ONE PERSON COMPANY

SMALL COMPANY

DORMANT COMPANY

ASSOCIATE

REGISTERED VALUER

FINANCIAL YEAR

CORPORATE SOCIAL RESPONSBILITY (CSR)

SECRETARIAL AUDIT

NATIONAL FINANCIAL REPORTING AUTHORITY

Means owned by one person and minimum one director

formed as Private limited company

Holding of AGM is not mandatory

First member shall be director

The Memorandum of such a company should indicate the

name nominee

An OPC shall file a copy of financial statement within 180

days from the closure of the FY.

One Board Meeting in each half of the calendar year

Gap between the two meeting is not less than 90 days

No quorum required

One Person to be natural person, Indian citizen and resident in

India

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 Crore

Public company can not be small company

Financial statement - may not include the cash flow statement -

Section 2(40)

Board Meetings- at least 1 Board Meeting in each half of a

calendar year and gap between the two meetings is at least 90

days - Section 173(5)

Fast Track Merger - need not follow the detailed procedure u/s

230 & 232 - Section 233

Mandatory rotation of Auditor & maximum term of auditors not

applicable - Rule 5 of Chapter X.

Signing of Annual Return - signed by the CS, if any, else by the

director - Sec 92 (1)

Where a company is formed and registered for a

future project or

to hold an asset/ intellectual property and

No “significant accounting transaction”

such an inactive company make an application for

obtaining the status of Dormant company.

Inactive company - carrying on no business or operation or

no significant accounting transaction during last 2 year

or has not filed financial statement & annual return for 2

years.

Registrar shall allow the status and issue a certificate on

consideration of application

Registrar maintain a register of Dormant Company

Company which has not filed financial statements for 2

financial years, the Registrar may issue a notice 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

Company by passing Special Resolution, may make an

application to ROC for obtaining the Dormant Status in Form

MSC- 1

ROC 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

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

As per MCA Circular 24/ 2014 dated 25.06.2014 – shares held by a

company in another company in a ‘fiduciary capacity’ shall not be

counted for the purpose of determining the relationship of ‘associate

company’.

• 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.

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 practice

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 holding/ subsidiaries of a

company incorporated outside India so as to enable

consolidation of accounts of such companies

Transition period of two years given to fix the financial year to

31st March ending.

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 Committee:

Mandatory to constitute CSR Committee of the board

Constitution: At least 3 Directors, 1 director shall be an

independent director

As per MCA circular No. 21/ 2014 dated 18.06.2014 - “Any

financial year” implies “any of the three preceding financial

years”.

Net Worth =

Paid up capital + Reserves created out of profit +

Securities Premium Account

-

[Accumulated losses + deferred expenditures + miscellaneous

expenditures not written off]

Above figures shall not include reserve created out of revaluation of

assets, write back of depreciation and amalgamation

Role of CSR Committee:

Formulate and recommend to the board , a CSR Policy and

activities to be undertaken (specified in Schedule VII and further

additions made by MCA Circular 21/ 2014 dated 18.06.2014)

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.

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 ???

Net Profit = Profit before tax (shall not include profit arising

form branches outside India)

Any dividend received from other companies in India which

are covered under and complying with the provision of section

135 of the Act.

2% CSR spending - computed as 2% of the average net profits

during every block of 3 years.

Tax treatment of CSR spend will be in accordance with the IT

Act as may be notified by CBDT.

Activities specified under schedule VII.

Activities undertaken in pursuance of normal course of

business shall be excluded be excluded from CSR Policy.

Reporting will be done on an annual basis commencing from

FY 2014-15.

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;

Secretarial Audit Report format - Form No.MR.3.

Annex the same with Director’s Report.

Qualifications, if any to be specifically explained in

Director’s Report by board.

Other class of companies means:

(a) every public company having a paid-up share capital of

50 crores rupees or more; or

(b) every public company having a turnover of 250 crore

rupees or more.

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

One person Company

Private Limited company

Public Limited company

Natural person who is an Indian citizen and resident in India can

incorporate a One Person Company

A person may make an application in Form No. INC.1 to the Registrar

for the reservation of a name

Application for registration shall be filed with the Registrar in Form

No.INC.2

Memorandum shall indicate the name of the nominee

Nomination in Form No INC.2 along with consent of nominee

obtained in Form No INC.3 shall be filed with the Registrar at the time

of incorporation

No minor shall become member or nominee of the One Person Company

or can hold share with beneficial interest

Nominee may, withdraw his consent by giving a notice in writing tomember and to Company

The member of One person company shall nominate a nomineewithin 15 days of the receipt of the notice of withdrawal

Member shall send an intimation to the Company, along with thewritten consent of nominee in Form No.INC.3.

Company shall file with registrar within 30 days of receipt ofwithdrawal notice :-

a notice of withdrawal of consent and

intimation of the name of nominee in Form No INC.4

the written consent of nominee in Form No.INC.3.

Cessation of member of One Person Company and nominee

becomes member, then member shall nominate within 15 days

a nominee

Company shall file with the Registrar within 30 days of change:-

Intimation of cessation and nomination in Form No

INC.4;

written consent of nominee in Form No.INC.3

Member of One Person Company intimate the company about:-

changing the name of the nominee and

nominate another person after obtaining prior consent in

Form No INC.3

Company may be formed for any lawful purpose by

7 or more persons – Public Company

2 or more persons – Private Company

by subscribing their names to memorandum

Memorandum and articles of association shall be signed by:-

Subscriber to the memorandum,

with at least one witness who shall attest and sign

The memorandum of a company shall state

the name of the company

the State in which the registered office is to be situated

the objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof

the liability of members of the company, whether limited or unlimited

the share capital of the company

A person may make an application in Form No. INC.1 to the Registrar for the reservation of a name

Registrar on the basis of documents furnished reserve the name for a period of sixty days

Memorandum of a company shall be in forms specified in Tables A,B, C, D and E in Schedule I

Articles of a company shall be in forms specified in Table F, G, H, I and J of Schedule I

Company shall give notice to the Registrar of provisions ofentrenchment in Form No.INC.2 or Form No.INC.7, as thecase may be.

For registration of company, an application shall be madein Form no. INC.7 to the Registrar

Documents to be filed with application:-

the memorandum and articles of the company

the declaration by professionals in Form No. INC.8.

the affidavit submitted by each of the subscribers and by first directors in Form No.INC.9

the address for correspondence;

Details of subscriber to the memorandum

Details of first directors and his interest in other firms

or bodies corporate along with his consent in Form

No.DIR.12

Registrar on the basis of documents filed issue Certificate

of Incorporation in Form No.INC.11

Registrar shall allot to the company a Corporate Identity

Number.

Company shall not commence any business or exercise any

borrowing powers unless:

Declaration in Form No.INC.21 shall be filed by a

director at the time of commencement of business;

Contents of the form shall be verified by Professionals;

Company has filed with Registrar, verification of itsregistered office in Form No.INC.22.

Private Company convert itself into One Person Company by:-

Passing Special Resolution

if paid up capital is less then 50 lakh and average annual turnover isless then Rs. 2 crore

Company should obtain No objection in writing from members and creditors before passing resolution.

One person company shall file Form No. MGT. 14. with ROC within 30 days of passing of Special Resolution.

Company shall file an application in Form No.INC.6 for its conversion into One Person Company

Documents to be attached with application:-

Affidavit by directors that all members and creditors of the company have given their consent for conversion

the list of members and list of creditors

latest Audited Balance Sheet and the Profit and Loss

Account

No Objection letter of secured creditors.

If all the filed documents in order then registrar will issue

certificate to this effect.

One Person Company convert itself into private company

within 6 months of the date on which its:-

Paid up share capital is increased beyond fifty lakh

rupees or

last day of the relevant period during which its

average annual turnover exceeds two crore rupees

One Person Company alter its memorandum and articles

by passing a resolution according to section 122 (3) of the

Act

One Person Company shall within 60 days give a notice to

the Registrar:-

In Form No.INC.5 informing that it ceased to be

One Person Company

And it is required to convert itself into a private

company.

If all the filed documents in order then registrar will issue certificate

to this effect.

ISSUE OF SECURITIES

(Section 23)

Public Company Private Company

Public

Offer

Private

Placement

Right/

Bonus

Issue

Private

Placement

Right/

Bonus

Issue

Preferential

allotmentPreferential

allotment

A public company may issue securities—

(a) to public through prospectus ("public offer“)

(b) through private placement

(c) through a rights issue or a bonus issue

Equity Shares

Equity share capital" means all share capital which is not

preference share capital;

Preference Shares

"Preference share capital" means that part of the issued share

capital of the company which carries or would carry a preferential

right with respect to—

(a) payment of dividend,

(b) repayment, in the case of a winding up or repayment of capital,

of the amount of the share capital paid-up.

Company can issue shares on preferential basis

Approval of shareholders by passing of Special Resolution

Issue of shares on preferential basis should comply with conditions

laid down in section 42 of the Act

Price of shares issued by listed company shall not be determined

by the valuation report of a registered valuer.

Price of shares issued by unlisted company shall be determined by

the valuation report of a registered valuer.

Preferential offer made by listed company in accordance with the:-

provisions of the Act and

regulations made by SEBI

Offer made by unlisted company in accordance with the:-

provisions of the Act and

Rule13(2) of Companies (Share Capital and Debenture)

Rules, 2014.

Private placement offer letter shall be accompanied by an

application form

It shall sent to the person to whom the offer is made within 30

days of recording the names of persons.

Company shall make private placement offer:

By approval of shareholders, by way of a Special

Resolution,

such offer shall be made to not more than 200 persons in

the aggregate in a financial year,

Excluding the QIB and employees.

Company make offer to subscribe to securities through issue of

private placement offer letter in Form PAS-4

Letter of offer shall be sent within 30 days of recording of

names

the value of offer per person should be not less than 20

thousand rupees of face value of the securities.

Share application money received has to be kept in separate

bank account

It can not utilized for any purpose other then allotment or

refund

Share application money can not be received in cash.

Company shall maintain a complete record of private

placement offers in Form PAS-5:

Company increase its subscribed capital by the issue of furthershares.

Shares shall be offered to existing shareholders

Offer shall be made by notice specifying:-

No. of shares offered and

limiting a time not less than 15 days and not exceeding30 days from offer date

within which the offer, if not accepted, shall be deemed to have been decline.

Offer shall deemed to include a right to :-

renounce the shares offered to him or any of them in favour of any other person

Further Issue of Share Capital

The provisions of section related to further issue of capital

will now be applicable to all types of Companies.

No time limit has been prescribed, Company can anytime

increase its share capital by issue of further shares.

A Provision is introduced for the offer of shares to employees

for ESOP

Company may issue fully paid-up bonus shares, out of its

free reserves, securities premium account orCapital Redemption Reserve

subject to the conditions provided.

Articles must authorize issue of bonus shares;

Approval of shareholders in general meeting;

Not defaulted in payment of interest or principal in respect of FD ordebt securities;

Not defaulted in payment of statutory dues of the employees ,such as PF, gratuity and bonus

No company which has once announced the decision of its Board

recommending a bonus issue, can subsequently withdraw the same.

Company cannot issue shares at discount

other than as sweat equity

no provision has been provided for any approval under the

Companies Act

Company can issue shares at premium

A sum equal to the premium received on shares shall be

transferred to “Securities Premium Account”

Share Premium may be utilized for:-

Issue of fully paid bonus shares.

Writing off preliminary expenses.

writing off the expenses of, or the commission paid or

discount allowed on, any issue of shares or debentures

providing for the premium payable on the redemption

of Preference shares or Debentures.

purchase of its own shares or other securities.

Company can increase its subscribed capital by way of

ESOP, offered to employees

Company require prior approval of shareholders by:-

Passing Special Resolution and

complying other conditions as prescribed.

The price of ESOP shall be arrived on the basis of the

report of the Registered Value.

Certificate is prima facie evidence of the title of the personto shares.

Share Certificate shall be issued in pursuance of :-

Board Resolution and

surrender letter of allotment to the company

Share Certificate shall be in Form No. SH.1

Share Certificate specify the:-

the name of person;

the shares to which it relates and

amount paid-up thereon

Share certificate signed by:-

two directors and

Secretary or any person authorized by the Board

Every company deliver the certificates of all securities:-

within 2 months from incorporation, in the case of

subscribers

within 2 from the allotment, in the case of any

allotment

within 1 month from the date of receipt by the

company of the instrument of transfer or the intimation of

transmission

within 6 months from allotment of debenture:

Company can register transfer of securities :-

between persons whose names are entered in the records

of depository.

Instrument of transfer shall be in Form No.SH.4

Instrument of transfer with the date of its execution on it

shall be delivered to the company

within sixty days from the date execution along with the

certificate or

with the letter of allotment of securities.

Any contract or arrangement between two or more persons in respect

of transfer of securities shall be enforceable as a contract

If Application made by the transferor alone of partly paid

shares:

the company shall gives the notice of the application to the

transferee in Form No. SH.5 and

the transferee has to give no objection to the transfer

within two weeks from the date of receipt of notice.

The transfer of security made by legal representative of a

deceased person shall be valid.

Any share transfer form executed before 1st April,

2014 and submitted to the company within the

prescribed period and the prescribed form as per the

Companies Act, 1956 needs to be accepted by the

companies. (In case of delay of submission the

company may get itself satisfied with the justification)

If the company refuses such registration of transfer

the company shall give the reasons for refusal.

A private Company within 30 days of delivery of

instrument of transfer, send notice of refusal to

the transferor and

the transferee

giving reasons for such refusal

The transferee may appeal to the Tribunal against the

refusal :-

within 30 days from the date of receipt of the notice or

within sixty days of delivery of instrument of transfer

to the company, in case no notice has been sent by the

company

If a public company within 30 days of delivery of instrument

of transfer, refuses to register the transfer :-

the transferee within 60days of refusal or

where no intimation has been received, within 90 days

of delivery of the instrument of transfer appeal to the

Tribunal

The Tribunal, either dismiss the appeal, or order:-

transfer registered by the company within 10 days of

the receipt of order; or

Rectification of the register and

Also direct the company to pay damages, if any.

Thanks

Arun Gupta

managing counsel

factum legal , advocates & solicitors

Tel : (O) 011-41066313 (M) 9810275571

www.factumlegal.com;arun@factumlegal.com