Master Class Series Session 10: Navigating the Legal Landscape: Startup Compliance

Tuesday, January 30, 2024, The Masterclass Series Session 10, was led by Mr. Malay Mandal, co-founder, and CEO of EzyLegal, who shared insights on Navigating the Legal Landscape: Startup Compliance.

Mr. Malay began the session by explaining the basics of compliance and post-incorporation requirements for private limited companies. He highlighted essential tasks such as conducting the first board meeting, opening a bank account, and securing capital infusion from subscribers to the memorandum. The discussion then shifted to year-end compliances, including MSMS Registration returns, MGT14 with the MCA, and DIR-8. Mr. Malay stressed the importance of holding an Annual General Meeting (AGM) within six months from the closing of the Financial Year, cautioning that failure to do so could result in heavy penalties or disqualification of the Director Identification Number.

Additionally, Mr. Malay provided insights into compliance requirements for limited liability partnership firms, covering mandatory forms such as LLP Form 3, Form 11, filing of Income Tax Return, and Form 8. He detailed the rules for adding or removing a director, outlining the necessary steps and documentation for both scenarios.

The session progressed to discussions on changing a company’s name, increasing authorized share capital, and the process of right issues in private companies. Mr. Malay explained the considerations for existing shareholders wanting to increase their holdings or onboard external shareholders through a right issue.

Moving forward, Mr. Malay shared valuable information about raising funds through equity or debt. He highlighted the importance of convincing board members, obtaining a share valuation report, signing a shareholders agreement, opening a new bank account, and complying with RoC regulations for new share allocations.

For companies seeking to onboard a new co-founder, Mr. Malay introduced the share transfer route as an alternative to private placement or right issues. He underscored the significance of GST and TDS compliance, emphasizing the mandatory nature of TDS for amounts exceeding Rs 30,000.

The session concluded with an in-depth discussion on due diligence, a crucial aspect for investors. Mr. Malay covered legal, secretarial/compliance, financial, and business & operational due diligence. He highlighted the importance of thorough checks in these areas to ensure a smooth investment process. The session wrapped up with a comprehensive Q&A session, providing participants with an opportunity to seek clarifications and further insights

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Key Learnings:

  • Understanding the fundamental post-incorporation compliances for private limited companies, including the first board meeting, bank account opening, and capital infusion processes.
  • Knowledge of the procedural requirements for adding or removing directors in a company, involving consent, disclosures, board meetings, and shareholder approvals.
  • Understanding the process of fundraising through equity or debt, including board persuasion, share valuation, shareholders agreements, and RoC notifications
  • Grasping the key components of due diligence – legal, secretarial/compliance, financial, and business & operational – and their role in the investment decision-making process

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