Thursday 2 November 2017

LEGAL METROLOGY - REGISTRATION AS 'PACKER'/'IMPPORTER'

Every individual or an entity dealing with pre-packed commodities shall register themselves as a ”Manufacturer”/ “Packer” or an “Importer” with the Director/Controller of Legal Metrology in the concerned Jurisdiction. The Legal Metrology (Packaged Commodities) Rules, 2011 (Rules) completely provide for all statutory requirements to be followed by persons dealing with and declarations to be made with respect to “Packaged commodities”.
Rule 27 of the said Rules provides for the procedure for Registration as a “Packer” or “Importer”

Scope and Applicability:
Rule 27 contains provisions relating to Registration as a “Manufacturer”, “Packer” and an “Importer”. Before analyzing the procedure for registration, it is important to understand the differences between the terms ‘manufacturer’ and ‘packer’.
According to Rule 2(d), the term “Manufacturer” means and includes any person / Firm, who
·         produce/ make / manufacture a commodity
·         Puts, or causes to be put, any mark on any packaged commodity and the mark claims the commodity in the package to be a commodity produced, made or manufactured by such person or firm.

On the other hand Rule 2(g) defines ‘Packer’ as a person / Firm, who which pre-packs any commodity in any bottle, tin, wrapper or otherwise, in units suitable for sale whether wholesale or retail.
The term ‘pre-packed commodity’ means a commodity which without the purchaser being present is placed in a package of whatever nature, whether sealed or not, so that the product contained therein has a pre-determined quantity;[1]
Rule 27 provides provision for two licenses- Packer and an Importer. The Rule lays down that the registration is applicable for any person who prepacks or imports any commodity for sale distribution or delivery.

Timeframe:
Application in this regard shall be made before the Director/Controller of Legal Metrology as the case may be made within ninety days from the date on which he or it commences such pre-packing/importing.  

Form and manner:
Every Applicant shall submit an Application for Registration before the Director/Controller as the case may be, containing the following particulars:
a) The name of the applicant;
b) The complete address of the premises (One or more) at which the pre-packing or import of one or more commodities is made by the applicant;
'Complete address' means, the postal address at which the factory is situated. In any other case, the name of the street, number (if any) assigned to the premises of the manufacturer or packer and either the name of the city and State where the business is carried on by the manufacturer or packer or the Postal Index Number [PIN] Code. [2]
 (c) The name of the commodity or commodities pre-packed or imported by the applicant.
In addition to the above particulars of goods imported and the names of the countries from which the goods are imported are to be given in case of application to register as an importer.
Registration of a shorter address is allowed if the Controller/Director is satisfied that such address is sufficient to enable the consumer or any other person to identify the manufacturer or the packer.[3]
The Application along with the supporting documents are required to be submitted along with the fee of Rupees Five Hundred. Upon verification of the Application and the documents, the Controller/Director as the case may be will issue the certificate of Registration as a ‘packer’ or ‘Importer’.

Amendment to the Certificate of Registration:
Any amendment to be carried out in the certificate of registration shall be communicated to the Registrar in writing along with a fee of rupees one hundred.

Offenses and Penalty:
Whoever contravenes the provisions of rules 27 to 31, he shall be punished with fine of four thousand rupees. In case if the violation is committed by a company, every director or person in-charge shall be punished independently.
It is pertinent to note that, the Registration under Rule 27 is mandatory for all ‘pre-packed commodities’. In spite of the definition provided in the Legal Metrology Act 2009, there is ambiguity in interpretation of the said term. Even though various High Courts and the Supreme Court have tried to interpret the term in various Judicial Precedents, lack of clarity in this regard still prevail among firms/ entities in complying with the provisions of these Rules.



[1] Section 2(l) of the Legal Metrology Act 2009
[2] Explanation to Rule 10(1) of the Legal Metrology (Packaged Commodity) Rules, 2011
[3]  Explanation to Rule 28 of the Legal Metrology (Packaged Commodity) Rules, 2011

Sunday 30 April 2017

5 Smart Startup Decisions

Today the number of startup concerns are quite increasing. The percentage of legal challenges faced by a startup is also proportionately increasing. Startups focus more on building their business and brand. Unfortunately, they ignore the legal component of setting up of a business and building the same. There are few legal aspects which every startup must consider before and after starting a business.

Law is just not dispute resolution. The trend that a legal consultant should be approached only in event of a dispute is slowly changing. Role of a consultant is not just to safeguard when an entrepreneur land up in a problem but also to give ample guidance to ensure that a business is in par with statutory / legal compliance.





Here are few basic legal decisions / practices which every business aspirant / start should consider at the beginning stage of the business.


1.     Register your entity: Every startup need not be a registered entity. It can be a sole proprietorship or an unregistered partnership. There is no legal mandate for registration of a business. However any entity formation or a registration has its own advantages in terms of a business development. It protects your brand and improves your business credibility.

The following are various types of entities and their corresponding Statutory Authorities:


Nature of Entity
Authority
Public/Private Limited Company
The Registrar of Companies
Limited Liability Partnership (LLP)
The Registrar of Companies
Partnership Firm
The Registrar of Firms

Based on the business requirements (both short term and long term), one should choose the manner in which the entity is to be incorporated. While deciding the same various legal parameters should be analyzed.

2.     Document Everything: Documentation is the core component of every business. It has two fold implications – Proper documentation is a value addition to the credibility of the entity. On the other hand, incomplete/ineffective documentation is the major reason for litigation in many situations. Every business entity should invest time and effort in drafting of agreements of contracts (External documentation) and maintenance of business returns and registers (Internal documentation).

3.     Protect your IP: Intellectual property plays a major role in this era of technological development as IP infringement cases are increasing day by day. Right from your business name and logo to your trade secrets, literary works/publications and designs everything can be registered as Trademarks, Designs, Copyrights and Patents. Registration of your IP not only protects your brand at the local level but at the international level.

4.      Statutory Approvals / Compliance:

To commence a business entity formation is the first step and not the only step. There are other industry specific approvals to be obtained to commence and continue business operations. For instance every packer/manufacturer or importer of packaged commodities should obtain a license from Controller of Legal Metrology.

Similar to approvals, compliance is another important component of every business.  Right from maintenance of documents, periodical filings to manner in which the business is to be conducted adherence to law is important. Companies should comply with the requirements of Companies Act 2013. All business entities should follow tax laws applicable to them.

Compliance play a huge rule in business acquisitions and appreciates the business image to a greater extent. On the other hand, non- compliance in many cases lead to huge penalties and legal proceedings which hinder the growth of the business.


5.     Plan your finance:  Financial planning is not just making financial decisions in the light of present business requirements. An effective financial planning should involve forecasting future implications of the said decision in light of the business entity’s environment. A wise financial planning should not always stick to the decisions that are cost effective. Tax planning, management control are few other parameters in valuation of a financial decision. 

Monday 6 February 2017

COMPROMISES, ARRANGEMENTS & AMALGAMATIONS - COURT CONVENED MEETINGS

Section 230 of the Companies Act 2013 (referred to as Act), provides for detailed procedure relating to compromise or arrangements with creditors or members. The first and foremost stage in the process of getting the scheme approved by the National company Law Tribunal (referred to as Tribunal) is filing of Applications by the respective companies before the Tribunal, upon which the Tribunal may order a meeting of members or creditors or a class of members or the creditors.
The meeting so ordered shall be conducted in the manner as may be prescribed by the Tribunal.[1]
The Companies (Compromises, Arrangements & Amalgamations) Rules 2016, which was made effective from 15.12.2016, enlists detailed procedure for the conduct of the meeting pursuant to the Order of the Tribunal to sanction the scheme if compromise or arrangement by the members or creditors as the case may be.
Following are the highlights of provisions relating to meeting as prescribed under Section 230 of the Act and the Rules made thereunder.


BEFORE THE MEETING:

1.      Notice of the Meeting: Notice of the general meeting ordered by the Tribunal as stated above shall be sent to the members or creditors as the case may be through registered post or courier or by email or hand delivery at the address registered with the company[2]. A copy of the same shall also be displayed at the website of the company if any. The form in which such notice has to be issued is prescribed in Rule 6 of the Companies (Compromises, Arrangements & Amalgamations) Rules 2016. In case of a listed company a copy of the same will be displayed in the website of SEBI and the recognized stock exchanges where the shares of the Company are listed.
2.      Information / Disclosures supporting Notice:
a)      Statement disclosing the details of compromise or arrangement.
b)      Copy of valuation report, if any.
c)      Effect of compromise or arrangement on material interests of the directors of the company / debenture trustees.
d)     All information as provided in Rule 6 (3) of the Companies (Compromises, Arrangements & Amalgamations) Rules 2016.

3.      Advertisement / Paper publication:
Rule 7 of the Companies (Compromises, Arrangements & Amalgamations) Rules 2016, provides the form and manner in which the contents of the notice referred above is required to be published.  In event of separate meetings conducted by for the members and the creditors, a joint publication may also be preferred.
The Rules further states that the publication is required to be made both in an English newspaper and a vernacular newspaper having vide circulation in the state where the registered offices of the Companies are situated.
A copy of the said publication should be displayed in the website of the Company if any.
Proviso to Section 230 (3) mandates that the time frame within which the copies of the compromise / arrangement is made available at the registered office of the company should be mentioned specifically in the advertisement
4.      Voting: Persons received the notice may vote either in person or proxy or by way of postal ballot within one month from the date of receipt of the notice. The concept of voting through postal ballot is a new addition to the existing provisions relating to voting in a meeting convened for the purpose of sanction of a scheme. Rule 10 of the Companies (Compromises, Arrangements & Amalgamations) Rules 2016 list outs the procedure relating to voting by proxies.
5.      Notice to Statutory Authorities: According to Section 230(5), Companies shall send notice in the form prescribed in Rule 8 of the Companies (Compromises, Arrangements & Amalgamations) Rules 2016 to the following Authorities:
a)      Central Government, Registrar of Companies, Income Tax Authorities in all cases.
b)      RBI, SEBI and Stock Exchanges if applicable.
c)      Other sector specific regulators/authorities as directed by the Tribunal.

If the Authorities referred above intend to make any representation, the same shall be made within 30 days from the date of receipt of the notice. In event of no representations received within the stipulated period, then it shall be presumed that the authorities have no representations to be made with respect to the proposed scheme.[3] It is pertinent to note that this provision stipulating timeframe for the authorities to provide their representations is new addition in the present Act.
6.      Physical copy of the scheme of compromise or arrangement, upon requisition shall be provided at free of cost to everyone who is entitled to attend the meeting and vote in the said meeting.[4]
7.      Affidavit of Service: The chairman appointed by the companies or such other person appointed by the Order of Tribunal shall file the Affidavit of Service before the Tribunal, not less than 7 days before the date fixed for the meeting.[5]

DURING & AFTER THE MEETING:
1.      VOTING MAJORITY: Section 230(6) stipulates that the Scheme is said to be approved if majority of members/creditors representing three fourth in value cast their votes in favor of the same. In that event the scheme is said to be binding on all the members or creditors as the case may be.
2.      RECORDING THE RESULT OF THE MEETING: The Chairman of the meeting shall record the result of the meeting and file Rule 14 of the Companies (Compromises, Arrangements & Amalgamations) Rules 2016 within the time fixed by the Tribunal. In case if no such time is fixed, then the same shall be filed within 3 days after the conclusion of the meeting.

RIGHT TO OBJECT:
Proviso to Rule 230 (4) states that objection to the compromise shall be raised only members holding at least 10% of shareholding or person(s) holding 5% of the outstanding debt as per the last audited financial statement.

DISPENSATION OF MEETING:

Section 230 (9) of the Act states that the Tribunal may dispense with calling of a meeting of creditor or class of creditors where such creditors having ninety percent in value give their assent to the scheme. Also Rule 5 of the Companies (Compromises, Arrangements & Amalgamations) Rules 2016 states that the Tribunal may give directions to determine the meeting to be held or dispensed with as per Section 230 (9).
The question whether the same is applicable for dispensation of meeting of members was raised before the Principal Bench, New Delhi. The Bench vide its Order dated 13.1.2017[6], clarified that the same shall not be applicable to the meeting of members of the Company. Dismissing the prayer raised by the companies in the said scheme of compromise, the Bench clarified that Section 230(9) is applicable only to meeting of creditors or class of creditors and not to the members.




[1] Section 230 (1) of the Companies Act 1956.
[2] Rule 6 (2) of Companies ( Compromises, Arrangements & Amalgamations) Rules 2016
[3] Section 230 (5) of the Act & Rule 8 (3) of the Companies (Compromises, Arrangements & Amalgamations) Rules 2016
[4] & Rule 11 of the Companies (Compromises, Arrangements & Amalgamations) Rules 2016
[5] & Rule 12 of the Companies (Compromises, Arrangements & Amalgamations) Rules 2016

[6] JVA Trading Pvt. Ltd. and C&S Electric Limited.