Practical Aspects of Companies Act, 2013 on Midsized Companies.

Presentation on Practical Aspects of Companies Act, 2013 on Midsized Companies. ByC.S.Kelkar Partner C. S. Kelkar& Associates, Company Secretaries

Points covered in the Presentation 1. Types of Companies 2. Incorporation Related Matters 3. Some New Concepts 4. Management / Board 5. Meetings BM / GM 6. Audit & Auditors 7. Share Capital /Deposits /Charges 8. Dividend 9. Related Party Transactions

Types of Companies One Person Company Small Company Private Company Public Limited Company

One Person Company (OPC ) TheActintroducedtheconceptof OPC for the first time. Clause 2(62) defines a OPC as a company whichhasonlyonepersonasamember. A OPC is required to be registered as a Private Limited Company. Single member to subscribe to the MOA & ensure all compliances Nocompulsiontohold AGM.

One Person Company (OPC ) Filing of a copy of Financial Statements mandatory. ThememorandumofsuchOPCisrequiredto indicate the name of the person who shall become member in the event of death or incapacity of the sole member. OPC is required to specifically mention the word one person company below the name wherever it is used.

Small Company Small Company means a company other than a Public Company having- I. PaidupcapitalnotexceedingRs.50Lakhs*& II. TurnovernotexceedingRs.2Crores*. (*These limits may change by notification.) Following companies will not be treated as Small Company : aholdingco.orasubsidiaryco.;or a Co. registered under section 8; or a Co. or body corporate governed by any special Act;

Small Company(cont ) Benefits to the small companies: 1. Financial Statement need not include Cash Flow 2. TheannualreturncanbesignedbytheCSinemployment alone,orwherethereisnocs,byonlyonedirector. 3. Onlytwoboardmeetings(BM)inayear,i.e.oneBMineachhalf ofthecalendaryearwithaminimumgapof90daysbetween the two meetings. 4. Not to follow the mandatory rotation for appointment of auditor 5. Simplified procedure for merger/amalgamation- Only approval ofrd. 6. No need to establish Corporate Social Responsibility Committee.

Private Company [Sec. 2(68)] Private Company means a company having a minimum paid-up share capital of one lakh rupees or such higher paidup share capital as may be prescribed, and which by its articles, (i) restricts the right to transfer its shares; (ii) except in case of OPC, limits the number of its members to 200: Provided that where two or more persons hold one or more sharesinacompanyjointly,theyshall,forthepurposesofthis clause, be treated as a single member: (iii) prohibits any invitation to the public to subscribe for any securities of the company;

Private Company As per section 4(7) of Companies Act, 1956: A private company, being a subsidiary of a body corporate incorporated outside India, which, if incorporated in India, would be a public company withinthemeaningofthisact,shallbedeemedforthe purposes of this Act to be a subsidiary of a public company if the entire share capital in that private company is not held by that body corporate whether alone or together with one or more other bodies corporate incorporated outside India. No such provision under Companies Act, 2013 9

Public Company [Sec. 2(71)] Public Company means a company which (a)isnotaprivatecompany; (b) has a minimum paid-up share capital of 5 lakh rupees or such higher paid-up capital, as may be prescribed: Providedthataco.whichisasubsidiaryofaco.,not being a private co., shall be deemed to be public co. for the purposes of this Act even where such subsidiary co. continues to be a private co. in its articles;

Incorporation Related Matters

Incorporation Related Matters Membership ofapvtco.: Themaximumnumberof Membershasbeenincreasedfrom50to200. Notrequiretheobjectclausetobeclassifiedasmain objects, incidental objects& other objects. Commencement of Business Certificate now to both type of companies- Pvt& Public. Subscription amount has to be paid before commencement, if not obtained in 180 days from incorporation, company could be strike off.

Incorporation Related Matters Wherethenameisreserved&lateritsfoundthatthe name was applied by furnishing wrong/incorrect information then: If the Company is not incorporated the reserved name shall be cancelled & the person making the application shall be liable to a penalty not exceeding Rs. 1,00,000/-. If the Company is incorporated the ROC after giving the Company a hearing direct the company to change its name within 3 months or make a petition for winding up of the Company. Conversion of Public Co. to Private- Approval of NCLT

Some New Concepts

Some New Concept Associate Company Dormant Company Corporate Social Responsibility Secretarial Audit

Associate Company Acompanyisconsideredtobeanassociatecompany of the other, if the other company has significant influence over such company (not being a subsidiary) or is a joint venture company. Significant influence means control of at least 20 percent. of total share capital of a company or of business decisions under an agreement. Concept of Associate has been added in various placesintheactfor: 1. Related party for ascertaining related party transactions 2. Ascertaining independence of the Independent Director &auditor 3. Disclosure with respect to financial statements

Dormant Company Section455definesitas: Acompanyformed&registeredforafutureprojectortohold an asset or intellectual property & has no significant accounting transaction Or an inactive company (defined in the explanation to Sec. 455(1) Can apply to Registrar to obtain the status of a dormant company Companies defaulting in filing financial statements or annual returns for two financial years can also be made a dormant company by Registrar Suchcompanytofilesuchdocumentsandpaysuchannualfeeas may be prescribed to remain as dormant. Can become an active company on application and payment of fee.

Secretarial Audit(Section 204) Required for: Listed Company Every Public company having paid up capital of Rs 50Croresormore Every Public Company having turnover of 250 crores or more shall annex with Boards Report a Secretarial Audit Report given by PCS. The Board has to explain in Board Reports, the qualifications made by PCS.

Corporate Social Responsibility (CSR)

CSR (Section 135) The MCA, Government of India, has notified Section 135 of the Companies Act, 2013 and Companies(CSR Policy) Rules, 2014, effective from April 1, 2014. The Notification was issued on February 27, 2014. The Section mandates specified companies to ensure that such companies spend, in every financial year (beginningwithapril1,2014),aminimum2%ofits Average Net Profits made during the 3 immediately preceding financial years, in pursuance of the companies CSR Policy.

Applicability : CSR (Cont ) Rs 5 Crores or more net profit Rs. 500 crores or more Net worth Private / public Company Rs 1000 Crores or more turnover

Sch. VII of the Companies Act, 2013 Activities which may be included by companies in their Corporate Social Responsibility Policies : 1. Eradicating hunger and poverty, making available safe drinking water.

Sch. VII of the Companies Act, 2013 2. Promotion of education

Sch. VII of the Companies Act, 2013 3. Promoting gender equality and empowering women

Sch. VII of the Companies Act, 2013 4. Ensuring environmental sustainability, Ecological balance

Sch. VII of the Companies Act, 2013 5. Protection of national heritage, art & culture

Sch. VII of the Companies Act, 2013 6. Measures for the benefit of armed forces veterans, war widows & their dependents:

Sch. VII of the Companies Act, 2013 7. Training to promote Rural Sport:

Sch. VII of the Companies Act, 2013 8. Contribution to the Prime Minister's National Relief Fund

Sch. VII of the Companies Act, 2013 9. Rural Development

Management

Directors No CG Approval for increase in Directors. The maximum number of directors: increased to15from12. Anyfurtherincreasecanbedonebypassinga Special Resolution without getting the CG approval as earlier required.

Directors (cont ) The Office of Director shall become vacant if he absents himself from all the Board meeting held during a period of 12 months with or without seeking leave of absence. A person can be a Director in Maximum 20 companies (including any alternate directorship). Provided that the maximum number of public companiesinwhichapersoncanbeappointedas a director shall not exceed 10.

Woman director Public Co. Only (Sec. 149) Listed Company Rs. 100 croresor more paid up capital Women Director Rs 300 Crores or more turnover

Independent Director -Public Co. Only Rs. 100 crores or more paid up capital Listed Company Independent Director Rs 300 Crores or more turnover Rs 200 Crores or more outstanding borrowings 35

Resident Director Sec 149(3) (5) Mandatory for ALL Companies A Director who has stayed in India for a total period of 182 days or more in previous calendar year

Director Appointments Prerequisites Sec 152 Rule 11.6 Applicable to both Private and Public Companies: Declaration by the Appointee that he/she is not disqualified mandatory [Sec 152(4)] Consent to act as director to be filed with the Company (Rule 11.6) Company to file the consent with ROC (Rule 11.6)

Appointment of a person as Director Applies to all companies Additional Directors affected Deposit increased to Rs. 1 lakh from Rs. 500 Refund of deposit if elected orsecures more than 25% of total valid votes

Additional / Alternate Directors Person not elected by Shareholders as Director - not to be appointed as Additional Director (Provision effective on September 12, 2013) [Sec 161(1)] A person can act as Alternate to only One Director [Sec 161(2)] Alternate Director to an Independent Director must be qualified to be an independent Director [Sec 161 (2)]

Present Section 274(1)(g) altered drastically New Section 164(2) uses two terms is and has been a Director of a company which has committed defaults Default in filing financial statements OR Annual Return for any three continuous financial years Failure to pay interest on debentures

Present Section 274(1)(g) altered drastically Not to be re-appointed in defaulting company for 5 years (Vacation of office under Sec 167) Not to be appointed as Director in any other company including a private company for 5 years Vacation of office of all Directors Promoter or in his absence, Central Government to appoint required number of directors till directors are appointed in General Meeting

Resignation of Director Sec 168 Rule 11.12 Board to take note of resignation. File Form with ROC and also post information on its website [Rule 11.12] Board s Report must contain the fact of resignation [Sec 168] Director must forward a copy of resignation alongwith reasons for resignation to ROC [Sec 168] Rule 11.13 provides this as an option Resignation effective - receipt of resignation by the Company or date specified by Director, whichever is later[sec 168]

Key Managerial Personnel (KMP) Appointme nt of KMP Listed Company Private & Public Co. with paid up capital of Rs 5 Cores or more Whole time KMP includes MD/ CEO / Manager / Whole-Time Director Company Secretary Chief Financial Officer

KMP Cont Every KMP shall be appointed in Board meeting containing the terms and conditions of the appointment including remuneration. A KMP shall not hold office in more than one company except in its subsidiary company at the same time. VacancyofKMPshallbefilledupbyBoardwithin aperiodofsixmonths. 44

DUTIES OF A DIRECTOR To act in accordance to the Articles of Association To act in good faith to promote the objects of the Co. in the best interests of its members, employees, community & environment To exercise duties with due &reasonable care, skill & diligence Not involve in a situation in which he may have a direct / indirect interest that conflicts the interest of the Co. To not achieve or attempt to achieve any undue gain or advantage to himself or his relatives/ partners or associates To not assign his office (any such assignment will be void)

Loan to Director (Sec. 185 ) No Company Shall Advance Any Loan Directly/Indirectly Give any guarantee or provide any security in connection with loan taken by Any director or any other person in whom he is interested.

Exemption available: Loan to Director (Sec 185) Provisions mentioned in the earlier slide will not apply to : Any Loan/guarantee/security given by a holding Company to it s wholly owned subsidiary. AnyguaranteeorsecurityprovidedbyaparentCo. in respect of loan of any of its subsidiary (not wholly owned) A Co. can however provide loan or give guarantee or provide security for the due repayment of any loanifitisintheordinarycourseofitsbusiness. Therateofinterestshallnotbelessthantherate of interest prescribed by RBI.

Loan to Director (Sec. 185) Exemption available: A Company can give loan to Managing Director OR Whole time director As a part of the condition of service extended by the Company to all its employees. Pursuanttoanyschemeapprovedby the members by a Special Resolution.

Appointment of MD/ WTD/ Manager Sec 196 No company including private company to employ or continue the employment of a person as Managerial person who - Is below the age of 21 years Is above 70 years or more unless special resolution passed. Notice to give justification for appointment [Sec 196(3)] MD/WTD/Manager can be appointed for a period of 5 years at a time. The provision shall also be applicable to Private Limited Company.

Remuneration Sec. 197, 198 Company having profits can remunerate its Directors exceeding the limits of 5%, 10%, 1%, 3% (But not exceeding 11%) by ordinary resolution of shareholders instead of Government Approval [Sec 197(1)] Remuneration to any one MD/WTD/ Manager can be more than 5% OR for ALL can be more than 10% with approval of shareholders [Sec 197(1)] Sitting Fee permitted to be paid for any other purpose as the Board may decide. Max. limit on sittingfee Rs.1Lakhpermeeting[Rule13.2(2)]

Remuneration -Schedule V Inadequate profits - No Government approval - Effective Capital Negative to < 5 Cr Max. YEARLY Remuneration 30 Lakh 5 Cr to < 100 Cr 42Lakh 100 Cr to < 250 Cr 60 Lakh 250Cr and more 60 Lakh+ 0.01% of the Effective Capitalin excess of 250 Cr Limit to be doubled if Special Resolution is passed

Remuneration of Professional MD No Government Approval Should not have held shares of nominal value of Rs. 5 lakhand more 2 yrs prior to appointment Was not an Employee of the Company Was not a Director of the Company or related to Directors or Promoters

No Government approval If Remuneration in excess of the Limits in Section II is paid by A Foreign Company A company which has got Member s approval and treats such excess remuneration as remuneration in its books A newly incorporated company permitted to pay remuneration for a period of 7 years in excess of Limits in Section II

Meetings

Board Meeting (Sec. 173 Rule 12.1) Minimum 4 meetings in a year Maximum gapbetweentwomeetings 120days. MinimumNoticeof7daysforameeting.No shorter notice permitted unless independent director is present[sec 173] Small Companies At least One meeting in each half of calendar year. Minimum gap betweentwomeetings 90days[Sec173]

Board Meeting ActenablesBMbyvideoconferencing&such participation shall be counted for the purposes of quorum. BM Notice may be given by hand delivery/electronic means.

Video / Audio Conference meetings Video, Audio conference permitted Mandatoryattendanceofatleastonemeetingina FY Place of the meeting is the place set forth in the Notice Deemed signing of Registers to be signed if consented to and recorded in Minutes DraftMinutestobecirculatedwithin7days Prohibition to approve Accounts and Directors Report in a conference meeting

Approvals at Board meeting only Sec 179 Rule 12.6 Diversification of business Approval of Accounts and Board s Report Approve amalgamations, mergers, reconstruction Taking over a company Entering into JV / Technical / Financial Collaborations Commencement of new business Shifting of location of plant or Registered Office Appointment of removal of KMP / Internal Auditors Selling of investments exceeding 5% of net worth of Investee company To accept Public deposits and related matters

Disclosure of interest Sec 184 Rule 12.7 Disclosure at first meeting of the Board in FY in Form 12.1 Form 12.1 to be maintained at the Registered Office and preserved for 8 years [Rule 12.7 (3)]

Circular Resolutions Sec 175 Rule 12.3 A resolution in draft form may be circulated to the directors for seeking their approval, by electronic means which may include E-mail or fax. Not less than 1/3 of the Directors may direct to place the resolution at a Board meeting [Sec 175] Mandatory to note circular resolution in the next meeting [Sec 175]

Annual General Meeting The business hours for conduct of AGM has beendefinedbetween9.00amand6.00pm. AGMcanbecalledonapublicholidaybutnota National Holiday. National Holiday are holidays declared as such by Government.

Share & Share Capital

Further issue of shares Applicable to Private& Public companies Any time when a company proposes to issue further shares, such shares shall be offered to existing equity shares in proportion to their existing shareholding by sending offer letter employees under ESOP scheme by passing special resolution by members. Any other person, if authorized by special resolution for cash or for consideration other than cash,ifpriceisdeterminedbyvaluationreportofa registered valuer.(preferential allotment)

Further issue of shares Exception issue of shares against convertible debentures or convertible loan if issue of such debentures/raising of loan is approved by special resolution of members

Issue of shares Issue of shares at discount: Issue of shares at discount prohibited except for sweat equity shares. Issue of bonus shares: Can be made out of Free reserves Securities premium account Capital redemption reserve account Bonus cannot be made out of revaluation reserve.

Private Placement Conditions: 1. Offer to section of public other than QIBs 2. Not more than 50 number of people or such higher number as may be Prescribed 3. In compliance of prescribed terms & Conditions 4. Made through Private Placement offer letter and not Prospectus Conditions Yes fulfilled No Private Placement Offer PUBLIC OFFER Comply with provisions of Act, Securities Contract Regulation Act, 1956 & SEBI Act, 1992

Private Placement (cont ) "Private placement" means any invitation to subscribesecuritiestoaselectgroupofpersonsbya Co.(otherthanbywayofpublicoffer)throughissue of a private placement offer letter and which satisfies the conditions specified in this section. Earlier the term shares was used. Now, the term Securities has been used thus removing the earlier limitation. The conditions for private placement to be strictly followed. Otherwise the issue would be treated as Public Issue and SEBI guidelines will be applicable. Approval of Special Resolution required.

Private Placement (cont ) Payment not to be made by cash but by any other means involving Bank Channel No fresh offer unless the allotment in respect to previous offer has been completed. Allotment must be made within 60 days. Else return back the money within 15 days from endof60days. FundsreceivedtobekeptinseparatebankA/c &notbeusedforotherpurpose.

Preference Shares Cannot issue irredeemable preference shares Can issue redeemable preference shares redeemableupto20yearsonly,ifauthroisedbyaoa and approved by special resolution of members. Issue of redeemable preference shares more than 20 years is permitted only for infrastructure projects. Infrastructural Projects are defined in the Schedule totheact. Limited voting rights of preference shareholder Hewillvoteonallresolutions whendividendisnot paidforperiodof2yearsormore

Share Capital Consolidation and division of shares: Consolidation and division of shares which results in changes in voting percentage of shareholders will require approval of Tribunal. Buy back of shares Second buy back cannot be made within a period of 1 year from the date of closure of the preceding offer for buy-back.

Debentures Issue of convertible debentures shall be approved by special resolution of members. Secured debentures can be issued with redemption period of maximum 10 years (for infrastructure project upto 30 years). Debenture redemption reserve to be created with atleast 50% of amount raised through debentures. In case of partly convertible debentures, Debenture Redemption Reserve shall be created in respect of non-convertible portion of debenture issue.

Dividend Dividend can be declared and paid Out of profit of the financial year Out of undistributed profit of previous year(s) Or both the above Or money provided by central or state government pursuant to any guarantees. Transfer of a specific % of profit to reserves not mandatory now.

Interim dividend Board can declare, out of profits of current financial year and surplus in the profit and loss account. In case of loss in the current year up to the quarter immediately preceding the date of declaration of interim dividend, rate can not be higher than average dividends declared in 3 previous financial years

Deposits Chapter V-Sec.73 to 76

Acceptance of Deposits Acceptance of deposit by Pvt. Co. & public Co. from Directors only: A private & public co. can accept deposit from members after fulfilling the specified conditions. A public co. having a net worth of Rs.100 Crores ormoreoraturnoverofrs.500croresormore can accept deposits from public after fulfilling the specified conditions.

Acceptance of Deposits Conditions to be fulfilled for acceptance of deposits from Members An ordinary resolution in general meeting should be passed by the members. Must get a credit rating from a recognized credit rating agency. Limit is 25 % of paid up share capital and free reserves

Acceptance of Deposits From Members A circular to be issued to members providing financial position of the Company, credit rating obtained Circular shall also be published in 1 English newspaper and 1 vernacular newspaper. Copy of the circular along with such statement to be filed with the ROC within 30 days prior the dateofissueofthecircular; Circular should be signed by maximum Directors.

Acceptance of Deposits From Members Amount not less than 15 % of its deposits maturing during a financial year and the financial year next following, to be deposited and kept in a scheduled bank in a separate bank account to be called as depositrepaymentreserveaccountonorbefore30 th April each year. This reserve can only be used for repayment of deposits and not for any other purpose. To enter into Insurance contract before 30 days from date of issuance of circular for deposit for providing deposit insurance.

Acceptance of Deposits Acceptance of deposit by Pvt. Co. & public Co. from Directors only: A private and public Co. can accept deposits from Directors. This is exempt category deposit. Only a declaration to the effect that deposit is not out of borrowed funds is required. Other earlier exemptions, except deposit from members, are included in new regulation.

Acceptance of Deposits Section 164 of the Act specifies the grounds on which a director gets disqualified for his appointment as director Any person who is a director of a company which has failed to repay the deposits or pay interest

Status of Existing Deposits In case of existing deposits of the Company (accepted before commence of new Act) Company, which are unpaid or due / unpaid interest, company should file a statement giving details of these deposits with Registrar of Companies within 3 months from commencement of new Act or due date of deposit. And company should repay these deposits within 1 year from commencement of new Act or from the date on which such payments are due, whichever is earlier.

Status of share application money In case of share application money pending allotment as on 31.03.2014: Share application money would be treated as deposit if allotment is not made within 60 days from 31.03.2014 Inform ROC by 30 th June 2014

Status of Existing Deposits Company can make application to Tribunal for extension of period if financial conditions of the Company are not good. Tribunal can provide reasonable time to repay deposits. If default is made in repayment of deposit as mentioned above, company is punishable with fine within a range of Rs.1 crore to Rs.10 crores and every officer in default will be punishable with fine (Rs.25 lacs to Rs.2 crores)or imprisonment or both

Fraudulent acceptance of deposits If it proved that deposits were accepted with intent to defraud the depositors or for any fraudulent purpose, every officer of the company, who was responsible for the acceptance of deposits, will be personally responsible, without any limitation of liability, for losses or damages incurred by the depositors on legal proceedings by the depositor.

Registration of Charges No changes except time limit for registration With additional fee, Creation/modification/ satisfaction can be registered within 300 days from date of event. In the companies act, 1956, satisfaction filing within 30 days and Creation / Modification maximum 60 days. In case of further delay, extension can applied for with central government

AUDIT & AUDITORS

Appointment of Auditor Appointment or Reappointment Of Auditor Individual as an Auditor Audit Firm Not More than 5 Consecutive years Not More than 10 Consecutive years

Audit & Auditor (Section 139) Every company shall comply with the requirements of tenure of appointment of auditors within 3 years from thedateofcommencementoftheact. Every company shall appoint an individual or a firm as an auditor 1st auditor shall be appointed in board meeting within 30 days of registration of company In case of failure of the Board to appoint auditor, members shall, within 90 days, appoint such auditor atanegm.

Audit & Auditor (cont ) If casual vacancy is due to resignation, such appointment shall be approved by the company at a general meeting convened within 3 months of recommendation of the Board. In case of failure of the Board to appoint auditor, members shall,within90days,appointsuchauditoratanegm. Company to inform auditor about his appointment and also file anoticewithregistrarwithin15daysofthemeetinginwhich auditor is appointed All companies, except OPC and Small companies, shall not appoint or re-appoint an individual as auditor for more than one term of 5 consecutive years or an audit firm as auditor for more than two terms of 5 consecutive years. AnycasualvacancyshallbefilledbyBODwithin30days. 89

Audit & Auditor (cont ) Auditor cannot render any of the following services, directly or indirectly to the company or its holding or subsidiary company: 1. Accounting and book-keeping service 2. Internal audit 3. Design and implementation of any financial information system 4. Actuarial services 5. Investment advisory services 6. Investment banking services 7. Rendering of outsourced financial services 8. Management services and Other prescribed services 90

Audit & Auditor (cont ) Remuneration of Auditors: Remuneration of first auditor shall be fixed by BOD Remuneration of other auditors shall be fixed at its general meeting or the general meeting can delegate thepowerstotheboard Remuneration shall not include any remuneration paid toauditorforanyotherservicerenderedbyhimatthe request of the company. 91

Internal Audit Appointment of an internal auditor or firm of internal auditor required for: ListedCo. PublicCompanywithpaidupcapitalofRs50Croresormore publiccompanyhavingturnoverofrs.200croresormore Public company with outstanding loans or borrowings from banks or public financial institutions of Rs 100 croroes or more Unlisted public company having outstanding deposits of Rs. 25croresormore CompanyhavingturnoverofRs.200Croresormore Private Company having outstanding loans or borrowings from banks or public financial institutions of Rs. 100 Crores or more 92

Internal Audit Internal auditor should be a chartered accountant or a cost accountant or such other professional as may bedecidedbytheboard. Internal Auditor to conduct internal audit of the functions and activities of the company, Consult audit committee to formulate the scope formulate the scope, functioning, periodicity and methodology for conducting the internal audit. 93

Audit Committee As per Companies Act, 1956, every public company having paid-up capital exceeding 5 crores, required to constitute Audit committee. As per Companies Act, 2013, following companies required to constitute Audit Committee: EveryListedCo. PublicCo.havingpaid-upCapitalofRs100Croresormore OR having Outstanding loans/ deposits /debentures, of Rs 200Croresormore 94

Vigil Mechanism Following companies shall establish vigil mechanism for its directors and employees to report genuine concerns: Establishing Vigil Mechanism Listed Company Company accepting deposits from public andborrowedinexcessofrs50 crores from banks and financial institutions 95

Vigil Mechanism (cont ) Companies required to constitute an audit committee shall operate the vigil mechanism through the audit committee. In case of other companies, the Board of directors shall operate the vigil mechanism through director nominated for that purpose. Vigil mechanism shall provide for adequate safeguards against victimization of employees and directors who avail of the mechanism. The details of establishment of vigil mechanism to be disclosed in Board s Report 96

RELATEDPARTY TRANSACTIONS

Related Party Transactions Key change: No approval of Central Government is required for entering into any related party transactions. No approval of Central Government is required for appointment of any Director or any other person to any office or place of profit in the Company or its subsidiary. 98

Related Party Transactions Following are the related parties: Directors and their relatives. KMPs and their relatives A firm where directors or his relatives / manager or his relatives are partner A Pvt. Co. where director / manager are director or member A Pub Co. where director / manager is a director or holds, with relatives more than 2 %paidupshares

Related Party Transactions Following are the related parties: AnyBodyCorporatewhoseBOD/MD/Manager acts on instructions of a Director/ Manager Any person on whose advise / directions / instructions (except professional capacity) - a Director/ Manager acts Any holding company, holding companies subsidiaries Any subsidiary company Any associate company (company holding at least 20% of the shares or controlling business decisions under an agreement)

Related Party Transactions Transactions covered under related party transactions: A Company can enter into any of the following contract with related party Sale purchase or supply of any goods or material Selling/ buying/ disposing any property Leasing of property Avail/ render any service

Related Party Transactions Transactions covered under related party transactions Appointment of an agent for sale /purchase goods / material / property / services Appointment of related party to office or place of profit* in co., subsidiary, associate co. Underwriting the subscription of any security or derivatives

Related Party Transactions *Officeorplaceofprofitmeans Iftheofficeorplaceofprofitisheldbyadirector,if he receives any remuneration by way of fee / commission, salary, perquisite or otherwise - over and above the remuneration to which he is entitled toasadirector. If held by other individual / company, body corporate, firm, and they receive anything by way of remuneration / fee / commission / salary / perquisite or otherwise

Approval for Related Party Transactions Approval of Board of Directors in Board Meeting if: paid up capital less than Rs. 10 crore Transaction value up to 25 % of the annual turnover (goods) or 10 % of the net worth of the Co. (services & selling of property) With Board Resolution Office or place of profitmonthly remuneration less than Rs.2.5 lacs

Approval for Related Party Transactions Any transactions beyond limits specified - approval by way special resolution in members meeting, of non interested members. paid up capital Rs. 10 crore or more Transaction value exeeds 25 % of the annual turnover or 10 % of the net worth of the company office or place of profit-monthly remuneration exceeds Rs.2.5lac With Special Resolution

Approval for Related Party Transactions Exemption: Nothing above will apply to the Transaction done in the Ordinary Course of the business and executed at Arm s Length(as if parties are unrelated). Reporting Requirements Every Related Party Transaction to be reported in the Board Report along with justification.

Approval for Related Party Transactions Approval of Members by way of Special Resolution is required in following cases: IfthepaidupsharecapitaloftheCo.isRs.10Crores or more Sale, purchase or supply of any goods or materials directly or through appointment of agents exceeds 25% of the annual turnover Selling or otherwise disposing of, or buying, property of any kind directly or through appointment of agents exceeding 10% of net worth

Approval for Related Party Transactions Leasing of property of any kind exceeding 10% the net worth or exceeding 10% of turnover Availing or rendering of any services directly or through appointment of agents exceeding 10% of the net worth Appointmenttoanyofficeorplaceofprofitintheco., its subsidiary co. or associate co. at a monthly remuneration exceeding Rs. 2.5 Lacs Remuneration for underwriting the subscription of any securities or derivatives thereof of the company exceeding1%ofthenetworth

Any Queries.

Thank you!!! Presentation By- CS C. S. Kelkar, C. S. Kelkar & Associates Company Secretaries, Pune.