly or parliamentary constituency during election, then assessing officer shall not be required to issue notice for assessing or reassessing the total income for 6 assessment years immediately preceding the assessment year relevant to the previous year in which search or requisition is made. In such case assessment shall be made for the assessment year relevant to the previous year in which search is conducted or requisition is made. Here a practical problem may arise, if the asset has been taken in custody by the police in the Month of Dec and the matter for requisition U/s 132A went long in the court and requisitioning officer was allowed requisition during the same previous year i.e. Upto 31 march 2014 then there is no problem, i.e. assessment will have to be made only for Assessment year , but since the more time was taken in the court and requisition U/s 132A i.e. possession was handed over to the requisitioning officer (Investigation wing) in the month of April 2014, then assessment will have to be made for A.Y i.e. F.Y , even if asset was taken into custody by police during F.Y , because assessment has to be made only for the year in which requisition executed. As per third proviso to Sec. 153A assessment shall be made only for the assessment year in which requisition is made. And as per explanation 2 to Sec. 158BE authorization shall be deemed to have been executed "in case of requisition U/s 132A, on the actual receipt of the books of account or other document or assets by the Authorized Officer." So if the court handed over the possession to the requisitioning officer in April 2014, requisition shall be deemed to have been executed in F.Y and not F.Y in which police taken into custody the assets. But the circular No. 10/2012 date , para 3 provides that if evidence 3

4 is available for any other assessment year, then assessment of that particular year shall be made. Q.7 In the case of search of a person, can a woman be searched by a man? A.7 No, as per sub-rule(5) of rule 112 any person may be searched by authorized officer with such assistance as he may consider necessary, but if such person is a woman, the search shall be made by another woman with a strict regard to decency. Q.8 Will the witness present during search, be required to attend or be called during assessment proceedings? A.8 No, persons witnessing a search shall not be required to attend as a witness of a search in any proceeding under Income Tax Act, unless specially summoned. Q.9 Can bullion, jewellery or valuable article seized or requisitioned be opened during custody? A.9 Yes, but in the presence of two respectable witnesses after giving a reasonable notice to the person from whose custody the contents were seized. Such person shall be permitted to be present till all or any of the contents of such package are placed in a fresh package or packages and sealed in the manner specified or delivered to such person or the custodian. Q.10 What is the time limit for completion for assessment in case of Sec. 153C? A.10 Whichever is later of following:- (i) in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made; within a period of 2 years from the end of the F.Y. in which the last of authorization for search U/s 132 or for requisition U/s 132A was executed; (ii) in respect to the assessment year relevant to the previous year in which search is conducted U/s 132 or requisition is made U/s 132A, within a period of 2 years from the end of the F.Y. in which the last of the authorizations for search U/s 132 or for requisition U/s 132A was executed; (iii) one year from the end of the F.Y. in which books of account or documents or assets seized or requisitioned are handed over U/s 153C to the AO having jurisdiction over such other person. Example :- If search is conducted and last of authorization U/s 132 was made in F.Y , then U/s 153A assessment has to be made for preceding 6 assessment years and for previous year in which search/requisition is conducted/executed till 31st March, 2016, but in case of other person U/s 153C if books/document/assets were handed over to that other jurisdictional AO in the F.Y then upto and if the handed over in F.Y then upto As per Sec. 153B(2) in case of search, last of the authorization shall be deemed to have been executed on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorization has been issued; and in case of requisition U/s 132A authorization shall be deemed to have been executed on the actual receipt of the books of account/document/assets by the authorized officer. Q.11 How much quantity of jewellery cannot be seized in case of man and woman? A.11 CBDT issued Instruction No dt. 11th May, 1994 in which following guidance was given forstrict compliance : (i) in the case of wealth-tax assessee, only excess of gross weight declared in the wealth-tax return need be seized, (ii) in case of a person who is not a wealth-tax assessee gold jewellery and ornaments to the extent of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per male member of the family need not be seized; (iii) quantity higher than above should not be seized if, having regard to the status of the family and the custom and practices of the community and circumstances of the case, the authorised officer is of opinion that such higher quantity would have normally been possessed by the person concerned and his family members. If higher quantity was exempted, this was required to be reported to the authority who had authorised the search, at the time of submitting search report, the Court in Commissioner of Income Tax vs. Ghanshyam Das Johri (2013) 86 CCH 112 AllHC has held that a married lady is expected to be in possession of 500gm of jewellery and said quantity of ornaments cannot be seized. Q.12 Can any witness refuse to attend when called upon? A.12 Provisions of CrPC,1973 apply to search proceeding. Any person who, without reasonable cause, refuses or neglects to attend and witness a search under this section, when called upon to do so by an order in writing delivered or tendered to him, shall be deemed to have committed an offence under s. 187 of the Indian Penal Code (45 of 1860). Q.13 What is the date since when pending assessments shall be abated U/s 132/132A/153A/153C? Is it necessary to give satisfaction note by AO in case of Sec. 153C? A.13 In the case of SSP aviation Ltd. DCIT, High Court of Delhi(2012) 207 Taxmann 260 (Del) held that in the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment year within the period of the six assessment years shall abate, is the date of initiation of the search under s. 132 or the requisition under s. 132A-However, in the case of the other person, i.e. the person other than the one who was searched i.e. U/s 153C, such date will be the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person. In the same case High Court held that there is no requirement in s. 153C(1) that the Assessing Officer should also be satisfied that such valuable articles or books of account or documents belonging to the other person must be shown to show to conclusively reflect or disclose any undisclosed income. But Finance Act 2014 has made it compulsory in the case of Sec. 153C also to record satisfaction note now. 4

5 Analysis of Sebi (share Based Employee Benefits) Regulations, 2014 Raghav Kumar Bajaj 1. INTRODUCTION: 1.1. Section 62(1)(b) of the Companies Act, 2013 ('Act') provides that where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered, inter alia, to employees under a scheme of employees' stock option, subject to special resolution passed by company and subject to such conditions as prescribed Such conditions are prescribed u/r 12 of the Companies (Share Capital and Debentures) Rules, 2014 ('Rules'). Rule 12(1) to 12(11) of these Rules deal with the requirements to be fulfilled by a company, other than a listed company. Rule 12(12) of these Rules provide that where the equity shares of the company are listed on a recognized stock exchange, the Employees Stock Option Scheme shall be issued, in accordance with the regulations made by the Securities and Exchange Board of India ('SEBI') in this behalf In exercise of these powers, the SEBI has, vide Notification No. LAD-NRO/GN/ /16/1729 dated 28th October 2014, made and notified the regulations namely Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 ('New Regulations') As per Regulation 31 of the New Regulations, the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ('Old Guidelines') are hereby repealed. Notwithstanding such repeal, the prohibition on acquiring securities from the secondary market as provided in SEBI circular CIR / CFD / POLICYCELL / 3/2014 dated June 27, 2014 shall continue till the existing schemes are aligned with the New Regulations. Moreover, all listed companies having existing schemes to which the New Regulations apply are required to comply with the New Regulations in their entirety within 1 year of the same coming into effect, subject to certain exceptions such as trusts holding shares for the purposes of implementing employee benefits schemes of the company Keeping into mind that the timelines within which all the existing schemes have to be realigned with the New Regulations, it becomes imperative to analyse and examine the various amendments that have been brought about in the Old Guidelines. Invitation to Contribute Articles in CIRC Newsletter & e- Newsletter for Members & e-newsletter for the CA Students. CALL FOR Articles Articles The articles sent for publication in the journal should conform to the following parameters, which are crucial in selection of the article for publication: Originality:The article should be original, Relevance/Usefulness: The article should be:-relevant to a significant number of CAs and allied professionals Contribute towards development of practice of professionals. Practicality:The article should be of practical value to the CAs Topicality:The article should be topical and should discuss a matter of current interest to the professionals/readers. Interest: The article should have the potential to stimulate a healthy debate among professionals. Technical Soundness:The article should be technically correct and sound. Word limit: The length of the article should be words in WORD FORMAT ONLY. WHERE TO SEND The article can be sent to by shailendra.saxena@icai.in or circ@icai.in 5

6 1. Analysis of the Amendments Made: S.No. Particulars Old Guidelines New Regulations 1. Applicability & Scope The Old Guidelines were applicable to any company whose shares are listed on any recognized stock exchange in India. Further, the Old Guidelines extended only to ESOS & ESPS. The criteria for the applicability of the New Regulations are twofold i.e. the type of the scheme being offered by the company to its employees and the type of the company offering such schemes. Scheme based applicability: As per Regulation 1(3), the provisions of the New Regulations shall apply to the following: employee stock option schemes (ESOS) :- defined in Regulation 2(1)(g); employee stock purchase schemes (ESPS) :- defined in Regulation 2(1)(h); stock appreciation rights scheme (SARS) :- defined in Regulation 2(1)(ze); general employee benefits schemes (GEBS) :- defined in Regulation 2(1)(l); and retirement benefit schemes (RBS) :- defined in Regulation 2(1)(y). Company based applicability: As per Regulation 1(4), the provisions of the New Regulations shall apply to any company whose shares are listed on a recognized stock exchange in India, and has a scheme: for direct or indirect benefit of employees; and involving dealing in or subscribing to or purchasing securities of the company. directly or indirectly; and satisfying, directly or indirectly, any one of the following conditions: a. the scheme is set up by the company or any other company in its group; b. the scheme is funded or guaranteed by the company or any other company in its group; c. the scheme is controlled or managed by the company or any other company in its group. 6

7 S.No. Particulars Old Guidelines New Regulations Impact: Now, even if an employee benefit scheme is set up by a group company, then also, the New Regulations will apply. Non-applicability of the New Regulations: On the other hand, the New Regulations shall not be applicable to the shares issued to employees in compliance with the provisions pertaining to preferential allotment as specified in the SEBI (Issue of Capital and Disclosure Requirements) Regulations, Implementation through trust(s) The Old Guidelines only provided that in case of ESOS/ESPS administered through a Trust, the accounts of the company shall be prepared as if the company itself is administering the ESOS/ESPS. As per Regulation 3(1), a company may implement schemes either directly or indirectly by setting up an irrevocable trust(s) established under the provisions of the Indian Trusts Act, 1882 Regulation 3(2) provides that a company may implement several such schemes through a single trust (in such a case, proper books of account, records and documents for each scheme shall be kept and maintained by such single trust) Regulation 3(8) provides that subject to the requirements of the Act r/w the Rules, the company may lend monies to the trust on appropriate terms and conditions to acquire the shares either through new issue or secondary acquisition (i.e. acquisition of existing shares of the company by the trust on the platform of a recognised stock exchange for cash consideration), for the purpose of implementation of the scheme(s). Regulation 3(9) provides that for the purposes of disclosures to the stock exchange, the shareholding of the trust shall be shown as 'non-promoter and non-public' shareholding. As per Regulation 3(4), a person shall not be appointed as a trustee, if he- is a director, KMP or promoter of the company or its holding, subsidiary or associate company or any relative of such director, KMP or promoter; or beneficially holds 10% or more of the paid-up share capital of the company. 7

8 S.No. Particulars Old Guidelines New Regulations Regulation 3(14) provides that the trust shall be permitted to undertake off-market transfer of shares only under the following circumstances: transfer to the employees pursuant to scheme(s); when participating in open offer under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, or when participating in buy-back, delisting or any other exit offered by the company generally to its shareholders. Regulation 3(15) expressly provides that the trust shall not become a mechanism for trading in shares and hence shall not sell the shares in secondary market except under the following circumstances: cashless exercise of options under the ESPS; on vesting or exercise, as the case may be, of SAR; in case of emergency (as per Reg. 2(1)(e), emergency means the need of funds by the trust to meet the commitment arising out of the objective of the scheme) for implementing the GEBS and RBS, and for this purposea. the trustee shall record the reasons for such sale; and b. money so realised on sale of shares shall be utilised within a definite time period as stipulated under the scheme or trust deed. participation in buy-back or open offers or delisting offers or any other exit offered by the company generally to its shareholders, if required; for repaying the loan, if the unappropriated inventory of shares held by the trust is not appropriated within the timeline as provided under sub- Regulation 3(12); winding up of the scheme(s) [as per Regulation 8, in case of winding up of the 8

9 S.No. Particulars Old Guidelines New Regulations schemes being implemented by a company through trust, the excess monies or shares remaining with the trust after meeting all the obligations, if any, shall be utilised for repayment of loan or by way of distribution to employees as recommended by the compensation committee]; and based on approval granted by SEBI to an applicant, for the reasons recorded in writing in respect of the ESOS or ESPS or SARS, upon payment of a nonrefundable fee of Rs. 1 lakh along with the application by way of a banker's cheque or DD payable at Mumbai in favour of the SEBI. 3. Definition of Employee Under the New Regulations, an 'independent director' has been specifically excluded from the definition of 'employee' Moreover, even the employee of an associate company is now covered within the scope of 'employee' as per the New Regulations. 4. Compensation Committee and its Role 5. Approval of shareholders by way of separate resolution in general meeting. 6. Applicability on preferential allotment The scope of the terms and conditions to be formulated by the Compensation Committee was expressly specified in the Old Guidelines, such as the quantum of the options to be granted; procedure for cashless exercise of option etc. Under the Old Guidelines, such approval was required only in 2 situations As per guideline 19 in the Old Guidelines, the Old Guidelines do not apply to shares issued to Under the New Regulations, only those employees shall be eligible to participate in the schemes as may be determined by the Compensation Committee The New Regulations only state that the Compensation Committee shall, inter alia, formulate the detailed terms and conditions of the schemes which shall include the provisions as may be specified by SEBI. In other words, there is no express list contained in the New Regulations In addition to those 2 situations, such approval is required for secondary acquisition for implementation of the schemes and the secondary acquisition by the trust in case the share capital expands due to capital expansion undertaken by the company. There is no such clause in the New Regulations. In fact, as per Regulation 6(3)(b) approval of shareholders by way of separate resolution in general meeting shall be obtained in case of 9

10 S.No. Particulars Old Guidelines New Regulations employees in compliance with the SEBI guidelines on preferential allotment secondary acquisition by the trust in case the share capital expands due to capital expansion undertaken by the company including preferential allotment. This gives an impression that the New Regulations shall apply on preferential allotment also 7. Variation in terms of the schemes The company shall not vary the terms of the ESOS in any manner which may be detrimental to the interests of the employees Under the New Regulations, there is a relaxation. Now, the company shall be entitled to vary the terms of the schemes to meet any regulatory requirements 8. Winding up of the schemes There was no such clause in the Old Guidelines As per Regulation 8, in case of winding up of the schemes being implemented by a company through trust, the excess monies or shares remaining with the trust after meeting all the obligations, if any, shall be utilized for repayment of loan or by way of distribution to employees as recommended by the Compensation Committee 9. Consequences on the transfer or deputation of an employee 10. Certificate from auditors 11. Accounting policies There was no such clause in the Old Guidelines Under the Old Guidelines, this certificate from auditors was required only in the case of ESOS and not ESPS Under the Old Guidelines, the accounting policies to be followed by a company were specified in the Schedule I therein As per Regulation 9(7), in the event that an employee who has been granted benefits under a scheme is transferred or deputed to an associate company prior to vesting or exercise, the vesting and exercise as per the terms of grant shall continue in case of such transferred or deputed employee even after the transfer or deputation Under the New Regulations, this certificate is required to be taken in case of all the schemes The New Regulations only provide that any company implementing any of the share based schemes shall follow the requirements of the 'Guidance Note on Accounting for employee share-based Payments' (Guidance Note) or Accounting Standards as may be prescribed by the ICAI from time to time, including the disclosure requirements prescribed therein. 10

11 1. ADMINISTRATION OF SPECIFIC SCHEMES Chapter III of the New Regulations contains the provisions relating to the administration, implementation, pricing, vesting period, lock-in period etc in relation to each specific scheme. For the sake of easy reference, the following comparative table summarizes the various points related to the each specific scheme covered by the New Regulations: 1. Analysis of the Amendments Made: Type of Screen 1. ESOS Practice C o m p a ny w i l l have the freedom to determine the exercise price Vesting Period and Lock in Period M i n i m u m v e s t i n g p e r i o d o f 1 y e a r. Company may specify the lock-in period Others Amount payable by the employee, if any, at the time of grant of option, may be forfeited or refunded, as the case may be The employee shall not have right to receive any dividend or to vote or in any manner enjoy the benefits of a shareholder in respect of option granted to him, till shares are issued upon exercise of option. ESPS C o m p a ny w i l l have the freedom to determine the price Minimum lock-in period of 1 year. NA SARS NA Minimum vesting period of 1 year. Company has the freedom to implement cash settled or equity settled SAR scheme The employee shall not have right to receive dividend or to vote or in any manner enjoy the benefits of a shareholder in respect of SAR granted to him. GEBS NA NA At no point in time, the shares of the company or shares of its listed holding company shall exceed 10% of the book value or market value or fair value of the total assets of the scheme, whichever is lower, as appearing in its latest balance sheet for the purposes of GEBS. RBS NA NA At no point in time, the shares of the company or shares of its listed holding company shall exceed 10% of the book value or market value or fair value of the total assets of the scheme, whichever is lower, as appearing in its latest balance sheet for the purposes of RBS. 4. CONCLUSION The New Regulations shall improve the governance and aim to be more transparent towards the share based employee benefits schemes. The New Regulations reflect the many changes which were required for good corporate governance. Now, there have been certain restrictions as well on the sale of shares by the trust. Needless to say that the New Regulations require various compliance and disclosure requirements to be complied with. However, as per Regulation 29, a company may apply to the SEBI for grant of relaxation from strict compliance with any of the New Regulations subject to such conditions as the SEBI deems fit to impose. For this purpose, the applicant company has to pay a nonrefundable fee of Rs. 1 lakh by way of a banker's cheque or DD payable at Mumbai in favour of the SEBI. There was no such provision in the Old Guidelines for making such an application for relaxation from the strict enforcement of the regulations. At this juncture, with these New Regulations coming up, we can only hope that there should be good and pleasant change in the corporate sector. 11

12 Limited Liability Partnership Emerging Corporate Form CA Gaurav Rawat I. OVERVIEW OF LIMITED LIABILITY PARTNERSHIP LLP Act, 2008 passed by Lok Sabha on 12th of December 2008 and the President gave assent to the Bill on 7th January LLP Rules, 2009 Notified on 01st of April Constituent of LLP Act, Section 4 Schedules 29 Forms Out of Four Schedules, Schedule 1 defines the Mutual Rights and Liabilities of the Partner, in the absence of any matter in LLP Agreement and other schedules prescribes provisions relating to conversion. II. WHAT IS LIMITED LIABILITY PARTNERSHIP? Hybrid of Corporate & Partnership business Form. Limits liability of partners to the extent of their contribution. Provides flexibility without imposing detailed (and costly) legal and procedural requirements. The organization and operations are on the basis of a mutual agreement. Features of LLP III. BENEFITS AS COMPARED TO PARTNERSHIP FIRM Unlimited No. of Partners Limited Liability of Partners LLP is liable to the extent of assets. No exposure to the personal assets of partners except in case of fraud. IV. BENEFITS AS COMPARED TO CORPORATE FORM Easy to Form, Run and manage. Internal structure and governance through mutual agreement. No Minimum Contribution Less Government Intervention Less requirement as to maintenance of statutory records Less Compliances Taxation (Income Tax) of LLP will be like general partnership. V. KEY CONCEPTS OF LLP VI. Partners & Designated Partners Contribution Role of Partner Liability of Partner Formation & Conversion Compliances of LLP PARTNERS & DESIGNATED PARTNERS Any Individual or/and body corporate may be partner. (A foreigner can be partner of a LLP in India). Body Corporate means company as defined under section 3 of the companies Act, 1956 and includes - Limited liability partnership registered under LLP Act - Limited Liability Partnership incorporated outside India and - Company incorporated outside India Designated partner : - - Every LLP shall have at least two designated partners who are individuals and at least one of them shall be resident in India. - Responsible for managing the day to day affairs and ensuring the compliances of all applicable laws. Requirements for Designated Partners : - - Designated Partner identification Number (DPIN) - Only individual can be the Designated Partners. - At least One Designated partner should be resident of India. 12

13 VII. - In case of Body corporate their nominees can be the Designated Partners. CONTRIBUTION Each partner shall bring contribution in LLP and nature & amount shall be disclosed in the Accounts of LLP. Contribution can be in tangible, movable, immovable or intangible Form. In case of tangible/intangible (other than cash) Form of contribution or is contribution by way of service contract it shall be valued by a practicing Chartered Accountant/Cost Accountant/Approved Valuer. VIII. ROLE/ RIGHTS OF PARTNER IX. Right to participate in Management For Business Purposes Agent of Limited Liability Partnership, not of other Partners. Ethical duty to comply with all provisions of LLP Act and LLP Agreement. LIABILITY OF PARTNERS Limited to the Extent of their Contribution Not Liable for Obligation of LLP arising out of a contract. Unlimited Liability of Partners in case of Fraud. FORMATION OF LLP X. STEP I INCORPORATION Deciding the Partners & Designated partners Parameters for deciding the Partners and Designated Partners: XI I - Deciding the Partners & Designated Partners II - Obtaining DPIN (Form -7) & Digital Signature III - Reservation of Name for IIP (Form - 1) IV - Filing of Incorporation Document (Form -2) At least 2 Partners - Individuals or Body Corporate Minimum Two Designated Partners out of total no. of Partners Individuals or Nominee of Body Corporate. At least One Designated Partner to be Resident of India. STEP II INCORPORATION Obtaining DPIN (Form-7) & Digital Signature DPIN Designated Partner Identification Number DPIN - 8 digit Numeric Number DPIN vs DIN V - Certificate of Incorporation VI - Filing of LLP Agreement (Form - 3) VII - Filing of Consent of partners/designated Partners (Form - 4) Online application in Form 7 to Central Government Submission of the physical application along with Identity and Address Proof of applicant. XII. STEP III INCORPORATION Reservation of name Availability for LLP (Form-1) The word "LLP" or "Limited Liability partnership" shall be the last word of name. Not to be identical or too nearly resembles to any other partnership firm, LLP, Body Corporate and trade mark. (Section-15) Not to be prohibited under Emblems Emblems and Names (Prevention of Improper use) Act, 1950 and Rule- 18. If business includes banking, stock exchange, NBFCs activities, chit funds, micro finance (offering small loans/contribution from public, collective investment scheme, a copy of in principle approval of appropriate authority to be obtained. e Form 1 to be filed with ROC. XIII. STEP IV INCORPORATION Filing of Incorporation Document (Form-2) Form 2 - Incorporation Document along with Subscription Sheet and proof of address of registered office of LLP. XIV. STEP V INCORPORATION XV. V - Certificate of Incorporation On successful compliance - Registrar Issues Certificate of Incorporation Conclusive Evidence of Registration of limited Liability Partnership STEP VI INCORPORATION VI - Registration of LLP Agreement Execution of LLP Agreement is mandatory (Section-23). In absence of Agreement as to any matter, Schedule 1 will be applicable. Filing of details of LLP Agreement through e Form 3 V within 30 days of Incorporation. Stamp duty on LLP agreement to be paid as per State Stamp Act. Features of Schedule 1 All partners entitled to share equally in the Capital and Profits/losses. Indemnity to the partners on personal liability in proper conduct of business. Every Partner shall take part in management No partner shall be entitled to remuneration. No partner introduced without consent of all partners. All decisions with majority of partners consent Minutes to be recorded within 30 days Render True Accounts All Disputes will be referred to Arbitration Act 13

14 XVI. COMPLIANCES OF LLP WITH REGISTRAR Event Based Compliances of LLP XVII. REGULAR COMPLIANCES OF LLP Maintenance of proper Books of Accounts on cash basis or on accrual basis and according to the Double Entry System of Accounting. Maintained at registered office and preserved for at least 8 years. Audit of Accounts in accordance with the Rules prescribed. Form-8 (Filing of Statements of Accounts & Solvency) V Within 30 days from the end of 6 months from the closure of Financial Year. Form-11 (Filing of Annual Return) within 60 Days of closure of Financial Year XVIII. CONVERSION OF LLP Who can Convert? Partnership Firm Private Company Unlisted Public Company Procedure of Conversion of Company/Firm to LLP Filing of Form with registrar of LLP:- - Form1 and - Form-2 (with mandatory attachments) All the Members of the Company/partners of the firm shall be the Partners in LLP (and no one else) with the same capital/contribution ratio. Consent of all Members of the Company/partners of the firm shall be obtained. No security interest on the assets shall be subsisting or in force on the date of application. NOC from Unsecured creditors. Statement of Assets and Liabilities certified by Auditor of not more than 30 days prior to the date of the conversion application. All due returns of ROC, Income Tax and other Tax authorities shall be filed. NOC from other authority for conversion, if required. After receiving Conversion Certificate the same to be filed within 15 days with the Registrar of Companies in Form 14. "Excellent! So that's all agreed, then! All we need do now is draft the consultation document." 14

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