companies act ,( 2013 new concepts_13.09.2013 (final)
TRANSCRIPT
13/9/2013
2 times the Companies Bill was referred to Standing Committee before being passed
by the Parliament.
Some Interesting Facts About New Law
The Companies Act, 2013The Companies Act 2013 will replace the Companies Act
1956.
On 30th August 2013, with the assent of the President of India and MCA notify the sec.1 of the New Act in the Official Gazette, and the Bill become Companies Act 2013.
On 12th September 2013, notified 98 section to be effective from the date of notification.
NEWLY INTRODUCED CONCEPTSONE PERSON COMPANYSMALL COMPANYDORMANT COMPANYASSOCIATERELATED PARTYREGISTERED VALUERFINANCIAL YEARCORPORATE SOCIAL RESPONSBILITY ( CSR)CLASS ACTION SUITSECRETARIAL AUDITNATIONAL FINANCIAL REPORTING AUTHORITYSECRETARIAL STANDARDS
One Person Company 2(62), 3(1)(C)“Why two when One can run the show”
One person company means owned by one person and minimum one director .
Such company will be formed as private limited company and state itself as One person company.
Provision relating to holding of an AGM is not mandatory.First member shall be director who is individual until the
director duly appointed by the member.
One Person Company 2(62), 3(1)(c) The Memorandum of such a company should indicate the
name of the person(nominee) who shall, in the event of the subscriber’s death, disability or otherwise becomes the member of the company.
An OPC is required to file a copy of financial statement within 180 days from the closure of the financial year.
At least one meeting of the BOD in each half of the calendar year and gap between two such meeting is not less than 90 days. No quorum requirement, if there is only one director on the board.
One Person to be natural person, Indian citizen and resident in India
One Person Company Draft Rule 2.1 One Person to be natural person, Indian citizen
and resident in India No person is eligible to incorporate more than five OPCSubscriber to obtain the prior consent of nominee before
mentioning his name in MOAWhere the paid up share capital of One Person Company
exceed Rs. 50 Lakh or its average turnover during the year exceed Rs. 2 crore , it shall cease to a One Person Company and it shall within 6 months to covert itself into either a private company or a public company
Not more than 5 OPC by a person
Small Company 2(85)“small fish should be treated differently”
Means a Private company Having Paid-up capital < 50L or such higher amount
as may be prescribed, which shall not be more than Rs. 5 crore
OR Turnover < 2 crore or such higher
amount as may be prescribed, which shall not be more than Rs. 20 CrorePublic company can not be small company
Dormant Company 455(1)“Why do compliance, if no business”
Where a company is formed and registered under this Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction such a company or an inactive company may make an application to the Registrar in such manner as may be prescribed for obtaining the status of Dormant company.
Inactive company means: carrying on no business or operation or no significant accounting transaction during last 2 year or has not filed financial statement and annual return for two years;
Dormant Company 455(1)The registrar on consideration of application shall allow the
status and issue a certificate.Registrar shall maintain a register of Dormant Company in
such form as may be prescribed.For a company which has not filed financial statements for a
period of two financial years consecutively, the Registrar may issue a notice to that company and enter the name of the company in the Dormant companies register.
Dormant company shall maintain minimum director, file such documents and pay such annual fees as prescribed
by government to maintain the status of dormant
Dormant Company Draft Rule 29.5“Why do compliance, if no business”
• A Company after passing Special Resolution in the general meeting may make an application to ROC for obtaining the status of Dormant Company.
• ROC shall allow the status of Dormant Company • Dormant Company shall have
• 3 Directors – In case of Public Company• 2 Directors – In case of Private Company• 1 Director – In case of One Person Company
Dormant Company to file Annual Declaration within 30 days form end of financial year to ROC
Associate 2(6)(Notified)
“ Nice clarity for sister concern of Group”A company in which that other company has a significant
influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company
Significant influence
Control of at least 20% of total share capital; or
Business decisions under an agreement;Associate company does not include foreign companies
Related Party 2(76)“One Law, one definition”
Director or his relativeKMP or his relativeA Firm, in which director, manager or his relative is partnerA Private Company, in which director, manager is director or
memberA Public Company, in which director or manager is a director
or holds more than 2% of paid-up share capital with relatives.Any Body Corporate whose BOD, MD or manager is
accustomed to act in accordance with advice, directions or instructions of a director or manager;
Related Party 2(76)Any Person on whose advice, direction or instructions a
director or manager accustomed to act Any Company which is holding, subsidiary or an associate or
subsidiary of holding company to which it is also subsidiaryOther Person as may be prescribed;
Foreign company will be called as related party only if its BOD works as per instruction and advise of director or
manager of Indian company
Related Party Draft Rule 1.3related party means:(1) a director or key managerial personnel of the
holding, subsidiary or associate company of such company or his relative;
(2) any person appointed in senior management in the company or its holding, subsidiary or associate company i.e. personnel of the company or its holding, subsidiary or associate company who are members of core management team excluding Board of directors comprising all members of management one level below the executive directors, including the functional heads.
Related Party Draft Rule 1.3a person shall be deemed to be the relative of
another, if he or she is related to another in the following manner:
(1) Spouse(2) Father (including step-father)(3) Father’s father(4) Father’s mother(5) Mother ( including step-mother)(6) Mother’s mother(7) Mother’s father
Related Party Draft Rule 1.3 (Cont…)
(8) Son ( including step-son)(9) Son’s wife(10) Son’s son(11) Son’s daughter(12) Daughter (including step-daughter)(13) Daughter’s husband(14) Brother ( including step-brother)(15) Sister (including step-sister)- See more at:
Registered Valuer (247)“There will be long queue before professional institutes for
becoming Registered Valuer”Valuation in respect of any property, stocks, shares,
debentures, securities or goodwill or other assets or net worth of company or its liabilities shall be done by a Registered Valuer.
Qualification & experience as prescribed by way of Rules.Appointment to be effective by audit committee or Board of
Directors;Pecuniary penalty & damages is prescribed if valuer commits
default under the section or the rules prescribed;The practice of taking certificate from any practicing
professionals shall be discontinued.
Registered Valuer (Draft Rule 17)
A registered valuer means a person registered as a valuer under Chapter XVII
The following persons shall be eligible to apply for being Chartered Accountant, Company Secretary, Cost Accountant in whole time practice, or a person holding equivalent Indian or foreign qualification, Merchant banker registered with SEBI
Member of the Institute of Engineers and who is in whole time practice or person in his employment with qualification
Member of the Institute of Architects and who is in whole time practiceAbove mentioned person shall have not less than five
years continuous experience after acquiring membership of respective institutions
Financial Year 2(41)“One India One financial year”
Means the period ending on the 31st day of March every year.If the Company starts after 1st January, then the period
ending 31st March, of the following year.
The National Company Law Tribunal (“NCLT”) shall have the
power to allow a different financial year for companies which
are either holding companies or subsidiaries of a company
incorporated outside India so as to enable consolidation of
accounts of such companiesTransition period of two years given to fix the financial
year to 31st March ending.
CSR Provisions (135)“ Donate or justify”
CSR has been introduced after long debates;Company having net worth of Rs. 500 crores or more or
turnover of Rs 1000 crores or more or net profit of Rs 5 crores or more during any financial year shall have to constitute CSR committee and implement CSR policies.
CSR CommitteeMandatory to constitute CSR Committee of the boardConstitution: At least 3 Directors; One director shall be an
independent director
CSR Provisions [Net Worth 2(57)(Notified)]“ Donate or justify”Net Worth means
= Paid up capital all reserves created out of
profit +Securities Premium Account -
[Accumulated losses deferred expenditures and miscellaneous expenditures not writ off]
Above figures shall not include reserve created out of revaluation of assets, write back of depreciation and
amalgamation
CSR Provisions (135)Role of CSR Committee:Formulate and recommend to the board , a CSR Policy
and activities to be undertaken as specified in Schedule VII
Recommend the expenditure to be incurred on such activities
Monitor the CSR Policy.The company spends at least 2% of the average net
profits made by the company in the preceding three financial years in accordance with the policy;
CSR Provisions (135)
Board Role and responsibility:
Disclosure of CSR committee and contents of policy in report
Board to ensure that that the CSR policy is complied; and
In case of failure, Board to give reasons in the board’s report.
The huge buzz is whether there will be tax benefit for such CSR spending ???
CSR Provisions (Draft Rule under Chapter IX)
Central Government prescribed Corporate Social
Responsibility Rules, 2013.
Net Profit mean- Profit before tax ,shall not
include profit arising form branches outside India2% CSR spending would be computed as 2% of
the average net profits made by the company during every block of three years.
Tax treatment of CSR spend will be in accordance with the IT Act as may be notified by CBDT
Reporting will be done on an annual basis commencing from FY 2014-15.
Class Action Suits (245)“ Yeah… this is the power”
Class action suit is right to: - Members - or Deposit holders to file an application before tribunal for restraining the
company from some specified acts, which are conducted or proposed to be conducted in a manner prejudicial to the interest of company, members or deposit holders
Class Action Suits (245)Eligibility for filling In Case of company having share capital: - At least 100 members or not less than the such percentage of
total number of its members as prescribed ( whichever is less) or
- Members holding not less than such percentage of issued share capital of company
In case Company not having Share capital- Not less than 1/5 of total number of its members.
Class Action Suits (Draft Rule 16. 1)FOR MEMBERS----------------->No. of Members to file
Class Action Suit[Company Having Share Capital]
or
If frivolous application filed, then cost up to Rs. 100000 can also
be imposed by tribunal on applicant.
Class Action Suits Section 245Following are grounds for Class action suit:
(a) to restrain the company from committing an act which is ultra vires the articles or memorandum of the company;
(b) to restrain the company from committing breach of any provision of the company’s memorandum or articles;
(c) to declare a resolution altering the memorandum or articles of the company as void if the resolution was passed by suppression of material facts or obtained by mis-statement to the members or depositors;
(d) to restrain the company and its directors from acting on such resolution;
Class Action Suits Section 245(e) to restrain the company from doing an act
which is contrary to the provisions of this Act or any other law for the time being in force;
(f) to restrain the company from taking action contrary to any resolution passed by the members;
(g) to claim damages or compensation or demand any other suitable action from or against—
(i) the company or its directors for any fraudulent, unlawful or wrongful act or omission or conduct or any likely act or omission or conduct on its or their part;
Class Action Suits Section 245(ii) the auditor including audit firm of the
company for any improper or misleading statement of particulars made in his audit report or for any fraudulent, unlawful or wrongful act or conduct; or
(iii) any expert or advisor or consultant or any other person for any incorrect or misleading statement made to the company or for any fraudulent, unlawful or wrongful act or conduct or any likely act or conduct on his part;
(h) to seek any other remedy as the Tribunal may deem fit.
Class Action Suits (245)Claim for damages be also filed by such members against
company, directors, auditor, expert, advisor, consultants for unlawful or fraudulent acts.
An order passed by the tribunal shall binding on the Company, and all its members, depositors and Auditors
Penalty imposed if company fail to comply order of tribunal not less than five lakh rupees but which may extend to twenty-five lakh rupees.
Any order passed by Tribunal shall be binding on the Company and all members, depositors and auditors including audit firm or Expert or consultant or any other person associated with
company
Class Action Suit [D raft Rule 16.1 ]
Notice to be given to the Central Government by Tribunal & Tribunal shall take into consideration any representation made by the CG
Secretarial Audit“ To ensure compliance of New law”
Every listed Company and Companies belonging to such class of Companies as prescribed will have to mandatorily get the secretarial audit done.
By a Practicing Company Secretary;In a prescribed form;Annex the same with Director’s Report;Qualifications, if any to be specifically explained in Director’s
Report by board;
Secretarial Audit( Draft Rule 13.7)“ To ensure compliance of New law”
Other class of companies means:Every public company having paid up share
capital of Rs. 100 Crore or more It Rule 13.8 prescribe the duties of Company
Secretary.
Company Secretary shall assist and advise the Board in ensuring good corporate governance.
National Financial Reporting Authority(132)“ A Powerful Authority”
Central Govt. may by notification, constitute a National Financial Reporting Authority to provide for matters relating to Accounting and Auditing Standards.
Make recommendation to CG on formulation and laying down of accounting policies;
Enforcement for the compliance of accounting and auditing standards;
Special Power have been vested with NFRA.
Power to investigate persons or body corporate for professional or other misconduct by any member of ICAI
National Financial Reporting Authority(132)“ A Powerful Authority”
Central Govt. may by notification, constitute a National Financial Reporting Authority to provide for matters relating to Accounting and Auditing Standards.
Make recommendation to CG on formulation and laying down of accounting policies;
Enforcement for the compliance of accounting and auditing standards;
Special Power have been vested with NFRA.
Power to investigate persons or body corporate for professional or other misconduct by any member of ICAI
Secretarial Standards 118(10)“ Uniform way to maintain proceedings”
For the First time, Secretarial Standards has been introduced and provided statutory recognition in the law.
“Every company shall observe Secretarial Standards with respect General and Board Meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 and approved by the Central Government”.
Secretarial Standard-1 (SS-1) and Secretarial Standard-2 (SS-2) are prescribed Secretarial Standards for Board
Meeting and General Meeting respectively.
Secretarial Standards (Draft Rule 7.26)“ Uniform way to maintain proceedings”
Annual Repot shall contain a confirmation that the secretarial standards with respect to general meetings have been observed.
Report on Annual General Meeting is to be submitted by all listed companies within 30 days of AGM
LET’S GEAR UP FOR CHANGE….. Thanks Arun Guptamanaging counselfactum legal , advocates & solicitorsTel : (O) 011-41066313 (M) 9810275571www.factumlegal.com;[email protected]