Company A Format of Business- Not For Compliance Only

Commercial activities can be carried on through the company format the best. This has been accepted as the best platform under which business can be carried on. Currently with the amendment of the Rules on incorporation of companies, companies get along with the incorporation certificate, Income Tax Pan Number, Tax Deducted at Source Number, Goods and Services Tax Number, State Insurance Registration Number and Provident Fund Number. The registrations are all at no cost to the persons incorporating the company.

Each registration is under different statute. Previously one had to wait between six months and one year to get registrations. By the time the registrations were in place the persons incorporating the company either went out of money or lost all enthusiasm. The Government must have realised this aspect and have given so many sops to the persons incorporating the company.

But the company cannot start operation in the states where obtaining Trade License before starting any business is compulsory. In some states it takes over a month for obtaining the registration. Trade License is issued by the Municipality, Corporation and in rural areas it is the Gram Panchayats. There are certain areas where business entities are not issued trade linsense. Without the trade license a company will not be granted registration under the Profession Tax applicable to the states. This of course can be done online.

Every company must have a Bank Account. It will have to be Current Account. However, Section 8 companies incorporated with Central Government permission for promoting art, science, culture not to declare dividend to its members, can open Savings Bank Account.

A company cannot operate with a Bank Account so along with incorporation, companies should be given the choice of opening Current Account in nationalised banks operating within 500 meters where the registered office of the company is situated. This will cut short the time taken. It will assist the company to commence operation immediately.

However, companies do not have to adhere to any amount to register a company with MCA. So two persons can incorporate a company with Share Capital of Rs 1000. Unless the incorporation is done by people having the expertise of incorporation, the company cannot incorporate the company with the amount of the capital with which it is incorporated. Persons termed as the promoters who may or may not be the first directors incorporating the company with such low capital can pay from their own account and ask the company to pay. For the company to pay there must be an agreement ratified by the Board of Directors of the company. Directors may not hold shares in a company unless it is specified by the Articles of Association. To take care of the operation of expenses of the company can raise the share capital of the company or the promoters can give loan to the company. Loan can be given by a shareholder, Directors from their own fund and companies can give loans which is known as incorporate deposit. While shareholders and directors can waive interest on loan, companies have to be have to paid interest which must not be below the prime lending of banks meaning the minimum rate at which banks lend. Interest payable on the loan to companies must be paid after payment of Tax Deducted at Source ( `TDS') payable under section 194A of the Income Tax Act, 1961.

Incorporation rules having been changed has given a thrust to company incorporation. But it may not be the instance in all cases. It is not possible to be liable for payment of provident fund and employees state insurance premium without having employees in a company. This will only call for filing `Nil' returns, Similarly such returns will be applicable in the case of GST. Intention of the Government but it will only a liability for the Directors. Default will lead to payment of interest.

Compliance will follow without the business taking off. In compliance there is no consideration whether the company has capital or there is business or not. There are employees or not. India ranks among the first three in the having companies registered under the Companies Act, 2013. There are about 18.5 lac companies. They are inclusive of all types of companies. The number includes both private and public limited companies and also companies without share capital being companies incorporated under guarantee without share capital. Out of the above number, there are about 11.5 lac companies in operation. It is assumed that most of the companies have bank accounts, It is not known how many companies have availed of bank loan. Loans availed by companies that have been categorised as NPA is not known,

Companies are platforms for business operation. Bank accounts are a part of companies. It is therefore considered prudent to include bank account steps while the incorporation of companies is done. Companies are not formed for the same of it. The promoters have business plan. Accordingly they floats companies. So it is considered significant to include a business plan along with the Memorandum of Association at the time of registration of the company. To-day all business laws have been brought together in a common platform to facilitate business. Business without a business plan with just main objects as required by law is in appropriate. Each company should be made to declare its business plan matching with its object clause which can be changed subsequently. MCA should forward the names of the companies with detail of Directors and shareholders to the banks within 500 metres of the registered office of the company. This will help banks to find borrowers. Under the present scenario, promoters are afraid to approach banks This fear in the minds of the Directors/promoters is to be ended Companies and banks must understand each other. It is acknowledged that a business cannot survive of its own. It requires financial support. Banks can first be knocked. Having numbers 11.5 lac operational companies in the country is not enough. The companies must be supported to undertake their business in an organised manner.

Business Plan at the time of registration of companies and linking of such companies with banks from the very start needs to be thought of. With the days ahead business is to be carried out with a modern approach not in the old manner and back dated ways. It this is done then only entrepreneurship and innovation will be generated to give fillip to the economy. Mere filing of Balance Sheet and Annual Return for compliance without having any business is no answer to the demand of the economy. There is urgent need of jobs and compliance cannot be the answer. To meet the demand there must be business then only will the existence of companies will be meaningful.