A Handbook on SME(2)

The Micro, Small and Medium Enterprises Development Act, 2006The Micro, Small and Medium Enterprises Development Act, 2006

WESTERN INDIA REGIONAL COUNCIL— 2009-10

OFFICE BEARERS

Chairman Vice ChairmanCA. B. C. Jain CA. B. K. Rathi

Secretary TreasurerCA. Raju Shah CA. Ashok Pagariya

MEMBERS

CA. Ashwin Nagar CA. Mangesh KinareCA. Atulkumar Parikh CA. N. C. HegdeCA. B. M. Agarwal CA. Prafulla ChhajedCA. Bhailal Patel CA. Rakesh LahotiCA. Chandrakant Pawar CA. Sanjeev LalanCA. Dhiraj Khandelwal CA. Shardul ShahCA. Durgesh Kabra CA. Shriniwas JoshiCA. Makarand Joshi CA. Sunil Kumar Patodia

EX-OFFICIO MEMBERS

CA. Atul Bheda CA. Nilesh VikamseyCA. Bhavna Doshi CA. Pankaj JainCA. Dhinal Shah CA. Rajkumar AdukiaCA. Jayant Gokhale CA. Sanjeev MaheshwariCA. Jaydeep Shah CA. Shivaji ZawareCA. Mahesh Sarda

RESEARCH & PUBLICATIONS COMMITTEE

Chairman ConvenorCA. Mangesh Kinare CA. Durgesh Kabra

OFFICE BEARERSCA. B. C. JainCA. Raju Shah

Appendix 4List of useful websites

• http://msme.gov.in/Ministry of Micro, Smalland Medium Enterprises.

• h t tp : / / dcmsme .gov . in /Deve lopmentCommissioner, MSME.

• ht tp : / /www.f i sme.org . in / index .htmFederation of Indian Micro, Small andMedium Enterprises.

• http://www.rbi.org.in Reserve Bank ofIndia.

• http://ssi.nic.in/Ministry of Small ScaleIndustries (Now, Ministry of Micro, Smalland Medium Enterprises).

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A

HANDBOOK

ON

THE MICRO, SMALL

AND

MEDIUM ENTERPRISE DEVELOPMENT

ACT, 2006

By

CA. Abhay Vasant ArolkarCA. Nirav Pajwani

WESTERN INDIA REGIONAL COUNCIL OF

THE INSTITUTE OF CHARTERED ACCOUTANTS OF INDIA

WESTERN INDIA REGIONAL COUNCIL— 2009-10

OFFICE BEARERS

Chairman Vice ChairmanCA. B. C. Jain CA. B. K. Rathi

Secretary TreasurerCA. Raju Shah CA. Ashok Pagariya

MEMBERS

CA. Ashwin Nagar CA. Mangesh KinareCA. Atulkumar Parikh CA. N. C. HegdeCA. B. M. Agarwal CA. Prafulla ChhajedCA. Bhailal Patel CA. Rakesh LahotiCA. Chandrakant Pawar CA. Sanjeev LalanCA. Dhiraj Khandelwal CA. Shardul ShahCA. Durgesh Kabra CA. Shriniwas JoshiCA. Makarand Joshi CA. Sunil Kumar Patodia

EX-OFFICIO MEMBERS

CA. Atul Bheda CA. Nilesh VikamseyCA. Bhavna Doshi CA. Pankaj JainCA. Dhinal Shah CA. Rajkumar AdukiaCA. Jayant Gokhale CA. Sanjeev MaheshwariCA. Jaydeep Shah CA. Shivaji ZawareCA. Mahesh Sarda

RESEARCH & PUBLICATIONS COMMITTEE

Chairman ConvenorCA. Mangesh Kinare CA. Durgesh Kabra

OFFICE BEARERSCA. B. C. JainCA. Raju Shah

2nd cover


ii

© Western India Regional Council ofThe Institute of Chartered Accountants of IndiaMumbai

First Edition

Disclaimer

These materials and the information contained herein are provided by thecontributors/authors and are intended to provide general information on aparticular subject or subjects and are not an exhaustive treatment of suchsubject(s).

Accordingly, the information in these materials is not intended to constituteaccounting, tax, legal, investment, consulting, or other professional advice orservices. The information is not intended to be relied upon as the sole basis forany decision which may affect you or your business or any transaction. Beforemaking any decision or taking any action that might affect your personalfinances or business, you should consult a qualified professional adviser.Neither the Publisher nor the authors shall be responsible for any losswhatsoever sustained by any person who relies on these materials and theinformation contained therein.

We take no responsibility to update the contents of this document.

Published by the Research & Publications Committee ofThe Western India Regional Council ofthe Institute of Chartered Accountants of India

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iii

FOREWORD

I am very pleased to present to you the latest publication by the

Research and Publications Committee of WIRC of ICAI titled “A

Handbook on the Micro, Small and Medium Enterprises

Development Act 2006”.

It is commendable that this publication is being brought to

members as the Micro, Small and Medium Enterprises sector is

the backbone of the Indian economy whose importance cannot

be emphasized enough. This publication will go far in making

members aware of the large opportunities that exist in this sector

while also ensuring that they become the domain experts who

can advise this sector. This is indeed a creditable endeavour on

the part of the erudite authors as well as the Research and

Publications Committee of WIRC of ICAI.

I compliment the Chairman of the Research and Publications

Committee of WIRC, CA Mangesh Kinare who took the initiative

for this publication as well as CA Abhay Vasant Arolkar and CA

Nirav Pajwani who have jointly authored this excellent

handbook.

CA. B C. JAIN

Chairman, WIRC


CONTENTS

Chapter Particulars Page No. No.

Chapter I : Preliminary ................................................................1

• Introduction ..............................................................................1

• Salient Features ........................................................................2

• Objective of the Act .................................................................3

Chapter II: Constitution of National Board,Advisory Committee and Facilitation Council ....................4

• National Board for Micro Small and MediumEnterprises ................................................................................4

• Advisory Committee ................................................................5

• Micro and Small Enterprise Facilitation Council .................6

Chapter III: Classification and Filing of Memorandumby an Enterprise ............................................................................7

• Meaning of an Enterprise ........................................................7

• Classification of an Enterprise into Micro Small andMedium Enterprises .................................................................8

• Computation of Investments in Plant & Machinery/Equipments ...............................................................................8

• Filing of Memorandum by Micro, Small and MediumEnterprises ............................................................................. 11

• Authority to which Memorandum shall be filed ............... 12

• Procedure for Filing of Memorandum andOther matters incidental thereto ......................................... 12

• Documents to be filed along with the EM.......................... 15

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PREFACE

Small and Medium Enterprises are back bone of Industrial orService Sectors; especially in our country. Therefore economicdevelopment of our country is largely dependent on the propernurturing and development of these SMEs. However on onehand SMEs face difficulties as regards requisite strength andresources to handle their affairs whereas on the other hand theyface competition from Large Enterprises in same Industry orSector. Micro, Small and Medium Enterprises Development Act,2006 (MSMED Act) was enacted to empower SMEs withrequisite legal backing so that they will not be squeezed by BigFish in the Industry/Sector.

Although this Act came into force from the year 2006, generalawareness about this Act is not as per expectation not onlyamong SMEs but also among professionals. We at Research andPublications Committee of WIRC thought it is our social duty tospread awareness about this very useful Legislation amongSMEs. This will also be useful to our professional colleagues inadvising their clients as Total Business Solution Providers.

I thank Chairman of WIRC CA. B.C. Jain for reposing faith in‘Research and Publications Committee’ of WIRC and giving usthis opportunity to bring out this Publication. I also thank boththe authors CA. Abhay Arolkar and CA. Nirav Pajwani forsparing their time and taking tireless efforts in preparing thisPublication.

CA. Mangesh P. Kinare

Chairman, Research &Publications Committee of WIRC

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1

THE MICRO, SMALL ANDMEDIUM ENTERPRISES

DEVELOPMENT ACT, 2006

Chapter IPreliminary

Introduction

The small scale industry is one of the leading contributory to theeconomy of India. These units comprise about 95% of industrialunits, manufacturing more than 8,000 different products. Itcontributes nearly 45% to the industrial employment and about50% to the export of manufactured goods. However this sector isgrossly unorganized and faces hurdles in their growth. Thissector does not have access to the finance or the markets. It isill-treated by the large procurement companies who are betterplaced in terms of supplies in quantity and offering competitiveprice. They lack management skills and have to also face hurdlesin administrative/bureaucratic procedures. Being an unorganizedsector, the Government did not have accurate, reliableinformation on the financial condition and performance of thissector.

Prior to the enactment of this law, an attempt was made for theprotection for this sector by making provisions. However as theattempt was ad hoc basis, the provisions were scattered invarious legislations, primary legislation of them being theIndustries (Development & Regulation) Act, 1951. Till theenactment of the new law, a small scale undertaking, is definedunder Industries (Develeopment & Regulation) Act, 1951 as anundertaking in which the investment in fixed assets in plant andmachinery whether held on ownership term, or on lease or onhire purchase, does not exceed Rs. 100 lakhs and it is not thesubsidiary of or owned or controlled by any other undertaking. If

Chapter IV: Measures for Promotion and Developmentof Micro, Small and Medium Enterprise ................................ 16

• Measures for Promotion & Development of Micro,Small and Medium Enterprise: (Sections 9 to 14) ............ 16

• Skill Development ................................................................. 16

• Credit Facilities ..................................................................... 16

• Procurement Preference Policy ............................................ 17

• Government Grants ............................................................... 17

Chapter V: Privileges offered to Micro andSmall Enterprise ......................................................................... 18

• Privileges to registered micro and small enterprises ......... 18

• Buyer’s liability to make timely payment forgoods & services .................................................................... 18

• Interest for delayed payment by buyer ............................... 20

• Examples for calculation of interest .................................... 20

• Reference of Disputes to Micro and Small EnterpriseFacilitation Council ............................................................... 23

• Disclosure requirements to be fulfilled by ‘Buyer’ ............ 24

Chapter VI: Miscellaneous ........................................................ 26

• Simplified scheme for closure for micro, smallor medium enterprise ........................................................... 26

• Penal provisions .................................................................... 26

• Powers of Government to make Rules ................................ 26

Appendices

1. MSME Registration Form ..................................................... 27

2. Sample confirmation letter ................................................... 43

3. List of addresses in Maharashtra, Gujarat & Goa. .............. 46

Chapter Particulars Page No. No.

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it manufactures the items specified in Appendix of NotificationSO 857 (E) dt. 10-12-1997, the limit is increased to Rs. 500lakhs. As seen from above, only manufacturing activities werecovered as the entity has to be an industrial undertaking.

However a need was felt to evolve a comprehensive legislationfor this sector which constituted of micro, small and mediumenterprises. Thus was born, The Micro, Small and MediumEnterprise Development Act, 2006, a landmark piece oflegislation, by the Central Government of India, for promotionand development of micro, small and medium enterprise inIndia.

The new law has shifted the base of registration from industrycomponent to enterprise component. This enabled even serviceenterprises to be covered under the purview of the Act. Anenterprise has been defined as follows:

Enterprise means an industrial undertaking or a businessconcern or any other establishment, by whatever name called,engaged in manufacture or production of goods, in any manner,pertaining to any industry specified in the First Schedule to theIndustries (Development & Regulation) Act, 1951 [IDRA, 1951] orengaged in providing or rendering of any service or services.

The Salient features

The Salient features of the Act are

(a) The Act is a comprehensive legislation concerning thissector and covers even service sector enterprises, whichwere hitherto out of the purview. The emphasis is onenterprise component rather than on industry component.

(b) The process of two-stage simplified registration of Micro andSmall Enterprise is dispensed with and replaced by filing ofmemorandum. Filing of memorandum is optional except formedium enterprises in manufacturing sector.

(c) The Act decisively defines Micro, Small and MediumEnterprises by the level of their investment in Plant andMachinery (P & M)/Equipments. This will eliminate any

lingering confusion over the category to which a businessbelongs.

(d) The Act has substantially strengthened the provisions tocheck delayed payments by larger enterprises to micro andsmall enterprises (that supply products to the largerenterprises). The old “The Interest on Delayed Payment toSmall Scale & Ancillary Industrial Undertaking Act, 1993”has been repealed. Notwithstanding such repeal, anythingdone under the Act so repealed shall be deemed to havebeen done or taken under the corresponding provisions ofthis Act.

(e) The Act establishes the National Board for Micro, Small andMedium Enterprises to provide the necessary structure foroverseeing and regulating the development of Micro, Smalland Medium Enterprises in India.

(f) The Act sets an agenda for specific policies that will becreated and implemented. One such policy is a ProcurementPreference Policy, which will guide government bodies onhow much of their supplies should be purchased frommicro, small and medium enterprises.

Objective of the Act

The primary objective of the Act is to facilitate:

• Promotion of micro, small and medium enterprise,

• Development of micro, small and medium enterprise and

• Enhancing the competitiveness of micro, small and mediumenterprise.

The Act aims to achieve these objectives through skilldevelopment, technological upgradation and preference inprocurement by government departments and government aidedinstitutions, etc.

The Act containing six chapters and thirty two sections, thougha small piece of legislation, will go a long way to give the muchneeded support to the micro, small and medium enterprises.


Chapter IINational Board, Advisory Committee

and Facilitation Council

National Board for Micro, Small and Medium Enterprises

Establishment of the Board: (Section 3)

The Central Government by notification has established a Board,known as the National Board for Micro, Small and MediumEnterprises with its head office at Delhi, for the purpose of thisAct. The constitution of the Board compromises of about 47persons being diverse representatives from government, industry,financial and civil society, some of whom shall be ex-officiomembers. The term of the ex-officio members of the Board shallbe as long as that person holds the office, by virtue of which hehas become the member of the Board. As regards the othermembers, the term would be as prescribed by the Government.The Act also empowers the Board to invite persons, whoseadvice it may desire and who shall take part in the discussionsbut shall not have the right to vote. Besides the Board may alsoinvite concerned Ministers at its Meetings. One officer not belowthe rank of Joint Secretary to the Government of India in theministry/department having administrative control of micro,small and medium enterprises, appointed as the member of theBoard shall act as Member Secretary to the Board and shall havesuch powers and shall perform such functions as may beprescribed. The Board shall meet once in three months.

Functions of the Board: (Section 5)

The Board, subject to the general directions of the CentralGovernment, performs all or any of the following functions,namely:—

1. To examine the factors affecting the promotion anddevelopment of micro, small and medium enterprise andreview the policies and programmes of the CentralGovernment in that regard and enhancing thecompetitiveness of such enterprises and the impact thereof.

2. To make recommendations on any matters referred to it bythe Central Government relating to the promotion anddevelopment of the micro, small and medium enterprisesand enhancing the competitiveness of such enterprises.

3. To advise the Central Government on the use of the Fund orFunds constituted under section 12 of this Act.

The member of the Board may be removed, (Section 4) aftergiving him an opportunity of being heard in the matter, if he:—

(i) is adjudged as insolvent.

(ii) is or becomes of unsound mind.

(iii) refuses to act or is incapable of acting as member of theBoard.

(iv) is convicted of an offence involving moral turpitude.

(v) renders his continuance in the Board detrimental to theinterests of the general public.

Advisory Committee (Section 7)

The Central Government by notification has established anAdvisory Committee for the purposes of this Act. The Committeewill have not more than ten members from government andrepresentatives from micro, small and medium industryassociations.

The Advisory Committee will perform the following functions:—

1. To examine and furnish recommendations on mattersreferred to it by the National Board for Micro, Small andMedium Enterprises;

2. To advise Central Government on matters specified insections 9, 10, 11, 12 or 14 of the Act; and

3. To advise State Governments on matters specified in therules made under section 30 of this Act.

The Advisory Committee shall advise and makerecommendations to the Central Government or the State

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Government, as the case may be, after considering the followingmatters

(a) the level of employment in a class or classes of enterprises.

(b) The level of investments in plant and machinery orequipment in a class or classes of enterprises

(c) The need for higher investment plant and machinery orequipment for technological upgradation, employmentgeneration and enhanced competitiveness of the class orclasses of enterprises.

(d) The possibility of promoting or diffusing entrepreneurshipin a micro, small or medium enterprises and

(e) The international standards for classification of small andmedium enterprises.

Micro and Small Enterprise Facilitation Council: (Sections 20& 21)

The State Government by notification will establish Micro andSmall Enterprise Facilitation Council as a forum for resolution ofdisputes between the buyers and suppliers covered by the Act.The Micro and Small Enterprise Facilitation Council will havenot less than four members being diverse representatives fromgovernment, industry, financial and civil society. The Director ofIndustries or an officer, not below that rank shall be appointedas a member of such facilitation Council and he shall as act asits Chairman. The composition of the Council, the manner offilling vacancies and procedure for discharge of duties by themembers of the Council shall be framed by the concerned StateGovernments.

Chapter IIIClassification and Filing of Memorandum

by an Enterprise

Meaning of an Enterprise

The term ‘Enterprise’ has been defined under section 2(e) as anindustrial undertaking or a business concern or any otherestablishment, by whatever name called, engaged in manufactureor production of goods, in any manner, pertaining to anyindustry specified in the First Schedule to the Industries(Development & Regulation) Act, 1951 [IDRA, 1951] or engagedin providing or rendering of any service or services.

“Industrial undertaking” is not defined under the MSMED Act,2006, but the same is defined in IDRA, 1951 as

Industrial undertaking means any undertaking pertaining to ascheduled industry carried on in one or more factories by anyperson or authority including government.

Under IDRA, 1951 Factory means any premises including theprecincts thereof, in any part of which manufacturing process isbeing carried on or is ordinarily carried on

(a) with the aid of power, provided that 50 or more workers areor were working thereon on any day of the preceding twelvemonths.

(b) without the aid of power, provided 100 or more workers,are or were working thereon on any day preceding thetwelve months and provided that in no part of suchpremises, any manufacturing process is being carried onwith the aid of power.

Business concern means a HUF, or a firm or an AOP or BOI or acompany or any commercial or industrial enterprise.

Thus the term ‘business concern’ as contained in section 7(1) ofthe Act, envisages to include proprietorship, Hindu Undividedfamily, association of persons, co-op. society, partnership firm,

6 7


company or undertaking by whatever name called, within thescope of ‘enterprises’ covered under the Act.

Classification of an Enterprise

Enterprises have been broadly classified into:

1. Manufacturing enterprises are enterprises engaged in themanufacture/production of goods pertaining to any industryspecified in the First Schedule to the Industries(Development & Regulations) Act, 1951. Manufacturingenterprises have been further classified into:

(a) Micro Enterprises — investment in plant & machinerydoes not exceed Rs. 25 lakhs.

(b) Small Enterprises — investment in plant & machineryis more than Rs. 25 lakhs but does not exceed Rs. 5crores.

(c) Medium Enterprises — investment in plant &machinery is more than Rs. 5 crores but does notexceed Rs. 10 crores.

2. Service enterprises are Enterprises engaged in providing/rendering of services. Service enterprises have been furtherclassified into:

(a) Micro Enterprises — investment in equipments doesnot exceed Rs. 10 lakhs.

(b) Small Enterprises — investment in equipments is morethan Rs. 10 lakhs but does not exceed Rs. 2 crores.

(c) Medium Enterprises — investment in equipments ismore than Rs. 2 crores but does not exceed Rs. 5crores.

Computation of Investments in Plant & Machinery/Equipments

The criterion for classifying an enterprise as a micro, small ormedium enterprise is the investment in plant and machinery incase of manufacturers (and in equipments in the case of serviceenterprises).

The word ‘Plant” means an assembly of machinery equipment ordevices installed for the manufacturing or productionactivity(ies). This it may include the factory itself as onecomposite unit including building, machinery and apparatustherein for the purpose of manufacture/production. The word“Machinery” means mechanical devices or implements used formanufacturing/production.

The word “Equipment” can be defined as an instrument, officeappliance, office machine and such other electro-mechanical orelectronic appliance that is directly related to the servicerendered. The word “Investment” means the utilization ofresources to increase income or production output in future.

For computing the value of investments in plant & machinery/equipment, one should note the following:

1) Valuation to be based on Original Cost: While calculatingthe investment in plant and machinery, the original pricethereof, irrespective of whether the plant and machinery arenew or second hand, shall be reckoned. In case theenterprise is unable to assess the original investmentcriteria, a certificate with regard to investment in plant,machinery, equipment etc. should be obtained from aChartered Accountant.

2) Only plant and machinery/equipments used in the course ofmanufacture or the service provided should be consideredfor finding the value of investments. Thus equipments suchas refrigerator or an air-conditioner or furniture notnecessary for the manufacture/rendering of service cannotbe included.

3) In determining the value of plant and machinery, thefollowing items of cost are to be excluded:

(a) Pollution control, research and development, industrialsafety devices.

(b) Items notified vide Notification No. S.O. 1722(E) dated5.10.2006 issued by the Ministry of Small ScaleIndustries:

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(i) Equipments such as tools, jigs, dies, moulds andspare parts for maintenance and the cost ofconsumable stores

(ii) Installations of plant & machinery

(iii) Research and development equipments andpollution control equipments

(iv) Power generator sets and extra transformersinstalled by the enterprise as per the regulations ofthe state electricity board

(v) Bank charges & service charges paid to theNational Small Scale Industries Corporation or theState Small Industries Corporation

(vi) Procurement or installation of cables, wiring, bars,electrical control panels (not mounted onindividual machines), oil circuit breakers orminiature be used for providing electrical power tothe plant and machinery or for safety measures

(vii) Gas producer plants

(viii) Transportation charges (excluding sales tax orvalue added tax and excise duty) for indigenousmachinery from the place of their manufacture tothe site of the enterprise

(ix) Charges paid for technical know-how for erectionof plant and machinery

(x) Such storage tanks which store raw materials andfinished products only and finished products onlyand are not linked with the manufacturing processand

(xi) Fire-fighting equipment.

4) Imported Machinery: In case of imported machinery, itsvalue shall include:

(a) Import duty (excluding miscellaneous expenses such astransportation from the port to the factory site,demurrage paid);

(b) Shipping charges;

(c) Customs clearance charges; and

(d) Sales tax or value added tax.

5) Although the Act specifies how the investment in plant andmachinery for manufacturing enterprises is to be calculated,no such formula is provided for calculating investment inequipments.

Filing of Entrepreneurs Memorandum by an Enterprise

The requirement for filing of Entrepreneurs Memorandum (seeAppendix 1) is summarized below:

• Filing of Entrepreneurs Memorandum is mandatory, in caseof the following: —

— Any person who intends to establish a manufacturingmedium enterprise in industry specified in the FirstSchedule to IDRA, 1951.

— A prior manufacturing industry specified in the FirstSchedule to IDRA, 1951 having investment in plantand machinery or more than one crore rupees but notexceeding ten crore rupees has filled an IndustrialEntrepreneurs Memorandum in pursuance ofNotification No. S. O. 477(E), dt. 25-7-1991.

• Filing of Entrepreneurs Memorandum is discretionary*, incase of the following: —

— Any person who intends to establish

� A micro or small enterprise

� A medium enterprise for services or

— A person who has, before the commencement of thisAct, established a SSI and obtained a registrationcertificate

*Note: It may be noted that even though it is optional/discretionary to file the Entrepreneurs Memorandum in

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some cases listed above, it is advisable, that all suchmicro and small enterprises to file memorandum ofregistration with prescribed authority, in order to avail ofthe benefits accorded under the Act. Section 15 of theAct provides protection to micro and small supplierregistered with appropriate authority, inter alia, making iteligible for timely payment from the buyer.

Authority to which Memorandum shall be filed

The memorandum shall be filed by micro & small enterprisewith the authority notified by the State Government. Thememorandum shall be filed by medium enterprise with theauthority notified by the Central Government.

The Central Government has specified the General Manager,District Industries Centre or any district level officer ofequivalent rank in the directorate or the department dealing withmicro, small, medium enterprise of State Government or UnionTerritory administration as the authority with which thememorandum is to be filed in case of medium enterprise (Min.of S.S.I., Notification No. S.O. 1636 (E), dt. 29-9-2006). List ofoffices in Maharashtra, Gujarat and Goa are given in Appendix 4.

In case of existing enterprises, to whom it is mandatory toregister, the Entrepreneurs Memorandum shall be filed within180 days from commencement of the Act.

Procedure for filing Entrepreneurs Memorandum and othermatters incidental thereto

1. Form of the Entrepreneurs Memorandum can bedownloaded from the Internet, the address of which can beobtained from Directorate dealing with Micro, Small &Medium Enterprises of the State Governments/UTs. or thehard copies of the same can be obtained from the DistrictIndustries Centres. This form can also be downloaded fromthe SIDCO website i.e., www.laghu-udyog.com orwww.smallindustryindia.com List of various useful websitesare contained in Appendix 5.

2. The form of Memorandum is in two parts. Any person whointends to establish a micro, small or medium enterpriseengaged in providing or rendering of services may file orthose who want to establish medium enterprise engaged inthe production or manufacture of products shall file Part 1of the Entrepreneurs Memorandum with the DistrictIndustries Centre. Once the above enterprises startproduction or start providing or rendering services, theyshould file Part II of the Entrepreneurs Memorandum withthe District Industries Centre.

In case of non-filing of Part II of the EntrepreneursMemorandum within two years of the filing of Part I, theMemorandum (Part I) filed by the entrepreneur will becomeinvalid.

Existing units intending to register with the DistrictIndustries Centre are to fill up only Part II of the form.

3. Before issuing the acknowledgement, the District IndustriesCentres shall make sure that the form is complete in allrespects and particularly the form is signed and isaccompanied with an undertaking, which is a part of theform of Entrepreneurs Memorandum.

4. The District Industries Centre shall fill all the codes in theform of the Memorandum and issue an acknowledgementafter allotting an EM number, date of issue and category ofthe unit within five days of the receipt of the form ofMemorandum by post or same day, if the form ofMemorandum is submitted in person as well as online.

5. The following shall form the basis of evaluation of theapplication for registration:—

(a) The unit has obtained all necessary clearances whetherstatutory or administrative. e.g. drug licence underDrug Control Order, NOC from Pollution ControlBoard, if required etc.

(b) Unit does not violate any locational restrictions in forceat the time of evaluation.

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(c) Value of plant and machinery is within prescribedlimits.

(d) Unit is not owned, controlled or subsidiary of anyother industrial undertaking as per notification.

6. The District Industries Centre shall, in addition of keeping arecord, in writing, shall also maintain records electronicallyon computer.

7. The District Industries Centre shall maintain record of allthe Entrepreneurs Memorandum so filed in respect of microand small enterprises and medium enterprises engaged inproviding and rendering services and forward a copy of theEntrepreneurs Memorandum so filed with EM numberallotted to the Small Industries Service Institutes of theirState/Jurisdiction. The District Industries Centre shall alsomaintain record of all the Entrepreneurs Memorandum sofiled in respect of medium enterprises engaged inproduction/manufacturing of products and forward onecopy each of the Entrepreneurs Memorandum with EMnumber allotted to Small Industries Service Institutes oftheir State/Jurisdiction and to Joint DevelopmentCommissioner (MSME Pol.) in the Office of theDevelopment Commissioner (Small Scale Industries).

8. The enterprise has to file the Entrepreneurs’ MemorandumPart II again, in case, the status of the enterprise changesfrom micro to small or small to medium or vice versa, as aresult of enhancement/decrease in the investment in plantand machinery/equipments.

In case of change in the investment in plant and machineryor in equipment, the enterprises who have already filedEntrepreneurs Memorandum should inform the DistrictIndustries Centre of the same in writing within one monthof the change in investment.

In case of change of products and that of services oraddition in products or services, the enterprises who havealready filed Entrepreneurs Memorandum should inform the

District Industries Centre of the same in writing within onemonth of the change.

In case of companies as defined in Companies Act, 1956,(1 of 1956), co-operative society, societies, partnership firmsor trusts, the change of name of the enterprise, if any,should be informed to District Industries Centre within theprescribed time limit of such change along with an affidavit.

9. Effect of non-activity: The Acknowledged Entrepreneurs’Memorandum shall be liable to be cancelled in case theunit is found closed for more than 6 months or furnishedwrong information in the Entrepreneurs’ Memorandum filedor fails to inform any change in the investment in plant andmachinery or in equipment (to be initiated based on anycomplaint in writing followed by an enquiry under anofficial not below the authority notified for accepting theEntrepreneurs’ Memorandum under the provisions of sub-sections (3) and (4) of section 8 of the said Act.

Documents to be filed along with the EntrepreneursMemorandum

A. The Entrepreneurs Memorandum in triplicate/quadruplicateas the case may be.

B. Document of incorporation, namely, the partnership deed,Memorandum and Articles of Association, Trust deed,Byelaws etc.

C. The local shops and establishment registration certificate.

D. Copy of registration or the licence required under anystatute for the trade.

E. Certificate of Chartered Accountant in regard to the value ofplant & machinery/equipment, as the case may be.

F. Latest Audited final statement of accounts.

G. Factory unit address, if any and the factory permitdocument, if any.

H. Any other additional form as may be required by theconcerned district office in the local language

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Chapter IVMeasures for Promotion and Development of

Micro, Small and Medium Enterprise

Measures for Promotion & Development of Micro, Small andMedium Enterprise: (Sections 9 to 14)

Sections 9 to 14 of the Act provide for various measures forpromotion, development and enhancement of competitiveness ofmicro, small and medium enterprise to be undertaken by CentralGovernment, State Government and Reserve Bank of India. Thesemeasures are briefly discussed as under:

1. Skill Development — Programmes and Guidelines formicro, small and medium enterprise: (Section 9)

The Central Government may from time to time notifyprogrammes & guidelines:

(a) to facilitate development of skill in the employees,management and entrepreneurs,

(b) for providing technological upgradation,

(c) to provide infrastructure facility and marketingassistance, and

(d) to have cluster development of micro, small andmedium enterprises.

2. Credit Facilities: (Section 10)

The policies and practices in respect of credit to the micro,small and medium enterprises shall be progressive and suchas may be specified by the Reserve Bank of India, with theaims of:

(a) Ensuring smooth credit flow to the micro, small andmedium enterprises,

(b) Minimizing sickness among them, and

(c) Ensuring enhancement of their competitiveness.

3. Procurement Preference Policy: (Section 11)

For facilitating promotion and development of micro andsmall enterprise, the Central Government or a StateGovernment may notify preference policies in respect ofprocurement of goods and services, produced and providedby micro and small enterprise, by its Ministries,departments or its aided institutions and public sectorenterprises. This is valid only for Micro and SmallEnterprises and not for Medium Enterprises.

4. Government Grants: (Sections 12, 13 & 14)

To facilitate promotion and development of such enterprisethe Central Government

(a) by notification, constitute one or more Funds,

(b) credit to the Fund or Funds, such sums as theGovernment may provide after due appropriation madeby Parliament by law in this behalf, and

(c) administer the Fund or Funds and ensure timelyutilization and release of sums with such criteria, asmay be prescribed.

16 17


Chapter VPrivileges offered to Micro and Small Enterprises

Privileges to the Registered Micro or Small Enterprises

The Act has substantially strengthened the provisions to checkdelayed payments by larger enterprises to micro and smallenterprise (that supply products to the larger enterprises).Sections 15 to 23 of the Act confers following privileges onmicro and small enterprises:

1. Buyer’s liability to make timely payment for goods &services.

2. Mandatory interest @ three times the bank rate for delayedpayment by the buyer.

3. The interest so paid will not be allowed as deduction to thebuyer under the Income-tax Act, 1961.

4. Reference of Disputes to Micro and Small EnterpriseFacilitation Council.

5. Disclosure requirements to be fulfilled by the ‘Buyer’.

Section 24 of this Act specifically states that sections 15 to 23 ofthe Act will have overriding effect over any other law for timebeing in force. The Buyer has to identify whether the supplier isregistered under the Act. A draft of correspondence between thebuyer and the supplier is given Appendix 2.

As a reference, a list of possible legislations which may beapplicable to such micro, small and medium enterprises iscontained in Appendix 3.

Buyer’s liability to make timely payment for goods andservices: (Section 15)

Section 15 of the Act casts an obligation upon the buyer of anygoods or service, to make payment to the supplier by thespecified date as follows:

1. Where there is an agreement in writing

On or before the date agreed upon between them in writing.Further in no case the period so agreed shall exceed 45 daysfrom the day of acceptance or day of deemed acceptance.

2. Where there is no agreement

Before the appointed date, which means the day followingimmediately after the expiry of 15 days from the day ofacceptance or day of deemed acceptance.

Who is eligible for protection?

The micro and small suppliers registered with appropriateauthority will be eligible for timely payment from the buyer.Thus, those who are not so registered will not be eligible forsuch protection. The eligible enterprise may register itself at anytime. No time frame is prescribed. The protection is accorded toan enterprise, immediately after the same is registered and thetransaction prior to such registration shall also be covered forsuch protection.

The terms buyer, supplier, day of acceptance and day of deemedacceptance have been defined in the Act as under:

Buyer

As per section 2(d) of the Act, Buyer means whoever buys anygoods or receives any services from a supplier for consideration.

Supplier

As per section 2(n) of the Act, Supplier means a micro or smallenterprise which has filed a memorandum u/s. 8(1) and includes

1. National Small Industries Corporation,

2. Small Industries Corporation of a State/Union Territory,

3. A registered company, co-operative society, trust or body,selling goods or services produced or provided by micro orsmall enterprise.

Appointed Day means —

The day following immediately after the expiry of 15 days fromthe day of acceptance or the day of deemed acceptance of anygoods or any services by a buyer from a supplier.

Day of acceptance means —

1. The day of actual delivery of goods or rendering services,

18 19


2. Where the buyer makes an objection (in writing) within 15days from the day of delivery of goods or rendering services,day of acceptance will be the day on which the supplierremoves such objection.

Day of deemed acceptance means —

Where the buyer makes no objection (in writing) within 15 daysfrom the day of actual delivery of goods or rendering of services,the day of deemed acceptance will be day of actual delivery ofgoods or rendering of services.

Interest for delayed payment by buyer: (Sections 16, 17 & 23)

Where a buyer fails to make payment as required undersection 15 :

1. He shall be liable to pay the amount with interest thereon.(Section 17)

2. The interest shall be payable for the period of delay fromthe appointed day or date immediately following the agreeddate. (Section 16)

3. The interest shall be payable at a rate three times the bankrate and compounded at monthly rests. (Section 16)

4. The interest paid or payable by the buyer shall not bededucted in computing his taxable income under theprovisions of the Income-tax Act.

Section 23 of the MSMED Act, 2006, states

“Notwithstanding anything contained in the Income-tax Act, 1961the amount of interest payable or paid by any buyer, under or inaccordance with the provisions of this Act, shall not be allowed asdeduction for the purpose of computation income under the I.T.Act, 1961”.

Some examples for calculation of interest under the Act.

Example 1: (No credit period/no objection)

• Date of Order : October 3, 2009

• No credit period

• Date of Supply : November 3, 2009

• No objection in writing from buyer

• Day of acceptance : November 3, 2009

• Appointed Day : November 18, 2009

• Interest will be applicable if the payment is made afterNovember 18, 2009

Example 2: (No credit period/objection within 15 days)




• Objection in writing from buyer received : November 15,2009

• Date of removal of objection: November 20, 2009


• Appointed Day : December 5, 2009

• Interest will be applicable if the payment is made afterDecember 5, 2009.

Example 3: (No credit period/objection beyond 15 days)






• Date of payment as per agreement between the parties:December 15, 2009


• Appointed Day : November 18, 2009

20 21


• Interest will be applicable if the payment is made afterNovember 18, 2009, even though the date of payment asagreed between the parties is December 15, 2010.

Example 4: (Credit period/no objection)


• Credit period : 60 days


• No objection in writing from buyer

• Date of payment as per agreement : January 2, 2010



• Interest will be applicable, if the payment is made afterDecember 18, 2009, even though the date of payment asagreed between the parties is January 2, 2010.

Example 5: (Credit period/objection within 15 days)






• Date of payment as per agreement between the parties:January 19, 2010


• Appointed Day : January 4, 2010

• Interest will be applicable if the payment is made afterJanuary 4, 2010, even though the date of payment as agreedbetween the parties is January 19, 2010.

Example 6: (Credit period/objection beyond 15 days)






• Date of payment as per agreement between the parties :January 19, 2010



• Interest will be applicable if the payment is made afterDecember 18, 2009, even though the date of payment asagreed between the parties is January 19, 2010.

Reference of Disputes to Micro and Small EnterpriseFacilitation Council: (Sections 18 to 21)

Who can make a Reference?

Any party to a dispute relating to amount payable for goods orservices and any interest thereon, may make a reference to Microand Small Enterprise Facilitation Council.

Proceedings by the Micro and Small Enterprise FacilitationCouncil

On receiving a reference, the Micro and Small EnterpriseFacilitation Council may itself conduct conciliation into thematter or seek assistance from any institution or centre providingalternate dispute resolution service for conducting suchconciliation.

If conciliation is not successful and stands terminated withoutany settlement between the parties, the Micro and SmallEnterprise Facilitation Council shall either itself take up thedispute for arbitration or refer it to any institution or centreproviding alternate dispute resolution service for sucharbitration.

22 23


Jurisdiction of Micro and Small Enterprise Facilitation Council

The Micro and Small Enterprise Facilitation Council or thecentre providing alternate dispute resolution services shall havejurisdiction to act as an Arbitrator or conciliator in a disputebetween the supplier located within its jurisdiction and a buyerlocated anywhere in India. Thus the jurisdiction is fixed on thebasis of location of the supplier.

Time limit for deciding the matter

Every reference made under this section shall be decided within90 days from date of making such a reference.

If an appellant (not being a supplier) wants to make anapplication for setting aside any decree, award or order passedby Micro and Small Enterprise Facilitation Council or anyinstitution or centre providing alternate dispute resolutionservice, the application shall not be entertained by any courtunless the appellant has deposited with it 75% of the amount interms of decree, award or order, in manner directed by suchcourt. The appellate court may order payment of a part of thedeposit to the supplier (micro or small) enterprise.

Disclosure requirement to be fulfilled in audit of ‘Buyers’ — tospecify unpaid amount with interest in his annual statement ofaccounts (section 22)

A ‘buyer’, who is required to get his accounts audited under anylaw for time being in force, shall furnish the following additionalinformation in his annual statement of accounts:

1. The principal amount and interest due thereon (to be shownseparately) due to any supplier at the end of eachaccounting year.

2. The amount of payment made to the supplier, beyond theappointed day, and interest thereon during an accountingyear.

3. The amount of interest due & payable for the period ofdelay in making the payment (which has been paid butbeyond the appointed day during the year) but withoutadding interest specified under this Act.

4. The amount of interest accrued and remaining unpaid at theend of each accounting year.

5. The amount of further interest remaining due and payableeven in the succeeding year, until the date such interest isactually paid, for purpose of disallowance as a deductibleexpenditure in terms of section 23.

The buyer will be required to make necessary changes in hisaccounting package so as to have a separate group of suppliersfor micro and small enterprises, have a separate account forinterest paid to them, calculate interest paid to them at threetimes the bank rate, compounded quarterly at monthly rest andcredit the same to suppliers account till the date of payment.

Micro and Small enterprise will be required to mention/getprinted on their letter heads, supply order sheets, invoices, billsand other relevant documents, the Entrepreneurs Memorandum(EM) Number as allotted after filing of the said Memorandum, bythe District Industries Centre (DIC) or competent authority.

While finalizing/carrying out audit of financial statements of anyentity the auditor will now have to take note of the disclosurerequirement in annual statement of accounts of the buyer as wellas provisions of interest for late payment of dues of micro/smallenterprises.

Besides, vide the Income-tax (Tenth Amendment) Rules, 2009Income, Form 3CD has been amended by insertion of a newEntry No. 17A which reads as follows:

• “17A. Amount of interest inadmissible under section 23 of theMicro, Small and Medium Enterprises Development Act,2006.”

24 25


Chapter VIMiscellaneous

Simplified Scheme for Closure: (Section 25)

With a view to facilitate closure of business of micro, small ormedium enterprises (not being a company registered under theCompanies Act, 1956) the Central Government may notify ascheme within one year from the date of commencement of thisAct.

Penal Provisions: (Section 27)

The penal provisions for contravention of sections 8, 22 & 26 ofthe Act are as under:

1. Penalty for contravention of section 8 or 26 of the Act:Penalty for non-filing of memorandum with the prescribedauthority as required under section 8(1) of the Act or non-furnishing of any information to the officers appointedunder section 26(1) of the Act will be:

(a) In case of first conviction, a fine which may extend toRs. 1,000.

(b) In case of any subsequent conviction, a fine whichshall not be less than Rs. 1,000 but may extend toRs. 10,000.

2. Penalty for contravention of section 22 of the Act: A buyerfailing to specify unpaid amount with interest in his annualstatements of account as required under section 22 of theAct, will be liable for a fine of not less than Rs. 10,000.

Powers to make Rules: (Sections 29 & 30)

• The Central Government/The State Government may, bynotification, make rules to carryout the provision of thisAct.

Appendix 1MSME REGISTRATION FORM

The Gazette of IndiaExtraordinary

Part II — Section 3 — Sub-section (ii)PUBLISHED BY AUTHORITY

Ministry of Small Scale IndustriesNOTIFICATION

New Delhi, the 30th September, 2006

S.O. 1643 (E)— In exercise of the powers conferred by sub-section (2) of section 8 of the Micro, Small and MediumEnterprises Development Act, 2006 (27 of 2006) herein referredto as the said Act, the Central Government, after obtaining therecommendations of the Advisory Committee in this behalf,hereby provides for the format of memorandum and procedure ofits filing and other matters incidental thereto for the purpose ofthe said Act, namely:—

Schedule IForm No. ——————

ENTREPRENEURS MEMORANDUMFOR

SETTING UP MICRO, SMALL OR MEDIUM ENTERPRISE

GENERAL INSTRUCTIONS

1. MEMORANDUM IS TO BE FILED WITH THE DISTRICTINDUSTRIES CENTRE* BY A MICRO, SMALL OR MEDIUMENTERPRISE, AS THE CASE MAY BE, UNDER SUB-SECTION (1) OF SECTION 8 OF THE MICRO, SMALL ANDMEDIUM ENTERPRISES DEVELOPMENT (MSMED) ACT,2006.

2. FOUR COPIES OF THE MEMORANDUM SHOULD BEFILED.

3. THERE IS NO FEE FOR PROCESSING THEMEMORANDUM.

26 27


4. EXISTING UNITS SHOULD FILL UP ONLY PART II OFTHE MEMORANDUM.

5. IN CASE OF ANY CHANGE IN THE INFORMATION, ATANY POINT OF TIME, PLEASE INFORM THE DETAILSWITHIN THREE MONTHS TO DISTRICT INDUSTRIESCENTRE.

6. WRITE/TYPE IN BLOCK (CAPITAL) LETTERS.

7. LEAVE ONE BLANK BOX AFTER EACH WORD.

8. FILL UP WHICHEVER IS APPLICABLE.

9. ALL CODES OTHER THAN PIN CODE SHALL BE FILLEDBY THE OFFICE.

10. FORM WILL BE MACHINE NUMBERED BY THE DISTRICTINDUSTRIES CENTRE.

* To be filed at the District Industries Centre under whosejurisdiction the enterprise is proposed to be located.

Form No. ——————

FOR OFFICE USE ONLY

D D M M Y Y Y Y

DATE OF ISSUE

CATEGORY OF ENTERPRISE

(MANUFACTURING-1, SERVICE-2)

(MICRO-1, SMALL-2, MEDIUM-3)

ENTREPRENEURS

MEMORANDUM NUMBER

(First two boxes are for State/Union Territory code, next threeboxes are for District code, sixth and seventh boxes are forcategory of enterprise (sixth box for indicting manufacturing orservice and seventh box for indicating micro or small ormedium) and last five boxes are for Entrepreneurs’ Memorandumnumber)


PART I(To be filled in as expression of intent)

1. NAME OF APPLICANT

2. (a) ADDRESS OF COMMUNICATION

(i) TELEPHONE NUMBER

(ii) FAX NUMBER

(iii) CELL PHONE NUMBER

(iv) E-MAIL

(v) WEB-SITE

(b) PERMANENT RESIDENTIAL ADDRESS(MAIN APPLICANT)


(ii) FAX NUMBER


PIN

PIN

28 29


(iv) E-MAIL

(v) WEB-SITE

3. NAME OF PROPOSED ENTERPRISE (if decided)

4. PROPOSED LOCATION OF ENTERPRISE

(i) VILLAGE/TOWN

CODE

(ii) TAHSIL/TALUK/MANDAL

CODE

(iii) DISTRICT

CODE

(iv) STATE

CODE

(v) PIN CODE

(vi) AREA (RURAL-1, URBAN-2)

5. CATEGORY OF ENTERPRISE


6. NATURE OF ACTIVITY [Tick Appropriate Box(es)]

(i) MANUFACTURE

(ii) SERVICE

(iii) OTHERS

In case of others, please specify

——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————

7. NATURE OF OPERATION

(Perennial-1, Seasonal-2, Casual-3)

8. WHETHER THE UNIT WILL BE AN ANCILLARY

(Yes-1, No-2)

M M Y Y Y Y9. PROPOSED SCHEDULE OF

INSTALLATION OF PLANT ANDMACHINERY

10. TYPE OF ORGANIZATION

(PROPRIETARY-1, HINDU UNDIVIDEDFAMILY-2, PARTNERSHIP-3, CO-OPERATIVE-4,PRIVATE LIMITED COMPANY-5, PUBLIC LIMITEDCOMPANY-6, SELF-HELF GROUP-7, OTHERS-8)

11. (a) MAIN MANUFACTURING/SERVICE ACTIVITY

NAME

CODE (NIC 98*)

(b) PRODUCTS TO BE MANUFACTURED/SERVICE TOBE PROVIDED

(i) NAME

CODE (ASICC2000*)

(ii) NAME

CODE (ASICC2000*)

(iii) NAME

CODE (ASICC2000*)

30 31


(iv) NAME

CODE (ASICC2000*)

(v) NAME

CODE (ASICC2000*)

10. (*)Codes for activities and products/services as perclassification specified from time to time by theDevelopment Commissioner (Small Scale Industries),Government of India to be filled in by the District IndustriesCentre or the office where the Entrepreneurs’ Memorandumis submitted.

(ADD ADDITIONAL SHEET FOR MORE PRODUCTS)

12. (a) PROPOSED INVESTMENT IN FIXED ASSETS[Rupees in lakh]

(i) LAND (OWNED-01/RENTED-02/

LEASED-03)

APPROXIMATE VALUE*

(ii) BUILDING (OWNED-01/RENTED-02/

LEASED-03)

APPROXIMATE VALUE*

(iii) PLANT AND MACHINERY VALUE*

(In case of manufacturing enterprise)

(iv) EQUIPMENT VALUE*

(In case of service enterprise)

(v) FOREIGN EQUITY, IF ANY VALUE*

[*The value in the boxes should be filled in from the rightside, e.g., if the value is Rupees 10 lakhs it should bewritten as . This will also apply to all other items

(rows) where quantity, number, etc., to be given.]

13. INSTALLED CAPACITY (proposed) QTY. UNIT

PER ANNUM

14. POWER LOAD (ANTICIPATED) H.P./K.W.

15. (a) (i) OTHER SOURCE OF ENERGY/

POWER [IF REQUIRED]

(NO POWER NEEDED-1, COAL-2, OIL-3, LIQUIDPETROLEUM GAS-4, ELECTRICITY FROM GRID-5,ELECTRICITY FROM GENERATOR- 6, NONCONVENTIONAL ENERGY-7, TRADITIONALENERGY/FIREWOOD-8)

(ii) If no power required, specify reasons;

(b) INDICATE ANNUAL REQUIREMENT

SOURCE OF ENERGY QTY. UNIT

........................................

........................................

........................................

16. EXPECTED EMPLOYMENT (Nos.)

(i) MANAGEMENT AND OFFICE STAFF

(ii) SUPERVISORY

(iii) WORKERS

17. ENTREPRENEURS’ PROFILE (OF ALL PARTNERS/DIRECTORS OF THE ORGANISATION — USE SEPARATESHEETS, IF NEEDED)

(a) NAME

(i) MALE (M)/FEMALE (F)

(ii) SC (1)/ST (2)/OBC (3)/OTHERS (4)

PHYSICALLY CHALLENGED (5)

(iii) KNOWLEDGE LEVEL

[TECHNICAL GRADUATE-1,MANAGEMENT GRADUATE-2,POST GRADUATE-3, OTHERGRADUATE-4, UNDER-GRADUATE-5,ANY OTHER LOWER-6]

1 0

32 33


(iv) EQUITY PARTICIPATION

(in Rupees)

(Percentage of total equity)

(v) STAKE IN OTHER MANUFACTURING

ENTERPRISES(Yes-1, No-2)[ADD ADDITIONAL SHEET, IF NEEDED]

18. EXPECTED SCHEDULE OF COMMENCEMENTOF PRODUCTION/ACTIVITY

M M Y Y Y Y

DATE:

PLACE:

[SIGNATURE OF THE APPLICANT/AUTHORISED PERSON]

NAME OF THE PROPRIETOR/PARTNER/MANAGING DIRECTOR

(a) Enclose a self-certified copy of Power of Attorney/BoardResolution/Society Resolution, wherever applicable, whilesigning as Partner/Managing Director or Authorised Person.

(b) Enclose a certified/notarized copy of the Partnership Deed/Memorandum of Association/Articles of Association in caseof Medium Enterprises.

Undertaking

This is to certify that the information furnished in thememorandum in Form No. …………………. is true and correct tothe best of my knowledge and belief.

DATE:

PLACE:



ACKNOWLEDGEMENT

M/s………………………………………………………………. HASFILED MEMORANDUM EXPRESSING ITS INTENT TO SET UPA N … … … … … … … … … … … … … … … … … … … … … … … … .(MANUFACTURING/SERVICE) ENTERPRISE AT THEADDRESS……………………………………………………………….………………………………………………………………………………………………………………………….PIN ………………… STATED IN FORM NO. …………………...AND ALLOCATED ENTREPRENEURS’ MEMORANDUM NO. ASBELOW

D D M M Y Y Y Y

DATE OF ISSUE

CATEGORY OF THE UNIT

(MANUFACTURING-1, SERVICES-2)

(MICRO-1, SMALL-2, MEDIUM-3 )

ENTREPRENEURS’

MEMORANDUM NUMBER


DATE:

PLACE:

SIGNATURE

WITH OFFICE SEAL

34 35


PART II


(To be filled up and submitted to the District Industries Centreafter commencement of production/activity)

[THE ROWS WHICH HAVE BEEN REPEATED NEED TO BEFILLED ONLY TO THE EXTENT THAT THE ACTUAL DETAILSON COMMENCEMENT VARY FROM THOSE IN PART I]

I. ENTREPRENEURS

MEMORANDUM NUMBER (Part I)

D D M M Y Y Y Y

II. DATE OF ISSUE

M M Y Y Y Y

III. MONTH OF COMMENCEMENTOF PRODUCTION/ ACTIVITY

1. NAME OF APPLICANT

2. (a) ADDRESS OF COMMUNICATION


(ii) FAX NUMBER


(iv) E-MAIL

(v) WEB-SITE

(b) PERMANENT RESIDENTIAL ADDRESS(MAIN APPLICANT)


(ii) FAX NUMBER


(iv) E-MAIL

(v) WEB-SITE

3. NAME OF ENTERPRISE

4. LOCATION OF ENTERPRISE

(i) VILLAGE/TOWN

CODE

(ii) TAHSIL/TALUK/MANDAL

CODE

(iii) DISTRICT

CODE

(iv) STATE

CODE

PIN

PIN

36 37


(v) PIN CODE

(vi) AREA (RURAL-1, URBAN-2)

5. CATEGORY OF ENTERPRISE


6. NATURE OF ACTIVITY [Tick Appropriate Box(es)]

(i) MANUFACTURE

(ii) SERVICE

(iii) OTHERS

In case of others, please specify

——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————

7. NATURE OF OPERATION

(Perennial-1, Seasonal-2, Casual-3)

8. WHETHER THE UNIT IS AN ANCILLARY(Yes-1, No-2)

M M Y Y Y Y

9. MONTH OF INSTALLATION OFPLANT AND MACHINERY

10. WHETHER THE UNIT IS REGISTERED

UNDER FACTORY ACT(Under Section 2m(i)/2m(ii)-1, 85)I)/85(ii)-2,not registered-3)

11. TYPE OF ORGANIZATION

[PROPRIETARY-1, HINDU UNDIVIDED FAMILY-2,PARTNERSHIP-3, CO-OPERATIVE-4, PRIVATELIMITED COMPANY-5, PUBLIC LIMITEDCOMPANY-6, SELF-HELP GROUP-7, OTHERS-8]

12. (a) MAIN MANUFACTURING/SERVICE ACTIVITY

NAME

CODE (NIC 98*)

(b) PRODUCTS TO BE MANUFACTURED/SERVICE TOBE PROVIDED

(i) NAME

CODE (ASICC2000*)

(ii) NAME

CODE (ASICC2000*)

(iii) NAME

CODE (ASICC2000*)

(iv) NAME

CODE (ASICC2000*)

(v) NAME

CODE (ASICC2000*)

(*) Codes for activities and products/services as perclassification specified from time to time by theDevelopment Commissioner (Small Scale Industries),Government of India to be filled in by the District IndustriesCentre or the office where the Entrepreneurs’ Memorandumis submitted.

(ADD ADDITIONAL SHEET FOR MORE PRODUCTS)

13. (a) INVESTMENT IN FIXED ASSETS [Rupees in lakh]

(i) LAND (OWNED-01/RENTED-02/

LEASED-03)

VALUE*

(ii) BUILDING (OWNED-01/RENTED-02/

LEASED-03)

VALUE*

38 39


(iii) PLANT AND MACHINERY

VALUE*

(In case of manufacturing enterprise)

(iv) EQUIPMENT

VALUE*

(In case of service enterprise)

(v) FOREIGN EQUITY, IF ANY VALUE*

[*The value in the boxes should be filled in from the rightside, e.g., if the value is Rupees 10 lakhs it should bewritten as . This will also apply to all other items

(rows) where quantity, number, etc., to be given.]

14. INSTALLED CAPACITY PER ANNUM QTY. UNIT

UNIT

15. POWER LOAD H.P./K.W.

16. (a) (i) OTHER SOURCE OF ENERGY/

POWER [IF REQUIRED]

(NO POWER NEEDED-1, COAL-2, OIL-3, LIQUIDPETROLEUM GAS-4, ELECTRICITY FROM GRID-5,ELECTRICITY FROM GENERATOR- 6, NON-CONVENTIONAL ENERGY-7, TRADITIONALENERGY/FIREWOOD-8)

(ii) If no power required, specify reasons.

(b) INDICATE ANNUAL REQUIREMENT

SOURCE OF ENERGY QTY. UNIT

........................................

........................................

........................................

17. EMPLOYMENT

MALE FEMALE(Nos.) (Nos.)

(i) MANAGEMENT AND OFFICE STAFF

(ii) SUPERVISORY

(iii) WORKERS

18. TOTAL ANNUAL TURNOVER(in Rupees)

(If less than one year of operation,then expected turnover)

19. EXPORT (if any) (in Rupees)

20. ENTREPRENEURS’ PROFILE (OF ALL PARTNERS/DIRECTORS OF THE ORGANISATION — USE SEPARATESHEETS, IF NEEDED)

(a) NAME

(i) MALE (M)/FEMALE (F)

(ii) SC (1)/ST (2)/OBC (3)/OTHERS (4)

PHYSICALLY CHALLENGED (5)

(iii) KNOWLEDGE LEVEL

[TECHNICAL GRADUATE-1,MANAGEMENT GRADUATE-2,POST GRADUATE-3,OTHERGRADUATE-4, UNDER-GRADUATE-5,ANY OTHER LOWER-6]

(iv) EQUITY PARTICIPATION

(in Rupees)

(Percentage of total equity)

(v) STAKE IN OTHER MANUFACTURING

ENTERPRISES(Yes-1, No-2)[ADD ADDITIONAL SHEET, IF NEEDED]

21. DATE OF COMMENCEMENT OFPRODUCTION/ACTIVITY

D D M M Y Y Y Y

DATE:

PLACE:


1 0

40 41


NAME OF THE PROPRIETOR/PARTNER/MANAGING DIRECTOR

(a) Enclose a self-certified copy of Power of Attorney/BoardResolution/Society Resolution, wherever applicable, whilesigning as Partner/Managing Director or Authorised Person.

(b) Enclose a certified/notarized copy of the Partnership Deed/Memorandum of Association/Articles of Association in case ofMedium Enterprises.

Undertaking

This is to certify that the information furnished in thememorandum in Form No. …………………. is true and correct tothe best of my knowledge and belief.

DATE:

PLACE:



ACKNOWLEDGEMENT

M/s……………………………………………………………….HASFILED MEMORANDUM FOR A ………………………………….(MANUFACTURING/SERVICE) ENTERPRISE WHICH HAS BEENSET UP AT THE ADDRESS……………………………………………………………………………………………………………………………………………………………………………………………………………………………………PIN……………………… STATED IN FORM NO. ………………...AND ALLOCATED EM NO. AS BELOW

D D M M Y Y Y Y

DATE OF ISSUE

CATEGORY OF THE UNIT

(MANUFACTURING-1, SERVICES-2)

(MICRO-1, SMALL-2, MEDIUM-3 )

ENTREPRENEURS

MEMORANDUM NUMBER


DATE:

PLACE:

SIGNATURE

WITH OFFICE SEAL

Appendix 2(Sample confirmation letter)

(To be sent by Buyer to Suppliers for confirming their status)

Date

To

_______________

_______________

Subject :Confirmation regarding Category of Enterprise for thePurpose of the Micro, Small and Medium EnterprisesDevelopment Act, 2006

Dear Sir,

In view of the newly enacted, Micro, Small and MediumEnterprises Development Act, 2006 the enterprises has beenclassified into three categories, i.e., micro, small and mediumenterprise, based on the amount of investment in Plant &Machinery. The basis of classification is reproduced below:

I. In the case of the enterprises engaged in the manufacture orproduction of goods pertaining to any industry specified in

42 43


the First Schedule to the Industries (Development andRegulation) Act, 1951:

(a) Micro Enterprise: where the investment in plant andmachinery is up to Rs. 25 lakhs.

(b) Small Enterprise: where the investment in plant &machinery exceeds Rs. 25 lakhs but up to Rs. 5 crores.

(c) Medium Enterprise: where the investment in plant &machinery exceeds Rs. 5 crores but up to Rs. 10 crores.

II. In the case of the enterprises engaged in providing orrendering of services:

(a) Micro Enterprise: where the investment in plant andmachinery is up to Rs. 10 lakhs.

(b) Small Enterprise: where the investment in plant &machinery exceeds Rs. 10 lakhs but up to Rs. 2 crores.

(c) Medium Enterprise: where the investment in plant &machinery exceeds Rs. 2 crores but up to Rs. 5 crores.

Please provide us the status of your enterprise in the enclosedformat.

Thanking you,

Yours faithfully,

For XYZ Limited

(Authorised Signatory)

Encl: as above

(Sample reply to be sent by the Supplier to Buyer confirmingtheir status)

Date

To

XYZ Limited (the buyer)Accounts Department,

Subject: Confirmation regarding Category of Enterprise for thePurpose of the Micro, Small and Medium EnterprisesDevelopment Act, 2006

Dear Sir,

With reference to your letter dated ________ I/we confirm asunder:

1. My/Our enterprise falls in category against which I/we haveput tick mark (✓) in the table below.

Sr. Category Enterprise engaged EnterpriseNo. of in manufacturing providing

Enterprise goods services

(i) Micro

(ii) Small

(iii) Medium

(iv) None ofthe above

2. The status with reference to Registration/Recognition of my/our enterprise is as under

(a) Memorandum filed with specified Authority: Yes/No/Applied for.

(b) Registration/recognition received from the specifiedAuthority: Yes/No.

I certify that the above stated information is true to the best ofmy knowledge and belief.

For ______________(company/enterprise name)

Sign

Name

Authorised signatory

Official Stamp/Seal of the enterprise

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Appendix 3List of Addresses in Maharashtra, Gujarat and Goa

In the State of Maharashtra

• Development Commissioner of Industries*Government of MaharashtraDepartment of IndustriesNew Administrative Building, Opp. MantralayaMumbai-400 032Phone : (022) 2202 8616

• In Mumbai

o Director of IndustriesInstitute for Design of Electrical MeasuringInstruments (IDEMI)Opp. Tata Nagar, Swantantryaveer Tatya Tope Marg,Chunabhatti, Sion P.O., Mumbai-400 022.

In the State of Gujarat

• Commissioner of Industries*Government of Gujarat,Block No. 1, 2nd Floor, Udyog Bhawan,Gandhinagar – 382 011Phone : (079) 2325 2524

In the State of Goa

• Director of Industries, Trade and Commerce*Government of Goa,Udyog Bhawan, Secretariat, Panaji-403 001Phone: (0832) 243 2826

In the Union Territory of Daman & Diu, and Dadra & Nagar Haveli

• Director, Department of Industries*,Collectorate of Admn. of UT of Daman & Diu,Daman – 396 220Phone: (0260) 223 0689

• Districtwise addresses may be obtained from the aboveoffices.

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Appendix 4List of useful websites

• http://msme.gov.in/Ministry of Micro, Smalland Medium Enterprises.

• h t tp : / / dcmsme .gov . in /Deve lopmentCommissioner, MSME.

• ht tp : / /www.f i sme.org . in / index .htmFederation of Indian Micro, Small andMedium Enterprises.

• http://www.rbi.org.in Reserve Bank ofIndia.

• http://ssi.nic.in/Ministry of Small ScaleIndustries (Now, Ministry of Micro, Smalland Medium Enterprises).

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