MODULE 4: INDIAN COMPANIES, SHOP AND ESTABLISHMENT REGULATIONS
1. Explain the steps involved in incorporating a company, including the documentation
and legal requirements they need to fulfill.
Steps Involved in Incorporating a Company in India
Incorporating a company in India involves following the guidelines of the Companies Act,
2013 and complying with the Ministry of Corporate Affairs (MCA) requirements. Here’s a
detailed breakdown of the steps, documentation, and legal requirements:
1. Decide the Type of Company
Determine the type of company you wish to incorporate, such as:
• Private Limited Company
• Public Limited Company
• One Person Company (OPC)
• Limited Liability Partnership (LLP)
2. Obtain Digital Signature Certificate (DSC)
• A Digital Signature Certificate is required for filing documents electronically with the
MCA.
• Who Needs DSC?
o Directors and subscribers of the company.
• How to Obtain DSC?
o Apply through a Certifying Authority (CA) licensed by the Controller of
Certifying Authorities (CCA).
Documents Required:
• PAN card and Aadhaar card of the applicant.
• Passport-size photograph.
• Email ID and phone number.
3. Apply for Director Identification Number (DIN)
• Directors of the company must obtain a DIN, a unique identifier assigned by the
MCA.
Documents Required:
• PAN card and Aadhaar card.
• Passport-size photograph.
• Proof of address.
4. Select and Reserve Company Name
• Use the RUN (Reserve Unique Name) service or SPICe+ Form to propose and
reserve a name for the company.
Tips:
• Propose two names to avoid rejection.
• Verify name availability on the MCA portal and IP India (Trademark Registry).
5. Draft Incorporation Documents
Prepare the necessary documents for incorporation, including:
Memorandum of Association (MOA)
• Defines the company's objectives and scope of operations.
Articles of Association (AOA)
• Lays down the rules and regulations for the company's internal management.
Declaration by Subscribers and Directors
Proof of Registered Office
• Electricity bill, rent agreement, or property tax receipt (not older than 2 months).
6. File the Incorporation Application
• File the incorporation application using the SPICe+ Form on the MCA portal.
• The SPICe+ Form integrates multiple processes such as:
o Name reservation.
o Incorporation.
o Allotment of PAN, TAN, and GSTIN.
Attachments Required:
• MOA and AOA (digitally signed by subscribers and witnesses).
• Proof of registered office.
• Identity and address proof of directors and subscribers.
• Consent to act as a director (Form DIR-2).
• Declaration by professionals (e.g., Chartered Accountant or Company Secretary).
7. Pay Fees and Stamp Duty
• Fees for incorporation and stamp duty vary based on the company’s authorized share
capital and the state where the registered office is located.
8. Verification and Approval by MCA
• The Registrar of Companies (RoC) reviews the application and attached documents.
• If all documents are in order, the RoC approves the application and issues:
o Certificate of Incorporation (COI)
o Corporate Identification Number (CIN).
9. Post-Incorporation Compliance
After incorporation, the company must fulfill certain legal requirements:
Open a Bank Account
• Use the Certificate of Incorporation, PAN, and MOA/AOA to open a corporate bank
account.
Apply for GST Registration
• Mandatory if turnover exceeds the threshold limit or if the business falls under the
compulsory GST registration category.
Register with EPFO and ESIC
• Register under the Employees’ Provident Fund Organization (EPFO) and
Employees’ State Insurance Corporation (ESIC), if applicable.
Commencement of Business
• File Form INC-20A (Declaration for Commencement of Business) within 180 days
of incorporation.
Conclusion
Incorporating a company in India is now streamlined with the SPICe+ Form, which
integrates multiple processes into a single application. Proper documentation and adherence
to legal requirements ensure smooth incorporation and compliance with the Companies Act,
2013.
2. Explain the steps they would need to follow under the Shop and Establishment Act to
register their business, obtain the necessary licenses, and comply with regulations for
operating a commercial establishment.
Steps to Register and Comply with the Shop and Establishment Act
The Shop and Establishment Act is a state-specific law in India that governs the
registration, regulation, and operation of shops, commercial establishments, and other
workplaces. It ensures proper working conditions, rights of employees, and compliance with
local labor regulations. Below are the steps for business registration, obtaining licenses, and
ensuring compliance:
1. Determine Applicability of the Act
• Identify whether the Act applies to your business based on the type of establishment
(e.g., shop, commercial office, restaurant, hotel).
• Each state has its own version of the Act, so check the specific state’s rules and
provisions.
2. Registration Process
Step 1: Submit an Application for Registration
• File an application with the Chief Inspector under the Shop and Establishment Act of
the respective state.
• The application should include:
o Name of the establishment.
o Address of the business.
o Name and details of the employer.
o Number of employees.
o Nature of the business (e.g., trading, service, manufacturing).
Step 2: Attach Necessary Documents
• Documents required for registration include:
o Address proof of the business (electricity bill, rent agreement, or property tax
receipt).
o Identity proof of the owner (Aadhaar, PAN, or passport).
o Details of employees (if applicable).
o Memorandum of Association (MOA) or partnership deed for registered
entities.
Step 3: Payment of Registration Fee
• Pay the prescribed fee for registration. The amount varies by state and size of the
establishment.
Step 4: Issuance of Registration Certificate
• Upon verification of the application and documents, the authority will issue a Shop
and Establishment Registration Certificate.
• Display the certificate prominently in the establishment.
3. Obtain Necessary Licenses
Step 1: Trade License
• Obtain a trade license from the local municipal authority to conduct business
activities legally.
Step 2: Additional Licenses (if applicable)
• Food License (FSSAI): For businesses dealing in food products.
• Professional Tax Registration: For businesses employing staff.
• GST Registration: Mandatory for businesses exceeding the prescribed turnover.
• Fire Safety License: For establishments requiring fire safety compliance (e.g.,
restaurants, malls).
4. Compliance with Regulations
Step 1: Maintain Records and Registers
• Keep records of employee attendance, wages, working hours, and leave.
• Maintain a register of holidays, salary details, and overtime hours (if applicable).
Step 2: Adhere to Working Hours and Holidays
Working Hours
Maximum Working Hours
• Typically, employees cannot work more than 8-9 hours per day and 48 hours per
week.
• States may allow overtime, but the total working hours (regular + overtime) should
not exceed 10-12 hours per day.
Overtime
• Employees working beyond the prescribed working hours are entitled to overtime
pay, which is usually twice the regular hourly rate.
Breaks and Rest Periods
• Continuous work beyond 5 hours requires a 30-minute break.
• Total working hours, including breaks, should not exceed the daily and weekly limits.
Night Shifts
• Special provisions may apply for establishments operating at night (e.g., IT
companies, hospitals).
• Women may be allowed to work night shifts, provided the employer ensures safety
measures (as per respective state rules).
2. Weekly Holiday
Mandatory Weekly Holiday
• Every establishment must provide employees with one day off per week (often
Sunday).
• Some states allow substitution of the weekly holiday with another day, provided prior
notice is given to employees and authorities.
Step 3: Welfare Measures
• Provide basic facilities like clean drinking water, proper ventilation, and washrooms.
• Ensure adequate lighting and safety measures are in place.
Step 4: Display Notices
• Display notices about employees’ rights, holidays, and wages as mandated by law.
Step 5: Renewal of Registration and Licenses
• Renew the Shop and Establishment Registration Certificate and other licenses
periodically.
Step 6: Annual Compliance Filings
• Submit annual returns to the respective authority (if applicable) based on the state's
rules.
Penalties for Non-Compliance
Failure to comply with the provisions of the Shop and Establishment Act may result in:
• Fines and penalties as prescribed under the Act.
• Cancellation of registration or license.
Conclusion
The Shop and Establishment Act provides a framework to ensure the smooth and lawful
operation of businesses while safeguarding employee rights. By following the above steps,
businesses can register, obtain necessary licenses, and comply with regulations, ensuring
hassle-free operations.
3. Examine the Steps to Register for GST Once Turnover Exceeds the Threshold
Limit
Under the Goods and Services Tax (GST) system in India, any business with an annual
turnover exceeding the prescribed threshold limit must register for GST. Below are the steps
to register:
Threshold Limits for GST Registration
1. For Goods:
o ₹40 lakh for most states.
o ₹20 lakh for special category states (e.g., Arunachal Pradesh, Manipur,
Mizoram, Nagaland, Sikkim).
2. For Services:
o ₹20 lakh for most states.
o ₹10 lakh for special category states.
If turnover exceeds these limits, GST registration becomes mandatory.
Steps for GST Registration
Step 1: Visit the GST Portal
• Go to the official GST portal: https://www.gst.gov.in.
Step 2: Gather Required Documents
Ensure you have these documents ready for submission:
For Individuals/Proprietorship:
• PAN Card.
• Aadhaar Card.
• Address proof of the business location (electricity bill, rent agreement, or property tax
receipt).
• Bank account proof (cancelled cheque or bank statement).
• Passport-size photograph of the proprietor.
For Partnership Firms/Companies:
• PAN Card of the business entity and partners/directors.
• Partnership deed or certificate of incorporation (for companies).
• Business address proof.
• Bank account proof.
• Digital signature (for companies/LLPs).
• Authorisation letter for the authorised signatory.
Step 3: Initiate Registration Process
1. On the GST portal, click on 'Services → Registration → New Registration.'
2. Enter details:
3. After verification, you’ll receive a Temporary Reference Number (TRN).
Step 4: Fill the GST Application Form (Part-B)
1. Log in to the portal using the TRN.
2. Complete the GST Registration Form by providing:
3. Upload the required documents.
Step 5: Submit Application with E-Signature
• Use Digital Signature Certificate (DSC) or Electronic Verification Code (EVC) to
sign and submit the form.
Step 6: Verification by GST Officer
• The GST officer will review the application and documents.
• If everything is in order, the GSTIN (Goods and Services Tax Identification Number)
will be issued within 7 working days.
• Penalties for Non-Registration
Failing to register for GST after exceeding the threshold limit can result in:
• A penalty of 10% of the tax due (minimum ₹10,000).
• In cases of deliberate evasion, a penalty of 100% of the tax due.
Conclusion
Registering for GST ensures legal compliance, access to input tax credits, and smooth
business operations. Following the above steps will help any business register quickly and
meet their tax obligations.
