Is an IEC Code transferable upon selling the business?

The Import Export Code (IEC) is a mandatory business identification number required for companies and individuals involved in international trade in India. As regards issued by the Directorate General of Foreign Trade (DGFT), the IEC plays a crucial role in enabling import and export activities. However, one common question that arises is whether an IEC Code is transferable when a business is sold, merged, or taken over by another entity.

In this article, we will explore the transferability of the IEC Code, the process of updating IEC details, and how other government registrations like CSR-1 Registration, LLP Registration, Startup India Registration, and Government e-Marketplace (GeM) Registration are impacted when selling a business.

What is an IEC Code?

The Import Export Code (IEC) is a unique 10-digit registration number issued by the DGFT (Directorate General of Foreign Trade) under the Foreign Trade Policy. It is mandatory for businesses engaged in international trade and is required for:

• Importing goods into India
• Exporting goods from India
• Availing benefits under various trade policies
• Customs clearance of shipments
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IEC Code Registration Process

To obtain an IEC Code, businesses must complete the IEC Registration process through the DGFT portal.

The key steps include:

• Create an account on the DGFT website.
• Fill in the application form (ANF-2A).
• Submit required documents, including PAN card, Aadhaar, business address proof, and bank details.
• Pay the IEC registration fee.
• Receive the IEC Certificate after approval.

Once issued, the IEC remains valid for a lifetime, but businesses are required to update it annually through the IEC Update process.

Is an IEC Code Transferable When Selling a Business?

1. IEC Code is Linked to the Business Entity

An IEC Code is not transferable when a business is sold because it is linked to the PAN (Permanent Account Number) of the entity (Company, LLP, or Proprietorship) that originally obtained the registration. Unlike other business registrations, IEC is tied to the business structure and cannot be transferred to another owner.

2. What Happens to the IEC Code When Business is Sold?

When a business is sold, merged, or acquired, the new owner must follow one of the two options:

Option 1: Update IEC Details for Ownership Change

• If the business continues under the same legal entity (same PAN and GSTIN), the IEC details can be updated.
• The new owner must apply for an IEC Update through the DGFT portal.
• The update should include the new name, ownership details, contact information, and bank details.
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Option 2: Apply for a New IEC Code

• If the business is sold to a new entity with a different PAN, the new owner must apply for a fresh IEC Registration.
• The old IEC Code becomes inactive, and the new entity will receive a unique Import Export Code.

How to Update IEC Code Details After Selling a Business?

If a business is sold but retains the same legal entity, the IEC details must be updated. Here’s how:

1. Login to the DGFT Portal (https://www.dgft.gov.in/) using existing credentials.

2. Go to "Modify IEC" and enter the required details.

3. Update the new ownership details, including:

· Business name (if changed)

· Contact details of the new owner

· Updated bank details

· Revised business address

4. Submit the application and pay the modification fee.

5. Approval from DGFT: Once verified, the updated IEC certificate is issued.

Other Business Registrations and Their Transferability

When selling a business, several other registrations need to be updated or transferred:

1. CSR-1 Registration & CSR Fund Eligibility

CSR-1 Registration is required for businesses seeking Corporate Social Responsibility (CSR) funding. If a company with CSR-1 Registration is sold, the new owner must update the details with the Ministry of Corporate Affairs (MCA).

Key Steps for CSR-1 Update:

• File necessary changes with the MCA.
• Update the CSR-1 form with new ownership details.
• Ensure compliance with CSR funding guidelines under the Companies Act, 2013.

2. LLP Registration & Transfer of Ownership

If a business is registered as an LLP (Limited Liability Partnership), the transfer of ownership requires updating the LLP Agreement and filing the necessary forms with the Ministry of Corporate Affairs (MCA).

Key Steps for LLP Ownership Transfer:

• File Form-3 with the MCA to amend the LLP Agreement.
• File Form-4 for change in designated partners.
• Ensure IEC Code Update if the LLP is engaged in import-export activities.

3. Startup India Registration

If the business is a DPIIT-recognized startup, the new owner must update the Startup India Certificate details. However, if the entity itself is being dissolved, the new owner must apply for fresh Startup India Registration.

Key Steps for Updating Startup India Registration:

• Update business details on the Startup India portal.
• Notify the DPIIT (Department for Promotion of Industry and Internal Trade).
• Ensure compliance with tax benefits and exemptions under the Startup India scheme.

4. Niti Aayog Registration

For NGOs and social enterprises, Niti Aayog Registration must be updated with new details when ownership changes. This ensures eligibility for government grants and funding.

5. Government e-Marketplace (GeM) Registration

If the business is registered on the Government e-Marketplace (GeM) for government procurement, the new owner must:

• Update the business profile on the GeM portal.
• Provide revised ownership details and supporting documents.
• Ensure the GST and PAN details match the new entity’s credentials.

Key Takeaways: Is IEC Code Transferable?

• IEC Code is NOT transferable when a business is sold.
• If the business structure remains the same, the IEC can be updated with new ownership details.
• If the business is sold to a new entity, the new owner must apply for a fresh IEC Registration.
• Other business registrations like CSR-1, LLP Registration, Startup India Registration, Niti Aayog Registration, and GeM Registration must be updated accordingly.

Conclusion

When selling a business engaged in import-export activities, it is crucial to update or apply for a new IEC Code, depending on the ownership structure. Since the IEC Code is linked to the business PAN, it cannot be transferred directly to the new owner. Instead, businesses must either update IEC details or obtain fresh IEC Registration.

Additionally, all associated registrations, such as CSR-1 Registration, LLP Registration, Startup India Certification, Niti Aayog Registration, and GeM Registration, must be updated to reflect the new ownership.

Understanding these legal procedures ensures a smooth business transition while maintaining compliance with government regulations. If you're planning to buy or sell a business with an existing Import Export Code, consulting with a legal expert or compliance professional is recommended for hassle-free updates.