Solo Trip to Dehradun

Dehradun, as what I saw, had a pleasant climate, good people, some surprisingly good places, pretty girls & sumptuous food.

Clock Tower (Ghanta Ghar) is the central point of the city & you can get shared autos to almost every place from this point. I stayed at Moti Mahal which was close to the Clock Tower. The rooms were decent & food here was costly.

Rober’s Cave (Gucchupani)

I took a Bus from clock tower (going towards Ghadi Kant), to reach Rober’s cave. On reaching here, you have to trek almost one km to reach the base of the cave. Once you are inside, the views are stunning. They have locker facilities & changing room. I reached there early morning, it was quite peaceful with not a soul around. These are times when you feel happy that you’re traveling alone. Make sure you rent slippers out here before you enter the waters. I stepped inside the floor of lake with my rented slippers dipped in knee length waters. The cave is located in between two mountains which converge at places. You can walk almost 200 meters inside till you reach the waterfalls. There’s a snacks shop in there at the top but it was closed when I reached. The path leading to the cave also has restaurants where you can have Maggi, Omletes & Momos beside the river.

Bus from Clock Tower to Guccupani & back- Rs. 10 * 2
Entry charges – Rs. 25
Clock room – Rs. 30
Rented Slippers – Rs. 10
Maggi – Rs. 50

I returned back to my hotel at 9 to get ready for the office meeting. The meeting ended sooner than I had expected & I was back to my hotel at 12. Had lunch & left for FRI.

Forest Research Institute (FRI)

There’s a direct share auto connecting clock tower to FRI. But that dropped me at the entrance gate, which was about 1.5 kms away from the Institute. The scenic beauty was just woah. If you’re a nature lover, this a must visit place at Dehradun. After a 20 mins stroll through the jungle I reached the building which was used in the movie Student of the Year. And let me put these bluntly, this is one place which disappointed me the most. There are 5 museums inside FRI. The tickets they provide has the map of all the museums. My legs were already numb with the walk & now I walked again through museums after museums of paintings & dead timber.

Auto from Clock tower to FRI – Rs. 10
Ticket for Museums – Rs. 30
Ola from FRI to Monastery – Rs. 110

With dawn hanging on to me & my mind bugging me with questions like whether sleeping at the hotel would’ve been a better plan, I had to run to the Mind rolling Monastery which closes at 7. I chucked Tapkeswar Temple out of my imaginary itinerary and quickly booked an Ola to that buddha monastery.

Mind rolling Monastery & Buddha Temple

Tibetans always have that rich culture & mountaineer charm in their expression. The monasteries are the right place to witness this. Mind rolling monastery is located towards the south of ISBT. You can get direct autos for them from the clock tower. Before I could step inside the monastery, I saw the child monks playing cricket in the backyard. They were kind of cute. The monastery was closed when I reached at 6, but to my relief the Buddha temple was flooded with tourist. There were no entry charges, just a nominal token for depositing shoes. The insides of the temple was serene & calm. The temple was surrounded by Giant Buddha statues, which deserved a good pose for the camera.

On the back gates to the temples there were a dozen cafe offering Drinks, Chinese & Tibetan delicacies. I tried the Uptown cafe, and it’s ambience was just awesome. Ordered an Iced Tea, which was just fine. Tried momos in another cafe which tasted surprisingly different. I missed out on Kalsang restaurant which is really good for authentic Tibetan & Chinese delicacies.

After walking few meters from clock tower, there’s this restaurant called The Buffet Snacks where I tried Break Rolls, they were the best I have ever had. It’s Veg Sandwich is also popular here.

All in all Dehradun is a nice place is you’re travelling alone, but for just a day.

Delisting Guidelines – Procedures

• Introduction

• In terms of the SEBI (Delisting of Equity Shares) Regulations, 2009 read with SEBI (Delisting of Equity Shares) (amendment) Regulations, 2015 (“Delisting Regulations”), a company may delist its shares from all or any of the recognised stock exchanges[1] where they are listed.

• The company is required to provide an exit opportunity to all its public shareholders^[2].

• Once delisted voluntarily, a company cannot be re-listed again for 5 years.

• Delisting Procedure

 

• Approvals Required:

• Prior approval of the board of directors of the Company in its meeting;

• Prior approval of the shareholders of Company by a special resolution passed through postal ballot and passed by at least a 2/3^rd majority of the public shareholders;

• In-principle approval from Stock Exchanges;

• Appointment of Merchant banker for Due Diligence

Board of Directors before granting its approval shall:

• Disclose to SEs about (i) delisting proposal from Promoters (ii) appointment of merchant banker to carry out due-diligence;

• Obtain details from SEs about trading in shares of company by top 25 shareholders, and their details of off-market transactions for past 2 years and furnish the same to merchant banker;

• Certify, taking into consideration the due diligence report of merchant bankers that:
• company is in compliance of securities laws;
• promoter or their related entities have not engaged in fraudulent or manipulative practice in connection with delisting;
• delisting is in the interest of shareholders.

• Due Diligence Report from Merchant Banker to certify whether :

• trading carried out by entities belonging to promoter or their related entities is in compliance or not, with the applicable provisions of securities laws; and

• entities belonging to promoter or their related entities have carried out or not, any transaction to facilitate the success of the delisting offer which is not in compliance with the provisions of delisting guidelines.

• Application to Stock Exchange for in-principle approval

• While considering the application, SE may require the company to satisfy it as to, amongst others, –
• resolution of investor grievances;
• payment of listing fees to that SE and compliance with conditions of listing agreement;
• any litigation pending against the company pertaining to its activities in securities market;
• any other matter having a material bearing on the interests of its equity shareholders;
• any other relevant matter as stock exchange may deem fit.

• Such application to contain Audit report by a CA/ CS in terms of Reg 55A of SEBI (Depositories and Participants) Regulations, 1996, reconciling the total issued capital, covering a period of 6 months prior to date of application.

• Application to be disposed within 5 working days from receipt of satisfactory information

• Final application for delisting to be made within 1 year of passing the special resolution of shareholders accompanied with the proof of having given an exit opportunity to the public shareholders;

 

• Escrow Account

• The Promoters are required to open an escrow account and deposit in it, the total estimated amount of consideration calculated on the basis of the floor price and no. of equity shares of the company outstanding with public shareholders.

• The escrow account can consist of either cash deposited with a scheduled commercial bank, or a bank guarantee in favour of the merchant banker, or a combination of both.

• On determination and accepting the final price, the promoter shall deposit further sufficient additional sum in the escrow account.
  • Public Announcement (‘PA’) & Letter of Offer

• Within 1 working day of receipt of the in-principle approval from SE and subject to opening of the escrow account, the Promoters are required to make a PA (setting out all material information relating to the delisting, including the information set out in Annexure I) in one English, Hindi and regional daily.

• PA must also specify a ‘Record Date’, no later than 30 working days from PA, for determining the names of the shareholders to whom the letter of offer will be sent;

• A letter of offer (accompanied by a bidding form and a form for tendering the shares) shall be dispatched within 2 days from the PA, to all the entitled shareholders as on the Record date.

• Bidding Period

• Within 7 days from the date of PA, the offer will be opened for 5 working days and the entitled public shareholders may tender their bids and participate in the book building process (in the manner set out in Annexure II).

• The promoter shall facilitate tendering of shares by the shareholders and settlement of the same, through the stock exchange mechanism as specified by the SEBI. (key provisions set out in Annexure III).

• Promoters cannot make a bid in the offer and merchant banker shall ensure the compliance of the same.

• No promoter group entity can sell shares of the company from the date of the board meeting in which the delisting proposal was approved till the completion of the delisting process.

• Pricing of Shares

 

• Offer Price: Determined through book building process, after fixation of floor price and disclosure of the same in PA and letter of offer.

• Floor Price: Determined in terms of SEBI Takeover Regulations, 2011 as under, being the highest of:

1. Highest negotiated price per share of the company for any acquisitions made attracting open offer;
2. Volme Weighted Average Price (‘VWAP’) paid or payable for acquisitions by promoter group during preceding 52 weeks of PA;
3. Highest price paid or payable for acquisitions by promoter group during preceding 26 weeks of PA;
4. VWAP of 60 trading days (for frequently traded shares only)
5. Price determined by promoter and merchant banker taking into account valuation parameters including, book value, comparable trading multiples, etc. (for infrequently traded shares – in which traded turnover during 12 months preceding the month in which PA is made, is less than 10% of total number of shares).
6. Price at which convertible instruments are converted into shares.

The price paid for shares of the company shall include any price paid or agreed to be paid for control premium or non-compete fees or otherwise.

If promoter acquires shares of the company during 26 weeks after tendering period at a price higher than the offer price, the promoter shall pay difference between the highest acquisition price and offer price, to all shareholders whose shares were accepted in open offer.

• Final Offer Price: Price at which shares accepted through eligible bids takes the promoter shareholding > 90%.

 

The promoter shall not be bound to accept the equity shares at the offer price determined by the book building process.

If the final price is accepted, then the promoter shall accept all shares tendered at the final price or at a price lesser than the final price. Promoter may also fix a higher final price.

Within 5 working days of the closure of the offer, the Promoters and the merchant banker are required to make a PA regarding the success, failure or rejection of the offer;

 

• Successful Delisting only if:

• Post offer Promoter Group shareholding, together with shares accepted through eligible bids at final price > 90% of company’s total share capital; and

• At least 25% of public shareholders holding shares in demat mode as on the Board meeting, participate in book building process. (not reqd. if Promoter & merchant banker demonstrate to SE that they have delivered letter of offer to all public shareholders with proof of delivery).

 

In case of Successful Offer	In case of Unsuccessful Offer or rejection of offer price by promoters
§  Promoters are immediately required to open a special account;	§  No shares shall be bought back
§  Transfer entire consideration payable under the offer from escrow account to such special account.	§  Equity shares deposited shall be released within 10 working days from bidding period;
§  Shareholders must be paid the final price within 10 working days from the closure of the offer.	§  The company shall not make the final application to SE for delisting and promoters shall close escrow account;

The remaining public shareholders are entitled to tender their shares to Promoters within 1 year from the date of delisting and the Promoters are required to accept such shares at the final price determined as above.

• Restrictive Provisions for Delisting

 

• Delisting of equity shares not permitted:

1. pursuant to a buy back; or
2. pursuant to a preferential allotment; or
3. upto 3 years of listing of that class of equity shares on any recognised stock exchange; or
4. if any instruments convertible into that class of equity shares sought to be delisted are outstanding; or
5. if any entity belonging to promoter has sold equity shares of company in preceding 6 months of the board meeting in which the delisting proposal was approved;
6. of convertible securities.

• No promoter or their related entities shall, amongst others –

1. directly or indirectly employ the funds of the company to finance the exit opportunity;
2. employ any device, scheme or artifice to defraud any shareholder or other person; or
3. engage in any transaction or practice that operates as a fraud or deceit upon any shareholder or other person; or
4. engage in any act or practice that is fraudulent, deceptive or manipulative

 

 

• Steps and Tentative Timelines of Delisting:

 

Particulars of Steps	Estimated Time
Board to appoint Merchant Banker to carry out due diligence (intimation to stock exchange)	–
Board Approval at a Board Meeting (considering Merchant Banker report)	X
Shareholders approvals by a Special Resolution through postal ballot [favourable public shareholders > 2x against public shareholders]	X
In-principle delisting approval from stock exchange (to be disposed of by SE w/n 5 days from receipt of complete application).	X+5
Appointment of other necessary intermediaries.	X+6
Deposit of estimated consideration in a Escrow Account by the Promoters.	X+6
Public Announcement (‘PA’) (w/n 1 day) mentioning about, inter alia, floor price, offer price & ‘Record Date’ (not later than PA + 30 days).	X+6
Dispatch the Letter of Offers accompanied by a Bidding Form to all public shareholders as on Record Date (not later than PA + 2 days)	X+8
Bid Opening Date (not later than PA + 7 days)	X+13
Bid Closing Date (5 days)	X+18
Public Announcement of final offer price and Promoter’s acceptance/ rejection of final offer price (w/n 5 days of Bid Closing Date).	X+23
Payment of Final Price for Offer Shares in case of a successful Delisting Offer (w/n 10 days of Bid Closing Date) or Return to Public shareholders of Offer Shares tendered but not acquired under the Delisting Offer (w/n 10 days of Bid Closing Date)	X+28
Final application for delisting to the stock exchange (w/n 1 year of passing SR)	X+30

 

[1] ‘Recognised Stock Exchange’ means any stock exchange which has been granted recognition under Sec. 4 of the Securities Contracts (Regulation) Act, 1956;

[2] ‘Public Shareholders’ are holders of equity shares other than promoters and holders of depository receipts against equity shares held with a custodian and such custodian.

Payment of Royalty & Fees for Technical Services (FTS) by a WOS/JV to Parent company outside India

Two of the most popular ways in which a Foreign Company can set-up Manufacturing/Trading operations in India are –

1. Setting up a Wholly owned Subsidiary
2. Setting up a JV with an Indian Partner

Eventually, Foreign company would be providing various Trademark, Patents, Copyrights, and Technical Services to its indian Operations. In this post, we are going to explore about what Taxability & withholding liability would be in such a case.

(Indian Government has entered into Double Taxation Avoidance Agreements (DTAAs) with various countries with an aim to eliminate Double Taxations on cross-country transactions. This post is going to be for a company incorporated in Thailand, so it’s with perspective of India-Thailand DTAA.)

Payment of Royalty (Article 14 of India-Thailand DTAA)

Royalty has been defined as “payments of any kind received as a consideration for the alienation or the use of, or the right to use, any copyright of literary, artistic or scientific work (including cinematograph films, phonographic records and films or tapes for radio or television broadcasting), any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.”

Such royalty shall be taxed in India at lower of the following –

• As per normal provisions of Indian Income Tax Act, 1961 i.e.
  • If the Foreign Company has a Permanent Resident (“PE”) in India –  It shall be chargeable under the head “Profits and gains of business or profession” (Section 44DA)
  • If the Foreign Company doesn’t have a PE in India – 10% (Section 115(b)(A))
• 15% of gross amount of receipts

Now, what exactly is “Permanent Establishment” ? Can the WOS/JV Operated in India be called as a Permanent Establishment?

PE has been defined in Article 5 of the India-Thailand DTAA –

The term “permanent establishment” shall include—
(a) a place of management;
(b) a branch;
(c) an office;
(d) a factory;
(e) a workshop;
(f) a mine, a quarry, an oil or gas well or other place of extraction of natural resources;
(g) a farm, plantation or other place where agricultural, forestry, plantation or related activities are carried on;
(h) a building site or construction or assembly project or supervisory activities in connection therewith, where such a site, project or activity continues for the same or a connected project for a period or periods aggregating to more than 183 days;
(i) a warehouse, in relation to a person providing storage facilities for others;
(j) the furnishing of services, including consultancy services, by a resident of one of the Contracting States through employees or other personnel provided activities of that nature continue (for the same or a connected project) within the other Contracting State for a period or periods aggregating to more than 183 days.

Regarding the consideration of WOS/JV as a permanent establishment, clause 6 of Article 5 clears the air –

6. The fact that a company, which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other Contracting State (whether through a permanent establishment or otherwise), shall not, of itself, constitute either company or a permanent establishment of the
other.

Payment of Fees for Technical Services (“FTS”)

FTS has been defined in various DTAAs in Article 9 as “any consideration (including lump sum) for rendering of any managerial, technical or professional services including the services of technical or other personnel.”

Its pertinent to note the various DTAAs (including the India-Thailand DTAA) doesn’t have a separate provision dealing with FTS. The issue with respect to taxation of FTS has been a subject matter of dispute before the judicial authorities.

Two options arises in such a case –

1. When the entity has a PE in India – Taxable under “Article 7 – Business Profits” of the DTAA
2. When the entity doesn’t have a PE in India – Two decisions has been given by the judiciary in such a case –

• As held in the case of Bangkok Glass Industry Co. Ltd.*, such FTS won’t be taxable in India. It wi
• As held in the case of TVS Electronics Ltd, when DTAA is silent, the provisions of Income Tax shall apply i.e. FTS shall be taxable at 10% and MSA is liable to deduct TDS at 10%. [Section 115A(b)(B) & Sec 195(1)]
• If the Foreign Company has a Permanent Resident (“PE”) in India –  It shall be chargeable under the head “Profits and gains of business or profession” (Section 44DA)
• If the Foreign Company doesn’t have a PE in India – 10% (Section 115(b)(B))

• A lot of judgments given by various ITATs has confirmed the judgements of Bankok Glass Industry.

Stamp Duty on Transfer of Shares outside India – When the agreement is Executed outside India

So, when one non-resident entity (Corporate or Non-corporate, doesn’t matter!) transfer shares of an Indian Company to another another non-resident then does it require to pay Stamp Duty under the Indian Stamp Act, 1899.

When shares are transferred, liability of stamp duty payment arises in two instances :

1. Agreement entered into between both the non-residents
2. On the transfer

On the Agreement

First, Lets see what the Indian Stamp Act says about it (If you want, you can skip through this details) :

Section 3 : Instruments chargeable with Duty

Subject to the provisions of this Act and the exemptions contained in Schedule I, the following instruments shall be chargeable WIth duty of the amount indicated in that SChedule as the proper duty therefore, respectively, that is to say-

…….

(c) every instrument (other than a bill exchange or promissory note) mentioned in that Schedule, which, not having been previously executed by any person, is executed out of lndia on or after that day relates to any property situates, or to any matter or thing done or to be done, in India and is received in lndia.

Section 18 : Instruments other than bills and notes executed out of India.–

(l) Every instrument chargeable with duty executed only out of lndia and not being a bill of exchange or promissory note, may be stamped within three months after it has been first received in lndia

So basically interpreting Section 3 we can conclude that an instrument is not chargeable with duty unless both this conditions are satisfied :

• the instrument relates to any property situated or to any matter or thing done or to be done in India; and
• the instrument being received in India

Thus, even if the Instrument relates to any property situated in India but is executed outside India, Stamp Duty shall not be chargeable.

But what if the non-resident subsequently brings those documents into India (for whatever reason!) :

Then as per Section 18 such instrument shall be stamped within 3 months after it has been first received in India.

The rate at which they will be charged to duty is mentioned in

Article 5 – Agreement or Memorandum of an Agreement

(ii) If relating to the sale of a share in an incorporated company or other body corporate;

For West Bengal, it is – Rs. 0.50 for every Rs. 5,000 or part thereof of the value of the share, i.e., effectively, 0.01% of the value of the shares. If might vary from State to State!

On the Transfer

As per Section 56 of Companies Act, 2013 dealing with “Transfer & Transmission of securities”, company shall record transfer in its books and issue new share certificate only if a proper transfer deed DULY STAMPED in Form SH-4 has been delivered to it by the transferee within 60 days from the date of execution. So, its mandatory for the transferee to file the transfer deed with the company.

Stamp duty on such transfer depends on whether the shares are in Dematerialised or Physical Format :

• If Shares are held in Dematerialised Format – No stamp duty shall be levied (See Section 8A of Indian Stamp Act)
• If Shares are held in Physical Format – Stamp Duty shall be levied at 0.25% of the value of shares. (See Article 62 of the Indian Stamp Act). One thing to note is the fact that, Stamp duty on share transfer are now included in Union Legislative list in the constitution to secure uniformity of rates. So the same rate will be charged in all states, irrespective of what’s mentioned in their respective Stamp Duty Acts.

Actuarial Science – Whether to register from UK or India

Actuarial entrants often get confused between UK & Indian Actuaries. This post will surely clear most of their doubts.

Governing Body

UK Actuaries is governed by Institute and Faculty of Actuaries (IFOA). Whereas Indian Actuaries is governed by Institute of Actuaries of India (IAI). Both Indian & UK actuaries are sought after courses and have their own pros and cons. One point worth pointing is the Mutual Recognition Agreement signed between both these institutes.

Any IFOA candidate can claim exemption of any of the 15 subjects from IAI if he has cleared it from IFOA on payment of an exemption fees. In retrospect, an IAI candidate can also claim exemption from IFOA for any of the 15 subjects. It simply means that a candidate needs to clear a subject from one Insitute only.

Eligibility

IAI – Any person who has passed 12th can register for a ACET. Only after passing ACET can a person be eligible to take membership of IAI. ACET (entrance exam) is an online objective paper conducted twice a year (June/Dec) based on 12th Maths & Statistics.

IFOA – There are two criterias here

• Direct Membership – If the candidate has 80% in 12th Maths (or) 55% in Graduation Maths (or) 55% in MBA Finance he can directly register for membership and then appear for CT exams.
• Non-Membership – If the candidate doesn’t fulfill any of the above requirements he has to first sit for CT-1 ( Financial mathematics) and can register for membership only after clearing this exam.

Fees

IAI – Fees consist of –

• One time Fees for registering into ACET – Rs. 3000
• One time Fees for Admission into Actuarial course – Rs. 1500
• Per subject fees – Varies between 2000 & 4000 (This fees excludes the cost of Study Material i.e. Rs. 2500 which is compulsory to purchase)
• Annual Membership Subscription fees – Rs. 750

IFOA – You can find the fees structure of IFOA from this link. The fees is approximately 2.5 times of that of IAI.

Exams & Passing Percentage

Both IAI & IFOA has the same syllabus. In fact, IAI distributes the same study material issued by the IFOA. So anyone preparing for IAI exams can appear for IFOA and vice-a-versa. So, if you wish, you can sit for both the exams, it would simply enhance your chances of clearing it.

IAI – Syllabus

IFOA – Syllabus

Regarding Passing percentage, it’s a common trend that the CT level papers of IAI are tough as compared to that of IFOA. And the CA, ST & SA level papers of IFOA are tough as compared to IFOA. So, it would be wise enough to register for IFOA first than switch to IAI in the later stage. I just personally feel that the marking is lenient in IFoA.

One thing to note that, passing percentage in IAI is quite erratic. In some of the attempts the CT level papers have even seen a passing percentage of 0% !!

Scope

It hardly makes any difference whether you have registered yourself with IAI or IFOA with respect to Future scope if you are searching for a job in India. But, for a person seeking job in Foreign countries (US, UK, etc.) it is recommended to register through IFOA because IFOA has a mutual agreement with Society of Actuaries, US & many foreign universities also affiliated to IFoA. [Disclaimer : This observations are subjective and I am not an expert]

To conclude, Register for IFOA if you can afford it. You don’t need to appear for ACET and you can also take advantage of a better passing percentage there.

If you are doubtful and don’t want to shell out so much money appearing for IFOA, you can register for IAI and sit for the easy papers first (i.e. CT1, CT2, CT3 & CT7) and then decide on making a switch to IFOA.

You can find for articles on CA, MBA & Actuaries at RatLearnings

Cheating the Law – Section 8 Charitable Companies

Cheating the Law is a series of Posts I would be writing detailing the loopholes in the Tax Laws & how to deal with them. As one of my Tax Teacher used to tell me, “There is a very thin line between tax planning, tax avoidance and tax evasion”, I will make a sincere attempt not to breach that line.

 

What are Section 8 companies ?

A company whihc fulfills the following requirements as laid down by the Companies Act, 2013 :

(a) has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
(b) intends to apply its profits, if any, or other income in promoting its objects; and
(c) intends to prohibit the payment of any dividend to its members,

 

Is section 56(2)(viia) of Income Tax Act applicable to a Section 8 Company ?

As per Sec. 2(18) of the Income Tax Act,

“company in which the public are substantially interested”—a company is said to be a company in which the public are substantially interested—

(aa) if it is a company which is registered under section 25 of the Companies Act, 1956 (1 of 1956) “

Thus, a company registered u/s 8 of Companies Act would be deemed to be a company in which public are substantially interested. Hence, the provisions of Section 56(2)(viia) isn’t applicable on a Sec. 8 Company.

 

Difficulties that a Section 8 Company could face:

A. RESTRICTION ON USE of FUNDS

1. Income shall be used only in Promotions of Commerce, Arts, Science etc.

The company shall have in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object & shall apply its profits, if any, or other income in promoting such objects; [Section 8(1)(b)]

2. Investment in Shares

There is nothing in the section or under the law debarring such companies to become holding companies and accordingly surplus funds, if any, of such companies may be utilized by investing in other companies.

However, the investments as standing in the books of a Sec. 8 company should not be substantial & making it a investment company as the main object of such companies is to promote art, commerce etc and not to invest for profits.

In addition, these companies can promote only such companies having objects similar to the investor company.

3. Receiving Gift of shares

There is nothing in law that restrictions a Section 8 company from receiving Gifts of shares of another company.

 

B. COMPLIANCE & REPORTING REQUIREMENTS

Every company is required to file with the ROC on an annual basis the following:

• Balance Sheet of the Company, and
• Annual Return

There are no specific Reporting Requirements for a company registered u/s 8.

 

C. EXIT ROUTE FOR SHAREHOLDERs

1. Payment of Dividend

Section 8 companies are prohibited from payment of any dividend to its members [Section 8(1 (c)]

2. Winding up (or) Dissolution

If on the winding up or dissolution of a Sec. 8 company, there remains, after the satisfaction of its debts and liabilities, any asset, they may be

• Transferred to another company registered under this section and having similar objects, or
• Sold & proceeds thereof shall be credited to the Rehabilitation & Insolvency Fund.

[Section 8(9)] [This Sub-section is yet to be notified].

3. Sale of Shares

If the company is a private company in nature, shares/membership cannot be transferred to outsiders.

If the company is a public company in nature, shares/memberships are freely transferable in accordance with Articles of Association of the company.

4. Amalgamation

A company registered under Section 8 shall amalgamate only with another company registered under Section 8 & having similar objects. [Section 8(10)]

5. Conversion into a Company of any other kind

For the conversion to a company of other kind, the company shall pass a SR and make an application to Regional Director for approval.

A copy of the application filed by the company with RD shall also be send to Chief CIT having jurisdiction over the company, ITO who has jurisdiction over the company, the Charity Commissioner, the Chief Secretary of the State in which the registered office of the company is situated, any organisation or Department of the Central Government or State Government or other authority under whose jurisdiction the company has been operating.  [Rule 21 & Rule 22 of Companies (Incorporation) Rules, 2014]