1. Meaning Of Charge
The term "charge" has not been defined under the Companies Act, 1956. Section 124 states that the expression "Charge" includes a mortgage. The term "charge" is defined in section 100 of the TOPA Act, 1882. A charge includes lien and also equitable charge whether created or evidenced by an instrument in writing or by deposit of title deeds or by a mortgage deed.
Charge is created on assets of the company and not on credit facilities sanctioned by a lender
2. Types Of Charges
A charge may be 'fixed' or 'floating'.
- Fixed charge: A charge is fixed or specific when it is made specifically to cover assets which are ascertained and definite or are capable of being ascertained and defined, at the time of creating charge e.g., land, building. A fixed charge, therefore, is against security of certain specific property, and the company loses its right to dispose of that property as unencumbered.
- Floating charge: A floating charge, as a type of security, is peculiar to companies as borrowers. A floating charge is not attached to any definite property, but covers property of a fluctuating type e.g., stock-in-trade. It is a charge on a class of assets present and future which, in the ordinary course of business, keeps changing from time to time and leaves the company free to deal with the property as it sees fit until the holders of charge take steps to enforce their security.
3. Kinds Of Charge Which Require Registration
As per section 125(4), the following kinds of charges are mandatory and these charges need to be registered with the Registrar of Companies:
- A charge for the purpose of securing issue of debentures;
- A charge on uncalled share capital of the company;
- A charge on immovable property, wherever situated, or any interest therein;
- A charge on any book debts;
- A charge, not being a pledge, on any movable property;
- A floating charge on the undertaking or any property of the company including stock in-trade;
- A charge on calls made but not paid;
- A charge on a ship or any share in a ship;
- A charge on goodwill, patent or on a licence under a patent or on a trademark or on a copyright or licence under a copyright.
4. Creation Of Charge (Section 125)
If a charge created by the company falls within any of the classes as specified in section 125 (4), its particulars shall be filed with the Registrar within 30 days of creation of charge. If particulars of charge could not be filed within 30 days, the ROC has power to extend the said period by 30 more days subject to payment of an additional filing fee by the Company.
Particulars of creation of charge shall be filed in e-form No. 8, along with the instrument creating charge.
The Registrar of Companies (ROC) will verify the particulars filed under e-form No. 8 and thereafter shall register charge and issue a certificate for the creation of charge which shall be conclusive evidence of compliance with the requirements as to registration of the charge.
5. Modification Of Charge (Section 135)
Any change in terms / conditions / extent of operation of any charge already registered tantamount to modification under Companies Act, 1956, such as :
- Change in rate of interest (other than bank rate), repayment period or any other material term of loan.
- Further charge for the same loan by way of additional security.
- Increase in limit.
- Change in nature of security in respect of charge already created.
Particulars of modification of charge shall be filed in e-form No. 8 with ROC within 30 days (or else within 60 days with an additional fee). The said forms will include the instrument modifying the original charge.
The ROC will register the same and issue certificate for modification of charge which shall be conclusive evidence of compliance with the requirements as to registration of the charge.
6. Satisfaction Of Charge (Section 138)
A company is required to give intimation to ROC of the payment of satisfaction in full of any charge created under section 125 of the Act and registered in the records of the ROC.
Intimation shall be given to ROC within 30 days of satisfaction of the charge by filing e-form No. 17, together with a letter or certificate given by the charge-holder confirming that the charge has been satisfied in full.
The ROC will register e-form No. 17 regarding satisfaction of charge and issue certificate for satisfaction of charge which shall be conclusive evidence of satisfaction of the charge.
7. Register Of Charges Maintained By A Company (Section143)
Section 143 provides for the Register of Charges to be maintained by a company at its registered office. Section 143(1) says that every company shall keep at its registered office a Register of Charges and enter therein all particulars of charges specifically affecting property of the company and all floating charges on the undertaking or on any property of the company.
The following particulars shall be recorded in the Register of Charges, to be maintained by the company in respect of each and every charge:
- a short description of the property charged;
- date of creation/modification/satisfaction of charge;.
- amount of the charge; and
- except in the case of securities to bearer, the names of the persons entitled to the charge.
8. Rectification By Company Law Board (CLB) Of Register Of Charges: (Section 141)
The Power of CLB is exercisable in the following events:
- If the omission to file the particulars of charge or delay or misstatement was accidental;
- If it was due to inadvertence;
- If it was due to some other sufficient cause;
- If it was not of a nature to prejudice the position of creditors or shareholders of the company'
- If on any ground it is just and equitable to grant relief
9. What is franchising?
Franchising is a business strategy to get and retain customers. It is a marketing system to create an image in the minds of current and future customers on the usefulness of a company's products and services to them. It is a method for distributing products and services that satisfy customer needs. In short, franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with a common goal to dominate markets, i.e. to get and retain more customers than their competitors.
10. How to set up a company in India?
The promoters of a company may be individual entrepreneurs or a body corporate engaged in efforts to incorporate a company. They have the power to define the objectives of the company and to decide on various matters relating to the company proposed to be incorporated. It is dependent upon the purposes for which the company is to be incorporated, the proposed scale of operations, the capital involved, etc. The promoters can select the type of company they wish viz. private company, public company, non-profit making company, etc.
11. PAN Card Registration
Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued, in the form of a laminated card, by an Assessing Officer of the Income Tax Department. A typical PAN is AFRPP1595D.
12. Who can invest in India?
A non-resident entity (other than a citizen of Pakistan or an entity incorporated in Pakistan) can invest in India, subject to the FDI Policy.
13. What is the description of various types of organizations?
- A company can be incorporated under the Companies Act, 1956, as a Joint Venture (JV) or a Wholly-Owned Subsidiary (WOS)
- Or the company can set up a Liaison Office (LO) / Representative Office (RO) or a Project Office (PO) or a Branch Office (BO) of the foreign company which can undertake activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office or Other Place of Business) Regulations, 2000)
14. What types of routes are authorized for FDI in an Indian company?
Two routes, permitted under which an Indian company may receive FDI, are:
- Automatic Route: FDI up to 100% is allowed under this route in all activities/sectors except where the provisions of the consolidated FDI Policy are attracted. FDI, to the extent permitted under this route, does not require any prior approval either of the Government or the RBI.
- Government Route: FDI, which is not covered under the above route, requires prior Government approval. The FDI is considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs and the Ministry of Finance. An application has to be made on Form FC-IL under this route.
15. What is the procedure to be followed after receiving of FDI in either of the routes?
On receipt of share application money:
- Within 30 days of receipt of share application money from the non-resident investor, the Indian company is required to report to the RBI (through authorized dealer bank), the Advance Reporting Form, containing the following details:
- Name and address of the foreign investor/s
- Date of receipt of funds and the Rupee equivalent
- Name and address of the authorized dealer through whom the funds have been received
- Details of the Government approval, if any
- KYC report on the non-resident investor from the overseas bank remitting the amount of consideration.
- Foreign Inward Remittance Certificate
On receipt of intimation, the RBI allots a Unique Identification Number which is to be used in all further correspondence with RBI. The importance of the remittance receipt date is that the Indian company has to issue shares within 180 days of the receipt of remittance.
Upon issue of shares to non-resident investors:
Within 30 days from the date of issue of shares, a report on Form FC-GPR- PART A, together with the following prescribed documents, should be filed with the Regional Office concerned of the RBI:
- A certificate from the Company Secretary of the Indian Company accepting investment from persons resident outside India, certifying that
Certificate from Statutory Auditors/ SEBI registered Category - I Merchant Banker /Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.
Copy of Memorandum of Association & Article of Association
Copy of intimation to RBI
- the company has complied with the procedure for the issue of shares as laid down under the FDI scheme as indicated in the Notification No. FEMA 20/2000-RB, dated 3rd May, 2000, as amended from time to time.
- the investment is within the sectoral cap / statutory ceiling permissible under the Automatic Route of the Reserve Bank and it fulfils all the conditions laid down for investments under the Automatic Route.
16. When and in what Form is the Annual return required to be filed to RBI?
An Indian company is required to file an Annual Return on Form FC-GPR Part B with the RBI. The Annual Return is to be submitted by July 15th of every year. The Return must contain details with respect to all investments by way of direct/portfolio investments/re-invested earnings/other capital in the Indian company made during the previous years.
17. What are the types of Instruments that can be issued by Indian companies to foreigners?
Indian companies can issue equity shares, fully, compulsorily and mandatorily convertible debentures and fully, compulsorily and mandatorily convertible preference shares, subject to pricing guidelines/valuation norms prescribed under FEMA Regulations. Other types of Preference shares/Debentures i.e. non-convertible, optionally convertible or partially-convertible for issue of which funds have been received on or after May 1, 2007 are considered as debt. Accordingly, all norms applicable for ECBs, relating to eligible borrowers, recognized lenders, amount and maturity, end-use stipulations etc., will apply.
18. Which are sectors prohibited for foreign investment in India
FDI is prohibited in the following activities/sectors:
- Retail Trading (except single-brand product retailing)
- Lottery Business, including Government /private lottery, online lotteries, etc.
- Gambling and Betting, including casinos etc.
- Chit Fund Business
- Nidhi Company
- Trading in Transferable Development Rights (TDRs)
- Retail Trading (except single-brand product retailing)
- Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.
- Activities / sectors not opened to private sector investment, including Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems).Besides foreign investment in any form, collaboration of foreign technology in any form, including licensing for franchise, trademark, brand name, management contract, is also completely prohibited for the Lottery Business and Gambling and Betting activities.
19. What are the types of Instruments that can be issued by Indian companies to foreigners
All foreign investments are freely repatriable (net of applicable taxes) except in cases where:
- the foreign investment is in a sector such as Construction and Development Projects and Defence wherein the foreign investment is subject to a lock-in-period.NRIs choose to invest specifically under non-repatriable schemes.
Dividends (net of applicable taxes) declared on foreign investments can be remitted freely through an Authorised Dealer bank.
20. Can types of Instruments be issued by Indian companies to foreigners?
As per the regulations/guidelines issued by the RBI/Government of India, investment can be made by foreign investors in shares issued by an unlisted Indian company.
21. Types of Instruments that can be issued by Indian companies to foreigners?
A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO), resident outside India, can vest by way of contribution to the capital of a firm or a proprietary concern in India on non-repatriation basis, provided:
- the amount is invested by inward remittance or out of NRE/FCNR(B)/NRO accounts maintained by Authorized Dealers / Authorized banks.
- the firm or proprietary concern is not engaged in any agricultural/plantation or real estate business or print media sector.
- The amount invested shall not be eligible for repatriation outside India. Investments with repatriation benefits: NRIs/PIO may seek prior permission of the Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation benefits. The application will be decided in consultation with the Government of India.