Alternate Director under Companies Act 2013 Explained

Types of Consulting

Consulting services span multiple domains, each catering to a unique set of client needs. Here are some popular types of consulting and what they typically involve:

Financial Consulting

Financial consultants help individuals and organisations manage money more effectively. Services may include investment planning, tax optimisation, budgeting, cash flow management, and economic risk assessment. Clients often include SMEs, startups, large corporations, and even high-net-worth individuals.

Management Consulting

Management consultants focus on improving business performance and solving operational challenges. They analyse existing processes, identify inefficiencies, and recommend strategies to improve productivity and profitability. Clients are usually companies undergoing restructuring, scaling, or entering new markets.

Marketing Consulting

Marketing consultants help businesses create and execute strategies to attract, engage, and retain customers. Services include brand positioning, campaign planning, market research, and digital marketing strategy. Their clients range from small businesses to large enterprises looking to strengthen their market presence.

IT Consulting

IT consultants advise on technology adoption, infrastructure setup, software implementation, and cybersecurity. They work with businesses looking to upgrade systems, integrate digital tools, or protect against cyber threats. Common clients include startups, tech companies, and corporations undergoing digital transformation.

Legal Consulting

Legal consultants provide guidance on compliance, contracts, dispute resolution, and regulatory matters. They help businesses avoid legal risks and ensure operations are aligned with applicable laws. Their clients often include startups, corporates, NGOs, and individuals requiring legal clarity.

Legal Steps to Register Your Consulting Business

Starting a consulting business in India requires following specific legal procedures under the Companies Act, 2013. While you can set up as a sole proprietorship, registering as a Private Limited Company or LLP offers more credibility and growth opportunities.

Here’s a step-by-step breakdown of the company registration process:

Step 1: Get in Touch with an Expert

Engage a Chartered Accountant (CA), Company Secretary (CS), or a reliable online platform that specialises in company registration. They can guide you through choosing the right business structure, preparing documents, and ensuring compliance.

Step 2: Share the Information and Required Documents

Provide details such as your proposed company name, nature of business, registered office address, and personal KYC documents for all directors or partners. This typically includes PAN, Aadhaar, address proof, passport-sized photos, and, in some cases, bank statements.

Step 3: Obtaining the DSC of Directors

A Digital Signature Certificate (DSC) is mandatory for directors to sign and submit forms electronically on the Ministry of Corporate Affairs (MCA) portal. Each director must have their own DSC issued by a government-approved agency.

Step 4: Applying for Company Name Reservation

File an application through the MCA’s RUN (Reserve Unique Name) service or as part of the SPICe+ form. Choose a name that reflects your consulting services, complies with MCA naming guidelines, and isn’t already in use.

Step 5: Creation of Mandatory Documents (MoA and AoA)

Draft the Memorandum of Association (MoA) and Articles of Association (AoA).

• The MoA defines your company’s objectives, including consulting services as your main activity.
• The AoA outlines your company’s internal rules and governance structure.

Step 6: Submitting the Application for Company Registration

Complete the incorporation process by filing the SPICe+ form along with all required documents on the MCA portal. Once approved, you’ll receive your Certificate of Incorporation (COI), along with PAN and TAN. You can then proceed to open a current bank account and commence operations.

Frequently Asked Questions (FAQs)

What is Secretarial Audit?

A Secretarial Audit is an independent verification of a company’s compliance with corporate laws, rules, and regulations.

It helps companies to:

• Detect instances of non-compliance early.
• Promote good governance and transparency.
• Ensure that legal and procedural requirements are consistently met.

The audit is conducted by an independent professional, usually a Company Secretary (CS) holding a valid Certificate of Practice issued by the Institute of Company Secretaries of India (ICSI).

Secretarial Audit Applicability

Under the Companies Act, 2013, certain classes of companies are required to undergo a Secretarial Audit.

It is mandatory for:

• All Listed Companies.
• All Public Companies with:
  
  • Paid-up Share Capital of ₹50 crore or more, or
  • Turnover of ₹250 crore or more.
• All types of companies (including Private Companies) having outstanding borrowings of ₹100 crore or more from banks or financial institutions.

Secretarial Audit Report

The Secretarial Audit Report is the formal output of the audit process. It:

• Certifies whether the company is in compliance with applicable laws.
• Identifies any governance risks or gaps.
• Highlights areas of non-compliance and recommends corrective actions.

The report is prepared in Form MR-3, submitted to the Board of Directors, and included in the company’s Annual Report. As per Section 204 of the Companies Act, 2013, the audit can only be conducted and the report issued by a:

• Practising Company Secretary (PCS).
• Holding a valid Certificate of Practice from ICSI.

Scope of Secretarial Audit

The scope of a Secretarial Audit is broad and spans multiple laws, including but not limited to:

• Companies Act, 2013
• Securities Laws, including:
  
  • SEBI (LODR) Regulations
  • SEBI Takeover Code
  • SEBI Insider Trading Regulations
  • SEBI Listing Agreement
• Foreign Exchange Management Act (FEMA)
• Labour Laws
• Environmental Laws
• Industry-specific Regulations
• Secretarial Standards issued by ICSI

Additionally, the Secretarial Auditor also:

• Reviews the company’s systems and processes for compliance.
• Examines the Board structure and its functioning.
• May rely on reports from other professionals (auditors, legal counsel) for certain compliance areas.
  
  

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Eligibility Criteria for the Appointment of a Secretarial Auditor

To be appointed as a Secretarial Auditor, the individual must:

• Be a qualified Company Secretary (CS) and a member of ICSI.
• Hold a valid Certificate of Practice (CoP) issued by ICSI.
• Have undergone relevant training in corporate governance and compliance.
• Maintain professional ethics and conduct in line with ICSI guidelines.

Only a Practising Company Secretary (PCS) is authorised to conduct and issue a Secretarial Audit Report.

Process of Secretarial Audit

The typical step-by-step process for conducting a Secretarial Audit is:

1. Preparation of a Compliance Checklist:
   Based on applicable laws and regulatory frameworks.
   
   
2. Compliance Verification:
   The auditor examines the company’s records, registers, filings, and processes.
   
   
3. Management Interaction:
   Discusses preliminary findings and areas of concern with management.
   
   
4. Recommendations and Corrective Actions:
   Advises management on how to address any gaps or non-compliance issues.
   
   
5. Preparation of the Final Report (MR-3):
   The auditor formally documents observations and recommendations.
   
   
6. Filing and Disclosure:
   The report is submitted to the Board and included in the Annual Report as required.

Features of Company Secretarial Audit

A Secretarial Audit is distinguished by several key features:

• Independent Audit:
  Conducted by an external Practising Company Secretary.
  
  
• Comprehensive Scope:
  Covers company law, securities law, tax law, labour law, environmental law, and other applicable legal frameworks.
  
  
• Systematic & Evidence-Based:
  Based on a thorough review of records and procedures.
  
  
• Board-Level Reporting:
  Findings and recommendations are directly reported to the Board of Directors.
  
  
• Governance-Focused:
  Designed to strengthen the company’s corporate governance practices.

Punishment for Default Secretarial Audit

Non-compliance with Secretarial Audit provisions carries penalties under:

Section 204(4) of the Companies Act, 2013:

The company, every officer in default, and the PCS (if found guilty) are liable to a fine of up to ₹5 lakh.

Section 448 (False Statements):

• Imprisonment up to 10 years, and/or
• Fine up to ₹10 lakh for making false statements in the audit report.

The Company Secretaries Act, 1980:

Disciplinary action against the Company Secretary may include:

• Suspension or cancellation of the Certificate of Practice.
• Monetary penalties.
• Professional misconduct proceedings.

Objectives of Secretarial Audit

The key objectives of Secretarial Audit are:

• Ensure the company complies with legal and regulatory frameworks.
• Identify non-compliance issues before they become liabilities.
• Promote good corporate governance.
• Protect the interests of stakeholders- investors, employees, customers, and regulators.
• Help management take corrective actions proactively.
• Prevent penalties and legal actions for non-compliance.

Benefits of Secretarial Audit

Conducting a Secretarial Audit offers many advantages:

• Enhances the company’s compliance culture.
• Reduces legal risks and the likelihood of penalties.
• Supports better corporate governance and transparency.
• Increases stakeholder confidence- important for investors and regulators.
• Helps Directors and Management make more informed decisions.
• Facilitates continuous improvement in internal processes and systems.

Frequently Asked Questions

What Are the Types of Business Entities?

India’s vibrant economy is home to diverse industries and entrepreneurial ambitions, necessitating a range of business entity options. From solo ventures to large-scale collaborations, the choice of business structure directly impacts a company's growth, legal compliance, tax obligations and operational efficiency.

There are different types of companies in India, ranging from individual ownership models to multi-member organisations, catering to various needs and scales. These include:

• Sole Proprietorship
  
• Limited Liability Partnerships (LLP)
  
• Private Limited Companies
  
• One Person Companies (OPC)
  
• Section 8 Companies
• Partnerships
• Public Limited Companies
• Joint-Venture Companies
• Non-Government Organisations (NGOs)

Types of Business Structures in India

India offers a variety of business structures to suit different entrepreneurial needs, scales and industries. Each structure has unique features, benefits and drawbacks, making it crucial to choose the right one based on your business goals. Let’s dive deeper into different types of businesses in India:

1. Sole ProprietorshipA sole proprietorship is the simplest and most commonly adopted business structure in India, especially for small businesses or individual entrepreneurs. It is an unincorporated business owned and managed by a single person.
   Features:
   
   • No separate legal entity; the business is considered the same as the owner.
   • Unlimited liability: The owner's personal assets are at risk in case of debts.
   • Minimal compliance: Easy to set up and operate with fewer regulations.
2. PartnershipA partnership is a business structure where two or more individuals share ownership, profits and responsibilities. It is governed by the Indian Partnership Act of 1932 and is ideal for businesses requiring diverse skill sets.
   Features:
   
   • Joint ownership and decision-making.
   • Unlimited liability for all partners unless specified otherwise in the partnership agreement.
   • No perpetual succession; the partnership dissolves upon a partner's death or withdrawal.
3. Limited Liability Partnerships (LLP)An LLP blends the advantages of a partnership with the benefits of limited liability. Introduced under the LLP Act of 2008, it is ideal for professionals or small businesses looking for a flexible yet secure structure.
   Features:
   
   • Combines the flexibility of partnerships with limited liability protection.
   • A separate legal entity from its partners.
   • Requires at least two designated partners.
4. Private Limited Companies (Pvt Ltd)A Private Limited Company is a favoured structure among startups and small-to-medium enterprises with several advantages. It is governed by the Companies Act of 2013 and allows for limited liability while offering scalability.
   Features:
   
   • Separate legal identity from its owners.
   • Limited liability for shareholders.
   • Eligibility to issue shares for raising funds.
5. Public Limited CompaniesA Public Limited Company is suitable for businesses aiming to scale operations and raise public funds through shares. A company whose shares are publicly traded, with ownership open to the general public.
   Features:
   
   • Requires a minimum of seven shareholders and three directors.
   • No upper limit on the number of shareholders.
   • Vulnerable to market fluctuations.
6. One Person Companies (OPC)Introduced under the Companies Act of 2013, an OPC caters to solo entrepreneurs seeking limited liability benefits. Simply put, a single individual owns the company while enjoying limited liability protection.
   Features:
   
   • Mandatory to appoint a nominee.
   • Limited liability for the owner.
   • Not eligible for equity funding.
7. Section 8 Companies (NGOs)Section 8 Companies are nonprofit organisations formed under the Companies Act of 2013 to promote social welfare activities. These companies focus on charitable objectives like education, healthcare or environmental protection.
   Features:
   
   • Profits cannot be distributed as dividends.
   • Tax exemptions are available under specific conditions.
8. Joint-Venture CompaniesA Joint- Venture (JV) combines two or more entities to collaborate on a specific project or goal. Partners share resources, expertise and profits while retaining their individual entities.
   Features:
   
   • Operates under a joint agreement for a specific purpose.
   • Temporary or long-term collaboration.
   • Shared financial risks.
9. Non-Government Organisations (NGOs)NGOs are entities dedicated to social welfare causes, operating independently of the government. NGOs can be structured as trusts, societies or Section 8 Companies, focusing on various charitable activities.
   Features:
   
   • Operates without a profit motive.
   • May qualify for tax exemptions.
   • Drives social change and community development.

Types of Companies Based on Size

In India, companies can be categorized based on their size, typically determined by factors such as turnover, capital investment, and employee count. Here are the main types of companies in India based on size:

Here are the main types of companies based on members:

1. Micro Enterprises

Micro-enterprises are the smallest category of companies, characterized by low investment in plant and machinery or equipment. In India, micro-enterprises are defined as those with an investment of up to Rs. 1 crore in manufacturing and an annual turnover of Rs. 5 crore.

2. Small Enterprises

Small enterprises are slightly larger than micro-enterprises but still fall within the small-scale sector. In India, small enterprises are defined as those with an investment of not more than Rs. 10 crore and an annual turnover of not more than Rs. 50 crore.

3. Medium Enterprises

Medium enterprises are larger than small enterprises but smaller than large corporations. In India, medium enterprises are defined as those with an investment of more than Rs. 50 crore in manufacturing and an annual turnover of not more than Rs. 250 crore.

4. Large Enterprises

Large enterprises are the largest category of companies, characterized by substantial investment, high turnover, and a large workforce. In India, large enterprises have investments exceeding Rs. 50 crore in manufacturing or Rs. 250 crore in services. They often have hundreds or even thousands of employees and operate nationally or multinational.

These categories are defined by the Ministry of Micro, Small, and Medium Enterprises (MSME) in India to provide various benefits and incentives to small and medium-sized enterprises (SMEs), such as priority lending, subsidies, tax exemptions, and easier access to government schemes and programs.

Types of Companies Based on Liabilities

Companies can be categorized based on the extent of liability their members or owners have. Some major types of companies based on liabilities are-

1. Company Limited by Shares

A Company Limited by Shares is a type of company where the liability of its members is limited to the amount unpaid on their shares. This means that shareholders are not personally liable for the company's debts beyond the amount they have agreed to contribute towards the shares they hold.

Companies Limited by Shares can be further classified into private limited companies and public limited companies based on the number of shareholders and other criteria.

2. Company Limited by Guarantee

In a Company Limited by Guarantee, the liability of its members is limited to the amount they agree to contribute to the company's assets in the event of its winding up. This type of company is commonly used for non-profit organizations, clubs, societies, and associations.

3. Unlimited Liability Company

In an Unlimited Liability Company, the members or owners have unlimited personal liability for the company's debts and obligations. This means that their personal assets are at risk to satisfy the company's liabilities, and creditors can pursue the members' personal assets to settle debts owed by the company.

Types of Companies Based on Listing Status

Companies can also be classified based on their listing status, which refers to whether their shares are listed on a stock exchange for public trading.

1. Listed Companies

Listed companies are those whose shares are listed and traded on a recognized stock exchange, such as the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) in India.

These companies are subject to stringent regulatory requirements and disclosure norms mandated by the Securities and Exchange Board of India (SEBI). Listing provides liquidity to shareholders and enables the company to raise capital by issuing additional shares to the public.

2. Unlisted Companies

Unlisted companies are those whose shares are not traded on any stock exchange. These companies may be privately held, meaning that their shares are owned by a small group of shareholders or closely held by promoters and investors.

Unlisted companies are not subject to the same level of regulatory scrutiny as listed companies but may still be required to comply with certain statutory requirements under the Companies Act.

Types of Companies Based on Holding

Companies can be categorized based on their holding structure, which refers to the relationship between parent companies and their subsidiaries.

1. Parent Company

A parent company is a corporation that owns a controlling interest in one or more subsidiary companies. It typically holds more than 50% of the voting rights in the subsidiary companies and has the power to make decisions affecting their operations and strategic direction.

2. Subsidiary Company

A subsidiary company is a company that is controlled by another company, known as the parent company. Subsidiary companies can be wholly or partially owned by the parent company, depending on the percentage of shares held.

Subsidiary companies operate independently but are subject to the control and influence of the parent company.

3. Holdings Company

A holdings company is a company whose primary purpose is to hold investments in other companies rather than engage in operational activities. Holdings companies typically own shares in subsidiary companies and may provide their subsidiaries with strategic direction and financial support.

Unlike a parent company, a holding company does not engage in business operations of its own.

4. Affiliate Company

An affiliate company is a company that is related to another company through common ownership or control. Affiliate companies may be part of the same corporate group or have a strategic partnership with each other.

5. Associate Company

An associate company is one in which another company holds a significant but not controlling interest, usually between 20% to 50% of the voting rights. While the investing company has influence over the associate company's operations and management, it does not exercise full control.

Documents Required to Open Different Types of Business in India

Here’s a list of documents required to open a company in India:

• Identity Proof: PAN card, Aadhaar card
• Address Proof: Utility bill, rent agreement, or property papers
• Business Registration Forms: Forms based on the business type (SPICe+, FiLLiP, etc.)
• Digital Signature Certificate (DSC): For online submissions
• Proof of registered office address: NOC or Rental Agreement

Additional documents may be required based on the business type, such as MOA and AOA for companies, LLP Agreements for LLPs or trust deeds for NGOs.

Conclusion

In India, the variety of business entities ensures there’s a fit for every kind of entrepreneur—whether you're a solo dreamer with a big vision, a small team building something impactful, or an organisation driven by social change.

Each type of entity offers unique features, advantages and challenges. From the simplicity of a sole proprietorship to the robust framework of private limited companies or the flexibility of LLPs, picking the right one can make your journey smoother, protect your personal assets and set you up for growth.

Think about your business goals:

• Do you want to stay small and agile or scale into a large organisation?
• Do you need investors or want to keep it self-funded?
• Are compliance and taxes manageable?

Your answers to these questions will guide you toward the perfect fit. If you’re unsure where to start, don’t worry—many successful entrepreneurs were in the same place when they started. The key is to take it one step at a time.

Frequently Asked Questions