THE COMPANIES ACT, 2013

Transcription

1 THE COMPANIES ACT, 2013 A Presentation by: Rajeev Goel B Com (Hons), LLB, FCS, MIMA Corporate Lawyer rajeev391@gmail.com

2 The Companies Act, 2013 Overview of Changes Accounts, Audit & Auditors Annual Return Board s Report

3 The Companies Act, 2013 The Companies Act, 2013 Rules Circulars Notifications Orders Forms

4 Standards Accounting Standards Auditing Standards Secretarial Standards Cost Auditing Standards Valuation Standards

5 Salient Features Rules to play very important role Elaborate provisions on most of the matters Most of the provisions applicable to Private Co.

6 Salient Features Provisions relating to Frauds Wide powers of Central Government for Investigation Measures for Investor Protections Class Action Suites Corporate Social Responsibilities

7 Salient Features Stiff punishment provisions, fine and imprisonment New provisions for Compounding Specific Punishment provisions for Professionals Strict provisions for Financial Transactions Detailed disclosures

8 Compounding of offences Offences punishable with fine only are compoundable; By RD or such other officers where total fine is up to Rs. 5 lac By Tribunal where total fine is more than Rs. 5 lac No compounding pending Investigation

9 Compounding of offences Offences punishable with fine or imprisonment, or with both may be compounded with permission of Special Court in terms of CrPC Offences punishable with compulsory imprisonment are not compoundable

10 Punishment for repeated default If same offence is committed for second or subsequent occasions within a period of 3 years; Fine amount double, In addition to imprisonment, if any

11 Promoter Promoter means a person: Named in Prospectus or Annual Return; Has control over the affairs of the Company, directly or indirectly, whether as a Shareholder, Director or otherwise; or In accordance with whose advice, directions or instructions, the BOD is accustomed to act

12 Uniform Financial Year Period ending on 31 st March every year In case of incorporation of a company on or after 1 st January, first FY will end on 31 st March of subsequent year Exemption by the Tribunal on the basis of foreign holding/ subsidiaries Existing Co.s to align within 2 years

13 Compulsory consolidation of accounts Compulsory Consolidation of accounts of Subsidiary, Associate and JV Company Provided further that nothing in Rule 6 shall apply in respect of preparation of consolidated financial statement by an intermediate WOS, other than a WOS whose immediate parent is a company incorporated outside India [Chapter 9, 1 st Amendment]

14 Compulsory consolidation Provided also that nothing contained in this rule shall, subject to any other law or regulation, apply for the financial year commencing from the 1 st April, 2014 and ending on the 31 st March, 2015, in case of a company which does not have a subsidiary or subsidiaries but has one or more Associate Companies or Joint Ventures or both, for the consolidation of Financial Statement in respect of Associate Companies or Joint Ventures or both, as the case may be [Chapter 9, 1 st Amendment]

15 Compulsory consolidation Provided also that nothing in this rule shall apply in respect of consolidation of Financial Statement by a Company having subsidiary or subsidiaries incorporated outside India only for the financial year commencing on or after 1 st April, 2014 [Chapter 9, 2 nd Amendment]

16 Holding/Subsidiary Control over composition of the Board Control over more than 50% of total Share Capital# (on its own or through one or more subsidiaries) Restriction on layer of subsidiaries # Paid-up Equity Capital and Convertible Preference Capital

17 Associate Company A company in which that other company has a significant influence significant influence means: control of at least 20% of total share capital; or Control of business decisions under an agreement Not a subsidiary company; and Includes a Joint Venture company

18 Joint Venture Company Joint Venture Company not defined under the Act AS 18 defines a Joint venture as a contractual arrangement whereby two or more parties undertake an economic activity which is subject to joint control

19 Re-opening of Accounts Company not to re-open its books of accounts and not to re-cast its Financial Statements except By an Order of the Court or Tribunal on application of Central Government, IT authorities or SEBI, etc., to the effect that:

20 Re-opening of Accounts the relevant accounts were prepared in a fraudulent manner; or the affairs of the company were mismanaged during the relevant period, casting a doubt on the reliability of financial statements.

21 Voluntary Revision of Accounts Revision of Financial Statement or Directors Report for last 3 FY, if these do not comply with sections 129 or 134; Approval of the Tribunal compulsory; Notice to Central Government and IT authorities, before passing any order Detailed reason of revision to be given in the Directors Report

22 Voluntary Revision of Accounts If Financial Statement or Directors Report have been circulated to members or filed with ROC or laid before AGM, Revisions must be confined to: correction in respect of which the previous Financial Statement or Report do not comply with section 129 or 134; and Making of any necessary consequential alternation

23 Internal Auditor Compulsory appointment Every Listed Company Other Public Co. having: Paid-up Capital of Rs. 50 crore or more; Turn over of Rs. 200 crore or more; Loans from Banks/PFI Rs. 100 crore or more; or Deposits of Rs. 25 crore or more

24 Internal Auditor Compulsory appointment Private Co.: Turn over of Rs. 200 crore or more; or Loans from Banks/PFI Rs. 100 crore or more Existing Companies to comply within 6 months Audit Committee/Board to formulate scope & functioning, etc. of the internal audit

25 Internal Auditor Internal Auditor will be a: Chartered Accountant (whether in practice or not); Cost Accountant; or Such Other Professional as may be decided by the Board May or may not be Company s employee

26 Auditors Appointment 1 st Auditor: By Board within 30 days from the date of incorporation In case of failure, by EGM within 90 days Subsequent Auditor: Appointment by AGM for a block of 5 years Appointment to be ratified at every AGM by way of Ordinary Resolution If not ratified, Board to appoint auditor [Rule 3/10]

27 Auditors Appointment Casual vacancy: to be filled by the Board in 30 days; In case of resignation, by EGM, within 3 months of recommendation by Board Written Consent & Certificate from Auditors before appointment Notice of Appointment: To be given by Company to Auditors and ROC within 15 days in ADT-1

28 Disqualification for Auditors A body corporate; other than LLP An Officer or Employee of Co. Person who is a Partner or in employment of an Officer or Employee of the Co.

29 Disqualification for Auditors Person who, or his Relative or Partner is: holding security or interest in the Co., subsidiary or holding co., etc. [In case of relative exceeding Rs. 1 lac and corrective action within 60 days] Indebted to the Company, etc. in excess of Rs. 5 lac Given a guarantee or provided security in excess of Rs. 1 lac

30 Disqualification for Auditors Person or Firm who, whether directly or indirectly, has business relationship with Co., its Subsidiary, Holding, Associate Co., or Subsidiary of such Holding or Associate Co. Business Relationship shall be construed as any transaction entered into for a commercial purpose, except: a. commercial transactions which are in the nature of professional services permitted to be rendered by an auditor

31 Disqualification for Auditors b. commercial transactions which are in the ordinary course of business of the company at arm s length price - like sale of products or services to the auditor, as customer, in the ordinary course of business, by companies engaged in the business of telecommunications, airlines, hospitals, hotels and such other similar businesses.

32 Disqualification for Auditors Person whose relative is a director or KMP of the Co. Person who is in full time employment elsewhere Person holding appointment in more than 20 companies Person convicted of an offence involving fraud and 10 years has not elapsed from conviction Person whose subsidiary or associate company or any other form of entity, is engaged in consulting and specialised services as provided in section 144

33 Disqualification for Auditors Where a person appointed as an Auditor of a company incurs any of the disqualifications mentioned in 141(3) after his appointment, he shall vacate his office as such auditor and such vacation shall be deemed to be a casual vacancy in the office of the auditor [Section 141(4)]

34 Auditors obligation Auditors to comply with Auditing Standards Auditors to attend all General Meetings unless exempt by Co. Auditor to report to Central Government of any fraud by officer against the Co. No breach of duty due to such reporting

35 Compulsory Rotation of Auditors Not Applicable on OPC and SC Applicable on the following: Listed Co. Other Public Co.: Paid-up Capital of Rs. 10 crore or more; Private Company: Paid-up Capital of Rs. 20 crore or more; Companies having borrowing from Bank/FI or Public Deposits of Rs. 50 crore or more

36 Compulsory Rotation of Auditors Individual Auditor: After one term of 5 consecutive years Firm as Auditors: 2 terms of 5 consecutive years 5 years cooling off period period prior to the commencement of new Act to be counted for compulsory rotation Existing companies to comply within 3 years

37 Compulsory Rotation of Auditors Firm with Common Partner not to be appointed new Auditor if a partner, who is in charge of an audit firm and also certifies the financial statements of the company, retires from the said firm and joins another firm, such other firm shall also be ineligible to be appointed for a period of five years

38 Compulsory Rotation of Auditors New Auditor not to be from the same network of Audit firm Same Network includes the firms operating or functioning, hitherto or in future, under the same brand name, trade name or common control

39 Auditors not to render certain services Auditors to provide other services to the Co. only with approval of the BOD/Audit Committee Auditors not to render certain services, directly or indirectly, to the Company or its Holding or Subsidiary Co. Auditor to comply before close of first FY after commencement of the Act

40 Auditors not to render certain services Prohibited Services: 1. Accounting and book keeping services 2. Internal Audit 3. Design and implementation of Financial Information System 4. Actuarial services 5. Investment Advisory Services

41 Auditors not to render certain services Prohibited Services: 6. Investment Banking Services 7. Rendering of Outsourced Financial Services 8. Management Services 9. Other services, as may be prescribed

42 Auditors not to render certain services Term directly or indirectly shall include rendering of services by the auditor, in case of auditor being an individual, either himself or through his relative or any other person connected or associated with such individual or through any other entity, whatsoever, in which such individual has significant influence or control, or whose name or trade mark or brand is used by such individual;

43 Auditors not to render certain services Term directly or indirectly shall include rendering of services by the auditor, in case of auditor being a firm, either itself or through any of its partners or through its parent, subsidiary or associate entity or through any other entity, whatsoever, in which the firm or any partner of the firm has significant influence or control, or whose name or trade mark or brand is used by the firm or any of its partners.

44 Resignation by Auditors Auditors can resign from the Co. [Section 140] Auditor to file a statement to the Co. and ROC in Form ADT-2 within 30 days Failure will attract a file of Rs. 50,000 to Rs. 5 lac

45 Annual Filing

46 Annual Filings; The Companies Act, 2013 Provisions of the Companies Act, 2013 to apply on: Preparation of Financial Statements for Financial Year commencing on or after 1 st April, 2014 Board s Report on such FS Filing of such FS

47 Annual Return Section 92: Annual Return Rule 11 of Chapter 7-the Companies (Management & Administration) Rules, 2014: Annual Return Form & Certification by PCS Rule 12/7: Extracts of Annual Return to be attached with Board s Report

48 Annual Return Form MGT-7: Annual Return Form Form MGT-8: Format for Certification of AR by PCS in case of specified Co. Form MGT-9: Extracts of AR to be attached to Board s Report

49 Annual Return Every Co. to prepare Annual Return: Particulars as on the close of the FY Changes since the close of the previous FY Annual Return as on to have detail from 1 st April, 2014 to 31 st March, 2015

50 Annual Return; Signing In case of OPC and SC: by CS; where there is no CS, by a Director Other than OPC & SC: Both by a Director and CS; where there is no CS, By a PCS

51 Annual Return; Certification Compulsory Certification by PCS as per Form MGT-8 In case of Listed Co.; and Other Co.s with Paid up of Rs. 10 crore or more; or Turnover of Rs. 50 crore or more

52 Annual Return Form; Disclosures Category & Sub-category of Co. Regd. Office & Correspondence Address [ of Dealing Officer] Particulars of RTA [ of Dealing Officer of RTA] Principal Business Activities of the Co. (All business activities contributing 10% or more of the total turnover)

53 Annual Return Form; Disclosures Particulars of Holding, Subsidiary, Associate, JV Co. Particulars of Equity, Preference, Debentures & Other Securities & Securities Premium Turnover and Net worth Shareholding Pattern Promoters Non-promoters

54 Annual Return Form; Disclosures Shareholding of Promoters including Share Pledge Changes in Promoters Shareholding Top 10 Shareholders other than Promoters, Directors, etc. Shareholding of Directors and KMP

55 Annual Return Form; Disclosures Indebtedness: Secured & Unsecured Loans, Deposits Details of Members, Debenture or other Securities holders; and Transfers since last close of previous FY

56 Annual Return Form; Disclosures Details of Promoters (Co.s and Individuals) Directors KMP Other Directorships of Directors and Changes therein Details of Meetings of Members, Board & its Committees detail of attendance and total Numbers, etc.

57 Annual Return Form; Disclosures Remuneration of Directors and KMP Values of Salaries and Perquisites given as per Section 17 of the Income Tax Act, 1961 Details of Penalties, Punishment and compounding of offences: Companies and Officers in default Matters related to Certification of Compliances and Disclosure

58 Annual Return Form; Disclosures Shares held by FII CSR spend Details of Inter Corporate Loans and Investments, RPT Limits u/s 186(2) and 180(1)(c) Confirmation for Disclosures of Interest by Directors Declaration by Independent Directors Appointment of Auditors

59 Annual Return; Signing We certify that: a. The Return states the facts, as they stood on the date of the closure of the financial year aforesaid correctly and adequately b. The whole of the amount of unpaid/ unclaimed dividend/other amounts as applicable have been transferred to the IEPF in accordance with section 125 of the Act

60 Annual Return; Signing c.the Company has maintained all the registers as per the provisions of the Act and the rules made there under; and d.unless otherwise anything in contrary is stated expressly elsewhere in this Return, the Company has complied with the applicable provisions of the Act during the financial year

61 Annual Return; Signing In case of Pvt Co.: e. The Company has not, since the date of the closure of the last financial year with reference to which the last return was submitted or in the case of a first return since the date of the incorporation of the company, issued any invitation to the public to subscribe for any securities of the company

62 Annual Return; Signing f. Where the annual return discloses the fact that the number of members, except in case of a one person company, of the company exceeds two hundred, the excess consists wholly of persons who under second proviso to section 2(68)(ii) of the Act are not to included in the reckoning the number of two hundred g. The Company continues to be a Private Company during the financial year

63 Annual Return; Signing In case of OPC or SC: i.the Company continues to be One Person Company/Small Company

64 Annual Return; Filing Annual Return to be filed with ROC: Within 60 days from the date of AGM If AGM is not held within statutory time period, within 60 days from the last date up to which AGM should have been held

65 Non filing of AR In case of non-filing of AR: Company: Fine of minimum Rs. 50,000 and maximum Rs. 5 lac; Officer in Default: Imprisonment up to 6 months; or Fine of minimum Rs. 50,000 and maximum Rs. 5 lac; or with both May 14, 2015 Rajeev Goel & Associates, Advocates

66 Default by PCS Section 92(6)-If PCS certifies AR otherwise than in conformity of section 92: PCS shall be punishable with fine Minimum: Rs. 50,000; Maximum: Rs. 5 lac May 14, 2015 Rajeev Goel & Associates, Advocates

67 Board s Report

68 Board s Report Section 134: Financial Statement & Board s Report Rule 8 of Chapter 9-The Companies (Accounts) Rules, 2014: Matters to be included in Board s Report Rule 9/9: CSR Disclosures in Board s Report Disclosures under various provisions of the Act and Rules

69 Board s Report Form AOC-2: Particulars of Related Party Transactions under section 188 Form MGT-9: Extract of Annual Return Annexure to CSR Rules: CSR Policy and implementation, Composition of CSR Committee, Annual Report on CSR Activities

70 Board s Report Disclosures in Board s Report based on stand-alone Financial Statements of the Company In case of Consolidated Financial Statements: Report [in a Separate Section] on the performance and financial position of each of the subsidiaries, Associates and Joint Venture Companies included in the CFS

71 Board s Report; Disclosures Stand-alone Financial Statements of the Company [section 134(3)]: Financial Highlights State of Companies Affairs Change in Nature of Business of the Company, if any Material Changes and Commitments affecting the Financial Position of the Company after Balance Sheet Date

72 Board s Report; Disclosures Proposed Dividend Transfer to Reserves Requisite detail of Energy Conservation, Technology Absorption, Foreign Exchange Earnings & Outgo as per Rule 8/9 Risk Management Policy Details in respect of adequacy of Internal Financial Controls with reference to the Financial Statements

73 Directors Responsibility Statement AS were followed Selection of Accounting Policies as to give true and fair view Maintenance of Accounting Records Going Concern basis Internal Financial Control, in Listed Co.

74 Directors Responsibility Statement The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively

75 Board s Report; Disclosures Explanation on Qualifications, Reservation, adverse remark or disclaimer made in: Auditor s Report ; and Secretarial Audit Report No. of Board Meetings Statement on Independent Directors Declaration In case of Nomination and Remuneration Committee, Co s Policy on Directors Appointment & Remuneration, etc.

76 Board s Report; Disclosures Statement on evaluation of performance of the Board, its Committees and individual Directors* Appointment and Resignation of Directors and KMP Names of companies which have become or ceased to be its Subsidiaries, Associate or Joint Venture Companies during the year

77 Board s Report; Disclosures Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company s operations in future Requisite detail of Deposits covered under Chapter V of the Act Detail of Deposits which are not in compliance with Chapter V of the Act Particulars of Loans & Investments under section 186

78 Board s Report; Disclosures Particulars of Related Party Transactions under section 188 as per Form AOC-2 Extract of Annual Return as per Form MGT-9 to be annexed CSR Policy and implementation, Composition of CSR Committee, Annual Report on CSR Activities as per Annexure to CSR Rules*

79 Board s Report; Other Disclosures Secretarial Audit Report Requisite disclosures of Managerial Personnel and their Remuneration [Section 197(12) & (14) and Rule 5/13, Schedule V] Independent Director s Reappointment [Section 149 (10) Chapter 11] Audit Committee: Composition and detail of any recommendation of the Audit Committee not accepted by the Board [Section 177 (8) Chapter 12]

80 Board s Report; Other Disclosures Vigil Mechanism Policy [Section 177 (10) Rule 7/12] Nomination and Remuneration Policy [Section 178 (3) Chapter-12] Details of Equity Share with Differential Voting Rights issued/completed during financial year. [Section 43 Rule 4(4)/4] Details of Sweat Equity Shares issued during financial year [Section 54 Rule 8(13)/4]

81 Board s Report; Other Disclosures Details of ESOPS issued during the financial year [Section 62 (1)(b) Rule 12 (9)/4] Detail of loans given by the Company for purchase of its shares Section 67(3) Rule 16(4)/4

82 Board s Report In case of Consolidated Financial Statements: Report [in a Separate Section] on the performance and financial position of each of the subsidiaries, Associates and Joint Venture Companies included in the CFS

83 Board s Report; Signing Board s Report and every Annexure thereto, to be signed by: Chairperson of the Co., if authorised by the Board; If he is not so authorised At least 2 Directors including MD; or 1 Director, in case of only 1 Director

84 Circulation of FS A Signed Copy of FS, including CFS, to be issued, circulated or published along with a copy of: Any Notes forming part of such FS; Auditor s Report Board s Report

85 Filing of Financial Statement Financial Statement to be filed with ROC: Within 30 days from the date of AGM If AGM is not held within statutory time period, within 30 days from the last date up to which AGM should have been held

86 Default In case of contravention of section 134 Company: Fine of minimum Rs. 50,000 and maximum Rs. 25 lac; Officer in Default: Imprisonment up to 3 years; or Fine of minimum Rs. 50,000 and maximum Rs. 5 lac; or with both May 14, 2015 Rajeev Goel & Associates, Advocates

87 THANK YOU! Rajeev Goel & Associates Advocates and Consultants 785, Pocket-E Mayur Vihar-II, NH 24 Delhi