A

Project Report

On

Documentation required for startup

For

“Distributorship of IT & Networking equipment in Maharashtra”

Submitted By: Roll No- 43 (Siddarth Mishra)

Roll No-58 (Rohan Sonawane)

Submitted on: October 24, 2013

INTRODUCTION

The term 'Information Technology' (IT), as defined by the Information

Technology Association of America (ITAA) is the "study, design, development, implementation,

support or management of computer-based information systems, particularly software

applications and computer hardware."

India IT Market

India IT industry is the only industry in the country that has outperformed all

others in the battle against the global competition. In fact, Indian IT industry went through a

dream run to grow from a meager US$ 150 million in 1991-92 to an astounding US$ 5.7 billion

in 1999-2000. Taking its advancement further ahead, the Indian IT industry has taken itself to a

new height to be at par with the global leaders in the current days. India IT market consists of all

the companies that use computer and computer software to convert, store, protect process,

transmit and retrieve information or data.

India IT market emerges across four broad sectors:

1. IT Services

2. Software Products

3. IT Enabled Services (ITeS)

4. E-business

Software exports in India have played a major role in the economic development of the country.

The software and services revenue of the country also soared up from US$ 22 billons in 2004-05

to US$ 28.5 billion in 2005-06 with a growth rate of 32%.

Not only in the software exports, India IT market has also considerably grown in the domestic

sector as well.

The NASSCOM - McKinsey Report

A research work was undertaken by The NASSCOM - McKinsey to learn about the future of

Indian IT market. The key findings of the report are:

IT export of the country will account for about 35% of the total export.

Software and Services will contribute 7.5% of the nation's overall GDP growth.

This industry will draw around US$ 4-5 billion Foreign Direct Investment.

Networking Equipment

The term ‘Networking Equipment’ refers to certain devices which are mainly

used to bridge the gap between a server and a personal computer. The definition is not limited to

bridging the gap, but it also provides cyber security, data encryption, data storage as well as

transmission and reception of data. Network equipment includes Gateways, Routers, Hubs,

Switches, Multiplexers, Proxy servers, Modems etc.

India IT Hub Irony

Indian capital’s famous Nehru Place market has been placed among the top 30

notorious IT markets of the world that deal in goods and services infringing on intellectual

property rights. Nehru Place is reportedly one of the many markets in major cities throughout

India that are known for dealing in large volumes of pirated software, pirated optical media

containing movies and music, and counterfeit goods”.

DISTRIBUTOR AND ROLES OF DISTRIBUTOR

A distributor is an intermediary entity between a producer of a product and

another entity in the distribution channel or supply chain, such as a retailer, a value-added

reseller (VAR) or a system integrator (SI). The distributor performs some of the same functions

that a wholesaler does but generally takes a more active role. Distributors also frequently take a

more proactive approach in educating resellers about new products, through such activities as

presales training, road shows, and demos on behalf of vendors. Distributors may provide services

around the procurement process, such as contract negotiation, marketing for resellers and SIs,

and warrantees.

A Distributor is not allowed to sell the product directly to the end user or the

consumer in this case. Distributor can only supply products to the Retailers or Dealers

which then supply to the consumer.

WHAT WE ACTUALLY WANT TO DO?

We are willing to start a Distributorship of IT Products and Networking Equipment

of certain Brands (Not one single brand) along with Sale of Services for the same.

Distributors are limited to only one in a city or sometimes a state.

The distributor purchases directly from the company and sells goods as well as services

to the dealers or retailers.

No retailer is allowed to directly to go in the company and purchase the product he

wishes to. He has to purchase it from the distributor of his city or state.

We will provide goods and services to Dealers and Big Corporate Establishments.

GOODS offered will be:

1. Routers,

2. Switches,

3. Hubs,

4. LAN,

5. WAN,

6. Cyber Security,

7. Data Encryption,

8. Data Transmitters-Receivers,

9. Servers, Data storage devices etc.

SERVICES Offered will be :

1. Data retrieval services

2. Networking services

3. Switching services

4. Intranetworking services

5. Optical fiber connectivity

6. Wireless connectivity services etc.

Type of Organization

We are willing to start a Private Limited company, as we will be dealing in

products as well as services. It will have ‘Share Holders’ with ‘limited liability’ and its shares

will not be offered to general public. This type of system is termed as "Limited by shares"

“Limited by Shares” means that the company has shareholders, and that the liability of the

shareholders to creditors of the company is limited to the capital originally invested, i.e. the

nominal value of the shares and any premium paid in return for the issue of the shares by the

company. A shareholder's personal assets are thereby protected in the event of the company's

insolvency, but money invested in the company will be lost.

The reason why we chose a Pvt. Ltd. is basically due to its advantages in general respect.

Advantages

It need not file a prospectus with the Registrar of companies.

It need not obtain the Certificate for Commencement of business.

It need not hold the statutory general meeting nor need it file the statutory

report.

Restrictions placed on the directors of the public limited company do not

apply to its directors.

Continuity of existence.

Limited liability.

Less legal restrictions.

Minimum number of shareholders need to start the business are only2.

More capital can be raised as the maximum number of shareholders

allowed is 50.

Scope of expansion is higher because easy to raise capital from financial

institutions and the advantage of limited liability.

MANDATORY SEQUENTIAL STEPS FOR

REGISTRATION OF COMPANY

1. DIRECTORS OF XYZ Pvt. Ltd .

Minimum 2 and Maximum 50 Directors are to be

appointed or made. The information of these directors will be mentioned in the

MEMORANDUM AND ARTICLES OF ASSOCIATION (MOA). We in this

case will be considering 2 directors. They will be the owner of XYZ Pvt. Ltd.

2. INVESTMENT AND NUMBER OF EQUITY SHARES

Investment or Capital should be minimum

Rs.1,00,000/-. This Investment done by the directors of XYZ Pvt. Ltd. Is on 50-50

percentage basis for easy understanding. This investment is on the basis of value

of shares. Consider a single share of Rs.10/- each, which is equating to a total of

10,000 shares of Rs.10/- each, to make a grand total of Rs.1,00,000/- as the

amount invested at the time of startup. Thus each director will hold a total of 5000

shares of XYZ Pvt. Ltd. This information will also be stated in the MOA.

3. PARTNERSHIP DECISION

Partnership in this case is MUTUAL. It interprets

that the 2 directors have mutually agreed to a specific percentage of partnership,

In this case it is 50-50 percentage of partnership. This information about the

partnership will also be stated in the MOA.

4. COMPANY NAME REGISTRATION

Registration of Name of Company is done with the

Registrars of Companies (ROC). Few options for the name of company are to be

given to the ROC for the registration purpose, generally 3 options are to be given

in the order of preferential basis. This name (XYZ in this case) will be considered

for all future correspondences and businesses. This information will also be stated

in the MOA.

5. OFFICE ADDRESS REGISTRATION

Registration of Address for Office of the Company.

The address of the office should be registered at the ROC. This address would

require some documents for the proof purpose. The officers may or may not come

to that address for the verification of the registered address. This will be depicted

in the MOA.

6. OBJECTIVES OF THE COMPANY

The objectives for which the company is

established should be clearly mentioned and stated at the ROC at the time of

registration. This objective is mentioned in the MOA of XYZ Pvt. Ltd. These

objectives are well stated and duly signed by the directors of the company in front

of the registrar of companies so that in time of discrepancy, the objectives of the

company shall be declared void and the company shall be ordered to stop its

operations and the licenses will be taken back.

7. COMPANY ACCOUNTS

A company's first accounts must start on the day of

incorporation. The first financial year must end on the accounting reference date,

or a date up to seven days either side of this date. Subsequent accounts start on the

day following the year-end date of the previous accounts. They end on the next

accounting reference date or a date up to seven days either side.

8. COMMON WITNESS

There is a need of common witness between the 2

directors of XYZ Pvt. Ltd. This will act as source of authority when in the case of

doubt and the ROC will catch hold of this witness.

9. CST and VAT Number

Registration for CST and VAT number is an

important aspect for business involving trading of goods and services. Central

Sales Tax no. (CST) is mandatory when the trading of goods involved is outside

the state in which the business is located.

While Value Added Tax no. (VAT) is mandatory

when the trading involved is inside the state of business. It is also mandatory to

print the VAT no. as well as the CST no. on the bills and receipts that are credited

or debited from the company accounts.

REGISTRAR OF COMPANIES

Registrars of Companies (ROC) appointed under Section 609 of the Companies Act

covering the various States and Union Territories are vested with the primary duty of registering

companies floated in the respective states and the Union Territories and ensuring that such

companies comply with statutory requirements under the Act. These offices function as registry

of records, relating to the companies registered with them, which are available for inspection by

members of public on payment of the prescribed fee. The Central Government exercises

administrative control over these offices through the respective Regional Directors.

MINISTRY OF CORPORATE AFFAIRS (MCA) can also be used to register a company or

to check the validity or authenticity of a company in India.

The contact detail for ROC in Pune is mentioned below:

Mr. Vijay Kumar Khubchandani,

(ROC Pune)

Registrar of Companies,

PMT Building,

Pune Stock Exchange,

3rd Floor, Deccan Gymkhana, Pune.

Regulatory Requirements

The most important regulation is the Companies Act, 1956, which regulates all the

affairs of a company. It contains provisions relating to the formation of a company, powers and

responsibilities of the directors and managers, rising of capital, holding company meetings,

maintenance and audit of company accounts, powers of inspection and investigation of company

affairs, reconstruction and amalgamation of a company and even winding up of a company. The

Ministry of Corporate Affairs, under Ministry of Finance, is primarily concerned with

administration of this Act as well as other allied Acts and rules & regulations framed there-

under.

The next important regulation relates to environment. The environmental regulatory

requirements envisage a wide legislative framework covering every aspect of environment

protection like air, water, noise, forest conservation, wildlife protection, etc. Also, separate set of

laws and rules for emission of hazardous wastes have been enacted. The Ministry of

Environment and Forests (MoEF), is the nodal agency for regulating all such environmental

aspects. Every industry has to abide by all such guidelines and parameters for environmental

protection because only this will ensure its sustainable progress and growth.

Procedure for Registration of Private Limited Company

1. Select, in order of preference, a few suitable names, not less than four, indicative of the

main objects of the company. Ensure that the name does not resemble the name of any

other company already registered and also does not violate the provisions of Emblems

and names (prevention of improper use) Act, 1950

2. Apply to the concerned ROC to ascertain the availability of name in e-Form1 A of

General Rules and Forms along with a fee of Rs. 500/-. If proposed name is not available

apply for a fresh name on the same application the digital signature of the applicant

proposing the company has to be attached in the form.

3. After the name approval the applicant can apply for registration of the new company by

filing the required forms (e-Forms 1, 18, 32) within six months of name approval.

4. Arrange for the drafting of the Memorandum and Articles of Association by the

solicitors, vetting of the same by ROC and printing of the same.

5. Arrange for stamping of the Memorandum and Articles with the appropriate stamp duty.

6. Get the Memorandum and Articles signed by at least two subscribers in his own hand, his

father's name, occupation, address and the number of shares subscribed for and witnessed

by at least one person.

7. Ensure that the Memorandum and Article is dated on a date after the date of stamping.

8. Pay the prescribed registration fee and filing fee.

9. The following documents are required to be filed with the Registrar of Companies:

a. Memorandum of Association (duly stamped) and a duplicate thereof.

b. Articles of Association (duly stamped) and a duplicate thereof.

c. The agreement, if any, which the company proposes to enter into with any

individual for appointment as its managing or whole time director or manager.

d. A copy of the agreement, if any, referred to in the articles.

e. A power of attorney, if any (with prescribed stamps).

f. A copy of the letter of the Registrar of Companies intimating the availability of

the proper name.

g. E-Form No. 1 (with prescribed stamps) for incorporation of a Company.

h. E-Form No. 18 , if desired for change of situation of registered office.

i. E-Form No. 32 and E-Form 32 Addendum, if desired for Particulars of

appointment of managing director, directors, manager and secretary and the

changes among them or consent of candidate to act as a managing director or

director or manager or secretary of a company and / or undertaking to take and

pay for qualification shares

j. Document evidencing payment of prescribed registration and filing fee.

10. Obtain Certificate of Incorporation from ROC. If the registrar is satisfied that all the

requirements have been complied with by the companies, it will register the company and

issue a Certificate of Incorporation of the company. The date mentioned in the certificate

is the date of incorporation of the company.

11. Under Section 149(7) of the Companies Act, a private company can commence business

right from the date of its incorporation.

Documentation Required

Documentation is generally considered as a lengthy and complex stage of

verification. Indeed, Documentation is very crucial when it comes to claim something.

Documentation is a process in which we give physical evidences approved by the governing

bodies or by the government, so that the claims we make are justified and true. An individual’s

personal information is authorized only when he/she gives the necessary documents required to

prove his/her identity.

1. Payment Slip: All payments made through cheque.

2. 2 Passport Size Photos of both Directors

3. Photo ID Proof of both directors (with visible sign)

a) Pan Card.

b) Indian Resident Card

c) Identity Cards issued by Govt. Departments. (Current Address).

4. Current Address Proof

a) Driving License.

b) Ration Card.

c) Voter’s/ Election Identity card.

d) Electricity Bill on Own Name.

e) Landline Telephone Bill.

f) Valid Passport.

g) Aadhar Card.

h) Current dated nationalized & multi-national banks statements only.

i) Canceled Cheque Required for NEFT/RTGS online commission transfer.

5. Witness Documents

a) Passport Size Photos

b) 1 Photo ID Proof Copy with Self Attested.

FEES INVOLVED

Generally, With a capital assumed to be Rs1,00,000/- , the registration fee will cost from Rs 13,000 to 20,000 depending on the licenses, quality of work and commissions. This kind of registration generally do not complete unless there is a bribe involved.

Thus this whole process of registration and production of documents costs around Rs.20,000/- including everything i.e. CA fee, registration fee, form fee, notary fee, printing cost, typing cost, stamp paper cost etc.

TIME DURATION

The time duration involved in the process of registration of a private limited company

varies from 2 to 10 months depending upon the stamps, clearances and licenses. Generally, a

private limited company is registered and all set to start its business in around 3 months.