Importer-Exporter Code :  The Fundamental to create an effective global trade
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Importer-Exporter Code : The Fundamental to create an effective global trade

The Importance Of Raising Materialism 

Modern societies need economics more than anything else. Only when materialistic needs of the people are fulfilled, they can turn towards higher and more intellectual pursuits. Thus, the goal of developing nations should  be to fastly and fiercely pursue the path of rapid and radical economic (and social) development. As for the developed countries, they should try to upgrade and maintain the high levels of socio-economic standards. 

The Role Of International Trade 

The most important factor in matters of the development of countries is international trade. And in international trade, export and import and their mutual balance & imbalance. And the Exim factor includes a crucial element, which is known as Importer and exporter codes. 

The Trigger To Go Global 

In this age of cut-throat competition, everyone wants to grow their business beyond the limits of the domestic market. However, doing business globally isn’t just a cup of tea for everyone. Before going global, you need to follow several procedures and laws in place and get different registration and license. IEC (Import Export Code) license is one of such prerequisites when you’re thinking of importing or exporting from India. It is also known as Importer- Exporter Code.


IEC For Traders: How The Traders Can Attain It 

IEC (Import Export Code) is required by anyone who is looking to kick-start his/her import/export business in the country. It is issued by the DGFT (Director General of Foreign Trade). IEC is a 10-digit code that has lifetime validity. Predominantly importers merchants cannot import goods without the Import Export Code and similarly, the exporter merchant cannot avail benefits from DGFT for the export scheme, etc. without IEC.

Situations Where IEC is Required

When an importer has to clear his shipments from the customs then it’s needed by the customs authorities.
When an importer sends money abroad through banks then it’s needed by the bank.
When an exporter has to send his shipments then it’s needed by the customs port.
When an exporter receives money in foreign currency directly into his bank account then it’s required by the bank.

You may also like reading Know about GST: The taxation system that changed India.


Steps Involved in IEC (Import/Export Code) Registration

  • Visit the DGFT website.

  • Click on the ‘Services’ tab on the homepage.

  • Select the ‘IEC Profile Management’ option from the drop-down list.

  • A new page will open. Click on the ‘Apply for IEC’ option on the page.

  • Click on the ‘Register’ option. Enter the required details and click on the ‘Sent OTP’ button.

  • Enter the OTP and click on the ‘Register’ button.

  • Upon successful validation of the OTP, you will receive a notification containing the temporary password which you can change after logging into the DGFT website.

  • After registering on the DGFT website, login to the website by entering the user name and password.

  • Click on the ‘Apply for IEC’ option on the DGFT website.

  • Fill the application form (ANF 2A format), upload the required documents, pay the required fees and click on the ‘Submit and Generate IEC Certificate’ button.

  • The IEC code will be generated by the DGFT. You can take a printout of your certificate once the IEC code is generated

Documents required for IEC (Import Export Code) Registration

For IEC Code Registration, the  following documents are required:

  • Individual’s or Firm’s or Company’s copy of PAN Card.

  • Individual’s voter id or Aadhar card or passport copy.

  • Individual’s or company’s or firm’s cancel cheque copies of current bank accounts.

  • Copy of Rent Agreement or Electricity Bill Copy of the premise.

  • A self-addressed envelope for delivery of IEC certificate by registered post.

Also read TDS Returns: Know the Aspects

Benefits of IEC Registration


Expansion of Business

IEC assists you in taking your services or product to the global market and growing your businesses.
 

Procuring Various Benefits

The Companies could avail several benefits of their imports/ exports from the DGFT, Export Promotion Council, Customs, etc., on the basis of their IEC registration.
 

No Filing of returns

IEC does not require the filing of any returns. Once allotted, there isn’t any requirement to follow any sort of process for sustaining its validity. Even for export transactions, there isn’t any requirement for filing any returns with DGFT.
 

Simpler Processing

It is fairly easy to obtain IEC code from the DGFT within a period of 10 to 15 days after submitting the application. There isn’t any need to provide proof of any export or import for getting IEC code.
 

Renewal Need Not There 

IEC code is effective for the lifetime of an entity and requires no renewal. After it is obtained, it could be used by an entity against all export and import transactions.
 

Some Cases Where Import-Export Code (IEC) is Not Mandatory

According to the latest circular issued by the government, IEC is not mandatory for all traders who are registered under GST. In all such cases, the PAN of the trader shall be construed as a new IEC code for the purpose of import and export. Import Export Code (IEC) isn’t required to be taken in case the goods exported or imported is for personal purposes and isn’t used for any commercial purpose. Export/ Import done by the Government of India Departments and Ministries, Notified Charitable institutions need not require getting Import Export Code.

You may also like reading Income Tax Verification: The checking of your filed taxes

 

Gaming Business in India - All You Need To Know About
Others

Gaming Business in India - All You Need To Know About

The Public Gambling Act, 1867 ("Gambling Act"), which dates back to British administration in India, and the Prize Competitions Act, 1955, are the two most important central gambling regulations in India ("Prize Act"). The anti-gambling discourse prevailing at the Gambling Act's implementation is reflected in current Indian jurisprudence. The Gambling Act applies to 16 states and union territories, although not to skill games. List II of the Indian Constitution's Seventh Schedule gives state governments the authority to control betting and gambling regulations.

Various states have adopted the antiquated parts of the Gambling Act, with the majority prohibiting betting on games of chance, which is considered gambling, while allowing participation in games of skill. Where state legislation exists, it takes precedence over the PGA's regulations. Courts have echoed this sentiment, prohibiting society from participating in skill-based games and treating gambling as a bad and dangerous vice in the past. In addition, courts have ruled that gambling is not included by Article 19 (1) (g) of the Indian Constitution, which states that the freedom to conduct business is a basic right. Gaming companies find it incredibly difficult to operate in India due to a lack of clarity around approved activities.

Requirements to Start a Gaming Business in India:

  1. A professional developer will analyse popular games and build a structure along those lines. Gaming software will set up the entire structure and add lucrative content and offers so that the gamer will spend more time and play more to earn points or offer-related items.
  2. A merchant account, which allows for easy financial operations. It must be ensured that it takes all major credit cards and that the gamer has the greatest possible experience while transacting for any game, regardless of the game module used.
  3. A dedicated server is necessary because it provides more memory and storage capacity than any other hosting solution, allowing for a quick connection to the client's favourite game and ensuring stability and reliability.

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Registration and Approval of License:

The Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2016 and the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Rules, 2016 allow for the offering of online skill games (from now on referred to as the "online game of skills law").

Law gives licences for online skill games involving activities that require players to expend effort and skill. Chess, Sudoku, Quiz, Rummy, Virtual racing, Virtual sports (Soccer/ Cricket/ Archery/ Snooker/ Bridge/ Pool), Fantasy games, and others are among the games for which the specified licence is granted. As a result, the players put up a greater effort and approach than their opponents to win.

Following receipt of the application, verification of the same by the Director, Nagaland State Lotteries, and compliance with the formalities prescribed concerning the payment of the requisite fees, the licence is granted to the applicant by the Nagaland State Lotteries within 6 months from the date of receipt of the application under the online game of skills law.

Under the online game of skills law, the licensee can provide their services to any state or union territory where games of skill are legal. The licence also allows online companies to advertise their games and gaming services in all jurisdictions where skill games are not considered gambling. The government access is required for the authorities to ensure that the licensee's actions are carried out in real time.

The licensee must pay a gaming tax/royalty of 0.5 percent of gross income, minus any service tax, bonuses, cashbacks, payment gateway fees, and so on. The licence would be valid for five years from when it was granted.

People Also Read This: Joint Venture Agreement Format & Required Documents in India

Legal Precedents:

The Hon'ble Supreme Court concluded in the Satyanarayan Case[1] that Rummy was a skill-based game and that gambling laws should not apply. This is how various courts and states arrived to the dramatic conclusion that games of skill are not covered by the applicable states' gambling laws.

The Hon'ble Supreme Court ruled in M.J.Sivani& Ors v. State of Karnataka[2] that poker was a game of chance. The Hon'ble Supreme Court further noted that the presence of a reward is an essential aspect of gaming, and that gaming entails playing any game, be it of skill or chance, to exchange money or consideration worth money.

 


[1]State of Andhra Pradesh v. Satyanarayana and Ors, 1968 AIR 825.

[2]M.J.Sivani & Ors v. State of Karnataka, (1995) 6 SCC 289.

Business Format Franchise
Agreement & Contract

Business Format Franchise

A franchising arrangement is a format which provides the franchisee with an already set up business. The company expands by providing independent business owners with an established business in this arrangement, including its name and trademark.

In other words, it can be said that Business format franchising is a distribution network that operates under a shared trademark wherein the franchisor gives the franchisees the right to do business under his name for a specified period in exchange of money.

Characteristics of a Business Format Franchise

Characteristics of a business format franchise are:

  • The Concept:
    • The franchise concept is an established business with a certain degree of success, a proven reputation and an established and recognized brand name.
  • The training:
    • As part of the business format, the franchisor promises paid training on program performance before opening a business, and assists with opening a business. The franchisor must make his brand and business success in the long-term and it is incumbent on him to offer ongoing training that will keep pace with the expansion of the franchise and its future success.
  • Support in operations:
    • Whether at the technical, operational or management level, franchisors should provide ongoing guidance on where the business is headed, what research and development needs to be done to keep it high and always improve management efficiency.
  • Assistance in Marketing:
    • The success of many franchise brands results from marketing innovation that ensures that the spread of merchants is supported by effective advertising and promotion. In many cases the funds raised by shareholders go to national advertising campaigns to benefit both the brand and the individual franchises.

People Also Read This: Types of Franchise Business Models

Business Format Franchise Agreement

A business format franchise agreement has the following clauses:

  • Description of the business which is being franchised.
  • Territory or area in which the franchise is given. Typically, one franchise per area is provided.
  • Determination of prices: Franchisor’s typically determine the prices for the products sold through the franchise.
  • An estimate of costs, names of suppliers etc. are also included in a business format franchise agreement.
  • Exit provisions.
  • Tenure: Typically, the parties want a long tenure ranging between 5-15 years to realise their costs.

People Also Read This: Franchise Terms And Conditions In India

Advantages and Disadvantages of Business Format Franchise

Advantages:

Marketing:

One of the franchisor's primary responsibilities is using the best efforts to advertise and promote its brand name. Therefore, the franchise business is often better advertised and branded than a traditional business. Also, in the case of a franchise business, as advertising or sales costs are shared by all franchisees, the total sales costs are lower in the franchise model.

Lower operating cost:

In some models, the franchisor would negotiate price and group purchases on behalf of the franchises. This will help reduce the operating costs of the franchisee business. In addition, as the business owner is aware of the local market conditions, the franchisor can save by conducting costly research on local markets, business processes, etc.,

Ease in expansion:

For standard business models, developers will need large sums of money or bank loans to grow their business. However, in the franchise model, the franchisee provides large amounts of money and the franchisor provides product information and technical knowledge to grow faster with the minimum amount of money required.

Low risk for the franchisee:

As the franchisor makes every effort to market the product, the franchisee poses a small risk. Moreover, in the franchise model, as the business model is also proven, the business risk for the business owner is reduced.

Easy access to capital:

With many well-established franchise business models with a proven name, it is easy for a franchise owner to get a bank loan to start a franchise business.

Business Knowledge:

Many businesses do not have sufficient business, legal, or real estate knowledge and investment experience in all the provinces and cities of India. However, in this format, franchisors have the ability to work with franchises to recognize information about local market conditions.

Training and technical knowledge:

In the franchise business, the franchisor provides the franchisee with training and technical knowledge. Therefore, it prevents the possibility of costly mistakes due to the lack of training on the franchisee side.

People Also Read This: Advantages and Disadvantages of Selling a Franchise

Disadvantages:

Franchisee Independence:

In a franchisee model, although the franchisee owns a business, the franchisee owner cannot act independently. The franchisor manages the franchisees and it is necessary to submit various reports to the franchisor.

Lock-in period/Commitment:

Franchisees are usually made to commit to a franchisor a closing period until they are legally obliged to conduct business regardless of profit or loss. During the locking period, the lender will not change the business model or change the franchisor.

Negative publicity:

If a retail business gets a bad name because of the actions of a franchisor or another trader, the entire product will suffer. This could result in the loss of sales or customers of the business owner who was not involved in the transaction.

It can be said that although the Business Format Franchise brings with it a lot of advantages for both the parties that enter into the Contract, it also poses certain challenges that serve as disadvantages for both the parties. Therefore, the advantages and disadvantages of the franchise format should be taken into due consideration for a particular business model.

How to Close a Business
Company

How to Close a Business

Closing a business is tougher than starting a business. The process of closing a business in India is referred to as Winding Up. At the commencement of Winding Up process, the business ceases to carry out any sort of business activity and the management of the company is transferred from the Director to the freshly appointed ‘liquidator’. Liquidator performs all the necessary tasks to wind up a company like realizing its assets, paying off the debts and distributing the surplus left among the people who are entitled to have it. Dissolution is the last stage of winding up and after this, the company ceases to exist. During the winding-up process the company remains a legal entity with rights, duties, and obligations but after dissolution, the company’s name is struck off the Register of Companies by the Registrar.

Also Read:  How to start a food packaging business?

Modes of Winding Up


Section 270 of the Companies Act, 2013 lays down the modes of winding up and prescribes two methods of closing a company. A company can be wound up either voluntarily or by the National Company Law Tribunal. The term winding up includes winding under the Companies Act and liquidation under the Insolvency Code.

 

Winding up by the Tribunal

The Tribunal is empowered to wind up a company if a petition is put forth before it as per Section 272 of the Companies Act. Section 271(1) of the same Act contains the grounds based on which a company may be wound up and these grounds inter alia include winding up if it is unable to pay debts, has passed special resolution for winding up the company and has acted contrary to the interests of the sovereignty, integrity and security of India. With the coming of the Insolvency and Bankruptcy Code, typically, a company which is unable to pay its debts, resorts to insolvency resolution under the Code. This has made the provisions pertaining to winding up on account of inability to pay debts under the Companies Act, defunct.

 

The petition can be filed by the company, trade creditors, contributors, the government or the registrar of the company and if must be accompanied by the Statement of Affairs prepared by the auditor. Part I of Chapter XX of the Companies Act contains the law governing winding up by tribunal. After petition if the Tribunal is satisfied that there is an apparent case for winding up then it shall direct the company to file objections within 30 days of such order. A liquidator is appointed who supervises the whole process of winding up and then submits a report to the tribunal within sixty days from the order. When the business activity of the company ceases completely then the liquidator files an application before the Tribunal and if the Tribunal is of the opinion that it is reasonable to wind-up the company then it may pass the order of dissolution, the copy of which shall be forwarded to the Registrar by the liquidator within 30 days from the date of order.

Also read:  Procedure, Document Checklist And Costs For Incorporation Of A Private Limited Company

Voluntary Winding Up

The other mode of winding up a company is voluntary without any intervention of the Company Law Tribunal. Section 304 of the Companies Act lays down the condition in which a company can be wound up voluntarily and they are, firstly, if a resolution is passed in the general meeting to wind-up due to expiry of the period mentioned in Articles of Association or any other reason mentioned in the Articles. Section 59 of the Insolvency and Bankruptcy Code contains the procedure for winding up voluntarily and another law that is relevant in this regard is the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulation, 2016. The first step of this process requires the Director of the company to declare winding up of the company at the general meeting following which a special resolution approving the same has to be passed. Then a meeting with creditors is to be conducted and consent of 2/3rd of the creditors is to be obtained. After the publication of the resolution, a liquidator is appointed and after the activities of the company are absolutely wound up then the liquidator prepares an application of winding up and sends it to NCLT for dissolving such company.

 

Conclusion

The process of winding up is a complicated one and is laden with a number of technicalities. With the introduction of Insolvency and Bankruptcy Code, the law in this regard has become even more complex. It is advised to engage an Insolvency Expert to do the winding-up proceedings.

How To Increase Authorised Share Capital?
Company

How To Increase Authorised Share Capital?

Each company is comprised of shares. An authorised share capital is the maximum number of shares which a company is authorised to issue. A company in India is empowered to increase its authorised capital prior to issuing shares to retail investors. It is also called nominal capital. In other words, authorised capital is essentially the limit to which an enterprise could be expanded. While, authorised share capital is the upper limit of the number shares a company may issue, its paid-up capital is the sum total of shares it has already issued. Therefore, paid-up capital can never exceed the authorised capital.

 

How To Increase Authorised Share Capital?

Following steps may be taken to increase the authorised share capital of a company:

Step 1: Verification of Articles of Association: The first step towards increasing an enterprise’s authorised capital is the verification of Articles of Association (AoA) to check if there is necessary authority to increase the authorised share capital, if not then the Articles of Association are to be accordingly changed which can be done by passing a Special Resolution as per Section 14 of the Companies Act.

Step2: Convening a Board Meeting: The next step is to convene a Board Meeting which can be done by providing of the notice of the same to the Director at least 7 days prior to the meeting and at the Board Meeting itself, approval is to be obtained the Board of Directors in order to increase the authorised share capital. Following this an Extraordinary General Meeting (EGM) is to be conducted and the date, time and venue of such meeting is to be fixed at the Board meeting. Other things that are required to be done during the Board meeting include issuing the notice of Extraordinary General Meeting to all the shareholders, auditors and directors of the enterprise.

The purpose of holding an EGM in this process is to obtain the assent of the shareholders. The approval of the shareholders is required to be in the form of an ordinary resolution authorising increasing of authorised share capital. It is to be noted here that if the Annual General Meeting (AGM) is to be conducted in the near future then this issue can be present before the shareholders under ‘Special Business’ and their assent can be obtained for the purpose of increasing share capital. The notice of a general meeting is to be issued at least 21 days prior to the meeting along with an Explanatory Statement as per Section 102 of the Companies Act. If there is a need to amend the Articles of Association then the company must file the form MGT-14 within 30 days after passing the Special Resolution at the General Meeting. Filing of form MGT-14 is a necessary step is Article of Association does not allow increasing of authorised share capital.

Step 3: Filing of Form SH-7: After conducting the EGM and obtaining the consent of shareholders the company is required to file form SH-7 within 30 days of passing the ordinary resolution at the general meeting. A certain amount of fee is to be paid while filing form SH-7 and along with filing the form, the company is required to attach and submit a copy of the Board Resolution, the notice concerning the EGM along with the explanatory statement, an authorised true copy of the ordinary resolution passed in the general meeting and an altered version of Memorandum of Association which has the new higher limit of authorised share capital.

Step 4: Increase in the Authorised Share Capital: if the procedure for increasing the authorised share capital is followed properly then the Registrar would authorise the request to increase the authorised share capital and the updated authorised share capital will be reflected on the Ministry of Corporate Affairs’ online portal. Following this, the company can increase its paid-up capital by attracting more investors to purchase their equity shares.

 

 

Conclusion

As the company grows and expands, or for the purposes of raising capital through an IPO, or to attract investors, an increase in the authorised share capital becomes essential. It is pertinent to know the procedure by which the same can be done. It is always preferable to obtain legal advice before you decide to increase the authorised share capital of your company.

Setting up a Sole Proprietorship Business in India
Company

Setting up a Sole Proprietorship Business in India

A sole proprietorship is the simplest form of company formation. In this form of business incorporation, you set up a business solely on your own. Sole proprietorship business is not separate from the owner, i.e., it does not have a separate legal identity of its own. The personal income tax return of the owner is used to file taxes for the business as well. In this form of business, a person alone is liable to pay the debts, if any, and enjoy the profits earned. A sole proprietorship is the preferred form of business for professionals such as consultants, lawyers, etc. Its popularity stems from factors such as simple to set up, low cost of formation, etc.

 

 

How is a Sole Proprietorship Business set up?

It is easy to form a sole proprietorship company. Since the entire business is done on the name of the owner itself, there is less paperwork to be done while setting up this kind of business. It is a hassle-free form of business. Any person who wishes to start a business that is not so complex, he/she may consider the Sole Proprietorship form of business. 


The following steps must be followed to form a Sole Proprietorship business:-

 

  1. Select a name and register your business: Name selected for business by a person can be any, but one must ensure that the name chosen must not be registered by others. After selecting a name, the person must register the name, if possible, the person must get the name trademarked. 
  2. Finding an appropriate location for the business: A person must decide whether he wants to do the business from home or at rent or purchase an office. If a person decides to work from home, then there's no need for finding an apt place for setting up a business. However, if a person is not opting for work from home, then he/she must find a suitable location for its business. If a person has set up a business premise, then it must be registered under the Shop and Establishment Act. 
  3. Apply for GST Registration: If the business is engaged in the sale of goods or services, it must apply for GST registration number. GST registration can be applied by providing certain documents such as Aadhar Card, PAN Card, and self-attested copies of the above documents. 
  4. Open a Current Bank Account: Most important is to open a current bank account. The person must open a separate current account in the name of the owner or business in order to avoid any mixing of the expenditure made for personal purposes or business purposes. 


Advantages of Sole Proprietorship

 

  1. The most important advantage of a sole proprietorship is its simplicity and that it is easy to establish and has a hassle-free process of establishment. 
  2. The owner himself enjoys all the profits earned. However, when there is a loss, he alone is liable to pay all the debts. 
  3. The person who sets up a sole proprietorship business he alone has authority over the entire business. He himself makes plans, invests money, supervises the business, enjoys profits.
  4. A sole proprietor and his business are not a separate legal entity, but it is one. Therefore, all the assets, liabilities, profits, and losses on the part of the owner. 
  5. In a sole proprietorship, the trader is taxed on the personal income of the owner, i.e., the tax is levied on the profits earned by the owner. Like other forms of business, the sole proprietor need not pay any other form of tax. 
  6. The sole proprietor can work for as long as he wishes, he may even sell it when is wishes, or may pass on to its heirs. 

 

Disadvantages of Sole Proprietorship 

 

  1. The owners are fully liable, i.e., if the owner fails to pay the debts, then the owner's personal property such as home, personal savings can be taken away to pay the debts. 
  2. The main disadvantage of a sole proprietorship is that it is difficult to expand the business due to factors such as lack of resources, lack of staff, and many more
  3. In the absence of a sole proprietor, the business can go haywire, i.e., it can cause huge losses if it is not managed aptly. 


Conclusion


A sole proprietorship is the best way to start a business if you have no funding, and you want to test your product in the market. It entails little liability and compliance while setting up a new business and creating a brand name for your product.