Incorporation of Companies under Companies Act, 2013

Steps for Incorporation of company under Companies Act, 2013

 

  1. Obtaining Digital Signature Certificate

For the Directors of the company, we have to obtain the Digital Signature Certificate (DSC).

For the DSC, the following documents are required:

  • For Indian Nationals: PAN Card (mandatory) and Voter’s identity card or Passport copy or Driving License copy
  • For Foreign nationals and Non Resident Indians: Passport Residential proof such as Bank Statement, Electricity Bill, Telephone / Mobile Bill; Provided that Bank statement Electricity bill, Telephone or Mobile bill shall not be more than two months old. Foreign director’s specimen signature and latest photograph duly verified by the banker or notary.
  1. Obtaining Director Identification No. (DIN)

Application in Form DIR-3 is to be e-filed for getting the Director Identification Number for all the proposed directors.

  1. Application for Reservation of Name

Application in Form INC -1 to be e-filed for the proposed company, giving 5-6 options of the main name with combination of coined words. The same shall be reserved for a period of 60 days.

  1. Drafting of Memorandum of Association

The main lines of business to be pursued on formation of the company to be mentioned. The secondary or incidental objects also to be furnished.

  1. Drafting of Articles of Association

The bye-laws of the company to be drafted as Articles of Association in line with the provisions of the Companies Act, 2013.

  1. Filing Incorporation Form

The e-filing of Form No. INC.7 to be made alongwith,

(a) The Memorandum and Articles of the company duly signed by all subscribers;

(b)   A declaration in Form No.INC.8 by an advocate or Practicing professional (CA, CS, CA) who is engaged in incorporation, and a person named as Director, Manager or Secretary, that all requirements related to incorporation has been complied with;

(c)   An affidavit in Form No. INC.9 from each subscriber and from each person named as first director in the articles that, he is not convicted of any offence in connection with promotion, formation or management of any company, he is not been found guilty of any fraud or misfeasance or of any breach of duty to any company during preceding five years, and all the documents filed with the Registrar contain correct, complete and true information to the best of his knowledge and belief;

(d)  The address for correspondence till its registered office is established;

(e)  The particulars of every subscribers along with proof of identity;

(f)   The Particulars of first directors along with proof of identity; and

(g)  The particulars of interests of first directors in other firms or bodies corporate along with their consent to act as directors.

 

  1. Registered Office to be established

A company shall have a registered office within 15 days of Incorporation and it shall file Form No.INC.22 to verify the same.

Thus all the documents can be filed on-line to incorporate the company.

As initiative of ease of doing business, incorporation can be done through e-filing of single integrated Form 29, as well.

Valuation of Business under DCF Method

Valuation of Business under DCF Method

Valuation of enterprise is a complex assessment of the intrinsic value of a business enterprise, based on the strength of historic performance, present value and the future potential taking various factors in to account. Hence, the valuation of a business enterprise is both an art and a science. There are broadly three approaches to valuation, namely, Net Asset Approach, Income Approach and Market Approach.

First one is based on Net Assets of the enterprise, viz., the value of the Total Assets as per the Audited Balance Sheet less the Total Liabilities.

Second one is based on the income of the enterprise, viz., EBITDA (Earnings Before Interest, Depreciation and Amortization).

Third one is the market approach, factoring both of the above and the Discounted Cash Flow (DCF) of future earning potential of the business enterprise.

DCF method is recommended as the most appropriate method for valuation of most business enterprises, including start-ups and RBI acknowledges internationally accepted pricing methodology for valuation of shares. SEBI and other bodies also recognize the DCF method as acceptable method of valuation. An illustrative report of valuation on the basis of the DCF Method is given below for the information of the readers.

Valuation of Business of ATL Networks Limited

Background Information:

ATL Networks Limited is a leading telecom infrastructure and service provider with world class path breaking Optic Fiber Technology FTTH (Fiber-to-the-home). ATL Fiber Network offers the High speed Internet access and plethora of services. ATL Networks offers the most advanced technology of delivering the Internet at unbeatable prices.

Valuation Analysis Date:

As represented by the Management, we have taken note of the developments that have happened between Financial Years 2013-14 and 2014-15 and till May 15, 2015, which may have significant impact on the valuation of the entity. Hence, for the focus of valuation of our analysis, we have considered the valuation date to be 23 May 2015. The Management of ATL Networks Limited have provided us the Historical Financials till March 2015 and the provisional till May 15, 2015 and the Projected Consolidated Financials from 2015-16 for the next 10 years.

Valuation Analysis Methodology:

For the purpose of Valuation of business entity, we have used the guidelines as per the Accounting Standards and the latest amended pricing guidelines under the Foreign Exchange Management Act, Regulations issued by Reserve Bank of India as on May 4th 2010.

The Valuation Method suggested by these latest amended guidelines for valuation of business of an unlisted Company is Discounted Cash Flow method.

Discounted Cash Flow Method (DCF):

“The DCF method uses the Future Free Cash Flows of the Company (FFCFC) or equity holders discounted by Cost of Capital/Cost of Equity respectively to arrive at the present value. In General, the DCF method is strong and widely accepted valuation tool, as it concentrates on cash generation potential of a business.

Valuation Analysis:

As per the FEMA Regulations, we have considered the DCF method for valuation of ATL Networks Limited.

The Future Free Cash Flows to the Company, FFCFC have been calculated based on the financial projections for the period from 2015 to 2025 as provided by the Management. Based on the discussions, we understand that a heavy capital expenditure would be required in the initial years and the revenue will be dependent on the initial capacity building. The Company will break even only after 18 months.

The future growth percentage is promising based on market penetration solely in the Telecom Industry, in particular the growth in the broadband connections. Hence, the growth in the domestic market & competition in the domestic market alone is factored in the above valuation analysis.

Discounting Factor:

The Discounting Factor considered for arriving at the present value of free cash flows to the company is weighted average cost of capital. The cost of debt is post tax interest cost for debt and cost of equity is calculated based on Capital Asset Pricing Model (CAPM). We have considered domestic comparable companies to calculate the Beta utilized in the CAPM model to estimate the Cost of Equity.

Valuation of ATL Networks Limited using DCF method:

Under DCF Method, the sum of Present Value of Free Cash Flows of the entity in the explicit period is arrived at in Annexure – A. ATL Networks Limited, being an unlisted company and a company of moderate size, a liquidity discount and size of discount of 10% has been applied to derive the fair value of future earnings / cash flows.

Based on the method discussed above and subject to the assumptions and limitations stated separately in the annexure to the report and in our engagement letter, we have calculated the valuation of the business entity under the DCF Method of Valuation.

Sources of information

The valuation analysis is based on a review of the documentation provided by the Management. The sources of information include:

  1. Foreign Exchange Management Regulations 2000
  2. Audited consolidated financials for the period up to 31.03. 2015
  3. Provisional financial statement of the company as on 15.05.2015
  4. Projected financials received from the client for the 10 years from 2015-16
  5. Other industry related information from the World Wide Web and various publicly available sources, etc.
  6. Discussions with the Management of ATL Networks Limited
  7. Information from financial publications on Telecom industries, some of which are listed below.

 

http://articles.economictimes.indiatimes.com/2014-11-10/news/55955622_1_digital-india-broadband-growth-google-india

http://www.nextbigwhat.com/broadband-penetration-in-india-in-2012-297/

http://www.ibef.org/industry/telecommunications.aspx

http://www.trai.gov.in/WriteReadData/ConsultationPaper/Document/4.pdf

Caveats

Provision of valuation recommendations and considerations of issues described herein are the areas of our regular corporate advisory practice. The services do not represent accounting, audit and financial due diligence review, consulting, transfer pricing or domestic tax related services that may otherwise be provided by us as Chartered Accountants. We have relied on explanation and information provided by the management and accepted their information provided to us as accurate. Although we have reviewed such data for consistency and reasonableness, we have not independently investigated or otherwise verified the data provided. Therefore, we assume no liability for the accuracy of the data. The valuation analysis recommendation contain herein is not intended to represent the value at anytime other than the date of this report. We have no present or planned future interest in either the company or its subsidiaries if any, and the fee for this report is not contingent upon the value reported herein. Our valuation analysis should not be construed as investment advice, specifically we do not express any opinion on the suitability or other wise of entering into this consolidation of business transaction.

Distribution of report:

The valuation analysis is confidential and has been prepared exclusively for the management of ATL Networks Limited for Company Law requirements in India. It should not be used, reproduced or circulated in whole or in part, without the consent of the undersigned to any other person and any other purpose other than mentioned earlier in this report.

 

Sd/-

For Sundar.K. F.C.A., A.C.S.,

Chartered Accountants

Ease of doing business: No need for certificate of commencement of business for companies

Ease of doing business:

No certificate of commencement of business required for companies

The government has done away with this requirement, taking another step to ease doing business in India.

The Cabinet, chaired by Prime Minister Narendra Modi, had approved the 14 changes in various provisions of the new Companies Act, 2013 under the Companies (Amendment) Act, 2015.

One of the changes brought with reference to Commencement of Business Certificate is as below:

SECTION EARLIER PROVISION

 PROVISIONS AFTER AMENDMENT

11

Commencement of Business. No requirement of Commencement of Business Certificate. Section 11 shall be omitted.

 

Many promoters have been asking for the clarification as, earlier companies having share capital shall not commence any business or exercise any borrowing powers unless –

Declaration shall be filed in Form No INC 21 by a Director and the content of the form shall be verified by Practising Professional (CS/CA/CWA) stating that every subscriber has paid the value of shares agreed to be taken and paid up capital is not less than statutory limit;

and

Following documents needs to be attached with the Form No INC 22

  • Registered document of the title in name of Company; or
  • Notarised copy of Lease/rent agreement along with rent paid receipt (Rent receipt shall not be older than 1 month); or
  • Authorisation from Owner to Company along with proof of ownership for use of premises as Registered Office (NOC can be submitted for this); and

Proof of evidence of any utility service like gas, electricity, telephone etc. in the name of owner (not older than 2 months)

The Cabinet, chaired by Prime Minister Narendra Modi, has made the meaningful change in various provisions of the new Companies Act, 2013, which came into force with effect from April 1, 2014, inter-alia, about the Commencement of Business Certificate and now, the government has done away with this requirement, taking another step to ease doing business in India.

What your PAN discloses of your details

The digital and smart platform is called the Income Tax Business Application-Permanent Account Number (PAN)

Your permanent account number (PAN) is a 10-digit alphanumeric number, which is used as your identity proof. It is used mainly for tax related purposes. The first five characters are letters from the English alphabet, the next four characters are numbers and the last character is also a letter. Have you ever wondered whether these numbers and letters have any meaning or not, what do they stand for and how the combination is made unique for you? Well, they have a meaning and they represent something about you. Here is what they mean.

First three characters: The first three characters are alphabetic series between AAA to ZZZ. For instance, the beginning of your PAN could be BEP or APZ; the selection is random.

Fourth character: The fourth character of your PAN always represents your status. The fourth character for a majority of PAN holders is the letter “P”, which stands for “person”. The other nine letters that can represent the fourth character are C, H, F, A, T, B, L, J, and G.

C stands for company. So if the PAN is in the name of your company, its fourth character would be C. H represents Hindu Undivided Family, F stands for partnership firm, A is for association of persons, T stands for trust, B for body of individuals, L represents local authority, J means artificial juridical person and G stands for government.

Fifth character: The fifth character represents the first alphabet of your last name or surname. For instance, somebody with the name Anil Kishore Gupta will have G as the fifth character on his PAN as his last name’s first alphabet is G. However, if you happen to change your surname after marriage or due to any other reason, your PAN card number will remain unchanged.

Sixth to ninth characters: The next four characters are sequential numbers between 0001 to 9999. Like the first three characters, here too the selection is random.

Tenth character: The last and tenth character in the PAN is an alphabetic check digit. Alphabetic check digit is generated by applying a formula to the preceding nine letters and numbers.

Why is the classification important?

A unique number enables the income-tax department to link all transactions of the person with the department. These transactions include tax payments, tax deducted at source/tax collected at source credits, returns of income/wealth/gift, specified transactions, correspondence and so on. PAN, thus, acts as a unique identifier of persons for the tax department.

How to read the Corporate Identification Number CIN of a company

How to read the CIN of a company:

You would have come across some long alphanumeric numbers of companies called CIN.

The CIN (Corporate Identification Number) of a company is given as unique code of alphanumeric characters, which, every company that is incorporated in India is given as unique code at the time of its incorporation and this is the Corporate Identification Number (CIN) of that company. This code is given irrespective of whether the company is a private company, public company or listed company or One Person Company.

 

What CIN represents:

​CIN is an alphanumeric 21 digit code given to companies. It stores vital information to represent a company.  For example, a CIN would read something like this: U72300MH2014PTC097368. The CIN Number given in the above example is divided into 6 parts. Each part contains information about the Company:

 

  1. First Digit represents the listing status – A Company may be either listed or unlisted. First Digit of the CIN indicates the Listing status of the company. If the company is listed, it will be mentioned “L”, if the company is unlisted, it will be mentioned “U” as the first digit of the CIN.

 

  1. Next Five Digits represents the Industry Code – Depending on the business line the company belongs to, the Company selects an industry in which it operates. Accordingly, a relevant industry code is allotted to the company.

 

  1. Next Two Digits represents the State Code – These digits represent the State in which the registered office of the company is situated. This helps us know which Registrar or ROC is applicable with respect to the company.

 

For Example: If the company has been registered in Tamil Nadu in the above example “TN” and in case a company is situated in the state of Maharashtra, the Code would be “MH”. In case, the company shifts its registered office to some other place later, the CIN would change due to change in the State Code.

 

  1. Next Four Digits represents the year of incorporation of the Company – These digits represents the year in which the company was incorporated. By looking at the CIN of the company, one can tell that the year in which the company was incorporated.

 

  1. Next Three Digits represents the type of the company – These three digits identify the type of the company. A company may be any of the following:

– Public Limited Company (PLC)

– Private Limited Company (PTC)

– Government of India Company, Centre (GOI)

– One person Company (OPC)

– Company of State Government (SGC)

– Section 8 Company – Not for Profit (NPL)

 

  1. Last Six Digits – These last 6 digits represent the ROC Registration Number of the company. They are unique numbers given to every company at the time of incorporation by the ROC in which they are registering. This number depends on the ROC in which the company is registering and also the Industry to which has been associated with.

 

This is what the 21 digit CIN Code comprises of. Next time, you see CIN of a company, there would be many things that you should be able to read easily.

You can look for CIN of the companies in a corporate directory. CIN is also mentioned on the letter head of the company.

 

Would a Company’s CIN ever change?

 

Yes. CIN is the number with which we identify a company. Typically CIN is to remain with the company for a lifetime but in, few cases, the CIN of the company could change:

* Change in State where registered office of the company is situated

* The listing status of the company changes

* The industry of the company changes

* The company becomes public limited from private limited or vice versa