Role & Importance of Corporate Consultants

The history of Corporate-Consulting:

We can often hear people using the term consulting, but let’s ask ourselves the question what Corporate Consulting really means and where it comes from?

The first management consulting firm was created in 1886 by Arthur Dehon Little, and initially specialized in technical research. However, Arthur D. Little refused to follow the general trends when the field he had created started to grow — according to his opinion — on much too homogeneous standards.

The first management consultancy to serve both industry and government clients was Booz Allen Hamilton, founded in 1914, while the first modern, pure management and strategy consulting company was McKinsey & Company. Marvin Bower, the Mckinsey’s CEO from 1950–1967, later developed the ‘professional’ status of consultants, focused on top MBA & Law graduates.

Later on, with the DuPont Company, the departmental structure was born. They reshaped their organization according to the different products: explosives, stains, and paints — opposed to the former structure based on functions: sales, production, R&D.

While from the 1940s to the 1960s, consulting firms contributed to the rise of multi departmental structures, from the mid-1960s, they started to sell strategy, rather than structure. By the end of the 1980s, consultants played a whole new role in firms: they would legitimize their strategy. The growth of strategic consulting led to the unification of practices or, how Paul DiMaggio and William Powell, called it, to an institutional isomorphism.

It is interesting to notice that until the mid-1960s, a firm would never recognize that it hired consultants, that would mean it was going through hard times. European firms were the first to publicly announce that they had hired American consulting companies, with an aim to give clear warranties of their legitimacy.

It is important to remember that consultants covered two principal functions:

  • Bringing information
  • Supporting legitimacy

Their role was to draw conclusions from observations and information they had and transpose these from one organization to another. This is where their advice to the companies which hired them came from.

What Corporate Consultants Bring to the table?


The main values of consultants include their knowledge, expert skills, and influence. Because consultants work with a variety of businesses, they may have a much broader and deeper knowledge of business trends, industry challenges, and new technologies and processes than internal employees.
In fact, according to Harvard Business School, consultants are fundamental in disseminating innovation and new knowledge within their industries.

Cost Savings:

When you hire a consultant, you pay only for the services that you need, when you need them. This can provide substantial savings over hiring a salaried employee with the same level of expertise to complete similar tasks.
Further, consultants in multiple areas—lean manufacturing, proactive funding, financial planning, etc.—can identify areas where you are currently spending more than you need to and help you cut costs.

Time Savings:

The experience of consultants means that they know best practices already. For example, a lean consultant can look at a client’s manufacturing process and very quickly identify inefficiencies. With a consultant, there is no need for business owners to reinvent the wheel or lose valuable time to something that can be completed by an expert contractor.


Consultants provide a useful distance from business challenges; they are not emotionally invested in operations in the same way that business owners are and they can more easily identify and address challenges, whether the issue is implementing a new technology or completing a merger or acquisition.
The consultant’s objectivity can be especially important in family-run businesses, where dynamics could be emotional and core problems more difficult to discuss.


Consultants do not offer a one-size-fits-all solution. Their value comes in learning about each client’s business and goals and tailoring advice and strategy consulting to the specific challenges that the business faces.
This customization means that a consultant’s solutions are much more effective than generic advisory services. For example, a legal consultant can select compliance requirement for which your business is clearly eligible and has to comply with.

Unsure about Hiring a Business / Corporate Consultant?

Despite the benefits of business consulting services, some business owners may be wary of engaging them. Researcher Lance Lindon has complained that consultants “would borrow our watch to tell us what time it is.” That is, some business owners may feel that consultants cannot tell them anything that they don’t already know. Other business owners and managers may reject consultants out of a discomfort with sharing the business’s problems with an outsider.

However, both concerns can be alleviated by choosing the right consultant for your business, one whose expertise will make a real difference to your firm’s growth.

Choosing the Right Consultant:

Select a consultant with a proven record of results. You might speak to other business owners and managers in your circle and see if you can get a recommendation.
You can also dig into the backgrounds of potential consultants through their websites and social media sites. Who have consultants worked for and what is their educational background? How long have they been in business? Such information will help ensure that your chosen consultant is a qualified expert who will provide concrete results.

As well, in choosing your consultant, remember that the best consultants meet both the technical and psychological needs of their clients.

The Journal of International Management Studies identifies the following additional key soft skills for consultants:

  • Capacity to cognitively collect, synthesize, and analyze information about a business.<
  • Empathy for the client’s situation.
  • Discretion about the client’s operations.
  • Adaptation to the client’s readiness for change and available resources.
  • Ability to “read” the client’s environment and fit in.

Consultants should understand your motives for engaging them and should approach the consulting work as a partnership. Development of this partnership can be the key to a business owner saving time and money and reducing stress while positioning the company for longevity and success.

Acceptance of Deposit by Companies

Every Company in India need to comply with the Companies Act, 2013 (hereinafter called “the Act”) to do any activity, whether it is to Appoint a Director or to fulfil the need of Capital, in the same scenario whenever a Company need to raise Deposits the Company need to Comply with the Chapter V Acceptance of Deposit by Companies containing Section 73 to 76A read with The Companies (Acceptance of Deposit) Rules, 2014 (hereinafter called “ Rules”).

As we all know the Act had giving more powers to Rules framed thereunder and its not just to amend the law in the first place but to counter the issues faced in the Corporate world by the professionals like us, there are many definitions and procedures defined under Rules and so in our concern Topic, the Conditions, procedures, Definitions are defined under the rules farmed.

Definition of Deposit

The definition of Deposit is given under the Rules framed and it is an inclusive definition i.e., any receipt of money taken by the Company is considered as Deposit if it does not fall into the List of Excluded transactions provided to us.

Now, let us read the definition provided in the Rule 2(1)(c) define deposits as-

“deposit” includes any receipt of money by way of deposit or loan or in any other form, by a company, but does not include –

  1. any amount received from the Central Government or a State Government, or any amount received from any other source whose repayment is guaranteed by the Central Government or a State Government, or any amount received from a local authority, or any amount received from a statutory authority constituted under an Act of Parliament or a State Legislature,
  2. any amount received from foreign Governments, foreign or international banks, multilateral financial institutions (including, but not limited to, International Finance Corporation, Asian Development Bank, Commonwealth Development Corporation and International Bank for Industrial and Financial Reconstruction), foreign Governments owned development financial institutions, foreign export credit agencies, foreign collaborators, foreign bodies corporate and foreign citizens, foreign authorities or persons resident outside India subject to the provisions of Foreign Exchange Management Act, 1999 (42 of 1999) and rules and regulations made there under,
  3. any amount received as a loan or facility from any banking company or from the State Bank of India or any of its subsidiary banks or from a banking institution notified by the Central Government under section 51 of the Banking Regulation Act, 1949 (10 of 1949), or a corresponding new bank as defined in clause (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or in clause (b) of section (2) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980) , or from a co-operative bank as defined in clause (b-ii) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934),
  4. any amount received as a loan or financial assistance from Public Financial Institutions notified by the Central Government in this behalf in consultation with the Reserve Bank of India or any regional financial institutions or Insurance Companies or Scheduled Banks as defined in the Reserve Bank of India Act, 1934 (2 of 1934),
  5. any amount received against issue of commercial paper or any other instruments issued in accordance with the guidelines or notification issued by the Reserve Bank of India,
  6. any amount received by a company from any other company,
  7. any amount received and held pursuant to an offer made in accordance with the provisions of the Act towards subscription to any securities, including share application money or advance towards allotment of securities pending allotment, so long as such amount is appropriated only against the amount due on allotment of the securities applied for.
    Explanation – For the purposes of this sub-clause, it is hereby clarified that –

    1. Without prejudice to any other liability or action, if the securities for which application money or advance for such securities was received cannot be allotted within sixty days from the date of receipt of the application money or advance for such securities and such application money or advance is not refunded to the subscribers within fifteen days from the date of completion of sixty days, such amount shall be treated as a deposit under these rules.
      Provided that unless otherwise required under the Act, 1956 (l of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or rules or regulations made thereunder to allot any share, stock, bond, or debenture within a specified period, if a company receives any amount by way of subscriptions to any shares, stock, bonds or debentures before the lst April,2014 and disclosed in the balance sheet for the financial year ending on or before the 3lst March,2014 against which the allotment is pending on the 3lst March,2015, the company shall, by the lst June 2015, either return such amounts to the persons from whom these were received or allot shares, stock, bonds or debentures or comply with these rules
    2. any adjustment of the amount for any other purpose shall not be treated as refund.
  8. any amount received from a person who, at the time of the receipt of the amount, was a director of the company or a relative of the director of the Private company, Provided that the director of the company or relative of the director of the private company, as the case may be, from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others and the company shall disclose the details of money so accepted in the Board’s report;
  9. any amount raised by the issue of bonds or debentures secured by a first charge or a charge ranking pari passu with the first charge on any assets referred to in Schedule III of the Act excluding intangible assets of the company or bonds or debentures compulsorily convertible into shares of the company within ten years,
    Provided that if such bonds or debentures are secured by the charge of any assets referred to in Schedule III of the Act, excluding intangible assets, the amount of such bonds or debentures shall not exceed the market value of such assets as assessed by a registered valuer;
  10. any amount raised by issue of non-convertible debenture not constituting a charge on the assets of the company and listed on a recognized stock exchange as per applicable regulations made by Securities and Exchange Board of India,
  11. any amount received from an employee of the company not exceeding his annual salary under a contract of employment with the company in the nature of non-interest bearing security deposit,
  12. any non-interest bearing amount received and held in trust,
  13. any amount received in the course of, or for the purposes of, the business of the company,-
    1. as an advance for the supply of goods or provision of services accounted for in any manner whatsoever provided that such advance is appropriated against supply of goods or provision of services within a period of three hundred and sixty-five days from the date of acceptance of such advance:
      Provided that in case of any advance which is subject matter of any legal proceedings before any court of law, the said time limit of three hundred and sixty-five days shall not apply,
    2. as advance, accounted for in any manner whatsoever, received in connection with consideration for an immovable property under an agreement or arrangement, provided that such advance is adjusted against such property in accordance with the terms of agreement or arrangement,
    3. as security deposit for the performance of the contract for supply of goods or provision of services,
    4. as advance received under long term projects for supply of capital goods except those covered under item (2) above,
    5. as an advance towards consideration for providing future services in the form of a warranty or maintenance contract as per written agreement or arrangement, if the period for providing such services does not exceed the period prevalent as per common business practice or five years, from the date of acceptance of such service whichever is less,
    6. as an advance received and as allowed by any sectoral regulator or in accordance with directions of Central or State Government,
    7. as an advance for subscription towards publication, whether in print or in electronic to be adjusted against receipt of such publications,
      Provided that if the amount received under items (a), (b) and (d) above becomes refundable (with or without interest) due to the reasons that the company accepting the money does not have necessary permission or approval, wherever required, to deal in the goods or properties or services for which the money is taken, then the amount received shall be deemed to be a deposit under these rules:
      Explanation.- For the purposes of this sub-clause the amount Omitted shall be deemed to be deposits on the expiry of fifteen days from the date they become due for refund.
  14. any amount brought in by the promoters of the company by way of unsecured loan in pursuance of the stipulation of any lending financial institution or a bank subject to fulfillment of the following conditions, namely:-
    1. the loan is brought in pursuance of the stipulation imposed by the lending institutions on the promoters to contribute such finance,
    2. the loan is provided by the promoters themselves or by their relatives or by both; and
    3. the exemption under this sub-clause shall be available only till the loans of financial institution or bank are repaid and not thereafter;
  15. any amount accepted by a Nidhi company in accordance with the rules made under section 406 of the Act.
    Explanation.– For the purposes of this clause, any amount.-

    1. received by the company, whether in the form of instalments or otherwise, from a person with promise or offer to give returns, in cash or in kind, on completion of the period specified in the promise or offer, or earlier, accounted for in any manner whatsoever, or
    2. any additional contributions, over and above the amount under item (a) above, made by the company as part of such promise or offer shall be considered as deposits unless specifically excluded under this clause.”

After the scam of Sahara Group Companies, the Ministry had increased the level of pre and post Compliance for the Deposits.

The Deposits under Act can be raised by both Private as well as Public Company, However the procedure and conditions which they need to comply has been provided as under,

Procedure for raising the Deposits from Public

Private Company

As per Section 76, only a Public Company is allowed to accept deposits from public, thus a Private Company is not allowed to accept deposits from general public.

Public Company

Section 76 of the Act has given an opportunity to Eligible Public Companies (defined under Rule 2(1)(d)) to accept Deposits from Public by complying the following provisions,

  • The Company needs to conduct the duly called Board Meeting.
  • E-Form- MGT-14, required to be filed within 30 days from passing the Board Resolution.
  • It can raise deposits upto the limit of 25% of paid- up capital, free reserve and security premium account, together with any other deposit.
  • It needs to pass a Resolution in General Meeting.
  • Tenure of Deposits will be Minimum 6 months and Max- 36 months, however, companies can accept deposits to fulfil the short term requirement of funds, for a minimum period of 3 months and upto the 10% of paid-up, free reserve and security premium.
  • Before issuing a circular or advertisement it needs to appoint a Trustee of Depositors, the Trust deed need to be executed in DPT-2.
  • A circular in Form-DPT-1 including therein a statement showing the financial position of the company, the credit rating obtained, the total number of depositors and the amount due towards deposits in respect of any previous deposits accepted by the company is required to be submit to Registrar within thirty days before the date of issue of the circular.
  • Then the Circular need to be issue to Public.
  • A requirement of certificate is also there that the company has not committed any default in the repayment of deposits accepted either before or after the commencement of this Act or payment of interest on such deposits and where a default had occurred, the company made good the default and a period of five years had lapsed since the date of making good the default.
  • The Intended Depositor need to submit an Application prescribed by the Company.
  • It needs to obtain a rating from recognized Credit Rating Agency at the time of invitation and subsequent on yearly basis.

Post Compliance

  • The Company must provide all the Depositors a receipt of amount received by them within 21 days from the receipt of funds.
  • The Deposits issued to be fully secured within 30 days of such acceptance.
  • Trustee of Deposits need to fulfils his / their duties.
  • If 1/10 Depositors in value or happening of any event, which constitute a default or which in his opinion affect the interest of the depositors, then the Trustee of Depositors is required to call the meeting of Depositors.
  • The Depositors are allowed to appoint nominee.
  • On or before 30th April each year, not less the 20% of the amount of its deposits maturing during the following financial year and kept in a scheduled bank in a separate bank account to be called Deposit Repayment Reserve account.
  • Register of Depositors is also required to be maintained with all the particulars provided under Rule 14.
  • Return of Deposit in E-Form- DPT-3 is required to be filed on or before 30th June of every year.

Note: The Company need to Comply with Regulations and Circulars issued by Security Exchange Board of India.

Procedure for raising the Deposits from Members

Private Company

Section 73(2) of the Act, provides for the Acceptance of Deposits by Private Company from its Members.

Following is the step-wise procedure,

  • Board Meeting- A Notice along with Agenda and all necessary documents is required to be sent to all the members of the Board for the approval of Issuance of General Meeting Notice, finalisation of Form of Application to be submitted by Depositor.
  • General Meeting- A Resolution is required to be passed in the General Meeting.
  • Creation of Security- If the Company is providing secured deposits, then it shall be secured by way of charge on its assets.
  • Trustee and Trust Deed- If the Deposits to be issued are secured in nature then as per the provisions of Rule 7, it must appoint one or more Trustee and execute a Trust Deed in Form DPT-2.

Furthermore, the he need to comply with the duties assigned and also need to conduct the meeting of Depositors on written request of 1/10 Depositors in value or happening of any event, which constitute a default or which in his opinion affect the interest of the depositors.

  • Circulation of Application to Members- As per Rule 10, The Board need to circulate an Application which need to be submitted by Depositors containing a declaration by them that they had not borrowed any money.
  • Limits-
    • 35% of Paid-up Capital, Free Reserve and Security Premium of the Company.
    • 100% Paid-up Capital, Free Reserve and Security Premium if it is not Subsidiary / associate of any other company, borrowing of such company from bank and financial institution or any body corporate is less than twice of its paid-up capital or fifty crore rupees (whichever is less) and not defaulted in the repayment of subsisting deposits.
    • 100% Paid-up Capital, Free Reserve and Security Premium if it is a start-up Company for 7 years of its incorporation

Public Company

Section 73(2) of the Act, 2013, provides that a Public Company can raise deposits from its member, however all the conditions are same as Accepting Deposit from Public but here the Company can issue unsecure deposits which leads to no requirement for appointing Trustee of Depositor and the requirement of taking yearly credit rating is not applicable here.

Moreover, the post- compliances are also same as stated above for the Deposits accepted by Private as well Pubic Company.

Penal Provisions

The Act has came up with many severe penal provisions for the Defaulters.

Section 76A of the Act provides that,

Where the Company accepts or invites or allows or causes any other person to accept or invite on its behalf any deposit in contravention of the manner or the conditions prescribed under section 73 or section 76or rules made thereunder or if a company fails to repay the deposit or part thereof or any interest due thereon within the time specified then,

(a) the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less thanone crore rupees or twice the amount of deposit accepted by the company, whichever is lowerrupees but which may extend to ten crore rupees; and

(b) every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years and with finewhich shall not be less than twenty-five lakh rupees but which may extend to two crore rupees,

Provided that if it is proved that the officer of the company who is in default, has contravened such provisions knowingly or wilfully with the intention to deceive the company or its shareholders or depositors or creditors or tax authorities, he shall be liable for action under section 447.

Moreover, Rule 17 provides a provision for penal interest of 18% p.a. for the overdue period in case of deposits, whether secured or unsecured, matured and claimed but remaining unpaid.

CONCLUSION: The Act has stringent the provisions of Accepting deposits for Company and made may provisions to increase the transparency to Deposit holders.

Presented By

Jitesh Gupta

Practicing Company Secretary

J. K. Gupta & Associates.

Incorporation of company in India

A Step towards the ‘MAKE IN INDIA’ campaign and to improve the ease of doing business in India: Again an attempt has been made from my side to share my experience regarding Incorporation of a Company under Companies Act, 2013 in the form of an Article. This Article contains the procedure for Incorporation of a Company under Companies Act, 2013
Incorporation is the legal process used to form a corporate entity or company. A corporation is a separate legal entity from its owners, with its own rights and obligations


  • A Company comes into existence when a group of people comes together with a view of forming an association to exploit the business opportunities by bringing together human resources, financial resources and managerial resources.
  • Company is a separate & distinct legal entity, which permits a group of people, as stakeholders, to apply to the government for an independent organization to be created, which can then focus on pursuing set objectives, and vested with legal rights such as to sue and be sued in its own name, own property, hire employees or loan and borrow money.
  • As you move into the new house, first, there is a huge process of “getting used to” – which is anyway usual for any such shifting. But the biggest issue is – we get to realize several shortcomings that we did not realize until we shifted. This might include silly things such as an electric point that we missed, or a water outlet that is not working, and so on. In case of the new house, all these are our own follies, or those of the architect – so we go ahead and get them fixed. In case of the new Act – the fixing process is the long trail of amending the law, and in the meantime, you have the 6-months-in-jail staring at you all the time!

A company may be formed for any lawful purpose by:

  1. Seven or more persons, where the company to be formed is to be a public company;
  2. Two or more persons, where the company to be formed is to be a private company; or
  3. One person, where the company to be formed is to be One Person Company, that is to say, a private company.

Minimum number of Directors required in a Company:

The minimum number of directors required to run a company-

  • In the case of Public Company, the minimum number of directors shall be three.
  • In the case of Private Company, the minimum number of directors shall be two.
  • In the case of One Person Company, the minimum number of directors shall be one.
  • And for other types of companies, the minimum number of directors shall be required as may be prescribed by law.

So, now there are 2 ways to incorporate a company

1. Incorporation of a company through a Normal process i.e. INC-7:

  • INC-7 for Incorporation of company with more than seven subscribers
  • DIR-12 For appointment of First  Director
  • INC-22 for address of registered office of the Company

2. Incorporation of a company through a New process i.e. Single Window for incorporation Spice Form INC-32:

  •  INC-32 (formerly INC-29)
  •  INC-33 e-MOA
  •  INC-34 e-AOA

Note: Only one name can be filed under Spice Form INC-32. However, if you need to file more than one name, then you may file INC 1 before SPICE form-32, 6 Names can be filed under INC- 1 form.

Ministry of Corporate Affairs (MCA) has recently introduced SPICE Form INC-32 which is a Simplified Performa for Incorporating Company Electronically through Companies (Incorporation) Fourth Amendment Rules, 2016. SPICE FORM 32 can help in the incorporation of a company with a single application for:

  • Reservation of name
  • Incorporation of a new company and/or
  • Application for allotment of DIN.

(Note: Maximum three Directors are allowed for using this integrated form for filing     application of allotment of DIN while incorporating a company).

 Purpose/ Advantages of the eForm:

Form INC-32 can help in incorporating a company quickly in India by integrating many of the steps into a single process. It has been introduced to do away with the filing of various forms.

  • No need to file a separate form for first director (DIR-12)
  • No need to file a separate form for address of registered office (INC-22)
  • No need to file a separate form for registration of PAN, TAN.

Key Features:

  • DSC of Subscribers needed instead of physical sign.
  • Date of signing MOA & AOA will be the date of affixing DSC.
  • DSC of witness needed. If no DSC, no SPICE procedure.  

Type of Companies that can be incorporated using SPICe Form INC-32:

  • Private Limited Company
  • Public Limited Company
  • One Person Company
  • Section 8 Company
  • Foreign company

(Note: For incorporation of producer companies, unregistered companies and companies being formed with more than 7 subscribers, new version of INC-7 shall be used).

This simplified & integrated process for incorporation of a company is done through:

  • SPICe Form INC-32
  • e- Memorandum of Association in Form No. INC-33 and
  • E-Articles of Association in Form No. INC-34.

Declaration by Professional

The digital signature of a professional (Chartered Accountant/ Company Secretary/ Cost Accountant/ Advocate) is required to file Form INC-32. The professional must declare that all information presented in the form is correct and enter his/her membership number and certificate number.

Mandatory Attachments of spice form

  • Memorandum of association
  • Articles of Association
  • Affidavit and declaration by first subscriber(s) and director(s)
  • Proof of Office address (Conveyance/ Lease deed/Rent Agreement etc. along with rent receipts)
  • Copy of the utility bills (not older than two months)

(The Integrated Form INC-29 has been replaced with SPICe Form INC-32 and as such the Form INC-29 have been completely removed from the MCA portal. The SPICe Form INC-32 is very similar to Form INC-29, which also helps with fast track incorporation of a company in India).


SPICe Form INC-32 is surely an improvised version of e Form-29, while drafting the SPICe form, an accommodation was made to changes that benefited the stakeholders by reducing timelines and multiplicity of several forms in the process of Incorporation. SPICe will become the standard form and format for all incorporation related purposes.

Disclaimer: [This article has been prepared on the basis of information available till date. But professionals are advised to study the laws and compliance thoroughly before carrying out the incorporation process using SPICE system].

We provide service for Registration, Incorporation and Formation of various companies ranging from Private, Public, Section 8 (Non-Profit Organization), and Wholly Owned Subsidiaries of Foreign Companies & LLP.

Important Aspects of Insolvency and Bankruptcy Code

The laws relating to insolvency and bankruptcy in the earlier centuries were framed for penalizing the defaulting debtors. Over the Years there has been improvising change in the global regulatory framework towards corporate insolvency. The principal focus of modern insolvency legislation is not liquidation and elimination of insolvent entities but on the renovation of the financial and organizational structure of debtors experiencing financial distress so as to permit the rehabilitation and continuation of their business. If the rehabilitation is not possible it enables effective winding up of companies in time bound manner through single regulator i.e. “National Company Law Tribunal”.

What is Insolvency and Bankruptcy?

Insolvency a terminology used for a state, when an Individual or business entity is unable to meet its outstanding debts to the Creditors, Investors or Lenders. However, it may also arise when the Liabilities or Debts of a Company supersede the Assets or Income of the Company. Hence in simple terms:

“Insolvency is when an individual, corporation, or other organization cannot meet its financial obligations for paying debts as they are due.”

However, Bankruptcy is not exactly the same as Insolvency. Bankruptcy occurs when a court has determined insolvency, and given legal orders for it to be resolved. It is subject to be a legal scheme under which the Insolvent Debtor seeks relief.

Thereby, “Bankruptcy is the legal process whereby financially distressed firms, individuals, and occasionally governments resolve their debts”.

Evolution of Insolvency and Bankruptcy Code, 2016

The Insolvency and Bankruptcy Code, 2016 (IBC) is the law of India which seeks to consolidate the existing framework by creating a single law for Insolvency and Bankruptcy. The Insolvency and Bankruptcy Code, 2015 was introduced in Lok Sabha in December 2015. It was passed by Lok Sabha on 5th May 2016. The Code received the assent of the President of India on 28th May 2016.

The ecosystem of the Code is dependent on four pillars namely, the Insolvency and Bankruptcy Board of India (IBBI), Information Utilities (IUs), Insolvency Professional Agencies (IPAs) and Insolvency Professionals (IPs).



  • The Insolvency and Bankruptcy Code, 2016 (IBC) replaces a fragmented legal framework and a broken institutional set-up that has been delivering poor outcomes for years for creditors and distressed businesses. Almost all of these are now eligible to be initiated as new cases under the Insolvency and Bankruptcy Code (IBC).
  • The Insolvency and Bankruptcy Code (IBC) offers a time-bound resolution process aimed at maximizing the value of a distressed business. This will benefit not just the creditor and debtor companies, but also the overall economy because capital and productive resources will get redeployed relatively quickly.
  • The main objective of the new law is to promote entrepreneurship, availability of credit and balance the interests of all stakeholders by consolidating and amending the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms, proprietorship firms, personal guarantors and individuals in a time-bound manner and for maximization the value of assets of such persons.


Salient Features of The Code

  1. Adjudicating authority– In relation to Insolvency Resolution and Liquidation for corporate persons including corporate debtors and personal guarantors, thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate person is located. The Matters relating to Insolvency and Bankruptcy of individuals and partnership firms the “Adjudicating Authority” means the Debt Recovery Tribunal constituted under sub-section (1) of section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
  2. Corporate Debtor means a corporate person who owes a debt to any person
  3. Financial and operational creditors- The code makes a distinction between creditors holding financial debt and creditors holding operational debt:
    • Financial Creditors: A person to whom Financial Debt is owed and to whom such debt is legally assigned or transferred. (Financial debt means debt extended against consideration for the time value of money, and includes: Term Loans, working capital loans, non-fund based limits such as bank guarantees, Bonds, notes, debentures, loan stock or any similar instrument, Lease or hire purchase agreements, receivables sold or discounted and any other transaction, having commercial effect of a borrowing or certain type of derivative transactions or liabilities in respect of guarantees or indemnities).
    • Operational Creditor: A person claiming in respect of the provision of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority, and any person to whom such debt has been legally assigned or transferred.
  4. Resolution Professional (RP): For the purpose of Corporate Insolvency Resolution Process, RP means an insolvency professional appointed to conduct insolvency resolution process and includes an Interim Resolution Professional.


Qualifications and experience of Insolvency Professional

An individual shall be eligible for registration if he

(a) has passed the Limited Insolvency Examination within twelve months before the date of his application for enrolment with the insolvency professional agency;

(b) has completed a pre-registration educational course, as may be required by the Board, from an insolvency professional agency after his enrolment as a professional member; and

(c) has:-

(i) Successfully completed the National Insolvency Programme, as may be approved by the Board;

(ii) successfully completed the Graduate Insolvency Programme, as may be approved by the Board;

(iii) fifteen years’ of experience in management, after receiving a Bachelor’s degree from a university established or recognized by law; or

(iv) ten years of experience as one the following–

  1. chartered accountant registered as a member of the Institute of Chartered Accountants of India,
  2. company secretary registered as a member of the Institute of Company Secretaries of India,
  3. cost accountant registered as a member of the Institute of Cost Accountants of India
  4. advocate enrolled with the Bar Council.

However, as per Regulation 3 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, a person shall be eligible to act as a Resolution Professional if:

  • He is eligible to be appointed as an independent director on the board of the corporate debtor under section 149 of the Companies Act, 2013 (18 of 2013), where the corporate debtor is a company;
  • Is not a related party of the corporate debtor; or
  • is not an employee or proprietor or a partner:
    1. of a firm of auditors or company secretaries in practice or cost auditors of the corporate debtor; or
    2. of a legal or a consulting firm, that has or had any transaction with the corporate debtor amounting to ten percent or more of the gross turnover of such firm, in the last three financial years.

Who Can Initiate Corporate Insolvency Resolution Process?

As per Insolvency and Bankruptcy Code 2016, Corporate Insolvency Resolution process can be initiated by

(a) Financial Creditor;

(b) Operational Creditor; and

(c) Corporate Debtor, itself


The Corporate Insolvency Resolution Process

  • A financial creditor, an operational creditor or the corporate debtor, may initiate corporate insolvency resolution process in case a default is committed by the corporate debtor.
  • An application can be made before the National Company Law Tribunal (NCLT) for initiating the resolution process. Operational creditor needs to give demand notice of ten days to the corporate debtor before approaching the NCLT. If the corporate debtor fails to repay dues to the operational creditor or fails to show any existing dispute or arbitration, then the operational creditor can approach NCLT.
  • Within fourteen days of filing such application, the Adjudicating Authority shall accept or reject the application. In case of acceptance of the application, the corporate insolvency process shall commence w.e.f. the date of admission of application.

Corporate insolvency process shall be completed within 180 days from the admission of application to initiate the process by NCLT.

  • Within fourteen days from the date of commencement of the insolvency procedure, the Adjudicating Authority is obligated to appoint an Interim Resolution Professional (IRP) whose term shall not exceed 30 days from the date of appointment. IRP takes control of the debtor’s assets and company’s operations, collect financial information of the debtor from information utilities or from the Corporate Debtor.
  • The Adjudicating Authority, after admission of the application declare a moratorium (a period under which the Corporate Debtor shall be prohibited the institution of any suits or continuation of pending suits or proceedings or transfer, encumber, alienate or dispose off any assets or any legal right or beneficial interest by the Corporate Debtor, or the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor.
  • The Interim Resolution Professional shall make Public Announcement in Form A in One English Newspaper, One Regional Newspaper, on the website of the Insolvency and Bankruptcy Board of India and on the website of the Corporate Debtor within a period not later than three days from the date of his appointment and call for submission of claims by creditors by giving them Fourteen days to submit the proof of claims.
  • The interim resolution professional shall within seven days of his appointment, appoint two registered valuers to determine the liquidation value of the corporate debtor.
  • After receiving claims pursuant to the public announcement, Interim Resolution Professional or the Resolution Professional shall verify every claim within seven days from the last date of receipt of the Claim and constitute the Creditors Committee. All financial creditors shall be part of Creditors Committee and if any Financial Creditor is a related party of the Corporate Debtor, then such financial creditor will not have any right of representation, participation or voting. Operational creditors shall constitute a committee in the absence of any Financial Debt.
  • With the formation of the Committee of Creditor, the Interim Resolution Professional shall convene First Meeting of Committee of Creditors within seven days of filing the report certifying constitution of Committee by giving Seven days’ notice to every participant of the Meeting.
  • At the First Meeting of Committee of Creditors, the members of the Committee along with the Interim Resolution Professional as the Chairperson take all necessary decisions regarding the smooth working of the Corporate Insolvency Process.
  • The Corporate Insolvency Resolution Process in complex cases or situations extend the time beyond 180 days of maximum up to 90 days as provided in the Code.
  • Resolution Professional shall prepare Information Memorandum containing the details of the Corporate Debtor and shall submit the Information Memorandum in electronic form to each member of the committee and any Potential Resolution Applicant.
  • The Resolution Professional shall also issue an invitation, including evaluation matrix, to the Prospective Resolution Applicants in accordance with clause (h) of sub-section (2) of section 25, to submit Resolution Plans at least thirty days before the last date of submission of resolution plans.
  • The Resolution Plan as approved by the Committee of Creditors shall be submitted to the Adjudicating Authority at least fifteen days before the expiry of the maximum period for the completion of the Corporate Insolvency Resolution Process.
  • The members of the Committee of Creditors shall also on approval of the majority decide on the restructuring process that could either be a revised repayment plan for the company, or liquidation of the assets of the company.


Insolvency Resolution and Bankruptcy for Individuals and Partnership Firms

The Provisions of the Insolvency and Bankruptcy Code, 2016 shall also apply to Partnership Firms, Proprietorship Firm, and Individuals. An Individual or Partnership Firm can also initiate the Insolvency Resolution Process where the amount of the default is not less than one thousand rupees.

Provided that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one lakh rupees.


The Insolvency and Bankruptcy Code aims at repayment to Creditors without harming the Corporate Debtor, the Code serves to provide a secure and effective means to recover Debts and to remove or eradicate the Financial Distress of the Corporate Debtor. The Insolvency Professional serves to be an integral part of the Corporate Insolvency Resolution Process, the role of whom changes with the progress of the process. The IPs undertakes various roles such as an Interim Resolution Professional, resolution professional and eventually as a Liquidator depending on the stage of the Corporate Insolvency Resolution Process.

Compounding Of Certain Offences Under Companies Act, 2013

An offence is an Act, of omission or Default, whether committed wilfully or due to negligence, ultimately lead the Company or its officer, to Fine, penalties and/or imprisonment, as specified under the Act.

Compounding of offence is a tool, whereby a person/entity committing default, admitted that he / it has committed an offence and seeks Compounding, by filing an application to the compounding authority.

The compounding authority may compound the offence and direct the defaulting party to deposit compounding fee as decided by it, on case to case basis. Once the said compounding fee is paid, the defaults will no more be treated as offence.

The provisions pertaining to compounding of offences are set forth under Section 441 of Companies Act, 2013.

Section 441 of the Act provides for compounding of following offences:

Offence punishable with fine only, or
Offence punishable with fine or imprisonment or both.

The following offences cannot be compounded under the Act:

Offence punishable with imprisonment only.
Offence punishable with both imprisonment and fine.

Compounding authorities under the Companies Act, 2013:

Under the Act, the compounding authority shall be either “Regional Director” or “National Company Law Tribunal”. Classification in between the Compounding Authority shall be based upon the Quantum of Fine involved in an offence.

An offence shall be compounded by Regional Director, where the maximum amount of fine which may be imposed for such offence does not exceed INR 25 Lacs.
All offences where the maximum amount of fine which may be imposed for such offence exceed INR 25 Lacs, shall be compounded by National Company Law Tribunal.

Procedure for compounding of offences:

An application for compounding of offences has to made in Form GNL-1 to Registrar of Companies under jurisdiction, the Company is registered.
Registrar shall forward the same, together with his comments thereon, to the Regional Director or NCLT depending upon the amount of fine which be imposed.
The Tribunal or the Regional Director or any officer authorised by the Central Government, as the case may be, while dealing with a proposal for the compounding of an offence for a default in compliance with any provision of this Act which requires a company or its officer to file or register with, or deliver or send to, the Registrar any return, account or other document, may direct, by an order, if it or he thinks fit to do so, any officer or other employee of the company to file or register with, or on payment of the fee, and the additional fee, required to be paid under section 403, such return, account or other document within such time as may be specified in the order.

(Any officer or other employee of the company who fails to comply with any order made by the Tribunal or the Regional Director or any officer authorised by the Central Government shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding one lakh rupees, or with both)

The compounded amount shall not exceed the maximum amount of fine.

Barriers to Compounding of offences under Companies Act, 2013

Any offence covered under this Section 441 by any company or its officer shall not be compounded if the investigation against such company has been initiated or is pending under this Act.
No offence committed by a company or its officer within a period of three years from the date on which a similar offence committed by it or him was compounded under this section is again compoundable.
Offences punishable with imprisonment only or with both imprisonment and fine are not allowed to be compounded under this Act.

Benefits of compounding of offences under Companies Act, 2013

Avoiding losing the Dignity and Goodwill of the Company and its office.
Last resort to correct any unintentional Default and Non Compliance
Avoiding heavy Fines and Penalty.
Restarting the Business Activities of the Company.

J. K. Gupta & Associates, (Company Secretaries), having experience of more than 25 years, has till date successfully completed many compounding assignment of its clients. For Assignments of Compounding of offences under companies Act, 2013, Kindly Contact us.

Post Incorporation Compliances

Finally, You are your own Boss! Heartiest congratulations on the new business venture that you have started.

So now it is important to follow risk governance and compliances of standards set by law. The act of compliance plays a vital role in every business whether it is big or small. Every failure to comply with the law brings serious consequences and will fall heavily on your pockets too. So, to avoid any such things we are there for your rescue as we are constantly working towards the highest level of compliance possible. AS IT IS RIGHTLY SAID THAT ‘DILIGENCE IS THE MOTHER OF GOOD LUCK’.

Glance on compliances that need to be done immediately after Incorporating a company:

Holding First Board Meeting

Every Company shall hold its first board meeting within the time limit specified as per Companies Act, 2013 read with Secretarial Standards issued by ICSI. Call meeting in order where board shall discuss and approve for the following resolutions with or without addition:

  • To take note of Certificate of Incorporation (COI)
  • To take on record the printed copy of Memorandum & Articles of Association
  • To fix the financial year of the Company
  • To adopt the common seal of the Company
  • To approve preliminary expenses and ratify the preliminary contracts
  • To approve for making application for taking registration under GST, PAN, TAN and other departments company would be dealing with (if not applied at the time of incorporation under spice+)
  • To open current Account of the Company for the financial dealings of the Company.|

Disclosure of interest by the Director(s)

Every director shall at the first board meeting disclose his concern or interest in any company or body corporate or firm or any other association as per Companies Act,2013 read with Companies (Meetings of Board and its Power) Rules,2014.

Appointment of First Auditor

The Board after considering the qualification, experience and on merit shall appoint first auditors of the Company to hold office till the conclusion of first Annual General Meeting(“AGM”)on such remuneration as fixed by the Board of Directors as per Companies Act,2013 read with Companies (Audit and Auditors) Rules,2014.

Issue of Share Certificates

Every Company shall issue share certificates to all its shareholders who are the subscribers of the Memorandum of the Company within time specified under Companies Act, 2013 read with Companies (Share Capital and Debenture) Rules, 2015.

Payment of Stamp duty

Pursuant to Stamp Act, 1899 stamp duty shall be paid on Share certificates issued to subscribers and to any person to whom share certificate will be issued after allotment within time specified under said provisions. And in case of delayed, non-payment or evasion of payment of stamp duty on the issue of share certificate in case of allotment of share, the company shall be liable for heavy penalty under the ActThe rate of stamp duty at the time of issue of share certificate is 0.005%. And stamp duty shall be calculated on the price at which shares are issued. This is a most vital compliance needs to be done by the company after incorporation and it is the most missed compliance by most of the companies which later result in heavy penalties to the company by stamping department.

Declaration of Commencement of Business

Company having a share capital shall not commence any business or exercise any borrowing power unless a declaration with respect to receipt of payment from subscribers is filed by a director within time specified in Specified form as per the Companies Act,2013 read with Company (Incorporation) Rules, 2014 and the contents of the said form shall be verified by Company Secretary or a Chartered Accountant or Cost Accountant in practice. Provided that in case of a Company pursuing objects requiring registration or approval from any sectoral regulators such as the Reserve Bank of India (RBI), SEBI etc., the registration or approval, as the case may be from such regulators shall also be obtained and attached with the declaration.

Affix Company Name Board

As per the Companies Act, 2013 every Company shall affix or paint its name, address of its registered office outside of every office or place in which its business is carried on.

Holding Subsequent Board Meetings

Holding of minimum four Board meetings in every year and not more than 120 days gap should be there between two meetings. And For OPC, Dormant Company Small Company, and Start-up Private Company to hold minimum two meetings in each half of calendar year with minimum gap of 90 days.


So, this is evident to say that it is a must to comply with the law otherwise, you could leave your Company at risk and can cause damage to all the hard work you did to set up your business. So for every Company once registered, legal compliance is of prime importance and we being Company Secretaries are there to help you to complete those compliances on time. There is a requirement of engaging a professional to make your company Compliance oriented, mere incorporating a company is not enough, there are post incorporation compliances that need to be carried out by every Company and We being COMPANY SECRETARIES help our clients to be compliance oriented and keep on guiding them related to annual compliances required.

Pre-certification of forms & Returns required to be filed with Registrar of companies

Pre certification of forms & Returns required to be filed with Registrar of companies


Pre certification refers to examination and authentication of various forms required to be filled with Authorities governed under various laws.

In other words, Pre certification means to check the form by the Independent Professional before filling it with the Ministry of Corporate Affairs.


As per Notification [F.No.1/5/2014-CL-V] dated 28th April, 2014, notified asThe Ministry of Corporate Affairs issued a notification to amend the Companies (Registration offices and fees) Rules, 2014 wherein certain rules have been inserted to provide for mandatory certification in the case of certain e-Forms required to be filed under the Companies Act, 2013 except for in the case of One Person Company and Small Companies by a Company Secretary, Chartered accountant or Cost Accountant in Whole time practice, namely, INC-21, INC-22, INC-28, PAS-3, SH-7, CHG-1, CHG-4, CHG-9, MGT-14, DIR-6, DIR-12, MR-1, MR-2, MSC-3, MSC-4, MSC-1, GNL-3, ADT-1, NDH-1, NDH-2, NDH-3Certain other e-Forms have also been specified which require pre-certification by a practicing professional.


Pre certification would mean that the Registrar can rely on the certification of the Professional in practice and take the document on record without further examination. Thus, Pre-certification by such Professional in practice ensures that no form or return is filed in the Office of Registrar of Companies which is defective or incomplete.

Companies Act requires filing of various e-forms by the companies which may be event based form or need to file on annual basis. For ensuring greater transparency for better governance, a number of disclosures are to be made while filing e-forms. Hence all the e-forms are required to be authenticated by authorized signatories of the company filing the same, using digital signatures. MCA has entrusted practicing professionals like members of the Institute of Company Secretaries of India (ICSI) with the responsibility of certifying the compliances and ensuring reliability of documents filed by companies with MCA in electronic mode and also ensuring proper due diligence for the same.

The requirement of authentication of documents prescribed under Rule 8 of the Companies (Registration Offices and Fees) Rules, 2014 elaborates on the responsibility of professionals certifying the forms. The professional certifying the form must verify whether all the requirements as per the provisions of the Act and the rules made thereunder have been complied with and all the attachment to the forms have been duly scanned and attached completely and legibly. If professional notices any defect or finds that the information provided in the form is incomplete/defective, he appropriately advices/provides guidance for completion of document/ rectification of defect and makes pre-certification only after completion/rectification of defects;

The introduction of pre-certification by an independent professional in the e-form is aimed at reducing the work load of the Registrar of Companies. Once an e-form has been pre certified by a professional towards its authenticity based on the particulars contained in the books of accounts and records of the company, ROC is entitled to take on record the e-form. If a professional gives a false certificate or omits any material information knowingly, he is liable to punishment under the provisions of the Act as well as liable for professional or other misconduct.

The Act has also prescribed onerous duties and responsibilities for company directors as well as company secretaries. The punishment for violation of provisions of the Act has also been enhanced under the Act. Therefore, to ensure the correctness of information filed becomes very critical.

Persons who are eligible to pre-certify

The e-form should be certified by

  • Company secretary (in whole-time practice) or
  • Cost accountant (in whole-time practice) or
  • Chartered accountant (in whole-time practice) by digitally signing the e-form.


No pre certification is required, if company is:

  • One Person Company;
  • Small Companies


  • To avoid registration delays;
  • To check correctness of documents filed by professionals;
  • To ensures that the particulars stated in the form are in agreement with the books and records of the company;
  • To ensure better governance;
  • To reduce the work load of the Registrar of Companies;
  • Pre-emptive check to ensure that the particulars stated in the form or return are as per the books and records of the company and are true and correct.

Forms and Returns required pre-certification:

While certification of e-form the declaration is given by the certifying professional which is as follow:

“I declare that I have been duly engaged for the purpose of certification of this form. It is hereby certified that I have gone through the provisions of the Companies Act, 2013 and Rules thereunder for the subject matter of this form and matters incidental thereto and I have verified the above particulars (including attachment(s)) from the original/certified records maintained by the Company/applicant which is subject matter of this form and found them to be true, correct and complete and no information material to this form has been suppressed. 

I further certify that: 

  1. The said records have been properly prepared, signed by the required officers of the Company and maintained as per the relevant provisions of the Companies Act, 2013 and were found to be in order; 
  2. All the required attachments have been completely and legibly attached to this form;”

therefore, Pre-certification of forms is, not a routine or mechanical exercise but is a serious and involved work calling for sound application of mind in verifying the averments made in the respective forms after due consideration of the provisions of the Act read with the relevant rules.

Following is the list of some of the Forms and Return which are required pre certification under companies Act, 2013 and other applicable Laws:

Sl No.FormPurpose
1INC-20AApplication for Declaration prior to the commencement of business or exercising borrowing powers
2INC-22Notice of situation or change of situation of registered office
3INC-28Notice of Order of the Court or any other competent authority
4PAS-3Return of Allotment
5SH-7Notice of Registrar of any alteration of share capital
6CHG-1Application for registration of creation, modification of charge (other than those related to debentures)
7CHG-4Particulars for satisfaction of Charge
8CHG-9Application for registration of creation or modification of charge for debentures or rectification of particulars filed in respect of creation or modification of charge for debentures
9MGT-14Filing of Resolutions and agreements to the Registrar
10DIR-6Intimation of change in particulars of Director to be given to the Central Government
11DIR-12Particulars of appointment of Directors and the key managerial personnel and the changes among them
12MR-1Return of appointment of MD/WTD/Manager
13MR-2Form of application to the Central PCMA Government for approval of appointment or reappointment and remuneration or increase in remuneration or waiver for excess or over payment to managing director or whole time director or manager and commission or remuneration to directors.
14MSC-3Return of Dormant Company
15MSC-4Application for seeking status of active company
16MSC-1Application to Registrar for obtaining the status of Dormant Company
17GNL-1Applications made to Registrar of Companies
18GNL-3Details of persons/directors/charged/specified
19ADT-1Information to the Registrar by Company for appointment of Auditor
20NDH-1Return of Statutory Compliance
21NDH-2Application for Not available extension of Time
22NDH-3Half yearly Return
23MGT-7Annual Return
24AOC-4Form for filing financial statement and other documents with the Registrar
25DIR-3 KYCKYC of Director


Penal Provisions: 

A wrong pre-certification leads to the following threat to the company, its authorized person and to the certifying professional.

To the company: 

The provisions of the Companies Act, 2013 provides for the actions/ fine/ penalty to be imposed on the companies in case of the default made by the company/its officers. Further the action may be taken up by central government up to the order of the compulsory winding up of the company

To the authorized representative of the company: 

The provisions of the Companies Act, 2013 provides for the actions/ fine/ penalty to be imposed on the companies in case of the default made by the company/its officers. Further the action may be taken up by central government under section 447,447 and 449 of the companies act, 2013.

To the Certifying professional:

  1. Risk on Reputation: Wrong certifications will not only lead to penal provisions but also will affect the reputation of a Company Secretary’s firm and also in his individual capacity. It may lead to possibility of lose the practice also. Apart from this there is bad rift to ICSI. So, a PCS has to keep this in mind while certifying or attesting the forms.
  1. Under the Company Secretaries Act 1980: The Second Schedule to the Company Secretaries Act, 1980 in clause 2 provides that where a Company Secretary in Practice certifies or submits in his name, or in the name of his firm, a report of an examination of the matters relating to company secretarial practice and related statements unless the examination of such statements has been made by him or by a partner or an employee in his firm or by another Company Secretary in Practice, he shall be deemed to be guilty of professional misconduct.

Further, clauses 5, 6, 7 and 8 provide that where a Company Secretary in Practice while pre certifying any e-Form or document fails to disclose a material fact known to him in his report or statement but the disclosure of which is necessary in making such report or statement, or fails to report a material mis-statement known to him or does not exercise due diligence, or is grossly negligent in the conduct of his professional duties or fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion, he would be deemed to be guilty of professional or other misconduct under the provisions of the Company Secretaries Act, 1980.

In case there is any false statement in any material particular or omission of any material fact in the form certified as correct by a Practicing Company Secretary, he would be liable for disciplinary action for professional or other misconduct under the provisions of the Company Secretaries Act, 1980.

In view of section 21B (3) of the Company Secretaries Act, 1980, in case he is found guilty of professional or other misconduct mentioned in the second schedule to the Company Secretaries Act, 1980, he will be liable for the following actions

(a) Reprimand,

(b) Removal of name from the registrar of members permanently or for such period as may be thought fit by the disciplinary committee,

(c) Fine which may extend to five lakh rupees.

iii. Under the Companies Act 2013: With a view to ensure that the secretary in practice carries out his work with due diligence, the Registrar may carry out scrutiny of Forms on random basis. As per rule 8(9) of the Companies (Registration Officers and Fees) Rules, 2014, where any instance of filing document, application or return etc. containing a false or misleading information or omission of material fact, requiring action under section 448 or section 449 is observed, the person shall be liable under section 448 and 449 of the Act. Section 448 of Companies Act, 2013 deals with penalty for false statements. The section provide that if in any return, report, certificate, financial statement, prospectus, statement or other document required by, or for the purposes of any of the provisions of this Act or the rules made thereunder, any person makes a statement, – (a) which is false in any material particulars, knowing it to be false; or (b) which omits any material fact, knowing it to be material, he shall be liable under section 447.

Section 447 deals with punishment for fraud which provides that any person who is found to be guilty of fraud, shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud. In case, the fraud in question involves public interest, the term of imprisonment shall not be less than three years.

In view of this, a company secretary in practice will be attracting the penal provisions of section 448, for any false statement in any material particular or omission of any material fact in the e forms. However, a person will be penalized under section 448 in case he makes a statement, which is false in any material particular, knowing it to be false, or which omits any material fact knowing it to be material.

It is pertinent to note that section 448 applies to “any person”. In view of this, a company secretary in practice, who is an independent professional, will be attracting the penalty, as prescribed in section 448 in case his observations in the secretarial audit report turns out to be false or he omits any material fact, knowing it to be false or material.

iv. Action by Regulator Further as per rule 8(10) The Companies (Registration Offices and Fees) Rules, 2014, without prejudice to any other liability, in the case of certification of any form, document, application or return under the act containing wrong or false or misleading information or omission of material fact or attachments by the person, the Digital Signature Certificate shall be de-activated by the central government till a final decision is taken in this regard. As per MCA circular no. 10/2014 dated 07.05.2014, where any instance of filing of documents, application or return or form etc., containing false or misleading information or omission of material fact or incomplete information is observed, the Regional Director or the Registrar as the case may be, shall conduct a quick inquiry against the professionals who certified the form and signatory thereof including an officer in default who appears prima facie responsible for submitting false or misleading or incorrect information pursuant to requirement of above said Rules, 15 days’ notice may be given for the purpose.

The Regional Director or the Registrar will submit his/her report in respect of the inquiry initiated, irrespective of the outcome, to the E-Governance cell of the Ministry within 15 days of the expiry of period given for submission of an explanation with recommendation in initiating action under section 447 and 448 of the Act wherever applicable and also regarding referral of the matter to the concerned professional Institute for initiating disciplinary proceedings. The

E-Governance cell of the Ministry shall process each case so referred and issue necessary instructions to the Regional Director/ Registrar of Companies for initiating action under section 448 and 449 of the Act wherever prima facie cases have been made out. The E-Governance cell will thereafter refer such cases to the concerned Institute for conducting disciplinary proceedings against the errant member as well as debar the concerned professional from filing any document on the MCA portal in future.

Preparation before Certification:

Professional in Practice before undertaking the work relating to Pre-certification should thoroughly read the requirements of the provisions of the Companies Act 2013 and Rules made thereunder and familiarize himself with the actual practices that are followed in this regard. He should particularly ensure the following:

  • Ensure that letter of engagement/Board Resolution authorizing the professional for the assignment by the company to be obtained. (Where the statutory requirement is there for the board resolution or general meeting resolution then a copy of the extract of such resolution shall be obtained by PCS. Wherever the instance is possible it is recommended to record such appointment in the Board meetings.)
  • Maintain a physical/scanned of all documents verified (subject to confidentiality requirement)
  • Ensure that all relevant documents and attachments are legible & visible.
  • Verification of the documents from the original records of the company.
  • Correctness of the records and the material departure from the facts.
  • The form is signed by the authorized person of the company.
  • Before certification of any form, the person should be aware about the relevant provisions under the Act and Rules made thereunder, Process to be followed by the company, approval if any required etc.

A Brief Introduction to the Liquidation Process under the IBC, 2016

Liquidation is the Last stage of any company’s Life, once the Liquidation Process of a Company is Completed, then such company ceased to exist. In India the Liquidation Process is governed by the “Insolvency and Bankruptcy Code, 2016, and Regulation made thereunder, i.e. Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. The Prime duty of the Liquidator is to maximise the value of the stakeholder(s). The liquidation Process, shall be completed within one year form its commencement date.

Following is table explaining the brief flow of liquidation Process:

Initiation of Liquidation Process:Where the Adjudicating Authority, -before the expiry of the insolvency resolution process period, does not receive a resolution plan or(b) rejects the resolution plan under section 31 for the non-compliance of the requirements specified therein,Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors to liquidate the corporate debtor, Where the resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clauses (i), (ii), (iii) of clause (b) sub-section (1).In occurrence of any of the above circumstance, the Adjudicating Authority passes liquidation order.
Appointment of liquidatorEligibility for appointment as liquidator:An insolvency professional shall be eligible to be appointed as a liquidator if he, and every partner or director of the insolvency professional entity of which he is a partner or director, is independent of the corporate debtor.Where the Adjudicating Authority passes an order for liquidation of the corporate debtor, the resolution professional appointed for the corporate insolvency resolution process shall, subject to submission of his written consent to the Adjudicatory Authority shall act as the liquidator for the purposes of liquidation unless replaced by the Adjudicating Authority.Replacement of the Resolution ProfessionalThe Adjudicating Authority shall by order replace the resolution professional, ifthe resolution plan submitted by the resolution professional was rejected for failure to meet the requirements mentioned in sub-section (2) of section 30; or the Board recommends the replacement of a resolution professional to the Adjudicating Authority for reasons to be recorded, orThe resolution professional fails to submit written consent, In any of the abovementioned events the Adjudicating Authority may direct the Board to propose name of another insolvency professional, to be appointed as a liquidator.
Public Announcement by LiquidatorThe liquidator shall make a public announcement in Form B of Schedule II within five days from his appointment, to call upon stakeholders to submit their claims or update their claims submitted during the corporate insolvency resolution process, as on the liquidation commencement date and provide the last date for submission or updation of claims, which shall be thirty days from the liquidation commencement date.]The announcement shall be published-(a) in one English and one regional language newspaper at the location of the registered office and principal office, if any, of the corporate debtor and any other location where in the opinion of the liquidator, the corporate debtor conducts material business operations;(b) on the website, if any, of the corporate debtor; and(c) on the website, if any, designated by the Board for this purpose.
Submission of claim.A person, who claims to be a stakeholder, shall submit its claim, or update its claim submitted during the corporate insolvency resolution process, including interest, if any, on or before the last date mentioned in the public announcement, in the following forms.01.Claims by operational creditors.Form C02.Claims by financial creditors.Form D03.Claims by workmen and employeesForm E04.Claims by other stakeholdersForm G
Verification of claimsThe liquidator shall verify the claims submitted within thirty days from the last date for receipt of claims and may either admit or reject the claim, in whole or in part, as the case may be.  The liquidator may call for such other evidence or clarification as he deems fit from a claimant for substantiating the whole or part of its claim.
List of stakeholdersThe liquidator shall prepare a list of stakeholders, category-wise, on the basis of proofs of claims submitted and accepted under these Regulations, with-(a) the amounts of claim admitted, if applicable,(b) the extent to which the debts or dues are secured or unsecured, if applicable,(c) the details of the stakeholders, and(d) the proofs admitted or rejected in part, and the proofs wholly rejected.The liquidator shall file the list of stakeholders with the Adjudicating Authority within forty-five days from the last date for receipt of claims, and the filing of the list shall be announced to the public in the manner specified in Regulation 12(3).
Stakeholders’ consultation committee and its meeting.The liquidator shall constitute a consultation committee within sixty days from the liquidation commencement date, based on the list of stakeholders to advise him on the matters relating to sale of Assets the Corporate Debtor.
The liquidator shall convene a meeting of the consultation committee when he considers it necessary and shall convene a meeting of the consultation committee when a request is received from at least fifty-one percent of representatives in the consultation committee
REALISATION OF ASSETS[Sale of Assets].The liquidator may sell- (a) an asset on a standalone basis; (b) the assets in a slump sale;               (c) a set of assets collectively; (d) the assets in parcels; (e) the corporate debtor as a going concern; or (f) the business(s) of the corporate debtor as a going concern:Provided that where an asset is subject to security interest, it shall not be sold under any of the clauses (a) to (f) unless the security interest therein has been relinquished to the liquidation estate.]
Mode of sale.The liquidator shall ordinarily sell the assets of the corporate debtor through an auction in the manner specified in Schedule I.
The liquidator may sell the assets of the corporate debtor by means of private sale in the manner specified in Schedule I when-(a) the asset is perishable;(b) the asset is likely to deteriorate in value significantly if not sold immediately;(c) the asset is sold at a price higher than the reserve price of a failed auction; or(d) the prior permission of the Adjudicating Authority has been obtained for such sale:
Distribution of unsold assets.The liquidator may, with the permission of the Adjudicating Authority, distribute amongst the stakeholders, an asset that cannot be readily or advantageously sold due to its peculiar nature or other special circumstances.
The application seeking permission of the Adjudicating Authority shall-identify the asset;provide a value of the asset;detail the efforts made to sell the asset, if any; andprovide reasons for such distribution
Liquidator to realize uncalled capital or unpaid capital contribution.The liquidator shall realize any amount due from any contributory to the corporate debtor.No distribution shall be made to a contributory, unless he makes his contribution to the uncalled or unpaid capital as required in the constitutional documents of the corporatedebtor.
Proceeds of Liquidation and Distribution of ProceedsAll money to be paid in to bank account.
The liquidator shall open a bank account in the name of the corporate debtor followed by the words ‘in liquidation’, in a scheduled bank, for the receipt of all moneys due to the corporate debtor.
DistributionSubject to the provisions of section 53, the liquidator shall not commence distribution before the list of stakeholders and the asset memorandum has been filed with the Adjudicating Authority.(2) The liquidator shall distribute the proceeds from realization within 22[ninety days] from the receipt of the amount to the stakeholders.(3) The insolvency resolution process costs, if any, and the liquidation costs shall be deducted before such distribution is made.
Completion of liquidation.The liquidator shall liquidate the corporate debtor within a period of one year from the liquidation commencement date.
Provided that where the sale is attempted under sub- Regulation (1) of regulation 32A, the liquidation process may take an additional period up to ninety days.]If the liquidator fails to liquidate the corporate debtor within one year, he shall make an application to the Adjudicating Authority to continue such liquidation, along with a report explaining why the liquidation has not been completed and specifying the additional time that shall be required for liquidation.
Final report prior to dissolutionWhen the corporate debtor is liquidated, the liquidator shall make an account of the liquidation, showing how it has been conducted and how the corporate debtor’s assets have been liquidated.If the liquidation cost exceeds the estimated liquidation cost provided in the Preliminary Report, the liquidator shall explain the reasons for the same.The liquidator shall submit an application along with the final report and the compliance certificate in form H to the Adjudicating Authority for –(a) closure of the liquidation process of the corporate debtor where the corporate debtor is sold as a going concern; or(b) for the dissolution of the corporate debtor, in cases not covered under clause (a).]
Post DissolutionAfter filing the Dissolution Application, Once the hon’ble tribunal passed the Dissolution order of the CD, a copy of the order shall be forwarded to authority with which the Corporate Debtor is registered within 7 days, from the receipt of the order.

Apart of the aforesaid Liquidation Process, the Liquidator is also required prepare and file several Reports, Applications and Documents, from time to time, into the spam of Liquidation.

Following the table explaining the brief Reporting requirement of the Liquidator and their respective Timeline:

Name of the ReportContentTimeline
Preliminary reportThe liquidator shall submit a Preliminary Report to the Adjudicating Authority date, having the following details-(a) the capital structure of the corporate debtor;(b) the estimates of its assets and liabilities as on the liquidation commencement datebased on the books of the corporate debtor:within seventy five days from the liquidation commencement
Asset memorandum;The asset memorandum shall provide the following details in respect of the assets which are intended to be realized by way of sale-(a)value of the asset, (b) intended manner of sale (c) expected amount of realization from sale; and(d) any other information that may be relevant for the sale of the assetwithin seventy five days from the liquidation commencement
Progress report(s);A Progress Report shall provide all information relevant to liquidation for the quarter,including-(a) appointment, tenure of appointment and cessation of appointment of professionals;(b) a statement indicating progress in liquidation, including (i) settlement of list of stakeholders,(ii) details of any property that remain to be sold and realized,(iii) distribution made to the stakeholders, and(iv) distribution of unsold property made to the stakeholders;(a) first Progress Report within fifteen days after the end of the quarter in whichhe is appointed;(b) subsequent Progress Report(s) within fifteen days after the end of every quarterduring which he acts as liquidator; and
Sale report(s);Assets Sale report consist the following:the realized value;cost of realization, if any;the manner and mode of sale;if the value realized is less than the value in the asset memorandum, the reasons for the same;the person to whom the sale is made; andany other details of the sale.On sale of an asset
Final report prior to dissolutionaccount of the liquidation, showing how it has been conducted and how the corporate debtor’s assetshave been liquidatedAlong with the Dissolution Application on the Completion of the Liquidation.

The liquidator shall preserve a physical as well as an electronic copy of the reports and minutes referred for eight years after the dissolution of the corporate debtor.

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