Tag Archives: India

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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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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Circular: Deposits under earlier Act

Posted on March 31, 2015 | 3 comments

“Ease of doing business” certainly is a joke invoked once again by the Government on eve of closing of financial year 2014 – 15. Even a fast track professional cannot study implication and advice companies about. This became bigger prank when it is meant to give relief to private companies with lesser resources. As one senior company secretary comments, “This clarification is being given on 30th March, 2015 when many companies have either repaid or have filed petitions with the CLB for extension of time to repay the deposits”. Another professional summarise it as “too little, too late”.

Before reading this well intended circulars, circumstance show this now may help intentional defaulters as law abiding corporate already following some process with almost no scope of reversibility.

Now we may read the general circular 05/2015 issued on 30th March 2015 (afternoon, almost before 36 hours of calendar deadline and just before 12 hours of working deadline).

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Posted in Chapter V - CA2013, Companies Act 2013

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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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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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Journey of Schedule II in 2014

Posted on March 3, 2015 | 1 comment

Schedule II of the Companies Act, 2013 deals with provision related to “useful life to compute depreciation”. This is second schedule of this Act which was amended before it may come into force in its original form.

A Notification published in Official gazette on 31st March 2014 amended the schedule with effect from 1st April 2014. These amendments were:

  1. In Part “A” Para 3 sub – paragraphs (i) to (iii) were substituted.
  2. In Part “C” Para 5, in Item IV, in sub – item (i); clause (b) was substituted.
  3. Under heading Notes appearing after Part “C”, Paragraph 5 was omitted.

Thereafter amended Schedule came into in force with effect from 1st April 2014.

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

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General Circulars on CSR

Posted on February 27, 2015 | 2 comments

As we discussed in last post here, government bringing changes in CSR law frequently. With all these development nightmare of CSR may become tax seems to be true soon. In this post, we are discussing General Circulars issued by Government in relation to CSR during first year. There are three circulars General Circular 21/2014 dated 18th June 2014, 36/2014 dated 17th September 2014 and 01/2015 dated 3rd February 2015.

General Circular 21/2014 enumerates following rules for interpretation of CSR Schedule VII of the Companies Act 2013:

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

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Journey of CSR Schedule in 2014

Posted on February 24, 2015 | 6 comments

This is being said in corporate sector, the companies Act 2013 is being treated by government and corporate as CSR law. The schedule related to corporate social responsibility has been amended since its being come into force.

Original CSR Schedule read as under:

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

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Companies Permitted to invest (Removal of Difficulty Order2015)

Posted on February 20, 2015 | 1 comment

Ministry of Corporate Affairs issued another “the Companies (Removal of Difficulties) Order, 2015” in exercise of the powers conferred by sub-section (1) of section 470 of the Companies Act, 2013 o remove the difficulties form (a) Definition of Small Companies under Section 2(85) and (b) for that purpose also inserted forth item in sub – section (11) of Section 186.

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

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