TECHNICAL FAULT IN ISSUANCE OF SECRETARIAL STANDARD

Posted on May 19, 2015 | 23 comments

Section 118(10) of the Companies Act, 2013 made it mandatory for every company to observe Secretarial Standards on general and board meetings. According to sub – section 118(10), these two Secretarial Standards shall be “specified” by the Institute of Company Secretaries of India and “approved” as such by the Central Government.

This sub – section does not confer any power to the Institute of company Secretaries of India to “issue” any Secretarial standards. This just confer power to “specify” some standards related to general and board meeting which may have been issued by the institute.

Whether the Companies Act, 2013 somewhere else confer any power to the institute of company Secretaries of India to “issue” any secretarial standards? If yes, Secretarial Standards should be issued under the power conferred by that provision and should only be “specified” under sub – section 118(10).

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Posted in Chapter VII – CA2013, Chapter XIII - CA2013, Companies Act 2013, Company Secretary, Secretarial Standards

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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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Amended Form INC – 7 (W.E.F. 1 May 2015)

Posted on May 7, 2015 | 1 comment

Form INC-7 is required to be filed pursuant to Section 7 (1) of the Companies Act, 2013 and pursuant to Rule 10, 12, 14 and 15 of Companies (Incorporation) Rules, 2014. New version of this form came into force from 1st May 2015 by the Companies (Incorporation) Amendment Rules 2015. This replaced earlier version of Form INC – 7 discussed earlier here.

Form INC-7 deals with incorporation of a new company (other than OPC). This form is accompanied by supporting documents such as details of Directors/subscribers, the Memorandum of Association (MoA) and Articles of Association (AoA) and evidence of payment of stamp duty. Once the Form is processed and found complete, a company is registered and CIN is allocated.

The Form INC – 7 is not required where Integrated Incorporation Form INC – 29 was opted by applicant.

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Posted in Chapter II - CA2013, Companies Act 2013

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Amended Form INC – 22 (W.E.F. 1 May 2015)

Posted on May 6, 2015 | 8 comments

Form INC – 22 is required to be filed pursuant to Section 12 (2) & 12 (4) of the Companies Act, 2013 and Rule 25 and 27 of the Companies (Incorporation) Rules, 2014.

New version of this form came into force from 1st May 2015 by the Companies (Incorporation) Amendment Rules 2015. This replaced earlier version of Form INC – 22 discussed earlier here.

The company is required to furnish to the Registrar verification of its registered office in Form INC – 22 within a period of thirty days from the date of its incorporation. The company can also specify the address of registered office at the time of filing incorporation Forms. For this, the applicant shall upload Form INC-22 as linked form to Form INC-7. In case of One Person Company, the particulars of the registered office address can be filed in Form INC-2 only.  Any change in situation of the registered office thereafter, the company is required to notify to Registrar in Form INC-22 within fifteen days of such change.

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Posted in Chapter II - CA2013, Companies Act 2013

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INTEGRATED INCORPORATION FORM INC – 29

Posted on May 5, 2015 | 7 comments

Form INC-29 deals with the single application for reservation of name, incorporation of a new company and/or application for allotment of DIN. This Form is accompanied by supporting documents including details of Directors & subscribers, MoA and AoA etc. Once the Form is processed and found complete, company would registered and CIN would be allocated. Also DINs gets issued to the proposed Directors who do not have a valid DIN. Maximum three Directors are allowed for using this integrated form for allotment of DIN while incorporating a company.

Select the type of proposed company under drop-down provided. Producer Company should be selected only in case company complies with the provisions of Part IXA of the Companies Act, 1956. Incorporation of a charitable company under section 8 and company defined under chapter XXI of the Companies Act, 2013 are not facilitated under this integrated incorporation form.

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Posted in Chapter II - CA2013, Companies Act 2013

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AMENDMENT IN COMPANIES INCORPORATION RULES

Posted on May 4, 2015 | 3 comments

At the time of writing this blog post, I have no information of publication of the Company (Incorporation) Rules, 2015 which seems to come into effect with effect from 1st May 2015 as Official MCA21 portal has issued all forms prescribed under these forms.

I have no words of advice on enforceability of these rules until copy of publication in official gazette. These Rules come into effect only after publication in official gazette. [Rule 1(1) of the Companies (Incorporation) Amendment Rules 2015]

Penalty:

In original Rule 5 discussed earlier here, penalty in relation to contravention of these rules by One Person Company or its officer was prescribed. Rule 5 of these rules is being deleted.

But penalty is still there. New Rule 7A is introduced for the purpose. I highlight effect in deletion of rule 5 and introduction of rule 7A here:

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Posted in Chapter II - CA2013, Companies Act 2013

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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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Effective Yield on Tax free Return

Posted on April 13, 2015 | 1 comment

Sub – section (7) of Section 186 of the Companies Act 2013 discussed earlier here, no loan shall be given under this section at a rate of interest lower than the prevailing yield of one year, three-year, five-year or ten-year Government Security closest to the tenor of the loan.

Rate of interest here directly linked to yield of government securities here. A tax-free bond gives higher yield compare to taxable bond at similar rate of interest.

Ministry of Corporate Affairs has issued clarification on rate of interest of tax-free bonds through its General circular 06 of 2015 dated 9th April 2015.

In cases where the effective yield (effective rate of return) on tax-free bonds is greater than the prevailing yield of one year, three-year, five-year or ten-year Government Security closest to the tenor of the loan, there is no violation of sub-section (7) of section 186 of the Companies Act, 2013.

Even though present circular refer to General Circular 06 of 2013 dated 14th March 2013, this serve only academic interest only.

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.

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Posted in Chapter XII - CA2013, Companies Act 2013

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Transition period for Managerial Remuneration

Posted on April 11, 2015 | 10 comments

This is very settled law that law applicable at the time of any act or action is law applicable to that action. This is also applicable on Company Law and for that matter also on managerial remuneration also.

The provisions of Schedule XIII (sixth proviso to Para (C) of Section ll of Part ll) of the Companies Act, 1956 (Earlier Act) and as clarified vide Circular number 14/11/2012-CL-VII dated 16th August, 2012, which allowed listed companies and their subsidiaries to pay remuneration, without approval of Central Government, in excess of limits specified in para II Para (C) of such Schedule if the managerial person met the conditions specified therein.

Similar provisions are not available in the Schedule V of the Companies Act, 2013. There is no need to worry because law that time was clear and applicable to the terms and conditions of agreement entered into that time. However, absence of similar provision in present law, may have a question that whether present law discontinue and invalidate act done under earlier law. Many stakeholders asked for a need for a clarification that a managerial person appointed in accordance with such provision of Schedule XIII of Earlier Act may receive relevant remuneration for the period as approved by the company in accordance with such provisions of Earlier Act.

Now, Ministry of Corporate Affairs through its General Circular 07/2015 dated 10th April 2015 clarified this transitional matter.

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Posted in Chapter XIII - CA2013, Companies Act 2013

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MAINTENANCE OF BOOKS OF ACCOUNT

Posted on April 10, 2015 | 3 comments

The Companies (Accounts) Rules 2014 came into force from 1st April 2014. These rules first time recognised electronic mode for keeping of books of account.

Notice of address at which books of account are to be maintained [Rule 2A]:

As we discussed earlier here according to Section 128 of the Companies Act 2013, every company shall prepare and keep at its registered office books of accounts and other relevant books and papers and financial statement for every financial year. These books must give a true and fair view of the state of affairs of the company and its branch offices. These books must explain the transactions effected both at the registered office and its branches.  These books shall be kept on actual basis and double entry system of accounting.

These books or some of these books may be kept at a place other than registered office at the decision of the Board of Directors after filing with the Registrar of Companies a notice in writing giving full address of that place.

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Posted in Chapter IX - CA2013, Companies Act 2013

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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 2015: DEPOSIT RULE

Posted on April 7, 2015 | 3 comments

Ministry of Corporate Affairs came with an amendment to the Companies (Acceptance of Deposits) Rules 2014. This is second amendment to these rules but first amendment for this year. Present amendment includes:

  1. Deadline for allotment of long pending share application money;
  2. Introduction of credit rating for deposits;
  3. Postponement of Deposit insurance; and
  4. Substitution of Form DPT – 3.

Deadline for Allotment:

As we have discussed earlier here, Rule 2(1)(c) define deposit giving exclusions from deposits. Clause (vii) of Rule 2(1)(c) excludes share/security application money pending allotment from the definition of deposits. Presently, Explanation (a) to Rule 2(1)(c)(vii) mandate of share application money within 15 days unless allotted within 60 days from the date of receipt.

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Posted in Chapter V - CA2013, Companies Act 2013

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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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