Setting Up Business Entities & Closure PDF

STUDY MATERIAL EXECUTIVE PROGRAMME SETTING UP OF BUSINESS ENTITIES AND CLOSURE MODULE 1 PAPER 3 i  © THE INSTITUTE OF COMPANY SECRETARIES OF INDIA TIMING OF HEADQUARTERS Monda...

STUDY MATERIAL EXECUTIVE PROGRAMME SETTING UP OF BUSINESS ENTITIES AND CLOSURE MODULE 1 PAPER 3 i  © THE INSTITUTE OF COMPANY SECRETARIES OF INDIA TIMING OF HEADQUARTERS Monday to Friday Office Timings – 9.00 A.M. to 5.30 P.M. Public Dealing Timings Without financial transactions – 9.30 A.M. to 5.00 P.M. With financial transactions – 9.30 A.M. to 4.00 P.M. Phones 011-41504444, 45341000 Fax 011-24626727 Website www.icsi.edu E-mail [email protected] Laser Typesetting by MP Printers, Phase-II, Noida 201305, and Printed at MP Printers, Noida/November 2021 ii  EXECUTIVE PROGRAMME SETTING UP OF BUSINESS ENTITIES AND CLOSURE There are various business structures such as Companies, LLP, Trusts, and Societies etc. which one can choose to start a business. Choosing a form of business entity is crucial to a successful organization. The choice of a business entity will depend on an object, benefits, size of the business of such entity and many other factors. The main types of business entities in India are Sole Proprietorship, Partnership, Hindu Undivided Family (HUF) Business, Limited Liability Partnership (LLP), Co- operative Societies, Branch Office and Company which may be any kind of company including One Person Company (OPC), private company, public company, company limited by guarantee, subsidiary company, statutory company, insurance company or unlimited company, company formed under section 8 of the Companies Act, 2013 or under section 25 of the earlier Companies Act, 1956. Various laws are applicable for proceeding to incorporate a business entity. Initial Registrations like Shops & Establishment, FSSAI, ISO, MSME, copyright, patent etc. and licences from the regulatory authorities like RBI, IRDA, GST, Income Tax, IPR, etc. need to be obtained. In this scenario of various options for the kind of business entity and the plethora of laws applicable to the businesses, it becomes quite crucial to know and understand the laws associated with a particular form of the business in order to initiate successful setting up of the business and prolific closure, when preferred to serve the best end of all the stakeholders. Therefore, with the objective to provide the working knowledge and understanding of the various procedural requirements involved in the setting up of business entities and overview of procedures involved in closure of entities to the students, this study material is published to cover the entire subject into three parts. Part A discusses the Setting up of Business and its various aspects, Part B is devoted to the exhaustive list and detailed procedures related to Registration, Licenses and Compliances applicable for setting up the businesses successfully and Part C deliberates upon Insolvency, Winding up and Closure of Business. With this, the study material to this subject becomes a One Spot Source of knowledge and understanding for efficaciously setting up business in India while subsuming compliance with all requirements of Registration and Licences, along with overview of the procedures related to Insolvency, Winding Up and Closure. After going through this study material and the practical training, the student should be able to - Assist in formation of various kinds of Companies (Certification part would be at Professional Programme); Setting of trust, societies, LLP; Setting up of other various entities at small level: Sole Proprietorship, Partnership, HUF etc.; Assist in post formation activities like - PAN; TAN;Open bank account; Assist in post formation registration including MSME registration; GST registration; IPR registration; Registration under shop & establishment law; Compliance under various pollution & environmental laws; Registration under various labour laws; Assist in regular compliances under various labour laws; Assist in closing up of business and alike. With this objective in mind, a number of procedures have also been included at relevant places. The legislative changes made upto July, 2021 have been incorporated in the study material. However, on hand, where the subject of Setting up of Business Entities and Closure is inherently fundamental to start any kind of business in India, on the similar end it is subject to the refinement of Legislation, Rules and Regulations. Henceforth, it becomes necessary for every student to constantly update with legislative changes made as well as judicial pronouncements rendered from time to time by referring to the Institute’s iii monthly journal ‘Chartered Secretary’, E-Bulletin ‘Student Company Secretary’ as well as other legal and professional journals along with the aid of reference books related to the subject. In the event of any doubt, students may contact the Directorate of Academics at [email protected]. Although due care has been taken in publishing this study material, the possibility of errors, omissions and /or discrepancies cannot be rules out. This publication is released with an understanding that the Institute shall not be responsible for any errors, omissions and /or discrepancies or any action taken in that behalf. Should there be any discrepancies, errors or omissions noted in the study material, the Institute shall be obliged, if the same is brought to its notice for issue of corrigendum in the e-Bulletin ‘Student Company Secretary’. iv  THE LIST OF LAWS COVERED UNDER THE STUDY Air (Prevention and Control of Pollution) Act, 1981 Banking Regulation Act, 1949 Beedi Workers Welfare Fund Act, 1976 Biodiversity Act, 2002 Building & Other Construction Workers (Regulation of Employment & Conditions of Service) Act, 1996 Child and Adolescent Labour (Prohibition and Regulation) Act, 1986 Chit Funds Act, 1982 Companies Act, 2013 Contract Labour (Regulation and Abolition) Act, 1970 Copyright Act, 1957 Cine Workers Welfare Fund Act, 1981 Design Act, 2000 Drugs and Cosmetics Act, 1940 Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 Employee’s State Insurance Act, 1948 Environment (Protection) Act, 1986 Factories Act, 1948 FEMA, 1999 Foreign Contribution Regulation Act, 2010 Geographical Indication of Goods (Regulations and Protection) Act, 1999 Goods and Services Act, 2017 Hazardous Wastes (Management, Handling and Transboundary Movement) Rules, 2016 Income Tax Act, 1961 Industrial (Development and Regulations) Act 1951 Industrial Disputes Act, 1947 Industrial Employment (Standing Orders) Act, 1946 Information Technology Act, 2000 Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 Iron Ore Mines, Manganese Ore Mines & Chrome Ore Mines Labour Welfare Fund Act, 1976 Insolvency & Bankruptcy Code, 2016 Insurance Act, 1938 Insurance Regulatory and Development Authority Act, 1999 Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979 Limited Liability Partnership Act, 2008 Limestone and Dolomite Mines Labour Welfare Fund Act, 1972 v  Maternity Benefit (Amendment) Act, 2017 Mica Mines Labour Welfare Fund Act, 1946 Micro, Small and Medium Enterprises Development Act, 2006 Mines Act, 1952 Minimum Wages Act, 1948 Motor Transport Workers Act, 1961 National Green Tribunal Act, 2010 Partnership Act, 1932 Patent Act, 1970 Payment of Bonus Act, 1965 Payment of Gratuity Act, 1972 Payment of Wages Act, 1936 Plantation Labour Act, 1951 Press Council Act, 1978 Press & Registration of Books Act 1867 Prevention of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) 2013 Public Liability Insurance Act, 1991 RBI Act, 1934 Rights of Persons with Disabilities Act, 2016 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SRFAESI) Act, 2002 Shop and Establishment Act, 1948 Societies Registration Act, 1860 Telecom Regulatory Authority of India Act, 1997 Trade Marks Act, 1999 Trade Unions Act, 1926 The Industrial Disputes Act, 1947 Water (Prevention and Control of Pollution) Act, 1974 Water (Prevention and Control of Pollution) Cess Act, 1977 vi  EXECUTIVE PROGRAMME Module 1 Paper 3 SETTING UP OF BUSINESS ENTITIES AND CLOSURE (MAX MARKS 100) Syllabus Objectives To provide working knowledge and understanding of setting up of Business entities and their closure. Detailed Contents: Part A : Setting up of Business (40 Marks) 1. Choice of Business Organisation Key features of various structures and issues in choosing between business structures including identification of location; tax implications etc. 2. Types of Companies Private Company; Public Company; One Person Company; Nidhi Company; Producer Company; Foreign Company- Liaison Offices; Branch Office & Project Office; Formation and Registration 3. Part I: Charter Documents of Companies Memorandum of Association and Articles of Association; Doctrine of ultra-vires; Doctrine of indoor management; Doctrine of constructive notice; Incorporation Contracts; Part II: Alteration of Charter Documents Alteration in MOA & AOA- Change of name;registered office address; objects clause; alteration in share capital and alteration in articles of association. vii  4. Legal Status of Registered Company Small Company; Holding Company; Subsidiary Company & Associate Company; Inactive Company; Dormant Company; Government Company. 5. Formation of LLP Concept of LLP; Formation and Registration; LLP Agreement; Alteration in LLP Agreement; Annual and Event Based Compliances. 6. Different Forms of Business Organisations & its Registration Partnership; Hindu Undivided Family; Sole Proprietorship; Multi State Co-operative Society; Formation; Partnership Agreement and its registration. 7. Formation and Registration of NGO’s Section 8 Company; Trust and Society- Formation and Registration. 8. Financial Services Organisation and its Registration Process NBFCs; Housing Finance Company; Asset Reconstruction Company; Micro Finance Institutions (MFIs); Nidhi Companies; Payment Banks; viii  Registration. 9. Startups and its Registration Start-up India Policy; Registration Process; Benefits under the Companies Act and other Government Policies; Different types of capital- Seed Capital; Venture Capital; Private Equity; Angel Investor; Mudra Bank. 10. Business Collaborations Purpose and Process. 11. Setting up of Business outside India and Issues Relating Thereto Issues in choosing location; Structure and the processes involved. 12. Conversion of Business Entities Conversion of private company into public company and vice versa; Conversion of Section 8 company into other kind of Company; Conversion of Company into LLP and vice versa; Conversion of OPC to other type of company and vice versa; Company Authorized to be registered under the Act (Part XXI Companies); and other types of conversion. Part B : Registration; Licenses & Compliances (35 Marks) 13. Various Initial Registrations and Licenses Mandatory Registration - PAN; TAN; GST Registration; Shops & Establishments; SSI/MSME; Additional Registration/License - ESI/PF; FCRA; Pollution; Other registration as per requirement of sector; IE Code; Drug License; FSSAI; Trademark; Copyright; Patent; Design; RBI; Banking; IRDA; Telecom; I & B; MSME Registration; Udyam Registration Process / Udyog Aadhar Memorandum; Industrial License, Industrial Entrepreneurs Memorandum (IEM); tate Level Approval from the respective State Industrial Department. 14. Maintenance of Registers and Records Register and Records required to be maintained by an enterprise. 15. Identifying Laws applicable to Various Industries and their Initial Compliances Compliance of industry specific laws applicable to an entity at the time of setting up of the enterprise. ix  16. Intellectual Property Laws (Provisions applicable for Setting up of Business) Copyright Act, 1957; Patents Act, 1970; Trade Mark Act, 1999; Geographical Indication of Goods (Registration and Protection) Act, 1999; Designs Act, 2000. 17. Compliances under Labour Laws (Provisions applicable for Setting up of Business) Factories Act, 1948; Minimum Wages Act, 1948; Payment of Wages Act,1936; Equal Remuneration Act, 1976; Employees’ State Insurance Act,1948; Employees’ Provident Funds and Miscellaneous Provisions Act, 1952; Payment of Bonus Act, 1965; Payment of Gratuity Act, 1972; Employees Compensation Act, 1923; Contract Labour (Regulation and Abolition) Act, 1970; Industrial Disputes Act, 1947; Trade Unions Act, 1926; Maternity Relief Act, 196; Child and Adolescent Labour (Prohibition and Regulation) Act, 1986; [Persons with Disabilities (Equal Opportunities; Protection of Rights and Full Participation) Act,1995]* replaced with Right of Persons with Disabilities Act, 2016 Prevention of Sexual Harassment of Women at Workplace (Prevention; Prohibition and Redressal) Act, 2013. 18. Compliances relating to Environmental Laws (Provisions applicable for setting up of Business) Water (Prevention and Control of Pollution) Act, 1974; Air (Prevention and Control of Pollution) Act, 1981; x  Environment Protection Act, 1986; Public Liability Insurance Act, 1991; National Green Tribunal Act, 2010. Part C : Insolvency; Winding up & Closure of Business (25 Marks) 19. Dormant Company Obtaining dormant status and dormant to active status. 20. Strike Off and Restoration of Name of the Company and LLP 21. Corporate Insolvency Resolution Process, Liquidation and Winding Up: An Overview xi  LESSON WISE SUMMARY SETTING UP OF BUSINESS ENTITIES AND CLOSURE Lesson 1 - Choice of Business Organisation The choice of a business organization is driven by a combination of several factors such as nature of activity, capital requirement, degree of independence required, etc. There is no readymade formula for selecting the particular type of business organization. Tax consideration is also an extremely important factor. Company Secretaries while playing advisory role would help the clients in deciding about the type of organization one may opt for when considering to start a business. This chapter will cover the factors which are taken into account in choosing a form of business organization. Brief outline of the various forms of business organization is also covered. Lesson 2: Types of Companies Companies may be classified on the basis of their incorporation, number of members, size, basis of control and motive. On the basis of incorporation of the companies, it may be classified into Charter Companies, Statutory Companies and Registered Companies. On the basis of liability, it may be Companies limited by shares/guarantee and unlimited liability companies. Further, on the basis of number of members, they may be classified into One Person Company, private company and public company. On the basis of size, they may be divided into small companies and other companies. On the basis of control, they may be classified into holding company, subsidiary company and associate company. Besides, companies may be nonprofit companies licensed under Section 8, Government companies, foreign companies, holding/subsidiary companies, investment companies, producer companies etc. This chapter covers the concepts of various types of companies, their legal basis, special provisions and privileges for some classes of companies, distinction between different types of companies etc. Lesson 3: Part I: Charter Documents of Companies The memorandum and articles of association of a company are the most important documents for the formation of a company and for its functioning thereafter. The memorandum of association contains the name, situation of registered office, objects, capital and liability and subscription clauses. The articles are its bye-laws or rules and regulations that govern the management and internal affairs and the conduct of its business. Both the documents are required to be registered with the Registrar of Companies at the stage of incorporation of the company. Before dealing with a company, it is advisable to read the memorandum and articles of the company to understand aspects, such as powers of Board, scope of company’s activities etc. and its relationship with the outside world. Since Memorandum sets out the constitution of a company and is therefore the foundation on which the structure of the company is built. It defines the scope of the company’s activities and its relations with the outside world. Company Secretary in employment should work within the four walls of the MOA and also subject to the provisions of AOA. This chapter includes the concept of Memorandum of Association and Articles of Association, their purpose, contents and registration. It also covers doctrine of indoor management and Alter Ego. Lesson 3: Part II: Alteration of Charter Documents Alterations that can be carried out in the Memorandum and Articles of Association and effect of such alterations. It also explains the legal effect of these documents. xii Company Secretary who is holding key position in the company must be aware of the procedural aspects of alteration of various clauses contained in the Memorandum of Association and of various regulations of Articles of Association of the Company which may be permissible under the provisions contained in Section 13 and Section 14 of the Companies Act, 2013 to be read with relevant Rules framed thereunder. Lesson 4: Legal Status of Registered Company This Chapter highlights explains the characteristics of private limited company, public limited company and a One Person Company (OPC). It also provides an overview of certain other types of companies, such as Small Company, Holding Company, Subsidiary Company and Associate Company, Dormant/Inactive Company. It further explains what is a Government Company and the exemptions available to them. Company Secretary should be aware of the distinctive features of different entities. Lesson 5: Formation of LLP Limited Liability Partnership is governed by the Limited Liability Partnership Act, 2008 and the Rules framed thereunder. In this Chapter, we shall learn about the Limited Liability Partnership (LLP), its formation and registration; It also covers the features of an LLP agreement and the manner of alterations therein. LLP is required to make various compliances and file various forms with the Registrar. We shall also study the various annual and event based compliances applicable to the LLP. Being compliance professional, Company Secretary should be aware of all the compliance requirements of various business entities including Limited Liability Partnership. Lesson 6: Different Forms of Business Organisations & its Registration This chapter include the various forms of business organisation, such as sole proprietorship, partnership, Hindu Undivided Family and Multi State Co-operative Societies. The lesson also highlights their respective merits and demerits and the manner in which they can be registered in India. Lesson 7: Formation and Registration of NGO’s In this Chapter, formation and registration of NGOs, namely, Section 8 Company, Trust and Society is included. Section 8 Company, its features, exemptions available to them and registration process. Trust, difference between public trust and private trust, exemptions available to them, more specifically, under the Income Tax Act and formation process. Society, its advantages and disadvantages, consequences of non-registration, benefits of forming a Society and formation process. Company Secretary should have clarity with regard to institutions which are not for profit, their features and formation process. Lesson 8: Financial Services Organisation and its Registration Process Different forms of Financial Services Organisations operating in India such as Non Banking Finance Companies (NBFC’S) and the various categories of such companies, Housing Finance Companies (HFC’s), Asset Reconstruction Companies (ARC’s), Micro Finance Institutions (MFI’s), Nidhi Companies and Payment Banks. This Chapter also explains the process of registering such entities. xiii  Lesson 9: Startups and its Registration Startups have emerged as a fast-growing business model. This chapter will deal with the evolution of Startups in India, the Startup India Policy, developments initiated in various States to encourage Startups, the exemptions available to them and the registration process. The Chapter also deals with the different kinds of Debt financing and Equity Financing which can be raised by Startups and the concept of MUDRA Banks. It also includes the benefits/ exemptions given to start ups, different financing options available and the procedures involved for incorporation and registration as startups. Lesson 10: Business Collaborations A Joint Venture (JV) is generally short lived for conducting specific business activities. It is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. A Special Purpose Vehicle (SPV) is formed for a specific purpose. In this chapter, Joint Venture and Special Purpose Vehicle, their advantages and disadvantages, their characteristics and the process for registering these entities are covered. Lesson 11: Setting up of Business outside India and Issues Relating Thereto In this lesson, you will learn about the various forms of business organization, such as sole proprietorship, partnership, Hindu Undivided Family and Multi State Co-operative Societies. The lesson also highlights their respective merits and demerits and the manner in which they can be registered in India. Company Secretaries, while playing advisory role, can guide and help in setting up of business outside India. Lesson 12: Conversion of Business Entities Companies Act, 2013 provides for conversion of public companies to private companies vice versa, conversion of One Person Company into public/private company, conversion of Section 8 companies (companies for charitable purpose) into any other class of companies. Companies (Incorporation) Rules, 2014 provides details of the procedural aspects. In addition you will be able to understand the overall legal and procedural aspects relating to various conversions. Conversion of existing business entity to other form is a strategic decision which needs to be taken to get the benefits of one form of business entity over other form for a particular business at a particular point of time. Company Secretaries can help in taking such strategic decisions and implementation of the same. Lesson 13: Various Initial Registrations and Licenses A business entity is required to secure various registration and licenses for setting up their businesses in India. In India, there are plethora of laws which requires various registrations and licenses to be obtained for setting up the business unit in India along with ensuring state level compliances. In order to facilitate one spot understanding, this chapter deals with the list of Mandatory as well as Additional Registration and Licenses along with their detailed process. Lesson 14: Maintenance of Registers and Records The Companies Act, 2013 (the Act) and the rules made there under (“the Rules”) lays down that every Company incorporated under the Act has to maintain Statutory Registers (“the Registers”). With various provisions incorporated in Company Act, 2013, it is made clear that every company governed under Company Act, 2013 is required to maintain a statutory register at its registered office until the dissolution of the company. Henceforth, this chapter specifies the list of various registers and records required to be maintained by enterprise. xiv  Lesson 15: Identifying Laws applicable to Various Industries and their Initial Compliances Keeping in pace with the contemporary global market and emerging stand of Indian economy, government initiated various flagship programs to boost the entrepreneurship environment in the country. Few of the major flagships including Make in India” coupled with “Ease of Doing Business in India”, “Skill India”, “Digital India”, etc., are starred to build the interest and ease among various domestic and overseas stake holders to set up and advance the entrepreneurship in India. Indeed, when the entrance and advancement to Indian business market would be of ultimate fortune, there are various laws which need to be abided for successfully setting up and taking forward an enterprise in India. In this perspective, this chapter aims at proving a quick understanding laws applicable to various industries, their setting up along with the thorough details of their initial compliances. Lesson 16: Intellectual Property Laws (Provisions applicable for Setting up of Business) In today’s world, the abundant supply of goods and services on the markets has made life very challenging for any business, big or small. In its on-going quest to remain ahead of competitors in this environment, every business strives to create new and improved products (goods and services) that will deliver greater value to users and customers than the products offered by competitors. To differentiate their products - a prerequisite for success in today’s markets - businesses rely on innovations that reduce production costs and/or improve product quality. In a crowded marketplace, businesses have to make an on-going effort to communicate the specific value offered by their product through effective marketing that relies on well thought-out branding strategies. In the current knowledge-driven, private sector oriented economic development paradigm, the different types of intangible assets of a business are often more important and valuable than its tangible assets. A key subset of intangible assets is protected by what are labelled collectively as intellectual property rights (IPRs). These include trade secrets protection, copyright, design and trademark rights, and patents, as well as other types of rights. IPRs create tradable assets out of products of human intellect, and provide a large array of IPR tools on which businesses can rely to help drive their success through innovative business models. Under this background, this chapter aims to address various provisions of Intellectual Property Rights applicable for setting up business in India. Lesson 17: Compliances under Labour Laws (Provisions applicable for Setting up of Business) Labour laws are one important set of welfare legislation for the employees and labour in India. They ensure that industrial relations are maintained at balance and employees are protected at their social, economic and political welfare. This has made various labour laws being enacted in India to be complied by business entities in India. This chapter deals in briefing the provisions of various labour laws applicable for setting up of business in India. Lesson 18: Compliances relating to Environmental Laws (Provisions applicable for Setting up of Business) With the recognition of Right to Heathy Environment as a human right under the Universal Declaration of Human Rights and its related covenants, measures are taken at full force to enforce these rights and guard the right to environment at parity. With the endowed protection to environment under the Constitution and Specific Statutes, all the personas be it natural or legal including a Company owes a duty to conduct themselves in such a manner that their act or omission should not pollute the environment. Therefore, a company is necessitated to abide by various laws in order to protect the environment. A brief list of the statutory protection to environment is discussed in this chapter. Lesson 19: Dormant Company Companies are generally classified on the basis of their incorporation, number of members, size, basis of control and motive. Additionally, companies can also be classified based on their status. Sometimes, the promoters of a company may feel the need to temporarily close down the company due to various reasons, but they do not want to dissolve it. In such cases, the company may become dormant as against an active company which is carrying on business. Thus, on the basis of its status, companies may be classified into active, dormant, under liquidation, under process of striking off, strike off, dissolved, amalgamated, etc. The ‘status’ of the company xv signifies the current state of the company - Whether it is active and operating OR dormant OR it has been struck off and closed. As a company secretary, one must be aware of the procedure of obtaining status of dormant company, active company, the compliances involved for a dormant company etc. Lesson 20: Strike Off and Restoration of Name of the Company and LLP On incorporation, the name of the company and LLP is entered in the Register maintained by the Registrar. On striking off, the name of the company/LLP is temporarily removed from the Register. The name of the company can be restored in the Register on making an application. Lesson 21: Corporate Insolvency Resolution Process, Liquidation and Winding Up: An Overview The Insolvency & Bankruptcy Code, 2016 consolidate and amend the laws relating to insolvency of companies, partnership firms, limited liability partnership into a single legislation. It aims to provide time bound resolution and empowered the creditors to initiate the insolvency resolution process if default occurs. The Insolvency and Bankruptcy Board of India has notified various Regulations under the Insolvency and Bankruptcy Code. The Regulations provides the process for initiating voluntary liquidation by a corporate person i.e. companies, limited liability partnerships and any other persons incorporated with limited liability for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues. The provisions of this Code shall apply to – (a) any company incorporated under the Companies Act, 2013 or under any previous company law; (b) any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act; (c) any Limited Liability Partnership incorporated under the Limited Liability Partnership Act, 2008; (d) such other body incorporated under any law for the time being in force, as the Central Government may, by notification, specify in this behalf; and partnership firms and individuals, in relation to their insolvency, liquidation, voluntary liquidation or bankruptcy, as the case may be. But the major focus of this chapter is to include the corporate insolvency process and matters incidental thereto. xvi  List of Recommended Books PAPER 3: SETTING UP OF BUSINESS ENTITIES AND CLOSURE 1. Relevant Bare Acts. 2. A.K. Majumdar, Dr. G.K. Kapoor, : Company Law and Practice; Taxmann Sanjay Dhamija 3. Aswani Kumar Bansal : Law of Trademarks in India 4. B L Wadehra : Law Relating to Patents, Trademarks, Copyright, Designs and Geographical Indications. 5. D.K. Jain : Company Law Ready Reckoner 6. D.K. Jain : Law & Procedure of Limited Liability Partnership 7. G.V.G Krishnamurthy : The Law of Trademarks, Copyright, Patents and Design. 8. N.D. Kapoor : Handbook of Industrial Law; Sultan Chand & Sons 9. P M Bakshi : Legal Aspects of Technology Transfer: A Conspectus 10. P. Leelakrishnan : Environment Law in India 11. P.L. Malik : Industrial Law; Eastern Book Company 12. Satyawrat Ponkse : The Management of Intellectual Property 13. S K Roy Chaudhary & H K Saharay 14. Taxmann’s Guide to Insolvency : The Law of Trademarks, Copyright, Patents and Design. and Bankruptcy Code, 2016 15. Vijaya Kumar Ivaturi, et al : The Manual for Indian Start ups Journals: 1. e-Bulletin (`Student Company : The ICSI, New Delhi-110 003. Secretary’) 2. Chartered Secretary (Monthly) : The ICSI, New Delhi-110 003. 3. All India Reporter : All India Reporter Ltd., Congress Nagar, Nagpur. Note: 1. Students are advised to read the above journals for updating the knowledge. 2. Students are advised to read/refer the latest editions of the recommended books. 3. Students are also advised to read legal glossary/legal terms given in Appendix. xvii  ARRANGEMENT OF STUDY LESSONS Module-1 Paper-3 SETTING UP OF BUSINESS ENTITIES AND CLOSURE S.No. Lesson PART – A: SETTING UP OF BUSINESS (40 MARkS) 1. Choice of Business Organisation 2. Types of Companies 3. Part I : Charter Documents of Companies Part II : Alteration of Charter Documents 4. Legal Status of Registered Company 5. Formation of LLP 6. Different Forms of Business Organisations & its Registration 7. Formation and Registration of NGO’s 8. Financial Services Organisation and its Registration Process 9. Startups and its Registration 10. Business Collaborations 11. Setting up of Business outside India and Issues Relating Thereto 12. Conversion of Business Entities PART B: REGISTRATION; LICENSES & COMPLIANCES (35 MARkS) 13. Various Initial Registrations and Licenses 14. Maintenance of Registers and Records 15. Identifying Laws applicable to Various Industries and their Initial Compliances 16. Intellectual Property Laws (Provisions applicable for Setting up of Business) 17. Compliances under Labour Laws (Provisions applicable for Setting up of Business) 18. Compliances relating to Environmental Laws (Provisions applicable for Setting up of Business) PART C: INSOLVENCY; WINDING UP & CLOSURE OF BUSINESS (25 MARkS) 19. Dormant Company 20. Strike Off and Restoration of Name of the Company and LLP 21. Corporate Insolvency Resolution Process, Liquidation and Winding Up: An Overview Test paper xviii  CONTENTS PART – A: SETTING UP OF BUSINESS LESSON 1 CHOICE OF BUSINESS ORGANISATION Types of Business Organisations  2 Sole Proprietorship  2 Partnership Firm  3 Hindu Undivided Family (HUF)  3 Limited Liability Partnership (LLP)  3 Co-operative Society  3 Section 8 Company  3 One Person Company  3 Private Company  3 Public Company  3 Choice of a business organization  4 Factors governing the decisions for suitable form of organization  4 1. Nature of Business Activity  4 2. Scale of Operations  5 3. Capital Requirements  5 4. Managerial Ability  5 5. Degree of Control and Management  6 6. Degree of Risk and Liability  6 7. Stability of Business  7 8. Flexibility of Administration  7 9. Division of Profit  7 10. Costs, Procedure and Government Regulation  7 11. Tax Implication  8 12. Geographical Mobility  8 13. Transferability of Ownership  8 14. Managerial Needs  8 15. Secrecy  8 16. Independence  8 Conclusion  9 xix Company as a Choice of Business Organisation for Start-Ups  9 Features of Private Limited Company  9 Limited Liability Partnership  9 Features of Limited Liability Partnership  10 Partnership Firm  10 Features of General Partnership  10 Sole Proprietorship  10 Features of Sole Proprietorship  10 One Person Company  11 Features of One Person Company  11 LESSON ROUND-UP  11 TEST YOURSELF  12 LIST OF FURTHER READINGS  12 OTHER REFERENCES  12 LESSON 2 TYPES OF COMPANIES Introduction  15 Classification of Companies 16 Private Company  19 Characteristics of Private Limited Company  20 Process of Incorporation of a Private Company  21 Commencement of Business  28 Pre-caution to be taken by Professionals  29 Privileges and Exemptions of Private Company  29 Public Company  33 Characteristics of Public Company  34 Incorporation of a Public Company  35 Steps for incorporation of public company  35 One person company (OPC)  35 Background of OPC  35 Status of OPC in other countries  36 Incorporation of OPC  36 Difference between a Sole Proprietorship and an OPC  37 Position of OPC in India under the Companies Act, 2013  37 Contract by One Person Company  37 Privileges of One Person Company  37 xx Benefits of One Person Company  39 NIDHI COMPANIES  40 Origin of the Concept in India  41 Prevailing Regulatory Aspects of Nidhi  41 Declaration of Nidhis [Rule 3A of Nidhi Rules, 2014]  42 Compliance with rule 3A by certain Nidhis  42 Companies declared as Nidhis under previous company law to file Form NDH-4  42 Incorporation of Nidhi  42 Requirements for minimum number of members and net owned funds  43 Return of statutory compliances by Nidhi Companies  43 General restrictions or prohibitions  43 Share capital and allotment  44 Membership of Nidhi  44 Branches of Nidhi  44 Acceptance of Deposits  45 Un-encumbered term deposits by Nidhi  45 Loans by Nidhi  45 Rate of interest on any loan given by a Nidhi  46 Directors in a Nidhi Company  46 Dividend  47 Appointment of Auditor  47 Auditor’s certificate  47 Filing of half yearly return  47 Power of Registrar to enforce compliance  48 Certain provisions of RBI Act not applied to Notified NBFCs  48 Exceptions, modification and adaptations to Nidhi Companies  48 Producer Companies  50 Objects of Producer Companies  51 Foreign companies  52 Branch office  53 Master Direction - Establishment of Branch Office (BO) / Liaison Office (LO) / Project Office (PO) in India by foreign entities  53 Funding of the BO by the Foreign Company  54 Activities  55 Annexure  55 LESSON ROUND UP  56 TEST YOURSELF 57 xxi LIST OF FURTHER READINGS  58 OTHER REFERENCES  58 LESSON 3 – PART I CHARTER DOCUMENTS OF COMPANIES Memorandum of Association  60 Form of Memorandum of Association  60 Contents of Memorandum 60 Name clause  62 Situation clause 64 Publication of name and address of the company  64 Object clause  64 Liability clause  65 Capital clause  65 Declaration for subscription  66 Articles of Association  66 Nature of Articles  66 Articles Subordinate to Memorandum  67 Registration of articles  67 Entrenchment provisions  68 Statutory requirements  69 Contents of Articles  69 Consistency of Articles of Association with the Companies Act, 2013  70 Doctrine of ultra vires  70 Loans, Borrowings, Guarantees and Ultra Vires Rule  72 Implied Powers  72 Powers which are not implied  72 Shareholder’s right in respect of ultra vires acts  73 Effects of ultra vires Transactions 73 Doctrine of indoor management  73 Relation of company with members and outsiders  74 Forgery and incompetent acts  74 Directors not aware of their disqualification  74 Exceptions to the doctrine of indoor management  74 Constructive notice of Memorandum and Articles  76 Monies payable by members is a debt [sub-section (2) of section 10]  76 Interpretation of Memorandum and Articles  76 xxii Doctrine of alter ego  77 Distinction between Memorandum and Articles 77 Legal effect of the Memorandum and Articles  77 Members Bound to the Company  78 Company Bound to the Members  78 Member Bound to Member  78 Company not Bound to Outsiders  78 LESSON ROUND-UP  79 GLOSSARY 80 TEST YOURSELF  80 LIST OF FURTHER READINGS  81 OTHER REFERENCES  81 LESSON 3 – PART II ALTERATION OF CHARTER DOCUMENTS Introduction  84 Alteration of Memorandum of Association (MoA) 84 Applicable section for Alteration of MOA  85 Alteration of MoA due to change in name clause [Section 13 (2) and (3)]  85 Methods of changing the name  86 Procedure for Alteration in Name Clause of Memorandum  86 Name change requirement under [Regulation 45 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015]  89 Effect of change  89 Rule 33A. Allotment of a new name to the existing company under section 16(3) of the Companies Act, 2013  90 Alteration of situation of registered office clause in the MoA [section 13 (4) (5) and (7)]  90 Change of Registered office from one State to another  92 Rule 30-31 of the Companies (Incorporation) Rules 2014  92 Steps after obtaining new certificate from ROC  97 Employees’ right to object in case of shifting of registered office from one state to another – Some legal cases  97 Alteration of MOA due to change in object clause [section 13 (8) and (9)]  98 Registration of alteration  100 Alteration of liability clause  101 Alteration of capital clause in MOA [section 61 read with section 64]  101 Alteration of Articles of Association of a company  102 Manner of Altering AOA  104 xxiii Procedure for alteration of AOA under Section 14  105 Effect of altered Articles  106 Alterations of memorandum or articles to be noted in every copy  106 Sample Board Resolution for Change in the Name of the Company  106 Sample Shareholder’s Resolution to be Passed in the General Meetings for Change in the Name Clause of MoA  106 Sample Board Resolution for Changing the Situation of Registered Office Clause in MOA:  107 Sample Shareholder’s Resolution to be Passed in the General Meeting for Shifting of Registered Office of the Company from One State to Another  107 Sample Board Resolution for Alteration of Object Clause in MoA  108 Sample Shareholder’s Resolution to be Passed in the General Meeting for Alteration of Object Clause in MoA  108 Sample Board Resolution for Alteration of Capital Clause in MoA  109 Sample Shareholders’ Resolution to be passed in the General Meeting  110 Sample Board Resolution for Alteration of Articles of Association of the Company  110 Sample Shareholders Resolution for Alteration of Articles  110 Specimen Notice for the Board Meeting for Convening General Meeting for Alteration of Articles to Convert a Public Company into a Private Company  111 LESSON ROUND-UP  112 TEST YOURSELF 112 LIST OF FURTHER READINGS 112 OTHER REFERENCES 112 LESSON 4 LEGAL STATUS OF REGISTERED COMPANY Corporate Personality  115 Limited liability  115 Perpetual succession  115 Separate property  115 Transferability of shares  115 Capacity to sue or be sued  116 Provisions relating to certain types of companies  116 Small Company  116 Advantages of a Small Company  116 Holding Company  118 Provisions in the Companies Act, 2013 relating to holding company 119 Financial Statements of Holding Company  119 xxiv If Holding Company has more than one subsidiary  119 Separate financial statement of Holding Company  119 Disclosure in balance Sheet of Holding Company  119 Disclosure in Profit and Loss account of Holding Company  119 Subsidiary Company  120 Associate Company  121 Additional compliances if a company has an Associate Company [sub-section (76) of Section 2]  122 Inactive Company / Dormant Company  122 Procedural aspects relating to dormant company / inactive company  123 Consent of shareholders is mandatory  124 Listed companies are ineligible to apply for status of dormant companies  124 Government Company  124 Annual General Meeting [Section 96(2)]  125 Appointment of Director [sub-section 5 of Section 152]  126 Right of persons other than retiring directors to stand for directorship [Section 160] 126 Disqualification of directors [sub-section (2) of Section 164]  126 Loan to Director [Section 185]  127 Loan and Investment by Company [Section 186]  127 Related Party Transaction [Section 188]  127 Appointment of Managerial Personnel [Section 196]  127 Appointment of Key Managerial Personnel [Section 203]  128 Provisions relating to Auditor  128 Auditor Report in a Government Company [sub-section (5) of Section 143]  128 Supplementary Audit Ordered by C & AG [sub-section (6) of Section 143]  129 Annual Report of Government Company [Section 394]  129 Leeson Round UP  129 TEST YOURSELF  130 LIST OF FURTHER READINGS  130 OTHER REFERENCES  130 LESSON 5 FORMATION OF LLP Concept of LLP  132 Definition of LLP  132 Nature and Characteristics of LLP  132 Advantages of LLP  133 Disadvantages of LLP  133 Procedure for Incorporation of LLP  134 xxv LLP Agreement  135 Objective of LLP Agreement  136 How to prepare LLP agreement  136 Alteration to the LLP agreement  138 Change in Partner /Designated Partner  139 Change of name  139 Procedure for Changing the Name of the LLP  139 Shifting of Registered office  140 Checklist for Shifting of Registered Office  141 Annual compliances of LLP  141 Filing of Annual Return  142 Filing of Statement of the Accounts or Financial Statements  142 Filing of Income Tax Returns  142 Event based compliances for LLP  142 Specimen Resolution 143 Draft LLP agreement 144 Admission of New Partner  146 Rights of Partner 147 Duties of Partners  147 Duties of Designated Partner  148 Cessation of Existing Partners  148 LESSON ROUND-UP  148 TEST YOURSELF  149 LIST OF FURTHER READINGS  149 OTHER REFERENCES  149 LESSON 6 DIFFERENT FORMS OF BUSINESS ORGANISATIONS & ITS REGISTRATION Introduction  152 Sole Proprietorship  152 Merits of Sole Proprietorship 152 Limitations of Sole Proprietorship 153 Procedure for Formation Sole Proprietorship Firm  153 Partnership153 Features of Partnership  154 Types of partnership  155 Types of partners  155 Minor admitted into the benefits of partnership  156 Merits of Partnership  156 xxvi Limitations of Partnership  156 Partnership Deed  157 Partnership Firm 158 Registration under Income Tax  158 Hindu Undivided Family (HUF)  158 Meaning of Joint Hindu Family Business  158 Characteristics of a Joint Hindu Family Business  158 Benefits of HUF  159 Hindu Undivided Family (HUF) 160 Multi State Co-Operative Society  161 Benefits of Multi State Co-Operative Society  162 Formation of Multi State Co-Operative Society  163 LESSON ROUND-UP  164 TEST YOURSELF  165 LIST OF FURTHER READINGS  165 OTHER REFERENCES  165 LESSON 7 FORMATION AND REGISTRATION OF NGO’S Section 8 Company  168 Regulatory Framework for Section 8 Company (Section 8 of the Companies Act, 2013 read with Rules made thereunder)  168 Rule 19 of the Companies (Incorporation) Rules, 2014 (License Under Section 8 for New Companies with Charitable Objects etc.) 169 Rule 20 of the Companies (Incorporation) Rules, 2014 (License for Existing Companies )  169 Features of a Section 8 Company  171 Exemptions available to Section 8 Company  172 Minimum Requirement for Section 8 Company  175 Application for Incorporation  176 Certificate of Incorporation  177 Trust  177 Objectives of a Trust  178 Persons who can create a Trust  178 Persons who can be a Trustee  179 Difference between Public Trust and Private Trust  179 Exemptions available to Trusts  179 Formation of Trust  180 xxvii Society  182 Definition  182 Advantages of Society  182 Disadvantages of Society  182 Consequences of Registration / Non-Registration of a Society  183 Accounts and Audits  183 Litigation  184 Benefits of forming a Society  184 Formation of a Society 184 Steps for Registering a society In India 185 Selection of a Name 185 Memorandum of Association  185 Tax Exemption to all NGO’s (section 8 Company /Trust/Society  187 LESSON ROUND-UP  187 TEST YOURSELF  188 LIST OF FURTHER READINGS  188 OTHER REFERENCES  188 LESSON 8 FINANCIAL SERVICES ORGANISATION AND ITS REGISTRATION PROCESS Introduction  190 Non-banking financial company  191 Types/categories of NBFCs  192 Benefits of incorporating an NBFC  194 Incorporation of NBFCs  195 Registration Process with Reserve Bank of India  195 Procedure for filing application with Reserve Bank of India  196 Documents required for registration as Type I - NBFC-ND  197 Housing Finance Companies  197 Benefits of incorporating a Housing Finance Company  199 Housing Finance Company: Registration Process  200 Net Owned Fund  200 Asset Reconstruction Company (ARC)  201 Benefits of incorporating an Asset Reconstruction Company (ARC)  202 Asset Reconstruction Company – the Registration Process  202 Micro Finance Institutions (MFI)  202 Characteristics of a Micro Finance Institution  202 xxviii Incorporation of MFI  203 Nidhi Companies 204 Characteristics of a Nidhi Company  205 General restrictions or prohibitions on Nidhis (Rule 6)  205 Benefits of incorporating a Nidhi Company  205 Incorporation of a Nidhi Company  206 MCA Advisory on Sensitization of Nidhi Companies  206 Payment Banks  207 Regulations  207 LESSON ROUND-UP  208 TEST YOURSELF  209 LIST OF FURTHER READINGS  209 OTHER REFERENCES  209 LESSON 9 STARTUPS AND ITS REGISTRATION Startups  212 Evolution  212 Startup India Policy  213 Funding Support & Incentives  215 Issue of sweat equity shares by Startup Companies  217 Recognition as Startups  217 Certification of the Inter-Ministerial Board for availing the Tax Benefit under Section 80-IAC  219 Eligibility criteria for applying to Income Tax exemption (80IAC)  219 Tax Exemption under Section 56 of the Income Tax Act (Angel Tax)  219 Indian States with Startup policies  220 State Startup Ranking  221 Exemptions for Startups  223 Benefits / Exemptions to Start-ups under the Companies Act, 2013  224 Life Cycle of Start-Up  226 Registration Steps  227 Important points for a Start-Up  229 Financing Options Available for Startup Companies  231 Seed Capital  233 Equity Financing  233 Sources of capital  235 Structure  235 xxix Debt Financing  236 Initial Public Offering (IPO) to raise the funds or increase the magnitude of the business operations  237 Unconventional modes of financing options which are now becoming popular in India  237 Mudra Banks  238 Procedure for loan  239 Mudra Card  241 LESSON ROUND-UP  241 TEST YOURSELF  242 LIST OF FURTHER READINGS  242 OTHER REFERENCES  242 LESSON 10 BUSINESS COLLABORATIONS Business Collaboration  244 Types of Business Collaboration  244 Joint Venture  244 Definition  244 MNC’s in different forms including Joint Ventures  245 Advantages of forming Joint Venture  245 Model Foreign Joint Venture Collaboration  247 Disadvantages of Joint Venture  247 Strategies of entering in to a Joint Venture  247 Formation of Joint Ventures  248 Restrictions under FDI Policy of the Government of India  251 LLP firm as a special purpose vehicle  253 Documents for Joint Ventures  254 Essential Features of a Shareholders’ Agreement (SHA) /Joint Venture Agreement / LLP Partnership  254 Agreement (PA)  Essential components of a Joint Venture Agreement  255 Special Purpose Vehicle (SPV)  255 Meaning of Special Purpose Vehicle (SPV)  255 Benefits of Special Purpose Vehicle  256 Purpose of Special Purpose Vehicle  257 Difference between a special purpose vehicle and a company  257 How is an SPV established  257 SPV as preferred vehicle for funds raising by Infrastructure Sector  258 LESSON ROUND-UP  258 xxx TEST YOURSELF  259 LIST OF FURTHER READINGS  259 OTHER REFERENCES  259 LESSON 11 SETTING UP OF BUSINESS OUTSIDE INDIA AND ISSUES RELATING THERETO Introduction  262 Laws /Authority governing Setting up of Business outside India  263 Foreign Exchange Management Act, 1999  263 Eligibility (Entities are Referred to as “Indian Party”)  264 Prohibitions  264 Automatic Route 264 Method of Funding  266 Investments not under automatic route and that require approval of the reserve bank  267 Foreign Direct Investment Policy  268 Reporting requirement under Master Direction – Reporting under Foreign Exchange Management Act, 1999  268 Issues in choosing location outside India  269 Setting up of a Business in New Zealand  270 Recent Initiatives in New Zealand for Setting up of Business  271 Setting up of a Business in Singapore  272 Recent Initiatives in Singapore for Setting up of Business  274 Setting up of a Business in Hong Kong SAR, China  275 Recent Initiatives of Hong Kong SAR, China  276 Setting up of Business in New York City  278 Recent initiatives in New York City  280 Setting up of a Business in United Kingdom  281 Recent Initiatives in United Kingdom  282 LESSON ROUND-UP  283 TEST YOURSELF  284 LIST OF FURTHER READINGS  284 OTHER REFERENCES  284 LESSON 12 CONVERSION OF BUSINESS ENTITIES Introduction  286 Conversion of a Private Company into a Public Company 287 xxxi Procedure for Conversion of a Private Company into a Public Company  288 Conversion of a Public Company into a Private Limited  289 Procedure for Conversion of a Public Limited Company into a Private Limited 290 Conversion of One Person Company to Private Company/Public Company  293 Conversion of Private Company into one Person Company  294 Procedure/Steps for conversion of Private Company into One Person Company  295 Conversion of Section 8 Company into any other kind  296 Rule 21 of the Companies (Incorporation) Rules, 2014  296 Rule 22 of Companies (Incorporation) Rules, 2014  297 Conversion of company into LLP  298 Conversion of a Company Limited by Guarantee into a Company Limited by Shares  300 Conversion of Unlimited Liability Company into a Limited Liability Company by Shares or Guarantee  300 Companies Authorised to Register under the Companies Act, 2013  302 Conversion of LLP into Company  303 Process for Conversion  304 Registration of society as a Company Limited by Guarantee under Section 8  305 Registration of trust as a company limited by guarantee under section 8  306 Memorandum of Association & Articles of Association  306 LESSON ROUND-UP  307 TEST YOURSELF  307 LIST OF FURTHER READINGS  307 OTHER REFERENCES  308 PART B: REGISTRATION; LICENSES & COMPLIANCES LESSON 13 VARIOUS INITIAL REGISTRATIONS AND LICENSES Introduction  310 Mandatory Registration  310 Significance of PAN for Setting up of Business  311 Application and Registration of PAN  311 Procedure to Apply for TAN  313 Where to get the Physical Application Forms  313 Communication  313 Status track  314 Compulsory Registration  316 Persons not liable to register  316 xxxii Procedure for Registration  316 Registration under Shops & Establishments  320 Purpose of Shop and Establishment Act  320 License under Shop and Establishment Act, 1948  321 Registration of Shops & Establishments  321 Micro, Small and Medium Enterprises  322 New definition of MSMEs  322 Udyam Registration Procedure  323 ESI Registration with Procedure & Benefits  327 ESI Registration Procedure for both Employer & Employee  327 Registration of Employee  329 Employee Provident Fund Meaning and Registration Procedure  329 FCRA Registration  330 Eligibility for obtaining FCRA Registration 330 Criteria for grant of FCRA Registration  331 Pollution Control  332 Other Registration as per requirement of sector  333 Drug License  334 List of State Drugs Control Organization  334 Requirement for obtaining Drug License  334 Documents required for obtaining Drug License  335 FSSAI  335 FSSAI Registration  336 FSSAI License  336 Trademark  337 Steps of Registration  337 Copyright  338 Copyright Registration Procedure  338 Time for Processing Application  339 Scope and Extent of Copyright Registration  340 Patent  340 Filing Patent Application  340 Design  342 Design Registration 342 Documents Required for Design Registration  342 General Guidelines  342 RBI  343 xxxiii Requirement of NBFC License with RBI  343 Financial Companies exempt NBFC License  343 Requirement for Obtaining NBFC License  344 Calculating Net Owned Funds as per RBI Definition  344 Types of NBFC License  344 Applying for NBFC License  345 Banking 346 IRDA (Insurance Regulatory and Development Authority)  347 Industrial Licensing Policy  350 Startup  352 LESSON ROUND-UP  353 TEST YOURSELF  354 LESSON 14 MAINTENANCE OF REGISTERS AND RECORDS Introduction  356 List of Register and Records required to be maintained by an enterprise  356 Place of Keeping the Records and Registers  358 Inspection of Statutory Registers  359 Suggested Method of Keeping Statutory Registers  359 LESSON ROUND-UP  359 TEST YOURSELF  359 LESSON 15 IDENTIFYING LAWS APPLICABLE TO VARIOUS INDUSTRIES AND THEIR INITIAL COMPLIANCES Introduction  362 Formalizing and Deciding the Business Structure  362 Procedure for Setting up a Company  364 Incorporation  364 Form of a Company  364 Applying for Business Licenses  367 Understanding Taxation and Accounting Laws  367 Adhering to Labour Laws  369 Adherence to Laws relating to Intellectual Property  370 Ensuring Effective Contract Management  370 Laws relating to industries and industries in specific  370 The Factories Act, 1948  371 xxxiv The Plantation Labour Act, 1951  371 The Mines Act, 1952  371 The Shops and Establishments Act, 1953  372 The Motor Transport Workers Act, 1961  372 The Contract Labour (Regulation & Abolition) Act, 1970  372 Labour Welfare Funds for Social Assistance to Workers  373 The Building & Other Construction Workers (Regulation of Employment & Conditions of Service) Act, 1996  373 LESSON ROUND-UP  374 TEST YOURSELF  374 LESSON 16 INTELLECTUAL PROPERTY LAWS (PROVISIONS APPLICABLE FOR SETTING UP OF BUSINESS) Introduction 376 Intellectual property vis-a-vis business: A rationale of relativity 376 Intellectual Property Regime in India 376 IP Protection for Businesses: A Snapshot 377 Trademarks  377 Points to Consider While Adopting a Trademark  378 Enforcement of Trademark Rights 378 Geographical indication of Goods (Registration and Protection) Act, 1999 379 Designs Act, 2000 379 Copyrights 381 Rights of the Registrar of Copyrights 384 Infringement of Copyright 384 Patents 384 Use of Technology or Invention 385 Enforcement of Patent Rights 385 LESSON ROUND-UP 386 TEST YOURSELF 387 LESSON 17 COMPLIANCES UNDER LABOUR LAWS (PROVISIONS APPLICABLE FOR SETTING UP OF BUSINESS) The Factories Act, 1948 390 Minimum Wages Act, 1948  400 Payment of Wages Act, 1936 402 xxxv Employees’ State Insurance Act, 1948  403 Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 404 Payment of Bonus Act, 1965 405 Payment of Gratuity Act, 1972 405 Employees Compensation Act, 1923 406 Contract Labour (Regulation and Abolition) Act, 1970 407 Industrial Disputes Act, 1947 407 Trade Unions Act, 1926 411 Maternity Relief Act, 1961  412 Child and Adolescent Labour (Prohibition and Regulation) Act, 1986 413 Rights of Persons with Disabilities Act, 2016  415 Prevention of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013  421 LESSON ROUND-UP  425 TEST YOURSELF  426 LESSON 18 COMPLIANCES RELATING TO ENVIRONMENTAL LAWS (PROVISIONS APPLICABLE FOR SETTING UP OF BUSINESS) Introduction 428 Water (Prevention and Control of Pollution) Act, 1974 429 Air (Prevention and Control of Pollution) Act, 1981 431 Environment Protection Act, 1986 432 Public Liability Insurance Act 1991 434 National Green Tribunal Act, 2010 435 LESSON ROUND-UP 438 TEST YOURSELF 438 PART C: INSOLVENCY; WINDING UP & CLOSURE OF BUSINESS LESSON 19 DORMANT COMPANY Introduction 440 Legal framework for Dormant Companies 441 Procedure to obtain the status of a Dormant Company 441 Prerequisite for obtaining the status of Dormant Company 442 Benefits / exemptions provided to a dormant company 442 Compliance requirements by dormant company 442 xxxvi Legal framework dealing with the provision of seeking the status of active company from dormant company  443 Procedure to obtain the status of an Active Company from Dormant Company  443 LESSON ROUND-UP 444 GLOSSARY 445 TEST YOURSELF 445 LESSON 20 STRIKE OFF AND RESTORATION OF NAME OF THE COMPANY AND LLP Introduction 448 Ways of striking off of companies  448 Strike Off by ROC Suo Motu 448 Strike Off by Way of Filing an Application by the Company 450 Procedure of striking off of the name of the company by way of an application to ROC 452 Restoration of the company 455 Appeal to NCLT for restoration of the name of the company 455 Strike Off by way of Filing an Application by the LLP 457 Power of the Tribunal to wind up 458 Restoration of the LLP 458 LESSON ROUND-UP 459 GLOSSARY 459 TEST YOURSELF 460 LESSON 21 CORPORATE INSOLVENCY RESOLUTION PROCESS, LIQUIDATION AND WINDING UP: AN OVERVIEW Introduction 462 The Insolvency and Bankruptcy Code, 2016  462 Important Definitions  466 Resolution Process 467 Suspension of initiation of CIRP 469 Time limit of Corporate Insolvency Resolution Process 470 Withdrawal of Application 470 Moratorium 470 Interim Resolution Professional (IRP) 471 Resolution Professional 472 Committee of Creditors 472 xxxvii Resolution Plan 472 Liquidation Process  472 Pre-Packaged Insolvency Resolution Process (PPIRP)  475 Voluntary Liquidation  4