How to Apply for TAN in India: Step-by-Step Guide

Defining Oppression and Mismanagement

The Companies Act, 2013, does not explicitly define oppression and mismanagement. Instead, their meanings have evolved through judicial interpretations and case law.

In simple terms:

• Oppression involves burdensome, harsh, or wrongful conduct toward minority shareholders. It typically refers to situations where the majority shareholders abuse their power to harm the minority's rights or interests.
  
  
• Mismanagement refers to gross mismanagement of company affairs, which could lead to financial loss or harm to the company’s reputation or operations. It often involves negligence, fraud, or actions taken in bad faith by those in control.

Legal Remedies under Sections 241–246

Sections 241 to 246 of the Companies Act, 2013 empower company members to approach the National Company Law Tribunal (NCLT) if they believe the company’s affairs are being conducted in a manner that amounts to oppression or mismanagement.

If the tribunal is satisfied, it can order remedies such as:

• Regulation of the company’s future conduct
• Removal of directors
• Termination, modification, or setting aside of certain agreements
• Recovery of misappropriated funds
• Preventive actions to safeguard the company’s interests

A Detailed Explanation of Section 241

Section 241 of the Companies Act, 2013 is the core provision that allows members to seek relief from oppression and mismanagement.

Section 241 exists to protect minority shareholders and the company itself from conduct that threatens their interests. It ensures that no shareholder or director misuses their powers to the detriment of others or the company.

Under Section 241, a member can apply to the NCLT if:

• The company’s affairs are being conducted in a manner oppressive to any member(s).
• There has been mismanagement that threatens to cause serious prejudice to the interests of the company, members, or the public.

How can an Application be made under Section 241?

Filing an application under Section 241 involves a specific legal process:

Who Can Apply?

Eligible members include:

• Shareholders holding at least 10% of the company’s issued share capital
• In companies without share capital, at least 1/5th of the total number of members
  In certain cases, members may request NCLT permission to file even if they do not meet the above thresholds (especially where the majority is acting in bad faith).

Grounds for Filing

The application must clearly describe:

• Acts of oppression (specific conduct harming member rights)
• Acts of mismanagement (negligence, fraud, misconduct, etc.)
• Resulting harm to the company or its members

Documentation Required

• Petition/application under Section 241
• Evidence of shareholding or membership eligibility
• Documentary proof of oppressive/mismanaged conduct
• Affidavit verifying the facts
• Court fees as prescribed

Where to File?

Applications must be filed with the relevant bench of the National Company Law Tribunal (NCLT) having jurisdiction over the company’s registered office.

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Who Can File an Application under Section 241 of the Companies Act, 2013?

Eligibility to file under Section 241 depends on the applicant’s status and shareholding:

In addition, the Central Government can also apply under Section 241(2) if it believes the affairs of the company are conducted in a manner prejudicial to public interest.

Frequently Asked Questions

What is a Certificate of Commencement of Business?

The Certificate of Commencement of Business is a mandatory legal document that certain companies in India must obtain before they start their business activities. It is issued by the Registrar of Companies (ROC) under the Companies Act of 2013, and applies specifically to public and private companies limited by shares.

Beyond legal compliance, this certificate also plays a big role in establishing trust. It shows investors, banks, and stakeholders that your company has met all foundational requirements and is operating within the bounds of the law. It also helps prevent fraudulent incorporations by ensuring that companies follow due process from the start.

Significance of Commencement of Business Certificate

The Certificate of Commencement of Business serves multiple purposes:

• Legal Authorisation: It acts as formal approval for a company to start its operations.
  
• Regulatory Compliance: Ensures adherence to the provisions of the Companies Act of 2013.
  
• Prevention of Fraud: Minimises the risk of shell companies or fraudulent incorporations.
  
• Credibility: Enhances trust with investors, financial institutions, and stakeholders.
  
• Access to Funds: Allows the company to exercise borrowing powers and raise capital legally.
  

Commencement of Business under Companies Act 2013 – Old Act and Procedure

Under the Companies Act, 2013, companies with share capital cannot begin operations immediately after incorporation. While companies without share capital may commence business right after receiving the Certificate of Incorporation, those with share capital must secure a Certificate of Commencement of Business as per Section 11 of the Act and Rule 24 of the Companies (Incorporation) Rules, 2014.

This requirement is applicable to all newly formed public and private companies with share capital, highlighting the importance of meeting initial capital commitments and completing registration protocols before beginning operations or seeking external financing.

Position Under Erstwhile Companies Act, 1956

Previously, the Companies Act of 1956 governed the commencement of business for companies in India. Under this law, only public companies with share capital were required to obtain a Certificate of Commencement of Business. Private companies, on the other hand, were exempt and could begin operations immediately after incorporation.

The 2013 Act introduced more stringent rules, bringing private companies with share capital under the same requirements to enhance transparency and accountability.

Certificate of Commencement of Business Under Companies Act 2013

To obtain this certificate under the current law, companies must meet two critical requirements:

1. Declaration by a Director: The director must declare that every subscriber to the memorandum has paid for the shares they subscribed to.
   
2. Registered Office Verification: The company must file verification of its registered office with the ROC.
   

Only after fulfilling these conditions can the company apply for the certificate and begin lawful operations.

Eligibility Criteria for Commencement of Business Certificate

The Certificate of Commencement of Business (COB) is mandatory for the following categories of companies:

• Companies Incorporated on or after November 2, 2018: Any company registered after this date is required to obtain the COB Certificate within 180 days from the date of incorporation.
  
• Companies with Share Capital: Regardless of industry or business type, all companies with share capital must apply for and secure the COB Certificate before starting operations.
  

Which Company is Not Required to File a Certificate of Commencement of Business?

The following categories of companies are exempt from filing for the Certificate of Commencement of Business. These include:

• Companies Incorporated Before November 2, 2018: This exemption applies to companies that were established prior to the implementation of the Companies (Amendment) Ordinance, 2018, specifically before November 2, 2018.
  
• Companies Registered After November 2, 2018, Without Share Capital: Companies that were incorporated after November 2, 2018, but do not have a share capital structure, meaning they haven’t issued any shares, are also exempt from obtaining the COB Certificate.
  

Documents Required to Obtain Commencement of Business Certificate in India

To apply for the Certificate of Commencement of Business, companies must submit the following documents:

• Form INC-20A: A declaration filed by a director.
  
• Board Resolution: Approving the commencement of business.
  
• Proof of Capital Subscription: Evidence that all subscribers have paid their share value.
  
• Registered Office Proof: Utility bill or rental agreement confirming office address.
  
• Certificate of Incorporation: Issued by the ROC.
  

Application Process for Commencement of Business Certificate

Here’s a detailed walkthrough:

1. Log in to the MCA Portal
   Visit the official website of the Ministry of Corporate Affairs (MCA). Log into the MCA portal using your registered credentials (User ID and Password). If you are not registered yet, you must create an account first.
   
2. Navigate to the e-Filing Section
   After logging in, go to the 'MCA Services' tab and select the 'e-Filing' option. This section contains all the necessary forms and submission options for company-related filings.
   
3. Download and Fill out Form INC-20A
   Locate and download Form INC-20A- the specific form used for the Declaration of Commencement of Business. Carefully fill in all the required details, such as company information, paid-up share capital details, and confirmation of compliance with registration requirements.
   
4. Select the Correct Corporate Identification Number (CIN)
   Enter and double-check the Corporate Identification Number (CIN) of your company. This number uniquely identifies your company and ensures the form is linked to the right entity.
   
5. Attach the Required Documents
   Upload the necessary supporting documents, which typically include:
   
   • The director’s declaration that the subscribers have paid all share capital
     
   • Proof of registered office verification (such as a utility bill, rent agreement, or ownership document)
     
6. Select the Correct Corporate Identification Number (CIN)
   Enter and double-check the Corporate Identification Number (CIN) of your company. This number uniquely identifies your company and ensures the form is linked to the right entity.
   
7. Submit the Form and Pay the Prescribed Fee
   Once the form and attachments are ready, submit them through the portal. Pay the applicable government fee based on your company's authorised share capital. The payment can usually be made online through various options available on the MCA portal.
   
8. Receive the Service Request Number (SRN)
   After successful submission, the system will generate a Service Request Number (SRN). Save this number carefully, it will help you track the status of your application and any future correspondence regarding your Certificate of Commencement of Business.
   

Time Limit for Filing the Declaration of Commencement of Business

As per Section 11 of the Companies Act, 2013, the declaration must be filed within 180 days from the date of incorporation. Failure to do so can lead to:

• Penalties for the company and its officers.
  
• Potential strike-off from the ROC register
  

Form INC-20A

Form INC-20A is the declaration form filed to confirm the commencement of business. It must be signed by a director and certified by a professional (CA/CS/CWA). The form includes:

• Company details
  
• Paid-up capital confirmation
  
• Registered office address verification
  

Fee For Filing Form 20A and Receiving Commencement of Business Certificate

The fee for filing Form INC-20A depends on the company's authorised share capital:

Consequences of Not Filing Certificate of Commencement of Business

Failing to file Form INC-20A within the 180-day window leads to:

• Penalty of ₹50,000 for the company.
  
• ₹1,000 per day penalty for each defaulting officer, up to ₹1 lakh.
  
• ROC may strike off the company’s name if it remains inactive under Section 11(3).
  

Conclusion

Obtaining the Certificate of Commencement of Business is a critical step that validates your company's readiness to operate in India’s regulatory landscape. For public and private companies with share capital, understanding and complying with this requirement ensures legal clarity, business credibility, and uninterrupted growth. By following the correct process, submitting the necessary documents, and meeting deadlines, companies can avoid heavy penalties and begin their entrepreneurial journey on the right foot.

Frequently Asked Questions

Difference Between Limited Liability Partnership and Private Limited Company

The fundamental difference between a Pvt Ltd and an LLP lies in ownership and management. While a Pvt Ltd company is governed by shareholders (owners) and directors (managers), an LLP is managed by partners who own and operate the business. Additionally, compliance requirements, taxation and funding options differ significantly between the two.

Here is a table outlining the difference between LLP and a private limited Company:

While the differences between LLPs and Private Limited Companies are numerous, they share similarities in key aspects:

• Limited Liability
• Separate Legal Identity
• Registration Process with the MCA
• Perpetual Succession

Let’s understand the key features and registration process in detail for both Private limited companies and LLPs.

What is a Private Limited Company?

A Private Limited Company (Pvt Ltd) is a privately held business entity that operates under the legal framework of the Companies Act of 2013 in India (or similar laws in other countries). It combines the benefits of limited liability protection for its shareholders with certain restrictions to maintain its private nature.

This structure is popular among startups and small to medium-sized enterprises due to its ability to attract investments while offering limited liability protection and operational flexibility.

Features of Pvt Ltd Company

Listing down some key advantages of a Private Limited Company below:

1. Limited Liability

The liability of Shareholders is limited. Personal assets are generally protected from business debts.

2. Separate Legal Entity

A Private Limited Company is considered a distinct legal entity from its owners (shareholders). It can enter into contracts, own property, and sue or be sued in its own name.

3. Ownership

Owned by shareholders who hold shares in the company. Transfer of ownership is facilitated through the buying and selling of shares.

4. Management

Managed by directors who are appointed by the shareholders. The day-to-day operations are overseen by the management team, while major decisions are often subject to shareholder approval.

5. Number of Shareholders

Requires a minimum of two shareholders and can have a maximum of 200 shareholders.

6. Regulation and Compliance

Governed by the Companies Act and regulated by the Ministry of Corporate Affairs in India. Compliance includes filing annual financial statements, conducting annual general meetings and maintaining statutory records.

7. Investment and Funding

Easier to attract investment and funding compared to other business structures due to the well-defined ownership structure and limited liability.

8. Perpetual Succession

The company continues to exist even if its shareholders or directors in private limited company change, retire, or pass away. Ownership can be transferred seamlessly through the sale of shares.

Private Limited Company Registration

The Ministry of Corporate Affairs (MCA) has introduced a streamlined process for incorporating companies called the Simplified Proforma for Incorporating Company Electronically Plus (SPICe+). It consists of two parts: Part A and Part B.

1. Step 1: Acquire a Digital Signature Certificate (DSC)

• A Digital Signature Certificate (DSC) is a digital method of verifying or attesting documents.
• It is typically issued with one or two-year validity and is mandatory for all witnesses in the Memorandum of Association (MOA) and Articles of Association (AOA).
• Class 2 or 3 DSCs can be obtained through listed Government Certifying Agencies (CAs).

2. Step 2: Apply for Name Approval using SPICe+ Part A

• Part A facilitates 'Name Reservation' with two proposed names and one re-submission (RSUB).
• In case of name rejection due to various reasons, a re-filing with the specified fee is required.

Note: Simultaneous application for name approval (Part A) and Incorporation (Part B) through SPICe+ is possible, but only one name can be reserved.

3. Step 3: Apply for Company Registration using SPICe+ Part B

After name approval, Part B completes the registration process, including:

• • Application for allotment of Director Identification Number (DIN)
  • Incorporation of the new company
  • Submission of e-MoA (INC-33) and e-AoA (INC-34)
  • Application for PAN and TAN (mandatory)
  • Application for EPFO registration (mandatory)
  • Application for ESIC registration (mandatory)
  • Application for Professional tax registration (only for Maharashtra)

The entered information in SPICe+ Parts A and B is automatically transferred to associated forms like AGILE-PRO, eAoA, eMoA, URC1, and INC-9, as applicable.

4. Step 4: Open a Bank Account

Open a current account for your company to facilitate seamless financial transactions and business operations, handling various aspects such as receiving payments, making supplier payments and managing payroll.

5. Step 5: File for the Commencement of Business Certificate

The Commencement of Business Certificate, filed through Form INC-20A within 180 days of incorporation, is a declaration by the Director of the Company submitted to the Registrar of Companies.

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After the SPICe+ Form receives approval, the Registrar of Companies (ROC) issues the Certificate of Incorporation, confirming the successful registration of your company.

This certificate includes vital information such as the Company's name, registration number (CIN), date of incorporation, registered office address, and so on.

Example of CIN: U72200KA2013PTC097389

Read more about what each letter in a CIN signifies here.

What is a Limited Liability Partnership?

A Limited Liability Partnership (LLP) is a business structure combining features of a traditional partnership and a limited company.

Limited Liability Partnerships are often chosen by professional services firms, small businesses and ventures where the partners want the flexibility of a partnership along with the protection of limited liability.

Features of LLP

A Limited Liability Partnership (LLP) is a business structure that combines features of both a traditional partnership and a limited company. Limited Liability Partnerships are often chosen by professional services firms, small businesses, and ventures where the partners want the flexibility of a partnership along with the protection of limited liability.

Some key characteristics of a Limited Liability Partnership are:

1. Limited Liability

Similar to a private limited company, partners in an LLP have limited liability.

2. Separate Legal Entity

An LLP is a distinct legal entity from its partners. It can own property, enter into contracts, and sue or be sued in its own name.

3. Ownership

Owned by partners, and the ownership structure is defined by the LLP agreement. Transfer of ownership usually requires the consent of other partners.

4. Management

Managed by partners or a designated management team, as specified in the LLP agreement. Each partner typically has an equal say in the management decisions, making it a more collaborative structure.

5. Number of Partners

Requires a minimum of two partners, and there is no maximum limit on the number of partners in an LLP.

6. Regulation and Compliance

Governed by the Limited Liability Partnership Act in India, with less stringent regulatory requirements compared to a private limited company. Compliance involves filing annual returns and maintaining statutory records.

7. Flexibility

Offers greater flexibility in terms of internal management and decision-making processes compared to a private limited company.

Limited Liability Partnerships Registration

Here's a simplified guide on the steps for Limited Liability Partnership (LLP) registration:

1. Step 1: Apply for DSC

• Obtain a Digital Signature Certificate (DSC) from Government Certifying Agencies with one or two-year validity.

2. Step 2: Name Reservation

• Reserve the LLP's name using the LLP-RUN form.

3. Step 3: Apply for Registration through FiLLiP

• Complete the FiLLiP (Form for Incorporation of Limited Liability Partnership) and submit it to the Registrar. Alongside FiLLiP, submit the Subscriber sheet and Partner's consent (Form 9) as additional documentation.

4. Step 4: File LLP Agreement

• File the LLP Agreement using Form 3 on the MCA portal within 30 days of LLP registration.

After the FiLLiP Form receives approval, the Registrar of Companies (ROC) issues the Certificate of Incorporation, a crucial legal document confirming the successful registration of your company.

This certificate includes vital information such as the LLP's name, registration number (LLPIN), date of incorporation, registered office address, and more.

Example of LLPIN: AAA-1234

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LLP vs Pvt Ltd Ownership

• Shareholders vs. Partners
  • Pvt Ltd Ownership: Shareholders own the company but may not be involved in day-to-day management. Primarily managed by Directors.
  • LLP Ownership: Partners typically manage the business and have a direct role in decision-making.
• Transfer of Ownership
  • Pvt Ltd: Shares can be easily transferred from private limited company members, making it simpler to onboard or exit shareholders.
  • LLP: Ownership transfer requires the consent of other partners, which can be complex.

LLP vs Pvt Ltd Compliance

• Compliance for Private Limited Companies
  • Hold the First Meeting of the Board of Directors within 30 days of the Incorporation of the Company. It is compulsory to host four meetings in a year with a gap not more than 120 days.
  • Hold an Annual General Meeting every year, on or before September 30^th, during business hours and in the registered office.
  • Appoint the company's first auditor within 30 days of incorporation, who will serve until the end of the first AGM.
  • File Form ADT 1 within 15 days of the appointment of the subsequent auditor.
  • File Annual Returns (AOC 4 and MGT 7) within 30 and 60 days of holding the AGM, respectively.
  • File Form ITR-6 for Income Tax Return annually.
  • File Form DIR-3 KYC to disclose details of the Directors.
• Compliance for Limited Liability Partnerships
  • File an LLP agreement within 30 days of incorporation. The penalty of ₹100/day will be levied if an LLP fails to comply with this condition.
  • File the form DIR3 for the DIN allotment in case of an existing company.
  • File two annual statements for Annual Return and Statement of Accounts and Solvency using Forms 11 and 8, respectively.
  • Sign, verify and file the Income Tax Return (ITR) annually.
  • Depending on their shareholding capacity, you and your partner must deposit their contribution into the relevant bank account within the specified time frame.
  • Get a GST registration since it is a legal compulsion per the GST Act.
  • Audit your accounts through CAs if the company's annual turnover exceeds Rs 40 lakhs or the contribution surpasses ₹25 lakhs of the threshold limit.
  For businesses that prefer a simpler and cost-effective compliance framework, LLPs are the better option. With fewer regulatory requirements, LLPs reduce the administrative burden, making them ideal for small businesses, professional firms and startups not seeking external funding. However, for companies planning rapid growth, attracting investors or requiring a formal structure for credibility, Pvt Ltd companies are worth the added compliance effort.

LLP vs Pvt Ltd Funding

• Equity Financing
  • Pvt Ltd Company funding: Easily attracts investors by issuing shares, making it suitable for startups seeking venture capital or private equity.
  • LLP funding: Equity financing is not possible since partners cannot issue shares.
• Debt Financing
  • Both structures can access loans, but Pvt Ltd companies have additional options like issuing debentures or convertible notes.

LLP vs Pvt Ltd Foreign Direct Investment (FDI)

• Pvt Ltd Company funding: Easily attracts investors by issuing shares, making it suitable for startups seeking venture capital or private equity.
• LLP: FDI in LLP is allowed only in sectors where 100% FDI is permitted and is subject to approval in other cases, making it less flexible.

LLP vs Pvt Ltd Taxation

• Taxation for Pvt Ltd CompaniesIncome tax for Pvt Ltd companies:
  • 25% if the turnover is up to ₹400 crore (as per recent provisions).
  • 30% for larger companies.
  A cess of 4% applies to the tax amount, along with surcharges for higher income levels.
• Taxation for LLPsLLP taxation rate is 30% on their total income plus a surcharge (if applicable) and cess.Both LLPs and Pvt Ltd companies are treated equally under the GST regime:
  • GST registration is mandatory for businesses with annual turnover exceeding ₹20 lakhs (₹40 lakhs for goods in some states).
  • Compliance includes filing monthly or quarterly GST returns, depending on turnover.

Company Registration with Razorpay Rize

You can experience a hassle-free, 100% online business registration process with Razorpay Rize, featuring the lowest professional fees and absolutely no hidden charges.

Explore the diverse range of services tailored to suit the needs of both startups and established businesses.

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Our package includes:

• Company Name Registration
• 2 Digital Signature Certificates (DSCs)
• 2 Directors’ Identification Numbers (DINs)
• Certificate of Incorporation(COI)
• MoA & AoA [Applicable for Private Limited Companies and OPCs]
• LLP Agreement [Applicable for LLPs]
• Company PAN & TAN

*Prices and documents can differ based on the company type.

Which Company Type Should You Register Your Business With?

Before proceeding with the registration of either an LLP or a company, it is crucial to evaluate the following factors carefully.

• Consider the nature and size of your business

• If you operate a small business with a limited workforce, opting for LLP registration might be more favourable, given the relatively lighter compliance requirements compared to a company. On the other hand, for larger businesses with substantial employee numbers and capital needs, registering as a company provides greater flexibility in raising capital.

• Fundraising requirements

• If your goal is to raise funds through equity, choosing a company structure is imperative. However, if your fundraising needs are more straightforward, the LLP structure may be a more suitable option.

• Tax rates

• It's essential to compare the tax rates applicable to both company and LLP structures, as there can be significant differences. Opt for the structure that aligns with your financial goals based on total income or turnover.

• Personal liability protection

• While an LLP offers limited liability protection, a company structure treats the company as a distinct legal entity, safeguarding shareholders' personal assets.

Ultimately, the choice between a company structure and an LLP structure hinges on the unique characteristics of your business, including its nature, size, and capital requirements.

Find Your Ideal Company Type

If you still need more help deciding which company type to register with, don't worry! We’ve got you covered with our latest tool - "Know Your Company Type."

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For the first time in India, simply answer a quick set of questions about your startup, and this tool will leverage your responses to identify the ideal company registration type. Find your perfect fit with just one click!

Explore side-by-side comparisons of popular company types for added clarity and make informed choices effortlessly!

Frequently Asked Questions