All the 11 benches of the newly constituted National Company Law Tribunal (NCLT) will be fully functional in the next “couple of days”, a top Corporate Affairs Ministry (MCA) official said.
Infrastructure is ready in all the 10 cities where the NCLT benches are being set up. The human resources aspect has also been taken care of and adequate steps are being taken to start work immediately.
To begin with, NCLT will handle all pending cases before the Company Law Board and other matters not assigned to any other Court, the official said.
“There will be no transition problem for existing CLB cases,” the official added.
As on date, as many as eight members have joined NCLT, out of approved 25 members. “The remaining members are expected to join in the next few days. They will be posted in various benches,” the official said.
The MCA has also planned a 10-day colloquium in July for the NCLT members, the official added. Asked about the status of cases before High Courts (company cases), the MCA official said the High Court will be the second stage of transfer.
“We will let the CLB cases transition to stabilise for some time and then, in discussion with NCLT Chairman, decide on the High Courts related matter,” the official said.
The creation of NCLT from June 1 is expected to speed up delivery of justice in corporate cases. Sai Venkateshwaran, Partner and Head, Accounting Advisory Services, KPMG in India, hailed the MCA move to set up NCLT and NCLAT.
“We can expect to see the new Companies Act become a reality in its entirety in the coming months,” Venkateshwaran said. The time required for setting up of the NCLT and NCLAT was one of the key reasons for the Companies Act 2013 not being fully operationalised, he said.
However, with the setting up of these tribunals, the way has been paved for operationalising most of the remaining parts of the Companies Act 2013, he added. .
Meanwhile, the Company Law Board hearing in the Financial Technologies’ Board removal case did not take place on Thursday as the CLB stood dissolved on May 31 by virtue of the government move to set up NCLT from June 1.
Indications are that an NCLT bench will hear this matter in the coming days, sources said.
Panel has sought the overhaul of the bankruptcy framework to allow the speedy winding up of failed businesses to protect shareholders and lenders, aiming to modernise an outdated system.
A government panel has sought the overhaul of the bankruptcy framework to allow the speedy winding up of failed businesses to protect shareholders and lenders, aiming to modernise an outdated system that drags out closure proceedings.
It has recommended new institutions and structures for a fresh regime that will encourage entrepreneurship and foster a startup culture, among the stated objectives of the Narendra Modi administration. The government has indicated it will move a Bill in the winter session of Parliament to give effect to the recommendations, addressing one of the key issues that has kept India low on the ease of doing business rankings.
The Bankruptcy Law Reform Commission headed by former law secretary TK Viswanathan has proposed insolvency resolution within 180 days and a new regulator to oversee the process. It’s also laid down a clear and speedy system for early identification of financial distress and revival of companies.
The timelines are on par with international norms for insolvency resolution. “The endeavour would be to introduce the Bill in the next session of Parliament,” Finance Minister Arun Jaitley said at the World Economic Forum in the Capital on Wednesday. Viswanathan submitted the report to the minister later in the day. The report, along with the draft legislation, has been made public for feedback. “The Bill seeks to improve the handling of conflicts between creditors and debtors, avoid destruction of value, distinguish malfeasance vis-a-vis business failure and clearly allocate losses in macroeconomic downturns,” the report said.
The World Bank has ranked India at 136 out of 189 countries in ‘resolving insolvency,’ estimating that it takes 4.3 years on average in Mumbai to settle a case.
Jaitley had identified bankruptcy law reform as a key priority for improving ease of doing business in his February budget speech. He said that a comprehensive bankruptcy code, meeting global standards and providing the necessary judicial capacity, would be unveiled in the fiscal year. Under the current system, proceedings take several years, hurting investors and lenders besides costing taxpayers crores of rupees.
Banks are groaning under bad debt stemming from projects that have got stuck, drawing the Reserve Bank of India’s concern. “We need a bankruptcy code. We need equity to be seen as equity and debt to be seen as debt. Today there’s a lot of confusion… We need that confusion to be changed,” RBI Governor Raghuram Rajan has said previously.
90 Days for Key Categories. The prescribed resolution timeline of 180 days can be cut further to 90 days from the trigger date for key categories. The proposed insolvency regulator will cover professionals and agencies specialising in the field.
The proposals include information utilities that will collect, authenticate and disseminate financial information from listed companies. An Insolvency Adjudicating Authority will hear cases by or against debtors. The Debt Recovery Tribunal should be the adjudicating authority with jurisdiction over individuals and unlimited liability partnership firms, it said. The National Company Law Tribunal (NCLT) should be the adjudicating authority with jurisdiction over companies and limited liability entities, it added.
The draft bill has consolidated existing rules relating to insolvency of companies, limited liability entities, unlimited liability partnerships and individuals, all of which are currently scattered across a number of laws, into a single legislation.
According to the draft bill, during the transition phase, the Centre will exercise all regulatory powers until the agency is established. The panel’s report suggests that an insolvency resolution plan prepared by a resolution professional has to be approved by a majority of 75% of the voting share of financial creditors. As part of the insolvency resolution process, creditors and debtors will engage in negotiations to arrive at agreeable repayment plans.
The draft proposes that any proceeding pending before the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) or the Board for Industrial and Financial Reconstruction (BIFR) before the new law goes into force should stand abated or stopped.
“However, a company in respect of which such proceeding stands abated may make a reference to Adjudicating Authority within 180 days from the commencement of this law,” the recommendation said, keeping in view continuity of the process. Minister of State for Finance Jayant Sinha said the required infrastructure needed to be put in place.
“We also have to ensure that necessary judicial capacity is available,” he said. “We also need to resolve many of the situations immediately because they are short of cash in most of these bankruptcy types of cases.” The minister said the government was trying to put together a comprehensive solution where “we can resolve default and bankruptcy cases as quickly and efficiently possible.”
Industry feels the new system will create a robust and globally competitive insolvency regime. This will significantly reduce the time taken for insolvency proceedings in India, which at present, on an average basis is estimated at about 4.3 years as against only 1.7 years in high-income OECD countries,” said Chandrajit Banerjee, director general of the Confederation of Indian Industry.
“The architecture proposed by the Viswanathan committee of establishing an insolvency regulator to have oversight of the new class of insolvency professionals, agencies and information utilities will enhance the systemic efficiency of dealing with insolvency cases in a timebound manner,” he said.
Viacom18, the television media house that owns and runs channels Colors and MTV, has signed an agreement with the Union government’s department of industrial policy and promotion’s Start-Up India project.
It will launch a year-long ‘outreach programme’ for entrepreneurs, called MTV Kickstart. The initiative will include activities on-ground, digital communication and a TV reality show.
While the Viacom18 brand attached to the programme is MTV, the network’s youth brand, all entities under the former’s umbrella will be mobilised.
The multi-platform initiative is to reach out to young and aspiring entrepreneurs through multiple touch-points across 300 colleges. Around 10 Start-Up Festivals, two-day events in tier-1 & 2 cities, will be organised, allowing youth to interact with top entrepreneurs and investors.
Amitabh Kant, secretary of the government’s department, said: “This will help us engage with dynamic youth and inspire a new generation to follow their dreams and become successful entrepreneurs.”
“The programme will look at a variety of start-ups — in tech and engineering, in the social space, in art and culture and, could be, in the media, too. We are working on the amount of seed money. It will come from a combination of entities across sponsors and VC (venture capital entities). One of the things we want to do is provide mentorship. It becomes critical in making the ideas commercially viable,” says Sudhanshu Vats, group chief executive of Viacom18.
The reality show will go on air in the third quarter of this calendar year. The format would mostly be developed in-house by the network and include a competition, where shortlisted start-ups or entrepreneurs from various on-ground activities under the programme are to compete before a jury for home seed funding.
“Through a process of auditions, we will shortlist the contestants, who will then be participants in the televised reality show. We’ll end the process with an awards show, also televised. The idea is not to make it too formal and intimidating. The MTV brand will help with this. While it’s not frivolous, it will help ease the contestants. It can be quite intimidating for anyone with an idea who does not know much about setting up a business (to present the idea). So, we are looking at people who don’t yet have a start-up but have ideas that can be turned into businesses,” says Ferzad Palia, head of youth and English entertainment at Viacom18.
The network is in talks with brands which want to market to youth and will soon announce the commercial partners. These brands will get visibility on all platforms the outreach programme is present on and across the Viacom18 network.
In December 2015, Zee Bangla, in association with the West Bengal government, launched Egiye Bangla, a start-up reality show. The format was similar to Shark Tank, a reality show for start-ups on the ABC television network in America. Each round had five contestants and each pitched his idea to investors. The latter included Anjan Chatterjee of Speciality Restaurants; Chandra Shekhar Ghosh, managing director of Bandhan Bank, and Ashok Banerjee, a professor at IIM-Calcutta. The show was aired in the 6–7 pm slot on Sundays and launched with 744,000 impressions on television viewers on December 6, 2015, and clocked 441,000 average impressions or TV viewership through the season, according to data from the Broadcast Audience Research Council of India.
The government is working on ensuring that the name of a new company is approved within 24 hours, a step towards improving ease of doing business and reducing overall transaction costs.
Corporate Affairs Secretary Tapan Ray said his Ministry is focused on reducing the problems faced by the industry and ensuring that ease of doing business becomes the “order of the day”.
“Incorporating a company is now much easier and will be made further easier as we go along the road. We are aiming to get a name (of a new company) approved within 24 hours,” Ray said.
The Corporate Affairs Ministry is fully geared up to improve ease of doing business, not only for starting a venture but also for the life cycle of companies as a whole, he noted.
Speaking at an event organised by the Institute of Cost Accountants of India (ICAI) here, Ray said speedier approval of names is itself a cost-cutting experiment because any delay adds to transaction costs.
“So ease of doing business is directly related to transaction costs. So the moment you make the ease of doing business better, transaction costs comes down and ultimately it has an affect on the product,” Ray said.
Stressing the need for becoming globally competitive, he said the dream of making India a manufacturing hub can be realised when costs are low.
“People will only start manufacturing in India if it is the cheapest,” he added.
Corporate Affairs Ministry, which is implementing the Companies Act, has been taking various steps to improve ease of doing business in the country.
Ray said setting up of the National Company Law Tribunal (NCLT) would further facilitate business in the country.
The Ministry has sought comments from stakeholders on draft rules pertaining to the proposed NCLT, which would replace the Company Law Board (CLB).
If a startup claims benefit in first year & does not make profit in next two years, it can still enjoy tax exemption on profit in fourth and fifth year
The three-year tax holiday proposed for startups in India will be available over a five-year window, ensuring that innovators won’t lose the benefit even if they make a profit later, the government said.
Those seeking the income tax exemption, announced in the Startup Action Plan on Saturday, will need to get approval by March 2019, in line with the government’s policy to weed out exemptions and bring down the corporate tax rate to 25%. Startups approved until March 31, 2019, will enjoy the benefit for up to five years. The government has proposed that a high-level, inter-ministerial committee should vet startup proposals to validate the innovative nature of the business for granting tax-related benefits. The details of the tax benefits will be announced in the budget.
“The benefit will be available for three years over a five-year period, “a senior government official told ET. If a startup claims the benefit in the first year and does not have a profit in the next two years, it will not lose out on the exemption. If profits are made in the fourth and fifth year, they will still be eligible for the tax break.
“All startups incorporated in India not prior to five years as per the definition of startup and starting the operations before 2019 can get this benefit for three years,“ said Amitabh Kant, secretary in the Department of Industrial Policy and Promotion, which piloted the startup initiative.
With the deadline for seeking exemption set for March 2019, the scheme will effectively run till March 2024, a period of eight years from now.
“This fiscal exemption shall facilitate growth of business and meet the working capital requirements during the initial years of operations, “according to the action plan document.
The policy imposes only one condition on startups claiming the benefit, apart from seeking approval from the appropriate body and meeting eligibility criteria: it should not distribute dividend while getting the tax exemption.
Tax-friendly Regime Need of the Hour for Startup Investors
The devil is in the details. The tax incentive package for startups will be clear in the Budget. But open-ended tax breaks won’t be possible as the government has already signalled a phasing out of exemptions to lower the corporate tax rate. Investments in unicorns would typically be long-term. So, it makes eminent sense to spare investors from paying capital gains tax when they sell their unlisted shares in startups after holding them for over a year. A tax-friendly regime will encourage many of them to relocate to India from, say, Singapore. The government, as promised, should end its Inspector Raj to boost the startup ecosystem.
Analysis of integrated e-Form INC-29 for Company Incorporation and Ease of doing business
With the introduction of the INC-29, the Ministry of Corporate Affairs (MCA) has begun to make good on its promise to improve India’s ranking on the World Bank’s Ease of Starting a Business Index to within the top 50 from the current 158.
The INC-29 form for company registration, combines the application for DIN allotment, name reservation, incorporation and even PAN & TAN, while making the process faster and simpler. As the entire incorporation process is in a single form, correct filing could mean approval in 48 hours. Compared to the old process, this helps in formation of company saving a lot of time, if properly implemented.
Purpose of the eForm – eForm INC-29 deals with the single application for reservation of name, incorporation of a new company and/or application for allotment of DIN. This eForm is accompanied by supporting documents including details of Directors & subscribers, MoA and AoA etc. Once the eForm is processed and found complete, company would be incorporated with Corporate Identification Number (CIN) and the Certificate of Incorporation would be issued. Also DINs gets issued to the proposed Directors, who do not have a valid DIN. Maximum three Directors are allowed for using this integrated form for allotment of DIN while incorporating a company.
Key Features of e-form INC-29
The integrated e-Form INC-29 is available with effect from 01.05.2015 for One Person Company, Private Company as well as Public Company.
INC-29 does away with filing of multiple applications/forms saving time and payable fees.
It combines the processes relating to:-
Allotment of Director Identification Number (DIN) (up to three Directors),
Incorporation of a company, and
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.
Declarations are in-built in the e-Form. Separate attachments containing such declarations are not required.
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 provides a single interface for these applications also.
Forms no longer to be filed individually as per the new Form INC 29:
During the past one year, Corporate Affairs Ministry has taken a number of steps, and is further streamlining processes and regulatory framework, to reduce the overall time taken for incorporating a company as a part of ‘ease of doing business’ effort, Finance Ministry has said.
The Government of India proposes to bring down the average number of days required for incorporating a company to one to two days, a move aimed at further improving ‘ease of doing business’ in the country.
During the past one year, Corporate Affairs Ministry has taken a number of steps, and is further streamlining processes and regulatory framework, to reduce the overall time taken for incorporating a company as a part of ‘ease of doing business’ effort, Finance Ministry said in a statement.
As a result of the many steps, the average number of days taken for incorporation of a company has come down significantly from 9.57 days in December, 2014 to 4.51 days in November, 2015.
“It (Ministry of Corporate Affairs) is targeting that the average number of days would be further reduced to one to two days for approval in normal cases,” the statement said.
Giving details of the step, it said the introduction of an Integrated Incorporation Form INC29 and tighter monitoring of Registrar of Companies’ (ROCs’) performance has resulted in faster approvals and lesser number of clarifications being asked from the stakeholders.
The Corporate Affairs Ministry will soon introduce a new version of Form INC29, incorporating suggestions received from the stakeholders, allowing up to five directors to be appointed and greater flexibility in proposing a name for a company, it said.
“This will allow an even more wider use of this integrated Form, which is already gaining popularity,” the statement added.
Further, the rules with regard to reserving and approving of names for companies are also being simplified, and a centralised new process will be introduced soon for strictly time bound approval of names for companies.
All the 11 benches of the newly constituted National Company Law Tribunal (NCLT) will be fully functional in the next “couple of days”, a top Corporate Affairs Ministry (MCA) official said.
