Category Archives: Governance and Responsibility

Governance and Responsibility – In life of Nation, State, Government, Corporate, Society and Individual

Internal Auditor

Posted on May 22, 2015 | 5 comments

Internal Audit is one most important tool for better Corporate Governance in any company. This is not a post – mortem like statutory audit, but may provide real time analysis and processing of transactions through watchful eyes.

According to Section 138 of the Companies Act, 2013 discussed earlier here, “Such class or classes of companies as may be prescribed shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company. The Central Government may, by rules, prescribe the manner and the intervals in which the internal audit shall be conducted and reported to the Board.”

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Posted in Chapter IX - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility

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Supreme Court NCLT Decision dated 14th May 2015

Posted on May 15, 2015 | 1 comment

This Supreme Court Judgement available here is a milestone in implementation of new corporate law and development of corporate jurisprudence in India. On cautious note, this is just another step effective implementation of law related to National Company Law Tribunal and its appellate body. Now, the Companies Act, 2013 need minor amendment in line of present Supreme Court decision and ball is now in court of political leadership. Supreme Court decided three important issues in the case.

Constitutional validity of NCT and NCLAT:

By Notification dated 12.09.2013, the Central Government has constituted the National Company Law Tribunal (NCLT) under power conferred by Section 408 of the Companies 2013. By the aforesaid Notification dated 12.09.2013, National Company Law Appellate Tribunal (NCLAT) has also been constituted by the Central Government under power conferred by Section 408 of the Companies 2013.

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Posted in Chapter XXVII - CA2013, Companies Act 2013, Governance and Responsibility

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FINANCIAL STATEMENT TO MEMBERS AND PUBLIC

Posted on May 12, 2015 | 3 comments

As discussed earlier here according to Section 136, a copy of the financial statements, including consolidated financial statements, if any, auditor’s report and every other document required by law to be annexed or attached to the financial statements, which are to be laid before a company in its general meeting, shall be sent to every member of the company, to every trustee for the debenture-holder of any debentures issued by the company, and to all persons other than such member or trustee, being the person so entitled, not less than twenty-one days before the date of the meeting. [Section 136(1)]

Statement containing salient features of financial statements:

In the case of a listed company, the provisions of this section shall be deemed to be complied with, if the copies of the documents are made available for inspection at its registered office during working hours for a period of twenty-one days before the date of the meeting and a statement containing the salient features of such documents in the prescribed form or copies of the documents, as the company may deem fit, is sent to every member of the company and to every trustee for the holders of any debentures issued by the company not less than twenty-one days before the date of the meeting unless the shareholders ask for full financial statements. [First Proviso to Section 136(1)]

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Posted in Chapter IX - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility

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UNEASE OF INTEGRATED INCORPORATION

Posted on May 8, 2015 | 1 comment

Irrespective of political parties in power, Government of India fails to deliver any substantial ease of doing business or living life. #EaseOfDoingBusiness #EaseOfLivingLife

There is no real delivery except creating some online filing like MCA21 and online payment of fees, taxes and duties in first fifteen years of this 21st century. Switching to online environment from paper environment is just change of mode not a relaxation for ease of doing business or ease of living life from the side of government. This is just a technical advancement without role of government. One can understand it switching from inkpot system to fountain pen or ballpoint pen, which was also resulted in substantial reduction of time. Another example may be paper based tax calculation to calculator based tax calculation.

Presently, government has also come out of another gimmick called integrated incorporation forms. Without digging deep, name just suggests; there is no ease just integration. Instead of less pain, all quantum of pain at one place one time with more possible error of treatment at once. #EaseOfDoingBusiness #EaseOfLivingLife

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Posted in Chapter II - CA2013, Companies Act 2013, Governance and Responsibility, Truth of Our Time

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Every Holding Company to Consolidate Financial Statements

Posted on May 1, 2015 | 15 comments

Rule 6 of the Companies (Accounts) Rules 2014 deals with consolidation of Accounts. This rule got its power from second proviso to sub – section (3) of Section 129.

According to Section 129(3), where a company has one or more subsidiaries, it shall, in addition to financial statements provided under sub-section (2), prepare a consolidated financial statement of the company and of all the subsidiaries in the same form and manner as that of its own which shall also be laid before the annual general meeting of the company along with the laying of its financial statement under sub-section (2).

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Posted in Chapter IX - CA2013, Companies Act 2013, Governance and Responsibility

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Board’s Report – 3

Posted on April 28, 2015 | 4 comments

In continuation of our earlier post dealing with Financial Statements and Boards’ Report, we will read Boards’ report of companies other than One Person Companies here.

Managerial Remuneration [Rule 5(1) of Managerial Remuneration Rules]:

Every listed company shall disclose in the Board’s report-

(i) the ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year;

The expression “median” means the numerical value separating the higher half of a population from the lower half and the median of a finite list of numbers may be found by arranging all the observations from lowest value to highest value and picking the middle one. If there is an even number of observations, the median shall be the average of the two middle values.

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Posted in Chapter IX - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility

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Board’s Report – 2

Posted on April 24, 2015 | 5 comments

In continuation of our earlier post dealing with Financial Statements and Boards’ Report, we will read Boards’ report of companies other than One Person Companies here.

Particulars of Contracts or Arrangements [Rule 8(2) of Accounts Rules read with Section 134(3)(h)]:

The Report of the Board shall contain the particulars of contracts or arrangements with related parties referred to in sub-section (1) of section 188 in the Form AOC-2.

As discussed earlier here and here, Section 188 lists out certain transaction restricted to be entered into with related parties.

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Posted in Chapter IX - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility

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Board’s Report – 1

Posted on April 21, 2015 | 4 comments

In continuation of our earlier post dealing with Financial Statements and Boards’ Report, we will read Boards’ report of companies other than One Person Companies here.

Preparation of Boards’ Report:

The Board’s Report shall be prepared based on the stand alone financial statements of the company and the report shall contain a separate section wherein a report on the performance and financial position of each of the subsidiaries, associates and joint venture companies included in the consolidated financial statement is presented. [Rule 8(1) of Accounts Rules]

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Posted in Chapter IX - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility

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FINANCIAL STATEMENTS AND BOARD’S REPORT

Posted on April 17, 2015 | 6 comments

Section 134 of the Companies Act 2013 enumerates provisions related to with Financial Statements and Boards’ Reports. Rule 8 to Rule 12 of the Companies (Accounts) Rules 2014 and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 also deals with Boards’ Report.

Penalty for Contravention of Section 134:

If a company contravenes the provisions of section 134, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both. [Section 134(8)]

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Posted in Chapter IX - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility

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SUBSIDIARIES AND CONSOLIDATION OF ACCOUNTS

Posted on April 14, 2015 | 5 comments

As we have discussed earlier here, Section 129(3) discuss about consolidation of accounts.

Where a company has any subsidiary, the company shall prepare a consolidated financial statement of the company and of all subsidiaries in the same form and manner as that of its own.  The consolidated financial statement shall also be laid before the annual general meeting along with own financial statement.

The company shall also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiaries.

Under this section, the word subsidiary shall include associate company and joint venture.

Form of Statement containing salient features of financial statements of subsidiaries [Rule 5]

According to Second Proviso to Section 129(3) discussed earlier here, where a company has any subsidiary, the company shall prepare a consolidated financial statement of the company and of all subsidiaries in the same form and manner as that of its own.  The consolidated financial statement shall also be laid before the annual general meeting along with own financial statement.

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Posted in Chapter IX - CA2013, Companies Act 2013, CorpGov

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Ceiling on Secretarial Audit and Annual Return

Posted on April 8, 2015 | 4 comments

Institute of Company Secretaries of India on 7th April 2015 informed its members by mail that it has put ceiling on Secretarial Audit and Annual Return. “The Council of the Institute has issued “Guidelines for Issuing Secretarial Audit Report, Signing and Certification of Annual Return” in supersession of the “Guidelines for Issuing Compliance Certificate and Signing of Annual Return” issued by the Council on 27th November, 2007”, the mailed apparently send by president of the institute declares. These new guidelines are issued on 6th April 2015.

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Posted in Chapter XIII - CA2013, Companies Act 2013, Company Secretary, CorpGov, Governance and Responsibility, Institute of Company Secretaries of India - ICSI, Secretarial Audit

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Amendment to Share Capital and Debentures Rules

Posted on April 3, 2015 | 3 comments

Ministry of Corporate Affairs recently introduced amendment to the Companies (Share Capital and Debentures) Amendment Rules 2015.

These Amendments shall come into force on publication on official gazette i.e.

Application of these Rules:

Rule 3 related to applicability of these rules have been substituted as under:

The provisions of these rules shall apply to –

(a) all unlisted public companies:

(b) all private companies: and

(c) listed companies so far as they do not contradict or conflict with any other regulation framed in this regard by the Securities and Exchange Board of India.

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Posted in Chapter IV - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility

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MCA introduces Limited Purpose Independent Director in private companies

Posted on April 1, 2015 | 7 comments

An amendment rules notified by MCA introduces concept of limited purpose independent director in private companies. Government is amending existing Companies (Corporate Social Responsibility Policy) Rules, 2014. These rules are being criticised by various eminent jurist for trying to undermine authority of Section 135 of the Companies Act, 2013. Sub – Section (1) of Section 135 mandate for at least one independent director in every company whether it is private or public company. Existing Rule 5 of CSR rules tries to undermine this provision of Section 135 by saying “an unlisted public company or a private company covered under sub-section (1) of section 135 which is not required to appoint an independent director pursuant to sub-section (4) of section 149 of the Act, shall have its CSR Committee without such director”. A rule being subordinate legislation has no constitutional authority to change a provision of the Act.

Amended Clause (i) of Sub – Rule (1) of Rule 5 reads, “an unlisted public company or a private company covered under sub-section (1) of section 135 shall have an independent director for being member of its CSR Committee and such independent director shall have no other duty, obligation and responsibility under the Act.” Consequently, Clause (i) of Sub – Rule (1) of Rule 5 also been deleted.

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Posted in Chapter XI - CA2013, Companies Act 2013, CSR, Governance and Responsibility, Prank

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E – Voting Rules 2015

Posted on March 27, 2015 | 9 comments

Indian E – voting Rules were under criticism from various quarters of corporate world since. Their application has been postponed some point of time. Now, the Rule 20 of the Companies (Management and Administration) Rules 2014 has been substituted by the Companies (Management and administration) amendment Rules, 2015. We have discussed, original Rules related voting through electronic Means earlier here.

These rules will come into force from the date of publication of these rules in official gazette i.e.

Applicability:

The provisions of this rule shall apply in respect of the general meetings for which notices are issued on or after the dale of commencement of this rule. [Rule 20(1)]

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Posted in Chapter VII – CA2013, Companies Act 2013, CorpGov, Governance and Responsibility

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Amendment to Meeting of Board Rules

Posted on March 24, 2015 | 1 comment

The Ministry of Corporate Affairs came with amendment to the Companies (Meeting of Board and its Powers) Rules 2014. These amendments shall come into effect from date of their publication in the Official Gazette i.e.

Power of Board:

As we have discussed earlier here, in addition to the powers specified under sub-section (3) of section 179 of the Act, the certain powers shall also be exercised by the Board of Directors only by means of resolutions passed at meetings of the Board.

Through this amendment, ministry of corporate affairs reduced list form total 9 items to only 3 items.

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Posted in Chapter XII - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility

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ICSI Trainer Registration

Posted on March 20, 2015 | Leave a comment

Since student life, if that was life at all, ICSI do wonder in our life. Now, it does more wonder when you try to help students. “ICSI is tech – savvy organisation with great e-governance model by providing online services” once, I was informed.

Here, I will narrate my experience with funny tone with intention of improvement. I am going public to fetch more feedback and suggestions.

I was going to registration of my firm for providing training to student. When I access “on-line service” tab and clicked for “company registration” i got this window:

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Posted in Company Secretary, CorpGov, Institute of Company Secretaries of India - ICSI, Truth of Our Time

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Loan and Advances to Employees

Posted on March 13, 2015 | 2 comments

Ministry of Corporate Affairs on 10th March 2015 came out with a general circular 04/2015 regarding clarification with regard to Section 185 and 186 of the Companies Act 2013 on subject of loan and advances to employees.

The ministry say in circular:

“This Ministry has received a number of references seeking clarification on the applicability of provisions of section 186 of the Companies Act, 2013 relating to grant of loans and advances by Companies to their employees.”

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Posted in Chapter XII - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility

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REPORT ON ANNUAL GENERAL MEETING

Posted on March 10, 2015 | 4 comments

This is new feature of Indian Corporate Law. Section 121 of the companies Act 2013 simply says that every listed public company shall prepare a report on each annual general meeting including the confirmation to the effect that the meeting was convened, held and conducted as per the provisions of this Act and the rules made there under. The company shall file with the Registrar a copy of the report within thirty days of the conclusion of the annual general meeting.

Rule 31 of the Companies (Management and Administration) Rules 2014 goes into details.

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Posted in Chapter VII – CA2013, Companies Act 2013, CorpGov, Governance and Responsibility

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All resigned No sign

Posted on March 6, 2015 | 3 comments

This is a comical situation under soap opera script but it must have been a practical situation in India. And yes, many dealers of “company retail market” face this situation daily. Sellers want a cut off point beyond which they do not want any liability for any single moment and buyer will take charge on very next moment after the resignation of seller. This cut – off point on time scale is a possible legal defence from all past or future sins. Under Companies Act 1956, dealers has no fine tuned pressure to create such cut – off point because there was no possibility of submission of resignation by resigning directors. Filing a return of resignation of outgoing directors, under earlier law, was duty and responsibility of incumbent directors. They have to appoint at least one new director first (if not legally required two/three, in broad sense) before resigning. During those golden days, dealers usually prepare documents in such a way time to give effect of resignation was mentioned in minutes and seconds in resignation letters. Same was also true for appointment. Thereafter, within legal thirty days, dealers ensure filing of all required documents and forms with registrar of companies. Hence, all laws complied, happy ending.

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Posted in Chapter IX - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility

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The World Remade

Posted on March 2, 2015 | Leave a comment

The world remade is a continuous phenomenon with the changing world. World changes itself every moment but in long-term it remade itself.

What is world is first and debatable question. My world is different from your world. Human world is different from animal world. For sure, creator’s world is different from all of us, the creatures.

I will define my world here, for the purpose of my discussions. My world is essentially a human world created by its original creator, the nature, and this world subsist within whole the world created by the nature.

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