Major initiatives by MCA in last one year

Major Initiatives and Achievements of the Ministry of Corporate Affairs in the Last One Year

Following are the major initiatives and achievements of the Ministry of Corporate Affairs in the last one year.

Furthering ease of doing business - Companies Act, 2013:

·       16 amendments in the Companies Act, 2013 approved by the Parliament– these amendments are aimed at facilitating business and addressing concerns raised by stakeholders. A summary of the amendments is enclosed at Annexure-1.

·       A new integrated e-Form INC-29 has been made available w.e.f 1stMay, 2015 for companies. The Form does away with filing multiple applications/forms saving time and payable fees. Detail may be seen atAnnexure-2.

·       24 amendments in Rules under the Companies Act, 2013, 8 Removal of Difficulty Orders as well as many clarifications were also issued.

·      Certain prescribed forms were discontinued or merged with existing forms. Other Forms were also simplified.

Setting up of a Committee to look into further modifications required in the Companies Act, 2013.

·         A broad based Committee consisting of representatives of the Institute of Company Secretaries of India, the Institute of Chartered Accountants of India or some industry chambers and from the Ministry is being constituted to look into requirement for further changes in the Companies Act, 2013.

Notification of Indian Accounting Standards (Ind AS):

·    Consequent to announcement in the budget of Financial Year 2014-15 (para 128), accounting standards converged with global standards, namely, International Financial Reporting Standards (IFRS) were framed in consultation with the Institute of Chartered Accountants of India and National Advisory Committee on Accounting Standards. These thirty nine standards, called Indian Accounting standards (Ind AS) have been notified on 16.02.2015 as Companies (Indian Accounting Standards) Rules, 2015. These accounting standards are significantly congruent with the global standards, with minimum carve-outs and are expected to boost investor confidence.

Constitution of NCLT and NCLAT

·       The Constitution Bench delivered its final order on the long standing litigation. The constitution of the NCLT is being taken up in an expeditious manner.

ANNEXURE 1

Companies (Amendment) Bill, 2015

SUMMARY OF AMENDMENTS AND THE OFFICIAL AMENDMENTS

1.    Omitting requirement for minimum paid up share capital, and consequential changes. (For ease of doing business) -[section 2(68)/2(71) of the Companies Act, 2013 (Act)].

2.    Making common seal optional, and consequential changes for authorization for execution of documents. (For ease of doing business) -[sections 9, 12, 22, 46 and 223 of the Act].

3.    Doing away with the requirement for filing a declaration by a company before commencement of business or exercising its borrowing powers. (For ease of doing business) -[Omission of section 11 of the Act and consequential change in section 248]

4.    Prescribing specific punishment for deposits accepted under the new Act. To deal with defaults in repayment of depositor. (For protection of depositors' interests) – [New Section 76A of the Act]

5.    Prohibiting public inspection of Board resolutions filed in the Registry. (To provide for confidentiality of commercial interests discussed in resolutions) -[section 117(3) of the Act].

6.    Including provision for setting off past losses/depreciation before declaring pidend for the year- (Standard prudential clause).[ section 123(1) of the Act]

7.    Rectifying the requirement of transferring equity shares for which unclaimed/ unpaid pidend has been transferred to the Investor Education and Protection Fund (IEPF) even though subsequent pidend(s) has been claimed -[section 124(6) of the Act].

8.    Enabling provisions to prescribe thresholds beyond which fraud shall be reported to the Central Government (below the threshold, it will be reported to the Audit Committee/ Board). Disclosures for the latter category also to be made in the Board’s Report. [section 143(12) and 134(3) of the Act].

9.    Empowering Audit Committee to give omnibus approvals for related party transactions on annual basis. (Align with SEBI policy and increase ease of doing business)– [section 177(4) of the Act].

10.  Exemption u/s 185 (Loans to Directors) provided for loans to wholly owned subsidiaries and guarantees/securities on loans taken from banks by subsidiaries. (This was provided under the Rules but being included in the Act as a matter of abundant caution).[ section 185(1) of the Act].

11.  Replacing ‘special resolution’ with ‘resolution’ for approval of related party transactions by non-related shareholders. (Balance the process for majority supported genuine commercial decisions) -[section 188(1) of the Act].

12.  Related party transactions between holding companies and wholly owned subsidiaries exempted from the requirement of approval of non-related shareholders. -[section 188(1) of the Act].

13.  Bail restrictions to apply only for offences relating to fraud u/s 447. [section 212(6) of the Act].

14.  Winding up cases to be heard by 2-member Bench instead of a 3-member Bench. - [section 419 of the Act].

15.  Special Courts to try only those offences carrying imprisonment of two years or more. (Rationalization of jurisdiction, to let magistrates try minor violations, with the objective of speeding up disposal).[section 435 and 436 of the Act].

16.  Rationalizing the procedure for laying draft notifications granting exemptions to various classes of companies or modifying provisions of the Act in Parliament, in order to ensure speedier issue of final notifications. (For a faster process of giving exemptions to classes of companies). [section 462 of the Act].

ANNEXURE 2

NEW FORM INC-29

1.   The integrated e-Form INC-29 is availablewith effect from 01.05.2015 for One Person Company, Private Company, Public Company and Producer Company.

2.    INC-29 does away with filing of multiple applications/forms saving time and payable fees. It combines the processes relating to:-

i. Allotment of Director Identification Number (DIN) (up to three Directors),

ii. Incorporation of a company, and

iii. Appointment of first Directors of the company.

3.    The new e-Form does away with the need for reserving a name for the company prior to applying for its incorporation.

4.    Declarations are in-built in the e-Form. Separate attachments containing such declarations are not required.

5.    The e-Form is enabled for future integration with e-Biz platform of DIPP for generating applications for PAN, ESIC and EPFO numbers on the platform and therefore provide a single interface for these applications also.

Latest procedure of company formation - Corporate Law

1. Obtain Digital Signature of all directors (Time taken 1 day)

Requirements:

• Copy of PAN card (self attested) and a Photo
• 1 address proof (self attested)

2. Obtain DIN for all directors in Dir-3 (Time taken 1 day)

Requirements:

• 1 colour photo
• Affidavit in DIR-4(Declaration by director)
• Copy of PAN card (self attested)
• Copy of address proof (self attested) for permanent and present address
• Area of occupation, Educational qualification, place of birth, email id, mobile number

3. Apply for name availability in INC 1 (Time taken 5 days)

• Upto 6 names in order of preference allowed
• Significance of each coined word required
• Main objects of company required
• If name resemble any partnership firm name, then NOC required.
• If name based on close relative’s name, proof of relation required
• Name should preferably indicate objects
• If name resembles registered trademark, then NOC required
• If name resembles existing company name, then NOC required

4. Apply for Incorporation, director appointment and registered office by filing INC-7, Dir-12 and INC-22 (Time Taken 7 days)

Requirements:

• 3 photos required
• For 1 director, register DSC in MCA site before filing INC-7
• Prepare AoA, MoA and Dir-2
• Affidavit for public deposits
• INC-8 by Professional engaged
• INC-9 by directors and subscribers
• INC-10 by subscribers

Specific identity proofs required for INC-7

• Passport
• Aadhar card
• Voters ID

Specific address proof required for INC-7

• Electricity bill
• Bank Statement
• Mobile bill
• Telephone bill

How CA’s have very smartly created the Organisational Structure of Flipkart

How CA’s have very smartly created the Organisational Structure of Flipkart

Binny (left) and Sachin Bansal have become the poster boys of India’s e-commerce business and the envy of the larger corporate world.

Flipkart has devised a complicated maze of inter-connected and purportedly independent entities that receive massive amounts of money it raises to build an integrated e-commerce business.

After our First Article ‘Flipkart all you need to know’ was loved by all, we to posted ‘Why Flipkart was registered in Singapore’ which also was loved and shared by you all. In both the cases we mentioned that we will be discussing the taxation part of Flipkart. But as we were researching on the same, we wanted to first know the structure of Flipkart. 

So, what’s the company’s corporate structure.

Since India bans foreign direct investment (FDI) in online retail, Flipkart has devised a complicated maze of many inter-connected and some purportedly independent entities that receive the massive amounts of money it raises to build an integrated e-commerce business.

This is in short what Flipkart does:

a. It sources goods from manufacturers, sells those goods to many of its third-party sellers who then, in turn, offer those products to shoppers. Flipkart provides the technology platform and logistics services and takes a commission on every sale on its site.

b. This isn’t how a pure marketplace—Flipkart claims to be one—operates. Which is why Flipkart has had to set up a complex web of at least nine entities.

c. Today, after nearly six rounds of investments from more than 15 investors and several acquisitions, Flipkart’s corporate structure would make older Indian conglomerates proud. Most of Flipkart’s entities finally lead to the ultimate holding entity, Flipkart Pvt. Ltd (FPL), which was set up in October 2011 in Singapore.

d. There are three entities registered in Singapore as 100% subsidiaries of FPL: Flipkart Marketplace Pvt. Ltd, Flipkart Logistics Pvt. Ltd and Flipkart Payments Pvt. Ltd.

e. These companies, in turn, hold stakes in five Indian entities: Flipkart India Pvt. Ltd, the wholesale cash-and-carry entity; Flipkart Internet Pvt. Ltd, which owns Flipkart.com and provides technology platform to e-commerce companies.

f. Digital Media Pvt. Ltd, currently a dormant company, formerly known as Digital Marketplace Pvt. Ltd ; Digital Management Services Pvt. Ltd that ran Letsbuy.com; and Flipkart Payment Gateway Services Pvt. Ltd, which ran payments product payzippy and is currently in middle of restructuring its operations and will continue to focus on payment services.

g. The ownership of FPL Singapore largely rests with Tiger Global, Accel Partners, Naspers and the Bansals. Tiger Global, the US-based hedge fund that holds close to 30% in the parent company, has two seats on the board.

h. This show just how important Flipkart has become to Tiger Global Management. According to Sources, Tiger Global has invested more than $700 million in Flipkart so far. That is significantly higher than what the firm invested in the likes of Facebook and Alibaba, making Flipkart one of Tiger Global’s biggest bets ever.

i. the Myntra acquisition in May, for an estimated value of $330 million, has opened doors for investors such as IndoUS Venture Partners, IDG Ventures and PremjiInvest to become part of Flipkart.

j. After the merger, all Myntra shareholders except co-founders Mukesh Bansal andAshutosh Lawania got stock in Flipkart Singapore.

k. Both Myntra co-founders received cash from Flipkart for their stakes, people familiar with the matter said. Neither Bansal and Lawania own any stake in Flipkart.We could not verify how much Bansal and Lawania received from Flipkart.

l. Mukesh Bansal now sits on the board of Flipkart India and continues to hold some stake in Myntra Holdings. He was also promoted to the role of Flipkart’s marketing chief earlier this month.

m. For the year ended 31 March 2014, the losses of all Flipkart India entities amounted to Rs.719.5 crore on revenue of Rs.3,035.8 crore.

n. Flipkart Marketplace Singapore alone posted a loss of Rs.3.55 crore on zero revenue for the year ended 31 March 2014.

Then there’s WS Retail, one of the most important pieces of the Flipkart puzzle. WS Retail was owned by Flipkart co-founders until September 2012. The Bansals and two of their relatives were also board members at WS Retail. In September 2012, Flipkart was forced to sell a large stake in WS Retail to former OnMobile Global Ltd chief operating officer Rajeev Kuchhal, just weeks before Indian regulatory agencies launched an investigation into the company’s business relationship with WS Retail.

Both the Bansals and their relatives gave up their board seats, too. Tapas Rudrapatna andSujeet Kumar control 46% of WS Retail, documents with the Registrar of Companies show. Rudrapatna and Kumar were employed by Flipkart at least until September 2012. WS Retail still accounts for more than 75% of Flipkart’s business, according to three other people familiar with the matter. WS Retail and Flipkart used to share offices until recently and continue to share at least one warehouse location in Bengaluru, though both companies have different spaces in the warehouse, one of the people cited above said.

After seeing such a complex structure, It has made us think more on the Taxation part of Flipkart. It has made us simple to review the Taxation applicable but also complex. Some major taxations which would be applicable are:

- Service Tax

- Transfer Pricing

- TDS / TCS

- And Finally Income Tax.

To know more Stay tuned, and follow, like, share, subscribe and Comment.

(This article was posted by Karan Khatrion his blog www.cakagyaan.wordpress.com)
Source: caclubindia.com

Depreciation As Per Schedule II of Companies Act 2013

♠ Schedule II to the Companies Act, 2013 requires depreciating the asset over its useful life. The depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value.

♠  The useful life of an asset is the period over which an asset is expected to be available for use by an entity, or the number of production or similar units expected to be obtained from the asset by the entity.

♠  New schedule by companies’ act 2014 provides the method to amortize intangible assets which is as per the provisions of AS-26.

♠  Instead of method and rates of depreciation, new Act prescribed only assets’ useful life. The difference between WDV and SLM will be removed. The useful life shall not be longer than the Specified life of the Asset as given in Part C of the Act and the residual value shall not exceed 5% of the cost of the asset. 95% of the original cost of asset only has to be depreciated.

♠  In case of Plant & Machinery, shift based depreciation needs to be calculated as under:

1.  For Single shift: Useful life mentioned under Companies Act 2013
2.  For double shift: depreciation to be increased by 50% [i.e. 50% of depreciation amount calculated under point (a)]
3. For triple shift: depreciation to be increased by 100% [i.e. 100% of depreciation amount calculated under point (a)]

 ♠ New act prescribes depreciation of assets whose cost is less than Rs. 5,000/- as per normal provisions of schedule II.

♠ Under act if any component of Asset have significant cost and has useful life other than the assets then is should be considered as separate asset for depreciation. As Per Schedule II of the Companies Act Component Approach as Defined in Ind AS 16 becomes Mandatory.

♠ If Company, being a class of company specifically prescribed by MCA, can adopt a different useful life longer than what is prescribed in Schedule II, however the same shall be disclosed, as Note on Accounts together with justification. For other companies, useful life cannot be longer than what is prescribed in Schedule II.

♠ Transitional effect of Schedule II

The most important and challenging aspect of Schedule II is the effect to be given in the books of account on the date of transition, i.e. 1st April, 2014.

Note 7 to Part C of Schedule II prescribes the transitional effect as follows:-

From the date this Schedule comes into effect, the carrying amount of the asset as on that date-

(a) Shall be depreciated over the remaining useful life of the asset as per this Schedule;

(b) After retaining the residual value, shall be recognized in the opening balance of retained earnings where the remaining useful life of an asset is nil.”

Two possibilities regarding the assets as on 1st April, 2014 in context of the above note:

1. Asset’s remaining useful life as per Schedule II is nil:

In that case, as per Note 7(b), the carrying amount has to be adjusted in the opening balance of retained earnings in the balance sheet after retaining the residual value.

2. Asset’s remaining useful life is as per Schedule II is not nil:

If one reads Note 7, specifically clause (a), then one has to continue depreciating the balance as on 1st April, 2014 systematically over the remaining useful life after recalculating the rate of depreciation. In that case, no effect of restating the carrying amount will be needed to be given. Depreciation should be provided at a rate prescribed as under based on the remaining useful life of the Asset.

CALCULATION OF DEPRECIATION:-

Rate of Depreciation under WDV Method:

R= (1 –(s/c) ^(1/n)) x 100

Where R = Rate of Depreciation (in %),

n = Useful life of the asset (in years)

s = Scrap value at the end of useful life of the asset (i.e. max 5% of cost)

c= Cost of the asset

Let’s take an Example to understand note 7(a):-

Asset: Plant & Machinery

Original Cost: Rs. 1,00,000

Useful Life and rate of Depreciation as per Old Provisions:   20 years & 13.91%

Useful Life and rate of Depreciation as per New Provisions: 15 Years & 18.10%

Expired Life: 5 years

Accumulated Depreciation for 5 years: 52,711/-

Now the Carrying Amount as on 01.04.2014 will be 47,289/- (1,00,000-52,711)

Remaining Useful life as on 01.04.2014 as per new provisions 10 years (15 years – Expired Life)

Rate of Depreciation on the basis of remaining useful life i.e.10 years is 25.89%

Let’s take another Example to understand note 7(b):-

Asset: Plant & Machinery

Original Cost: Rs.1,00,000

Useful Life and rate of Depreciation as per Old Provisions: 20 years & 13.91%

Useful Life and rate of Depreciation as per New Provisions: 15 Years & 18.10%

Expired Life: 16 years

Accumulated Depreciation for 16 years: 90,896/-

Now the Carrying Amount as on 01.04.2014 will be 9,104/- (1,00,000-90,896)

Remaining useful life as on 01.04.2014 as per new provisions is nil (15 years – Expired Life)

In such a case Note 7(b) comes into picture and the entry on 01.04.2014 would be

Retained Earnings Dr   4,104

To Plant & Machinery 4,104

(Being shortfall in the depreciation consequent upon change in the useful life of asset provided for after retaining residual value of 5% charged against opening balance of retained earnings)

Residual value should not be more than 5% of cost of asset i.e. Rs. 5,000 and accordingly the amount to be adjusted shall be Rs. 4,104 (9,104-5,000).

Rate of depreciation as per two methods can be calculated as follows:-

Method	Rate of depreciation
Written Down Value Method	(1-(salvage value/original cost of asset)(1/useful life)) * 100
Straight Line Method	Depreciation=(Carrying Value– Salvage Value)/ (Useful life) Hence Rate of depreciation =(Depreciation/ Carrying value)*100

USEFUL LIFE OF VARIOUS ASSETS AS PRESCRIBED IN SEC 123 READ WITH SCHEDULE II – PART C   OF COMPANIES ACT, 2013 CAN BE CHECKED AT FOLLOWING LINK :-

Depreciation Rate Chart as per Companies Act 2013 with Related Law

http://taxguru.in/company-law/depreciation-schedule-ii-companies-act-2013.html#sthash.EUCnuRDz.dpuf