REGISTRATION PROCEDURE UNDER MSMED ACT, 2006
INTRODUCTION
During the last decade, Indian economy went through massive shift of balance from
socialism to capitalism. The doors of our huge and lucrative market were opened to the
multi national giants. As a result of this, Darwin’s theory of survival of the fittest was
witnessed to a greater extent and all the inefficient units, whether in manufacturing or in
service sectors either opting to shut down the activities or to merge with these
International Conglomerates. Well this was just the beginning of the nightmare for small
industrial units. And at this point of time, the need was observed by many of the expert
committees, for a comprehensive central enactment to provide an appropriate legal
framework to facilitate the growth and development of the small scale sector. Further the
growing need was felt to extend policy support to the small scale sector to enable them
to grow and adopt better technologies to achieve higher productivity and remain
competitive in the era of globalization.
The existing enactment for the development and growth of SSI was Industries
(Development and Regulation) Act, 1951. But due to the dynamic structure of the
market, there was a need for the independent piece of legislation with comprehensive
set of legal provisions for Micro small and medium scale industries. It was fulfilled by
introduction of the Micro, Small and Medium Enterprise Development Act, 2006. The act
received assent of the president on 16th June 2006. The Act was introduced by keeping
an eye on the following objectives:
- To enable the Micro, small and medium enterprises to efficiently compete with
international competition
- To promote the growth of micro, small and medium enterprises on large scale to
effectively tackle the widespread problems of unemployment and poverty
- To extend benefits of various government schemes at one stop to the SSI units
- To safeguard SSI from financial harassment in the hands of big industries
CLASSIFICATION OF ENTERPRISES UNDER MSMED ACT:
As the industrial giants outsource their non core business requirements to the small
enterprises, the onus is on them to ensure that they do not make any default while
making dealings with the small units, other wise they have to face strict legal
consequences for such negligence. As per the provisions of the MSMED Act, 2006,
while making payment to the Micro, small or medium enterprise the buyer has to ensure
that the said enterprise has registered under MSMED Act. The payments made to units
registered as Micro, small or medium shall be separately disclosed in the financial
statements of the buyers and it should also include defaults made in payment if any. The
statutory auditor of the buyer has shouldered the responsibility to verify the said details.
To ensure the compliance of legislation, most of the clients of micro, small and medium
enterprises are asking for MSMED registration and therefore there is a huge spur in
small units opting for MSMED registration.
The MSMED Act, 2006 distinguishes between Micro, Small, and Medium enterprises
based on the investment made in plant and machinery. Since the investment is a key
indicator of quantum of activities of an enterprise, it needs a regular revision in tune with
the inflation and devaluing money value. For the purpose of registration under MSMED
Act, 2006, the new establishments (who are yet to start the activities) shall submit a
statement of proposed value of investment in plant and machinery (manufacturing units)
or value of equipment (service industry units). The existing units shall value investment
in plant and machinery or equipments as the case may be, based on last audited
balance sheet. For determining the status of an enterprise, following slabs have been
prescribed.
INVESTMENT IN PLANT AND MACHINERY OR
EQUIPMENTS (RUPEES IN LACS)
SR.
NO.
TYPE OF ENTERPRISE
SERVICE SECTOR MANUFACTURING
SECTOR
1. Micro Upto 10 lacs Upto 25Lacs
2. Small Above 10 lacs upto 200
lacs
Above 25 lacs upto
500 lacs
3. Medium Above 200 lacs upto 500
lacs
Above 500 lacs upto
1000 lacs
REGISTRATION & FILING OF MEMORANDUM:
Filing of Entrepreneurs Memorandum (EM) is optional for the Micro and Small
enterprises, but is compulsory for the Medium enterprises (Except Medium enterprises in
service sector). The memorandum is to be filed with the General Manager of District
Industries Centre of the concerned district.
For Pune district, the address of DIC is:
District Industries Centre,
Agriculture College Campus,
Shivaji Nagar, Pune 411005
1. The EM is divided in two parts i.e. Part -I and Part –II.
ENTREPRENUER’S MEMORANDUM (EM)
Two Parts
Part I Part II
i) Any person who intends to establish Micro, Small or Medium Enterprise,
whether in manufacturing or in service sector, shall file Part –I and after
commencing the production shall file Part –II. The validity of Part –I is for
two years, after the lapse of which, no renewal will be granted
ii) But the existing units who have already commenced production or rendering
services shall file Part –II directly without filing Part –I.
2. Application for registration can be made by following persons:
a) A Director of the company, who is authorised by Resolution, passed by Board in
this regard.
b) Any partner of the Partnership Firm
c) Sole proprietor for proprietorship firm
d) Any person authorised by the organization in this connection.
Information of applicant as to name, residential address, contact number and e-mail id
shall be stated in the application form.
For the administrative convenience, address of Enterprise shall be given as address for
communication in Point 2 (a) of the registration form.
3. As the application is made on behalf of the enterprise, it requires following
information
a) Name of the Enterprise
b) Location of the Enterprise- It should be the exact location of unit for
which registration is sought, and it my be different from the registered
office of the company. There are various codes allocated to different
districts and states by the government. The relevant codes regarding
village or town where the activity is, or is proposed to be carried out shall
be filled with the help of list available at respective DIC.
c) Category of the Enterprise- The category of the enterprise shall be
decided as per investment in plant and machinery or equipments.
d) Nature of Activity- It will be either manufacturing or Service as the case
may be.
e) Nature of operation- Registration is granted to all enterprises whether
the activities are of perennial (on going or continuous), seasonal or casual
in nature.
f) Month of installation of plant and machinery or equipments has to be
stated in the form. It should be noted that, the month required is month of
installation and not the month of commencement of production. It should
be noted that, if the plant and machinery is installed in phased manner,
month of first such installation shall be mentioned.
For part I registration, proposed schedule of installation of plant and
machinery shall be provided as annexure.
g) Other Information- Other information is required with regard to whether
the unit for which registration is sought is ancillary unit or not, in case of
manufacturing unit details of registration under Factories Act, 1948 and
the type of organization whether Public company, Private Company,
Partnership Firm etc.
4. The activity of the enterprise shall be identified with utmost care as the registration
certificate is issued with regard to main activity and proposed activity of the
company.
Main activity of the company shall be identified with the help of National Industrial
Classification (NIC), 2004.
Proposed Activity of the company shall be identified with the help of ASICC, 2000.
Both the NIC and ASICC classification lists are available at the office of DIC.
5. Information as to investment in Fixed Assets (in Rupees lakhs) of the enterprise such
as Land, Building, Plant & Machinery (for manufacturing units) and Equipments (for
servicing units) shall be stated in the form. Existing enterprise shall arrive this value
based on the latest audited balance sheet and the new enterprise shall disclose the
proposed value of investment.
If the land and building is leased, rented or owned, copy of said agreement alongwith
extract of Index II shall also be submitted as proof of status of investment. It should
be noted that, the proof shall be given in respect of the location of enterprise and not
the registered office of the company as these two may be different from each other.
If there is any foreign equity participation in fixed assets of the company, its value
shall also be discussed.
6. The Disclosure of installed capacity of machinery per annum, in terms of quantity
and units shall be stated in the registration form.
Units in service industry are not required to provide these details.
7. The power requirements of enterprise, in terms of Horse Power or kilo Watts shall
also be stated alongwith requirements of any other sources of power (such as coal,
oil, generator etc.)
8. Details of Employment:
a) In part –I of the memorandum, the details of expected employment shall be
given alongwith bifurcation of manpower in three categories namely,
- Management and office staff
- Supervisory Personnel
- Workers
b) In part –II of the memorandum additional information of total male and female
staff in all the three categories mentioned above shall also be provided.
9. The EM also requires that the details of all partners or directors, needed to be
disclosed i.e. Entrepreneur’s Profile. These details shall provide for
- Full names of the director or partners
- Male/ Female
- Category such as SC/ ST/ OBC/ OTHER or PHYSICALLY CHALLENGED
- Knowledge level of the person i.e. Technical Graduate, management
graduate, post graduate, other graduate, undergraduate etc.
- Equity participation of the said person in the enterprise (in Rupees and in %)
- Whether the said person holds any stake in other manufacturing unit
If the space provided in the form is not sufficient, a separate sheet shall be
attached in this regard.
10. Date of commencement of productivity or activity shall be mentioned and the
applicant shall sign all the four copies of memorandum under the rubber stamp of
enterprise.
11. The Memorandum shall be filed in four copies, and it shall be accompanied by
- Copy of Board Resolution (in case the unit is company),
- Income Tax Receipt for tax payment for the last assessment year (applicable only
to existing units),
- Proof of nature of investment in Land and Building. The proof will either be
ownership documents (if the same is owned by the company/ partnership firm) or
agreement of lease or rent, as the case may be. Extract of Index II for the said
premises shall also be part of attachment
- It is advisable to submit a copy of No Objection Certificate (NOC) for carrying on
the business activities from the concerned Municipal Corporation or
Grampanchayat.
After receiving the memorandum, complete in all respect, General Manager of DIC will
issue acknowledgment after allotting EM number. If the memorandum is received in
person, acknowledgment will be issued on the same day and if the memorandum is
received by post then the acknowledgment will be sent by post and shall be received
within five working days.
In case of change in the investment or change of products and services for which the
EM has already being filled, the enterprises shall inform DIC in writing within 3 months of
such change. No specific format is specified in this regard. The same fact should be
intimated to DIC and simultaneously wide publicity be given in newspaper
After going through the norms for registration under MSMED Act and the Registration
procedure we can say that the Government has taken a strong step towards providing a
helping hand to the micro, small and medium enterprises by keeping the registration
procedure simple so that, the enterprises can avail various benefits of registration under
the said legislation. The professionals like Company Secretaries can indulge into this
new area and help the enterprises in obtaining registrations easily.
Which are the classes of enterprises that may qualify for Reistration?
All classes of enterprises, whether Proprietorship, Hindu undivided family, Association of persons, Co-operative society, Partnership firm, Company or Undertaking, by whatever name called can apply for the registration and get qualified for the benefits provided under the Act.
Whether the Registration is mandatory/compulsory?
A Medium enterprise engaged in the manufacture or production of goods has to compulsorily register under the MSMED Act. For other Enterprises the registration is discretionary or optional.
Taking into consideration the benefits available under the Act, it is recommended that every enterprise shall opt for the registration.
Benefits available under the MSMED Act
Registration of Micro, Small and Medium (MSM) Enterprises under MSMED Act is a very powerful medium to enjoy the benefits available to such firms:
Micro and Small Enterprises: 1. Easy finance availability from Banks, without collateral requirement
2. Protection against delay in payment from Buyers and right of interest on delayed payment
3. Preference in procuring Government tenders,
4. Stamp duty and Octroi benefits,
5. Concession in electricity bills
6. Reservation policies to manufacturing / production sector enterprises
7. Time-bound resolution of disputes with Buyers through conciliation and arbitration
8. Reimbursement of ISO Certification Expenses Medium Enterprises: 1. Easy finance availability from Banks, without collateral requirement
2. Preference in procuring Government tenders
3. Reservation policies to manufacturing / production sector enterprises
4. Time-bound resolution of disputes with Buyers through conciliation and arbitration Obligations for the buyers availing services or goods from MSM Enterprises
•
•
•
•
The Buyers have to ensure whether those suppliers of goods and services are under the purview of MSMED Act i.e. the Buyers have to confirm the registration of the suppliers under the MSMED Act.
The Buyer should ensure the payment before the end of credit period decided else the interest would be payable.
In case of disputes, application to Micro and Small Enterprises Facilitation Council (MSEFC) would trigger the conciliation and arbitration process. Once the application is done under MSEFC, there is no provision to withdraw the proceedings. Therefore, the Buyer should ensure the best ways to resolve the disputes, if any, instead approaching to MSEFC in the initial stages of dispute.
The Buyers need to ensure that the Buyer does not owe any outstanding amount including interest due to MSM Enterprises for more than 15 days. Otherwise, the Buyer needs to disclose this non-payment in the Annual Financials of the Buyer.
Benefits/Safeguards to Micro and Small Enterprises in case of delayed payment by Payment of interest
The Act provides for the payment of compound interest at 3 times the Bank Rate by the Buyer in case of failure to make the payment with in maximum of 45 days from the date of receipt of goods or services. Disclosure of delayed payment in audited accounts Where any buyer is required to get his annual accounts audited under any law for the time being in force, such buyer shall furnish the following additional information in his annual statement of accounts, namely: -
•
•
• The principal amount and the interest due thereon (to be shown separately) remaining unpaid to any supplier (micro or small enterprise) as at the end of each accounting year;
The amount of interest paid by the buyer along with the amounts of the payment made to the supplier beyond the appointed day during each accounting year;
The amount of interest due and payable for the period of delay in making payment (‘payment’ here means the payment which have been made but beyond the appointed day during the year and without adding the interest thereon specified under this Act for the period of delay);
Disallowance of interest under Income Tax Act, 1961 According to the Income Tax Act, 1961 the amount of interest payable or paid by any buyer, for delayed payments to Micro and Small Enterprises shall not be allowed as deduction for the purpose of computation income under the Income Tax Act, 1961. Printing of MSMED Registration/EM Number on the letter heads, invoices etc.
The Micro and Small Enterprises should mention/get printed on their letter heads, supply order sheets, invoices, bills and other relevant documents, the MSMED Registration/Entrepreneurs Memorandum (EM) Number allotted by a competent authority, so that there remains an identification of being a MSE supplier.
Enjoy …
