Compliance Action Plan for Secretarial Standards
Secretarial Standards SS – 1 & SS – 2 dealing with Board Meeting and General Meeting respectively, became effective from July 01, 2015. These standards trigger certain action points at board level, shareholders level & general. CS Amit Gupta, Amit Gupta & Associates, Companies Secretaries, Lucknow has summarized action points to get prepared for implementation of these standards without hassles.
Posted in Chapter VII – CA2013, Chapter XIII - CA2013, Companies Act 2013, Company Secretary, CorpGov, Governance and Responsibility, Secretarial Standards
Tagged Board meeting, Company Secretary, General Meeting, India, MCA, Ministry of corporate affairs, Registrar of Companies, Secretarial Standard, The Companies Act 2013
In my earlier post here I have raised some issues related to issuance of secretarial standards. As these are curable technical issues. I continue my study of these Secretarial Standards.
In this post, I will discuss Secretarial Standards related to Attendance at Meetings under SS – 1 and SS – 2.
Attendance registers:
Every company shall maintain separate attendance registers for the Meetings of the Board and Meetings of the Committee. [Paragraph 4.1.1 of SS – 1]
The pages of the respective attendance registers shall be serially numbered. [Background Paragraph 1 after Paragraph 4.1.1 of SS – 1]
If an attendance register is maintained in loose-leaf form, it shall be bound periodically depending on the size and volume. [Paragraph 2 after Paragraph 4.1.1 of SS – 1]
Posted in Chapter VII – CA2013, Chapter XIII - CA2013, Companies Act 2013, Company Secretary, CorpGov, Governance and Responsibility, Secretarial Standards
Tagged Board meeting, Company Secretary, General Meeting, India, MCA, Ministry of corporate affairs, Registrar of Companies, Secretarial Standard, The Companies Act 2013
In my earlier post here I have raised some issues related to issuance of secretarial standards. As these are curable technical issues. I continue my study of these Secretarial Standards.
In this post, I will discuss Secretarial Standards related to frequency of Meetings under SS – 1 and SS – 2.
Quorum of Board meeting:
Quorum shall be present throughout the Meeting. Quorum shall be present not only at the time of commencement of the Meeting but also while transacting business. [Paragraph 3.1 of SS – 1]
A Director shall not be reckoned for Quorum in respect of an item in which he is interested and he shall not be present, whether physically or through Electronic Mode, during discussions and voting on such item. [Paragraph 3.2 of SS – 1]
For this purpose, a Director shall be treated as interested in a contract or arrangement entered into or proposed to be entered into by the company:
(a) with the Director himself or his relative; or
(b) with any body corporate, if such Director, along with other Directors holds more than two percent of the paid-up share capital of that body corporate, or he is a promoter, or manager or chief executive officer of that body corporate; or
(c) with a firm or other entity, if such Director or his relative is a partner, owner or Member, as the case may be, of that firm or other entity. [Background Paragraph 1 after Paragraph 3.2 of SS – 1]
Posted in Chapter VII – CA2013, Chapter XIII - CA2013, Companies Act 2013, Company Secretary, CorpGov, Governance and Responsibility, Secretarial Standards
Tagged Board meeting, Company Secretary, General Meeting, India, MCA, Ministry of corporate affairs, Registrar of Companies, Secretarial Standard, The Companies Act 2013
In my earlier post here I have raised some issues related to issuance of secretarial standards. As these are curable technical issues. I continue my study of these Secretarial Standards.
In this post, I will discuss Secretarial Standards related to frequency of Meetings under SS – 1 and SS – 2.
Board Meetings:
The Board shall meet at least once in every calendar quarter, with a maximum interval of one hundred and twenty days between any two consecutive Meetings of the Board, such that at least four Meetings are held in each Calendar Year. [Paragraph 2.1 of SS – 1]
The Board shall hold its first Meeting within thirty days of the date of incorporation of the company. It shall be sufficient if one Meeting is held in each of the remaining calendar quarters, subject to a maximum interval of one hundred and twenty days between any two consecutive Meetings of the Board, after the first Meeting. [Background Paragraph 1 after Paragraph 2.1 of SS – 1]
Posted in Chapter VII – CA2013, Chapter XIII - CA2013, Companies Act 2013, Company Secretary, CorpGov, Governance and Responsibility, Secretarial Standards
Tagged Board meeting, Company Secretary, General Meeting, India, MCA, Ministry of corporate affairs, Registrar of Companies, Secretarial Standard, The Companies Act 2013
In my earlier post here I have raised some issues related to issuance of secretarial standards. As these are curable technical issues. I continue my study of these Secretarial Standards.
In this post, I will discuss Secretarial Standards related to Notice of a General Meeting under SS – 2 issued by Institute of Company Secretaries of India.
Notice in writing of every Meeting shall be given to every Member of the company. Such Notice shall also be given to the Directors and Auditors of the company, to the Secretarial Auditor, to Debenture Trustees, if any, and, wherever applicable or so required, to other specified persons. [Paragraph 1.2.1 of SS – 2]
In the case of Members, Notice shall be given at the address registered with the Company or depository. In the case of shares or other securities held jointly by two or more persons, the Notice shall be given to the person whose name appears first as per records of the Company or the depository, as the case may be. In the case of any other person who is entitled to receive Notice, the same shall be given to such person at the address provided by him. [Background Paragraph 1 after Paragraph 1.2.1 of SS – 2]
In my earlier post here I have raised some issues related to issuance of secretarial standards. As these are curable technical issues. I continue my study of these Secretarial Standards.
In this post, I will discuss Secretarial Standards related to Notice of a board meeting under SS – 1 issued by Institute of Company Secretaries of India.
Notice in writing of every Meeting shall be given to every Director
In SS – 1, Electronic means is not defined by it is defined in Paragraph 1.2.2 of SS – 2. Please refer there for definition. I will post my remark on definition when I will write a post on those standards.
What is in name? Everyone had said it sometimes in life. Here, I am discussing what is in display of name.
Every professional practicing Corporate Law, selecting a name is rather a complex issue. When promoters select name for proposed company or a company try to change its name, there is complex rules. Rule 8 of the Companies (Incorporation) Rules, 2014 list undesirable names. Thereafter, a promoters or company, as the case may be, have to reserve selected name before further steps. All these are not within scope of this post.
Noun Object Private Limited (OPC)
Recently, when Registrar of Companies issued a Certificate of Incorporation for a One Person Company. A question was raised whether name as appeared on Certificate is correct and proper or not? How company will present this name to public, as it appear on certificate or in some other manner.
In my earlier post here I have raised some issues related to issuance of secretarial standards. As these are curable technical issues. I continue my study of these Secretarial Standards.
In this post, I will discuss Secretarial Standards related to convening a board meeting and general meeting under SS – 1 and SS – 2 respectively.
Authority for Board Meeting:
According to Paragraph 1.1.1 of SS – 1;
convene a Meeting of the Board, in consultation with
unless otherwise provided in the Articles.
Posted in Chapter VII – CA2013, Chapter XIII - CA2013, Companies Act 2013, Company Secretary, CorpGov, Governance and Responsibility, Secretarial Standards
Tagged Board meeting, Company Secretary, General Meeting, India, MCA, Ministry of corporate affairs, Registrar of Companies, Secretarial Standard, The Companies Act 2013
In my earlier post here I have raised some issues related to issuance of secretarial standards. As these are curable technical issues. I continue my study of these Secretarial Standards.
In this post, I will discuss scope of the Secretarial Standards namely SS – 1 and SS – 2 issued by Institute of Company Secretaries of India and interesting definitions.
SS – 1 is applicable to the Meetings of Board of Directors of all companies incorporated under the Act except One Person Company (OPC) in which there is only one Director on its Board. The principles enunciated in this Standard for Meetings of the Board of Directors are also applicable to Meetings of Committee (s) of the Board, unless otherwise stated herein or stipulated by any other applicable Guidelines, Rules or Regulations.
SS – 1 is not applicable to the meeting of Board of One Person Companies which has only one director, otherwise SS – 1 is applicable to One Person Companies Also.
Posted in Chapter VII – CA2013, Chapter XIII - CA2013, Companies Act 2013, Company Secretary, CorpGov, Governance and Responsibility, Secretarial Standards
Tagged Board meeting, Company Secretary, General Meeting, India, MCA, Ministry of corporate affairs, Registrar of Companies, Secretarial Standard, The Companies Act 2013
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.”
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).
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.
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)]
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).
Posted in Chapter IX - CA2013, Companies Act 2013, Governance and Responsibility
Tagged 2015, Accounting Standards, Consolidation of Accounts, India, MCA, Ministry of corporate affairs, Registrar of Companies, the Companies (Accounts) Amendment Rules 2014, The Companies (Accounts) Amendment Rules 2015, The Companies (Accounts) Rules 2014, the Companies (Indian Accounting Standards) Rules, The Companies Act 2013
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.
Posted in Chapter IX - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility
Tagged Boards’ Report, Financial Statements, India, Managerial Remuneration, MCA, Ministry of corporate affairs, Particulars of employees, Registrar of Companies, The Companies (Accounts) Rules 2014, The Companies Act 2013
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.
Posted in Chapter IX - CA2013, Companies Act 2013, CorpGov, Governance and Responsibility
Tagged Boards’ Report, Conservation of Energy, CSR Reporting, Evaluation of Boards Performance, Financial Statements, Foreign Exchange, India, MCA, Ministry of corporate affairs, Registrar of Companies, Technology Absorption, The Companies (Accounts) Rules 2014, The Companies Act 2013
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]
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)]
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.
Posted in Chapter IX - CA2013, Companies Act 2013, CorpGov
Tagged 2015, Accounting Standards, Consolidation of Accounts, India, MCA, Ministry of corporate affairs, Registrar of Companies, the Companies (Accounts) Amendment Rules 2014, The Companies (Accounts) Amendment Rules 2015, The Companies (Accounts) Rules 2014, the Companies (Indian Accounting Standards) Rules, The Companies Act 2013
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.
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