KHARABANDA ASSOCIATES

Transcription

1 Dear All, As we all know, the Companies Act 1956 has been phased out and is replaced with the New Companies Act 2013 (barring certain sections).the new law extends to the whole of India and has been introduced keeping in view the growth of Companies in India so that they are at par with the modern changes in business in the 21st Century. The Companies Act 1956 was passed at the time of "license raj" (First decade of Free India) and much has changed since then. Law too becomes redundant which arises the need to create a modern law to govern the manner in which Companies operate, regulate and comply in India. Statistical Snapshot of The Companies Act 2013 as compared to its predecessor is as below: The New Act comprises of 470 sections spread over 29 chapters and 7 schedules as against 658 sections and 14 schedules in the Companies Act Trust this area is of utmost importance to you and your business, thus we are making you familiar with the important changes in the law that is finally a reality: 1. Introduction of One Person Company (OPC): OPC is an entity or a company with only one person as its member. The same will be formed as a Private Company - No AGM/Board meetings will be required in case of a single director. The rule states that OPC can be incorporated only by an Indian citizen and Resident in India. 2. CIN to be printed and mentioned on all letter heads and printed material (Invoices and all important communications of the Company) wef April 1, Note: Business Letters, Bill Heads, Letter Papers, Notices and all Official Publications to comprise of the below mentioned details: Name Address of Registered Office CIN Telephone Number Fax Number Address and Website - If any. Note: Paid up and subscribed Capital should be mentioned wherever Authorized Capital is being mentioned.

2 3. Increase in number of shareholders/members in a Private Company from 50 to Appointment of Internal Auditor mandatory for the below mentioned Companies: Listed Company Every Private Company with Turnover greater than Rs 200 Crore or Outstanding Loan greater than 100 Crore. Every Public Company with Share Capital more than/equal to Rs 50 Crore or Turnover greater than Rs 200 Crore or Outstanding Loan greater than 100 Crore or Outstanding Deposits greater than 100 Crore. 5. Limit on maximum partners/persons in any association/partnership maybe upto such number as may be prescribed but not exceeding one hundred. This restriction will not apply to an association/partnership constituted by professionals who are governed by any special law/act such as The Chartered Accountants Act etc. Exception has also been extended to HUF's carrying on any business. Under the ICA 1956, there was a limit of maximum 20 persons/partners and no exemption was granted to professionals. 6. Corporate Social Responsibility (CSR) by imposing a duty on certain class of Companies to spend a certain amount of money every year on activities/initiatives that would help in improving the under privileged and backward sections of the society. CSR Committee to be followed by the following Companies: With Net Profit of Rs 5 Crores or more at the end of the Financial Year, With Turnover of Rs 1,000 Crores or more at the end of the Financial Year, With Net Worth of Rs 500 Crores or more at the end of the Financial Year,

3 Such Companies are required to incur expenses on CSR = 2% of Average Profits of the last 3 years. CSR Policy to be published on the Company's website and the policy to be formulated by the CSR Committee of 3 Directors comprising of at least One (1) Independent Director. Note: The policy developed on CSR and the initiatives are to be disclosed in the Board Report along with other mandatory disclosures. 7. Additional Disclosures in the Board Report as stipulated by Clause 134(1): Number of meetings of the Board Statement of declaration by Independent Directors Company's policy on appointment and remuneration of Director Particulars of Loans, Guarantee and Investments Implementation of risk management policy Policy developed on CSR as explained in Point No. 6 Statement of formal evaluation of Board performance incase of Public/Listed Companies 8. Financial Year Definition under Clause 2(41) requires Company/Body Corporate to adopt uniform FY of April 1 - March 31 every year and requires existing Companies who are not following the above FY to align themselves accordingly. 9. Clauses/ Contents of Memorandum: There are no exceptions to the mandatory clauses (Name, Registered Office, Objects, Liability, and Capital); however no classification will now be required for Objects Clause into main, incidental/ancillary or other objects. 10. Format of Articles of Association: Table F - Company limited by shares. Table G - Company limited by guarantee and having share capital.

4 Table H - Company limited by guarantee and not having share capital. Table I - Unlimited Company having share capital. Table J - Unlimited Company not having share capital. For the first time, Articles may contain provisions for entrenchment. 11. In case of Name Change of a Company during the last two years, Company to paint or affix outside every office or place of business letters, bill heads etc. along with its name, the former name or names changed during the last two years. The Company shall on and from the 15th day of its incorporation and at all times have a registered office address. 12. In case of Unutilized Proceeds from Public Issue, it cannot change its Objects unless a special resolution is passed by it and the details as may be prescribed, of the notice, shall be published in two newspapers and should also reflect on the website of the Company. 13. Points to be noted under The Companies (Specification of definitions details) Rules, 2014 Chapter 1: A. Total Share capital defined to include paid up equity share capital and 'convertible preference share capital. B. A director or KMP of the holding company or his relative will also be considered as related party under section 2(76) C. List of relatives to include step-brother and step-sister but does not include step daughter D. Executive director means a whole time director as defined in section 2(94) E. For the purposes of sections 164(1)(d) and 167(1)(f), the term 'or otherwise' means any offence in respect of which he has been convicted by a Court under this Act or the Companies Act, 1956

5 14. As per Companies (Management and Administration) Rules, 2014 a time period of 6 months is given for compliance with requirements relating to Register of Members ; Listed Companies and Companies with not less than 1,000 shareholders/security holders to maintain documents in electronic form. 15. For Listed Companies : Return for change in shareholding position of promoters and top 10 shareholders to be filed with ROC, only if there is change in value or volume by 2% or more. 16. For Distribution of Dividends: Incase of inadequacy or absence of profits, rate of dividend declared shall not be greater than the average of 3 preceding years as against 5 years. Further, the limit of 10% of paid up capital has been removed. 17. Requirement of Appointment of Women Director for every listed company and public company with paid up capital of Rs 100 Crore or more OR turnover of Rs 300 Crores or more to be complied with within the time frame as prescribed. 18. Every Company to have minimum of One Director who should reside in India for a period of 182 days or more in the previous calendar year. 19. Every Director to attend at least One Board Meeting (Face to Face) every Financial Year. 20. In case of Resignation by a Director, a copy of the Resignation Letter furnishing reasons for Resignation to be filed with the Registrar within 30 days of the date of Resignation. 21. The Act mandates compliance with Secretarial Standards I and II issued by ICSI in relation to Board and General Meetings. 22. The value of transactions for related party transactions which require special resolution have been specified. 23. Detailed rules given with respect to conducting meetings of the Board through video conferencing or other audio visual means. However, certain matters as specified cannot be dealt with in a meeting through video conferencing or other audio visual means (e.g., approval of annual financial statements, approval of the Board's report, approval of prospectus, approval for merger, demerger, acquisition, etc)

6 24. Director has option to intimate his/her intention to attend the meeting through electronic mode at the beginning of the calendar year, which is valid for 1 calendar year. 25. Annual Return Certification is compulsory from Practicing CS for the Companies having Paid Up Capital of > 10 Crores or Turnover of 50 Crores. (Prescribed Form: MGT 8) 26. A dedicated forum (National Company Law Tribunal) will be set up to deal with Company law matters and to facilitate speedy disposal of cases. 27. Mandatory Appointment of Whole Time Key Management Personnel (KMP) for Listed Companies & Public Companies having Paid Up Capital of more than or equal to Rs 10 Crores. Whole Time KMP's comprise of: MD / CEO / Manager / Whole Time Director. Company Secretary and CFO 28. In case of Borrowing from a person other than the Director, provisions of Deposit Rules are to be observed. 29. Prohibition of Loan to Directors/Companies in which there are common Directors/Shareholders. 30. Provisions regarding General Meeting wherein the First Meeting of the Board is to be held within 30 days of the date of Incorporation and at least Four (4) Board Meetings in a year are to be held within a gap of 120 days between the two. Concept of Board Meeting in every quarter is done away with.

7 All in all, the new Companies Act 2013 has brought a lot of cheer for the start ups, will result in better corporate governance, increase transparency in the system and will encourage Companies to take up CSR initiatives for better development of our society. We recommend the management to plan and implement the provisions of the new act in letter and spirit as the penal consequences of non compliance are very harsh under the New Act. We, at Kharabanda Associates have a dedicated team of professionals and shall be pleased to offer you the required support, guidance and assistance for implementation and compliance of the new Companies Act Please feel free to get in touch with the undersigned at any time regarding the same. Thanks and Regards, CA Sakshi Kharabanda KHARABANDA ASSOCIATES MOBILE : : sakshi@ kharabandaassociates. com