Types of Business Entities in India

Types of Companies in India - Types of Corporate Entities in India - Types of Legal Entities in India - Options for Foreign Investors Doing Business in India
In India, the following types of business entities are available:

Foreign Investors Establishing Business in India

Foreign investors planning to incorporate in India are required to seek governmental approval before investing in India. Some approvals are automatic, - RBI Approvals - though application is required for those approvals. Special Permission - FIPB Approvals - could be obtained to invest over and above the regular percentage allowed. See our FDI in India Sector wise Guide for more information on various conditions of investing in India. Also see Withholding Tax Rates For Foreign Companies Doing Business In India Under The Tax Treaties & the Joint Ventures in India

y y y y y y y y y y y

Private Limited Company Public Limited Company Unlimited Company Limited Liability Partnership (LLP) Partnership Sole Proprietorship Liaison Office/Representative Office Project Office Branch Office Joint Venture Company Subsidiary Company

Both the Indian promoters and the foreign promoters can form the following business entities: Private Limited Company, Public Limited Company, Limited Liability Partnership, Unlimited Company, Partnership and Sole Proprietorship. The foreign companies also have the _____****_____ options of forming the following type of business entities: Liaison Office/Representative Office, Project Office, Branch Contact us for incorporating in Office, and Joint Venture Company. It must be noted that India & setting up business in a Joint Venture Company is not a separate type of legal entity; it could be either a Private Limited Company, a India Public Limited Company, or an Unlimited Company. Similarly a wholly owned Subsidiary of a foreign company in India could be either a Private Limited Company, a Public Limited Company, an Unlimited Company, or a Branch Office. For a foreign Investor in India it is very important to choose a right kind of business or corporate entity which best suits its purposes and takes care of liability issues and tax planning issues. Foreign Companies planning to do business in India should pay special attention to Entry Strategies in India for Foreign Investors and corporate structuring to save taxes to the best extent allowed by laws and international tax treaties. It is also mandatory for foreign investors or foreign shareholders, both individuals and corporate shareholders, to seek Government Approvals for Investing in India In some special cases Foreign Investment Promotion Board, FIPB Approval for Foreign Investment in India is required. In other cases Reserve Bank of India, RBI Approvals for Foreign Investment in India is required. The sectors where RBI Approval for foreign investors is available under automatic route can be found at FDI in India Sector wise Guide.

There are various steps required to establish a business in India, before and after incorporation, as mentioned hereinafter. See also the Procedure for Formation of Company in India. A Company in India can have foreign directors provided some conditions are fulfilled. The directors of an Indian company, both Indian and foreigner directors, are required to obtain Director Identification Number - DIN and Digital Signature Certificate - DSC There are some restrictions regarding issuing sweat equity for a company incorporated in India.

Also see Annual Corporate Filings in India for corporate maintenance requirements in India.

Private Limited Company

A private company is a company which has the following characteristics:

y y y

shareholders right to transfer shares is restricted; the number of shareholders is limited to fifty; and an invitation to the public to subscribe to any shares or debentures is prohibited.

A Private Limited Company is the most popular form of business entity used for Foreign Investors in India, _____****_____ including USA investors in India. It takes some time to incorporate in India as there are various steps required in forming a private limited company in India. There are various steps required to establish a business in India, before and after incorporation, as mentioned hereinafter.

is mandatory for foreign investors to obtain governmental approval for incorporating in India or forming a joint venture in India. In some sectors certain restrictions apply.

IT

Public Limited Company

A public company is defined as a company which is not a private company. The following conditions apply only to a public company:

y y

y y

It must have at least seven shareholders. A public company is not authorized to start business upon the grant of the certificate of incorporation. In order to be eligible to commence business as a corporation, it must obtain another document called "trading certificate". It must publish a prospectus or file a statement in lieu of a prospectus before it can start transacting business. A public company is required to have at least three directors. It must hold statutory meetings and obtain government approval for the appointment of the management.

Limited Liability Partnership now available in India India

A law to allow "Limited Liability Partnership" (LLP) in India has been enacted by the Parliament of India recently. (Limited Liability Partnership (LLP) Act of 2008) LLP is an alternative corporate business entity that provides the benefits of limited liability of a company but allows its members the flexibility of organizing their internal management on the basis of a mutually-arrived agreement, as is the case in a partnership firm. This format would be quite useful for small and medium enterprises in general and for the enterprises in services sector in particular, including professionals and knowledge based enterprises. For more details visit LLP in India

There are several other provisions contained in the Companies Act 1956 which are applicable only to public companies and should be consulted.

Liais on Office/Representative Office

A Liaison Office could be established with the approval of the government of India. The role of Liaison Office is limited to collection of information, promotion of exports/imports and facilitate technical/financial collaborations.

Liaison office cannot undertake any commercial activity directly or indirectly.

Project Office
Foreign companies planning to execute specific projects in India can set up a temporary project/site offices in India for carrying out activities only relating to that project. The Government of India has now granted general permission to foreign entities to establish project offices subject to specified conditions.

Branch Office
Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:

y y y y y y y y

Export/Import of goods Rendering professional or consultancy services Carrying out research work, in which the parent company is engaged. Promoting technical or financial collaborations between Indian companies and parent or overseas group company. Representing the parent company in India and acting as buying/selling agents in India. Rendering services in Information Technology and development of software in India. Rendering technical support to the products supplied by the parent/ group companies. Foreign airline/shipping company.

A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of India (RBI). Procedure for Formation of Company in India

Limited Liability Partnership (LLP)

A law to allow "Limited Liability Partnership" (LLP) in India has been enacted by the Parliament of India recently. (Limited Liability Partnership (LLP) Act of 2008). LLP is an alternative corporate business entity that provides the benefits of limited liability of a company but allows its members the flexibility of organizing their internal management on the basis of a mutually-arrived agreement, as is the case in a partnership firm. This format would be quite useful for small and medium enterprises in general and for the enterprises in services sector in particular, including professionals and knowledge based enterprises.

As proposed in the Bill, LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partners wrongful business decisions or misconduct.

Requirements for a Private Limited Company

1. A Registered Business Name: This must be followed by the word Limited' or Ltd'. The Companies Registration Office exercises some control over the choice of name, it cannot be identical (or very similar to) the name of an existing company. It won't be considered if it is offensive or illegal and the use of certain words in a company (for example, `Institute', `National') can only be used in certain circumstances. The company name must be displayed in a conspicuous place at every office, or other premises where the company carries out business. 2. A Registered Office: This need not necessarily be the same address as the business is conducted from. Quite frequently the address used for the registered office is that of the firm's solicitor or accountant. This is the address, through, where all official correspondence will go. 3. Shareholders: There must be a minimum of two shareholders (also described as `members' or `subscribers'). A private company can have up to fifty shareholders. 4. Share Capital: The company must be formed with a stated, nominal share capital divided into shares of fixed amounts. Small companies are frequently formed with a nominal share capital of Rs.100. 5. Memorandum of Association: The memorandum is the company's charter. It states the company's name; the situation of its registered office; its share capital; the fact that liability is limited and, most importantly, the object for which the company has been formed. In theory, the company can only operate in the areas mentioned in the objects clause but in practice the clause is drawn to cover as wide an area as possible, and anyway a 75 per cent majority of the members of the company can change the objects whenever they like. Nevertheless, it is worth bearing in mind that directors of the company will incur personal liability if the company engages in a type of business which is not authorized by the objects clause. The memorandum must be signed by at least three shareholders. 6. Articles of Association: The document contains the internal regulations of the company, the relationship of the company to its shareholders and the relationship between the individual shareholders. Many companies don't bother to draw up their own articles but adopt (sometimes with some modifications) articles set out in the Companies Act. 7. Certificate of Incorporation: This is the document, which the registrar of companies issues to you once he has approved your choice of name and your memorandum. When you receive this document your company legally exists and is ready to trade. 8. Auditors: Every company must appoint a qualified auditor. The auditor's duty is to report to the treasurer whether or not the books of the company have been properly kept, and that the balance sheet and profit and loss account presents (or doesn't present) a true and fair view of the company's affairs and complies with the Companies Act. Auditors are appointed or re-appointed at general meetings at which annual accounts are presented, and they hold office from the conclusion of the meeting until the next general meeting. 9. Accounts: The Companies Act lays down strict rules on accounting. Every company must maintain a set of records, which show the financial position at any one time with

reasonable accuracy. The accounts comprise a profit and loss account and balance sheet with the auditors' and directors' reports appended. A new company's accounting reference period begins on its incorporation and runs until the following 31st March - unless the company notifies the registrar of companies otherwise. Within ten months of the end of an accounting reference period, an audited set of accounts must be laid before the shareholders at a general meeting and a set delivered to the registrar of companies. 10. Registers, etc.: In addition to the accounts books, companies are required to have: a register of members and share ledger; a register of directors and secretaries; a register of share transfers; a register of charges; a register of debenture holders; a book can be purchased to hold all of the above. This will be provided automatically if you buy a running concern. 11. Company Seal: All companies must have an engraved seal. This must be impressed on share certificates and must be used whenever the company has to execute a deed. Again, this is included in the ready-made company package.

Corporate Documents & Registration of a Company

For incorporating a company in India, an application for registration should be submitted to the registrar of companies with the following documents: 1. Memorandum of Association; 2. Articles of Association; 3. a declaration signed by a person named in the articles of the proposed company as a director, manager, or secretary of the company, or by an advocate of the Supreme Court or High Court, or by an attorney entitled to appear before the High Court, or by a chartered accountant practicing in India stating that all the requirements of the Companies Act 1956 and the applicable rules with respect to the registration and other matters have been complied with; 4. a list of persons who have consented to act as directors of the company. 5. if the proposed company is a public company, consent of very person prepared to act as a director must be submitted in a prescribed form; 6. information about directors, managing directors and managers and secretary must be submitted in a prescribed form; 7. information about the registered office in a prescribed form; 8. power of attorney in favor of one of the promoters or any other person, authorizing him/her to make corrections in the documents submitted to the registrar of the companies, if it becomes necessary; and 9. applicable registration fee payable to the registrar of the companies.

Advantages of Incorporating in India

y y y
Many tax exemptions available to the company set up in Special Economic Zone; Many tax incentives available to IT companies; India has got double taxation treaties with many countries;

y y y

Minimum authorized capital of only INR 100,000 (US $ 2250 approximately) is required to form a private company in India; Skilled and intelligent employees available at nominal rate; With its large base of English speaking skilled human resource, it is most sought after destination for business process outsourcing, Knowledge processing etc.

Applicable Laws for Forming a Company in India

The laws applicable for incorporating a company in India include the Indian Companies Act of 1956, read with Companies (Central Governments') General Rules and Forms,1956, the Indian Income Tax Act, and other laws & regulations. The Foreign Exchange Management Act of 1999 is applicable for foreign investments and transactions.

The Companies Act, 1956

32. Registration of unlimited company as limited, etc.

(1) Subject to the provisions of this section, (a) a company registered as unlimited may register under this Act as a limited company; and (b) a company already registered as a limited company may re-register under this Act. (2) On registration in pursuance of this section, the Registrar shall close the former registration of the company, and may dispense with the delivery to him of copies of any documents with copies of which he was furnished on the occasion of the original registration of the company; but, save as aforesaid, the registration shall take place in the same manner and shall have effect, as if it were the first registration of the company under this Act. (3) The registration of an unlimited company as a limited company under this section shall not affect any debts, liabilities, obligations or contracts incurred or entered into, by, to, with or on behalf of, the company before the registration, and those debts, liabilities, obligations and contracts may be enforced in the manner provided by Part IX of this Act in the case of a company registered in pursuance of that Part

The Companies Act, 1956

33. Registration of memorandum and articles.

(1) There shall be presented for registration, to the Registrar of the State in which the registered office of the company is stated by the memorandum to be situate (a) the memorandum of the company; (b) its articles, if any; and 1 [(c) the agreement, if any, which the company proposes to enter into with any individual for appointment as its managing or whole-time director or manager.] (2) A declaration by an advocate of the Supreme Court or of a High Court, an attorney or a pleader entitled to appear before a High Court, or 2[a Secretary or a chartered accountant in whole-time practice in India] who is engaged in the formation of a company, or by a person named in the articles as a director 3[***] manager or

secretary of the company, that all the requirements of this Act and the rules thereunder have been complied with in respect of registration and matters precedent and incidental thereto, shall be filed with the Registrar; and the Registrar may accept such a declaration as sufficient evidence of such compliance. 4 [Explanation.For the purposes of this sub-section, chartered accountant in whole-time practice in India means a chartered accountant within the meaning of clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) who is practising in India and who is not in full-time employment.] (3) If the Registrar is satisfied that all the requirements aforesaid have been complied with by the company and that it is authorised to be registered under this Act, he shall retain and register the memorandum, the articles, if any, and the agreement referred to in clause (c) of sub-section (1), if any. ----------------------------1. Subs. by Act 31 of 1988, sec. 6, for clause (c) (w.e.f. 15-6-1988). 2. Subs. by Act 31 of 1988, sec. 6, for a chartered accountant practising in India (w.e.f. 15-6-1988). 3. The words managing agent, secretaries and treasurers, omitted by Act 31 of 1988, sec. 6 (w.e.f. 15-6-1988). 4. Ins. by Act 31 of 1988, sec. 6 (w.e.f. 15-6-1988).

The Companies Act, 1956

34. Effect of registration.

(1) On the registration of the memorandum of a company, the Registrar shall certify under his hand that the company is incorporated and, in the case of a limited company that the company is limited. (2) From the date of incorporation mentioned in the certificate of incorporation, such of the subscribers of the memorandum and other persons, as may from time to time be members of the company, shall be a body corporate by the name contained in the memorandum, capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession and a common seal, but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is mentioned in this Act. comments (i) In the expanding horizons of modern jurisprudence, lifting of corporate veil is permissible and its frontiers are unlimited; State of Uttar Pardesh v. Renusagar Power Co., AIR 1988 SC 1737. (ii) The corporate veil may be lifted where a statute itself contemplates lifting the veil, or fraud or improper conduct is intended to be prevented, or a taxing statute or a beneficent statute is sought to be evaded or where associated companies are inextricably connected as to be, in reality, part of one concern; Life Insurance Corporation of India v. Escorts Ltd., (1986) 59 Comp. Cas. 548: 1986 (1) Com LJ 91: AIR 1986 SC 1370. (iii) A company registered under the Companies Act is a legal person, separate and distinct from its individual members. Property of the company is not the property of the shareholders. Director of a company is merely its agent for the purpose of management; Rustom Cavasjee Cooper v. Union of India, (1970) 40 Comp. Cas. 325: 1970 (1) Comp LJ 244: AIR 1970 SC 564.

(iv) The shareholder of a company is not the owner of its assets; he has merely an interest in the company measured by a sum of money for the purpose of liability and a right to participate in the profits of the company subject to the contract contained in the articles of association. Director of a company is merely its agent for the purpose of management; Rustom Cavasjee Cooper v. Union of India, (1970) 40 Comp. Cas. 325: 1970 (1) Com LJ 244: AIR 1970 SC 564. (v) The Court is entitled to lift the mask of corporate entity if the conception is used for tax evasion or to circumvent tax obligation or to perpetrate fraud; Juggilal Kamlapat v. Commissioner of Income Tax, 1969 (2) Com LJ 188: AIR 1969 SC 932. (vi) An incorporated company has a separate existence and the law recognizes it as a legal person separate and distinct from its members. A new legal personality emerges from the moment of incorporation but the members who form the incorporated company do not pool their status or their personality; State Trading Corporation of India v. The Commercial Tax Officer, (1963) 33 Comp. Cas. 1057: AIR 1963 SC 1811.
Conclusiveness of certificate of incorporation.

A certificate of incorporation given by the Registrar in respect of any association shall be conclusive evidence that all the requirements of this Act have been complied with in respect of registration and matters precedent and incidental thereto, and that the association is a company authorised to be registered and duly registered under this Act.
36. Effect of memorandum and articles.

(1) Subject to the provisions of this Act, the memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by the company and by each member, and contained covenants on its and his part to observe all the provisions of the memorandum and of the articles. (2) All money payable by any member to the company under the memorandum or articles shall be a debt due from him to the company.
Provision as to companies limited by guarantee.

(1) In the case of a company limited by guarantee and not having a share capital, and registered on or after the first day of April, 1914, every provision in the memorandum or articles or in any resolution of the company purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member shall be void. (2) For the purpose of the provisions of this Act relating to the memorandum of a company limited by guarantee and of this section, every provision in the memorandum or articles, or in any resolution, of any company limited by guarantee and registered on or after the first day of April, 1914, purporting to divide the undertaking of the company into shares or interests, shall be treated as a provision for a share capital, notwithstanding that the nominal amount or number of the shares or interests is not specified thereby.
43A. Private company to become public company in certain cases.

[43A. Private company to become public company in certain cases.(1) Save as otherwise provided in this section, where not less than twenty-five per cent of the paid-up share capital of a private company having a share capital, is held by one or more bodies corporate, the private company shall,

(a) on and from the date on which the aforesaid percentage is first held by such body or bodies corporate, or (b) where the aforesaid percentage has been first so held before the commencement of the Companies (Amendment) Act, 1960 (65 of 1960), on and from the expiry of the period of three months from the date of such commencement unless within that period the aforesaid percentage is reduced below twenty-five per cent of the paid-up share capital of the private company, become by virtue of this section a public company: Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be reduced, below seven: Provided further that in computing the aforesaid percentage, account shall not be taken of any share in the private company held by a banking company, if, but only if, the following conditions are satisfied in respect of such share, namely: (a) that the share (i) forms part of the subject-matter of a trust, (ii) has not been set apart for the benefit of any body corporate, and (iii) is held by the banking company either as a trustee of that trust or in its own name on behalf of a trustee of that trust; or (b) that the share (i) forms part of the estate of a deceased person, (ii) has not been bequeathed by the deceased person by his will to any body corporate, and (iii) is held by the banking company either as an executor or administrator of the deceased person or in its own name on behalf of an executor or administrator of the deceased person, and the registrar may, for the purpose of satisfying himself that any share is held in the private company by a banking company as aforesaid, call for at any time from the banking company such books and papers as he considers necessary. 2 [Explanation.For the purposes of this sub-section, bodies corporate means public companies, or private companies which had become public companies by virtue of this section.] 3 [(1A) Without prejudice to the provisions of sub-section (1), where the average annual turnover of a private company, whether in existence at the commencement of the Companies (Amendment) Act, 1974 or incorporated thereafter, is not, during the relevant period 4[less than such amount as may be provided] the private company shall, irrespective of its paid-up share capital, become, on and from the expiry of a period of three months from the last day of the relevant period during which the private company had the said average annual turnover, a public company by virtue of this sub-section: Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be reduced, below seven. 5 [(1B) Where not less than twenty-five per cent of the paid-up share capital of a public company, having share capital, is held by a private company, the private company shall, (a) on and from the date on which the aforesaid percentage is first held by it after the commencement of the Companies (Amendment) Act, 1974, or

(b) where the aforesaid percentage has been first so held before the commencement of the Companies (Amendment) Act, 1974 on and from the expiry of the period of three months from the date of such commencement, unless within that period the aforesaid percentage is reduced below twenty-five per cent of the paid-up share capital of the public company, become by virtue of this sub-section, a public company, and thereupon all other provisions of this section shall apply thereto: Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be reduced, below seven.] 6 [(1C) Where, after the commencement of the Companies (Amendment) Act, 1988 a private company accepts, after an invitation is made by an advertisement, or renews, deposits from the public, other than its members, directors or their relatives, such private company shall, on and from the date on which such acceptance or renewal as the case may be, is first made after such commencement, become a public company and thereupon all the provisions of this section shall apply thereto: Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be, reduced below seven.] (2) Within three months from the date on which a private company becomes a public company by virtue of this section, the company shall inform the Registrar that it has become a public company as aforesaid, and thereupon the Registrar shall delete the word Private become the word Limited in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association. 7 [(2A) Where a public company referred to in sub-section (2) becomes a private company on or after the commencement of the Companies (Amendment) Act, 2000, such company shall inform the Registrar that it has become a private company and thereupon the Registrar shall substitute the word private company for the word public company in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association within four weeks from the date of application made by the company.] (3) Sub-section (3) of section 23 shall apply to a change of name under sub-section (2) as it applies to a change of name under section 21. (4) A private company which has become a public company by virtue of this section shall continue to be a public company until it has, with the approval of the Central Government and in accordance with the provisions of this Act, again become a private company. (5) If a company makes default in complying with sub-section (2), the company and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues. 8 [***] (8) Every private company having a share capital shall, in addition to the certificate referred to in sub-section (2) of section 161, file with the Registrar along with the annual return a second certificate signed by both the signatories of the return, stating either

(a) that since the date of the annual general meeting with reference to which the last return was submitted, or in the case of a first return, since the date of the incorporation of the private company, no body or bodies corporate has or have held twenty-five per cent or more of its paid-up share capital, 9[***] 10 [***]] 11 [(c) that the private company, irrespective of its paid-up share capital, did not have during the relevant period, an average annual turnover of 12[such amount as is referred to in sub-section (1A) or more];] 13 [(d) that the private company did not accept or renew deposits from the public.] 11 [(9) Every private company, having share capital, shall file with the Registrar along with the annual return a certificate signed by both the signatories of the return, stating that since the date of the annual general meeting with reference to which the last return was submitted, or in the case of a first return, since the date of the incorporation of the private company, it did not hold twenty-five per cent. or more of the paid-up share capital of one or more public companies.] 13 [(10) Subject to the other provisions of this Act, any reference in this section to accepting, after an invitation is made by an advertisement, or renewing deposits from the public shall be construed as including a reference to accepting, after an invitation is made by an advertisement, or renewing deposits from any section of the public and the provisions of section 67 shall, so far as may be, apply, as if the reference to invitation to the public to subscribe for shares or debentures occurring in that section, includes a reference to invitation from the public for acceptance of deposits.] Explanation.For the purposes of this section, (a) relevant period means the period of three consecutive financial years, (i) immediately preceding the commencement of the Companies (Amendment) Act, 1974, or (ii) a part of which immediately preceded such commencement and the other part of which immediately, followed such commencement, or (iii) immediately following such commencement or at any time thereafter; (b) turnover, of a company, means the aggregate value of the realisation made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year;] 14 [(c) deposit has the same meaning as in section 58A.] 15 [(11) Nothing contained in this section, except sub-section (2A), shall apply on and after the commencement of the Companies (Amendment) Act, 2000.] ----------------------------1. Ins. by Act 65 of 1960, sec. 14 (w.e.f. 28-12-1960). 2. Ins. by Act 31 of 1988, sec. 7 (w.e.f. 15-6-1988). 3. Ins. by Act 41 of 1974, sec. 6 (w.e.f. 1-2-1975). 4. Subs. by Act 31 of 1988, sec. 7, for less than rupees one crore (w.e.f. 15-61988). 5. Ins. by Act 41 of 1974, sec. 6 (w.e.f. 1-2-1975). 6. Ins. by Act 31 of 1988, sec. 7 (w.e.f. 15-6-1988). 7. Ins. by Act 53 of 2000, sec. 12 (w.e.f. 13-12-2000). 8. Sub-sections (6) and (7) omitted by Act 31 of 1988, sec. 7 (w.e.f. 15-6-1988). 9. The word or omitted by Act 31 of 1988, sec. 7 (w.e.f. 15-6-1988). 10. Clause (b) omitted by Act 31 of 1988, sec. 7 (w.e.f. 15-6-1988). 11. Ins. by Act 41 of 1974, sec. 6 (w.e.f. 1-2-1975). 12. Subs. by Act 31 of 1988, sec. 7, for rupees one crore or more (w.e.f. 15-61988).

13. Ins. by Act 31 of 1988, sec. 7 (w.e.f. 15-6-1988). 14. Ins. by Act 31 of 1988, sec. 7 (w.e.f. 15-6-1988). 15. Ins. by Act 53 of 2000, sec. 12 (w.e.f. 13-12-2000).
44. Prospectus or statement in lieu of prospectus to be filed by private company on ceasing to be private company.

(1) If a company, being a private company, alters its articles in such a manner that they no longer include the provisions which, under clause (iii) of sub-section (1) of section 3, are required to be included in the articles of a company in order to constitute it a private company, the company (a) shall, as on the date of the alteration, cease to be a private company; and (b) shall, within a period of 1[thirty] days after the said date, file with the Registrar either a prospectus or a statement in lieu of prospectus, as specified in sub-section (2). (2) (a) Every prospectus filed under sub-section (1) shall state the matters specified in Part I of Schedule II and set out the reports specified in Part II of that Schedule, and the said Parts I and II shall have effect subject to the provisions contained in Part III of that Schedule. (b) Every statement in lieu of prospectus filed under sub-section (1) shall be in the form and contain the particulars set out in Part I of Schedule IV, and in the cases mentioned in Part II of the Schedule, shall set out the reports specified therein, and the said Parts I and II shall have effect subject to the provisions contained in Part III of that Schedule. (c) Where the persons making any such report as is referred to in clause (a) or (b) have made therein, or have, without giving the reasons indicated therein, any such adjustments as are mentioned in clause 32 of Schedule II or clause 5 of Schedule IV, as the case may be, the prospectus or statement in lieu of prospectus filed as aforesaid, shall have enforced thereon or attached thereto, a written statement signed by those persons, setting out the adjustments and giving the reasons therefor. (3) If default is made in complying with sub-section (1) or (2), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to 2[five thousand rupees] for every day during which the default continues. (4) Where any prospectus or statement in lieu of prospectus filed under this section includes any untrue statement, any person who authorised the filing of such prospectus or statement shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to 3[fifty thousand rupees], or with both, unless he proves either that the statement was immaterial or that the had reasonable ground to believe, and did up to the time of the filing of the prospectus or statement believe, that the statement was true. (5) For the purposes of this section (a) a statement included in a prospectus or a statement in lieu of prospectus shall be deemed to be untrue if it is misleading in the form and context in which it is included; and (b) where the omission from a prospectus or a statement in lieu of prospectus of any matter is calculated to mislead, the prospectus or statement in lieu of prospectus shall be deemed, in respect of such omission, to be a prospectus or a statement in lieu of prospectus in which an untrue statement is included. (6) For the purposes of sub-section (4) and clause (a) of sub-section (5), the expression included when used with reference to a prospectus or statement in lieu of prospectus, means included in the prospectus or statement in lieu of prospectus

itself or contained in any report or memorandum appearing on the face thereof, or by reference incorporated therein. ----------------------------1. Subs. by Act 31 of 1965, sec. 62 and Sch., for fourteen (w.e.f. 15-10-1965). 2. Subs. by Act 53 of 2000, sec. 13, for five hundred rupees (w.e.f. 13-122000). 3. Subs. by Act 53 of 2000, sec. 13, for five thousand rupees (w.e.f. 13-122000).