LUNAWAT & CO. Chartered Accountants CA. PRAMOD JAIN FCA, FCS, FCMA, MIMA, DISA
THE COMPANIES ACT, 2013 18/12/2012 Lok Sabha 08/08/2013 Rajya Sabha 29/08/2013 President Assent 30/08/2013 Companies Act 2013
THE STRUCTURE 1956 2013 13 Parts 29 Chapters 658 Sections 470 Sections 15 Schedules 7 Schedules 67 Definitions 95 Definitions 33 New Definitions; 11 removed Phrase as may be prescribed appears 346 times in 2013 Act
GENERAL It applies to the whole of India and is also applicable to certain companies or bodies corporate governed by Special Acts Substantial part of the Companies Act, 2013 in form of rules, to be prescribed separately. The Government of India has the power to notify different provisions of the Act at different point of time. 98 Sections made applicable w.e.f.. 12 th September 2013
CLASSIFICATION OF COMPANIES Small Others One Person Company (OPC) Private Public Holding Subsidiary Associates Limited Shares; Guarantee Unlimited Listed Unlisted Charitable ; Dormant Outside India; Government Company; Nidhi Producer Company
PARTNERSHIPS Earlier limit of Max. 20 partners in partnerships. Now to be prescribed but shall not exceed 100 (464) [as per draft 50] Limits not applicable for an association or partnership, if it is formed by professionals who are governed by special Acts (464)
DEFINITIONS 2(6) 2(40) Associate Co Includes JV Significant influence 20% of total capital or business decisions in an agreement Financial Statement B/S, P&L, Cash Flow, statement of changes in equity, any explanatory note to before items 2(41) 2(68) Financial Year 31/3, if incorporated after 1/1 31/3 of next yr. align in 2 Yrs Private company 1 L, restricts right to transfer; no of members 200 (employees excluded); prohibits public invitation for securities
DEFINITIONS 2(76) Related Party 2(85) Small Company Capital < 50 L / < 5 Cr or Turnover, 2Cr / <20 Cr NA to holding, subsidiary, S. 8, Special Act Co 2(69) Promoter Prospectus, A/R, control over affairs of company, on whose instructions Board acts 2(51) KMP CEO or MD or Manager; CS, whole-time director; CFO; other prescribed
NEW CONCEPT - OPC A company which has only one person as member. It would be a private company. MOA to indicate name of person who shall became member in case of death or his incapacity to contract. Consent of that person to be filed with ROC. Other person can withdraw his consent any time. Member can change the name of other person at any time. "One person company" has be mentioned in (bracket) below the name of company.
OPC Can be formed by resident, individual, citizen Not more than 5 No AGM No Cash Flow No meeting etc. provisions FS filing within 180 days Conversion to other class 18(1) Rules capital 50L, Turnover 2 Cr, B/S 1 Cr
NEW CONCEPT - DORMANT COMPANY
SIGNIFICANT ACCOUNTING TRANSACTION Any transaction other than:
INACTIVE COMPANY
NCLT AND NCLAT It will cover matters in jurisdiction of CLB, BIFR and High courts (Amalgamation, Merger and Acquisitions and winding up). A practicing CA / CS / CMA for more than 15 years can be appointed as technical members of NCLT. Advertisements already out for membership
FORMATION OF NCLT AND NCLAT Practicing CA / CS / CMA can appear before NCLT and NCLAT. Appeal against order of NCLT - NCLAT. Appeal against order of NCLAT - Supreme Court Petition pending before Supreme Court that formation of NCLT & NCALT is ultra virus the constitution
Incorporation
INCORPORATION - OVERVIEW Chapter II Sections 3 to 22 S. 19, 21 & 22 applicable from 12 th September 2013 19 Subs. Co not to hold shares in Hold. Co. 21 Authentication of documents 22 Execution of Bill of Exchange Draft Rules 2.1 to 2.32
FORMATION Private Public OPC For Lawful Purpose
LIABILITY Limited by Shares Unlimited Limited by Guarantee
COMMENCEMENT Obtain Name File documents Company Incorporated File statement that subscribers have paid & RO statement filed Submit R.O. verification 30 Days Find Registered Office 15 days Commence Business
COMMENCEMENT - PENALTIES Name obtained by wrong particulars [4(5)(ii)] Start of business / borrowing without filing statements [11(2)] If incorporated Strike off/remove Action u/s 447 / 448 P Co -5 k OID - F upto 1k p.d. If not incorporated Cancel name Penalty upto 1 L Removal of name if subscb. do not pay in 180 days & Declaration not filed [248(1)(b)]
IMPORTANT ISSUES - INCORPORATION MOA Main Objects AOA Private Limited Definition Entrenchment Clauses Documents Letter, bill, notice, official publication Name, Address, CIN; Tel, fax, e-mail, website (if any) Penalty: Co + OID 1K p.d. max 1 L
OTHER CRITICAL ISSUES - RULES Change of name if change in activity is not reflected in its name 6 months Mandatory to furnish the significance and proof for use of coined words made out of the name of the promoters or their relatives. If you use name of others no objection from them to be obtained If you use name of relatives proof of relation to be attached. PAN + 1 ID proof mandatory for subscribers
OTHER CRITICAL ISSUES - RULES To declare in affirmative or negative whether they are using or have been using in the last 5 years in prop. or partnership NOC and declaration whether to take over the concern or not. Family name, photo of subscribers to be given Each subscriber + first directors to furnish specimen signature duly verified by banker Witness to subscriber sheet to further verify ID for their identification and satisfy himself of his/her/their identification particulars as filled in
OTHER CRITICAL ISSUES - RULES Change of name not allowed in case of default in AR, FS, deposit For registered office - list of all other companies with their CIN, having the same unit / tenement / premises as their registered office address to be given.
ISSUE Public Public Issue Private Placement Right Private Private Placement Right Bonus Bonus
PRIVATE PLACEMENT Send letter of offer to persons from whom money to be raised < 50 persons Send the name of persons to whom offer sent to ROC within 30 days On receiving amount, allot within 60 days If not allotted refund within 15 days If not refunded pay interest @ 12%
PRIVATE PLACEMENT - CAUTION For Private Limited no other option Cannot be in cash If not followed - Penalty Penalty of amount involved or 2 Cr, whichever is high + to refund the money To be applicable soon
ACCOUNTS Chapter IX Sections 128 138 S. 133 CG to prescribe Accounting Standards effective from 12.9.2013 Draft Rules 9.1 to 9.15 Draft CSR Rules Draft Forms - 6
BOOKS Permits the maintenance of books of accounts and other books and papers in electronic mode (Second Proviso to Clause 128(1)) Books on accrual basis and according to the double entry system of accounting To be maintained at R.O. books, papers & FS Branches summarized periodical returns Preserve books for 8 years Investigation sep Non- compliance MD, etc in charge by Board- Imprisonment upto I yr or Fine 50 k to 500 k
FINANCIAL STATEMENTS Includes notes on B/s, PL. Cash Flow Shall give true and fair view. Shall comply with Accounting Standards Shall be in form of Schedule III. Cash Flow for all except OPC, SC, DC. One or more subsidiaries CFS Subsidiary shall include associate co. & Joint Venture To be laid before AGM
FINANCIAL STATEMENTS Has to be AS compliant: FS to disclose deviation from AS Reason for deviation Financial effect arising of deviation Non- compliance MD, WTD incharge of finance CFO Any other person charged by Board If no one all directors Imprisonment upto I yr or F 50 k to 500 k or both
REOPENING OR RE-CASTING Reopening of Accounts on Court s or Tribunal s Order (130) only on application by CG / IT / SEBI / other statutory body On order to effect: The relevant earlier accounts were prepared in fraudulent manner. The affairs of the company were mis-managed managed during relevant period casting the doubt on reliability of final statement. The revised /re-casted accounts shall be final.
VOLUNTARY REVISION (131) Board may apply to tribunal to suo- moto revise if FS or Board s Report do not comply the provisions of section 129 & 134. It can be: For any of the 3 preceding financial year Not more than once in a financial year. Reason to be disclosed in Board s Report. Copy of order of tribunal to be filed with ROC.
DRAFT RULES ON REVISION Application to tribunal to be made within 2 weeks from decision of Board. Disclosure in application for change of Auditor or majority of Director. Tribunal to issue notice & hear auditor on original statement. Copy of order to be filed with ROC (30 days) On receipt of order General Meeting to be called Notice of GM with reason for revision to be published Revised FS and BR shall be placed for adoption. Revised FS / BR shall be filed with ROC (30 days) Word revised be pre-fixed fixed. Consent letter from old auditor if not, with reasons.
BOARD OF DIRECTOR S REPORT ADDITIONAL DISCLOSURES (134) Extract of annual return Number of meetings of the Board A statement on declaration given by independent directors Company s policy on directors appointment & remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters Explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the CS in his secretarial audit report
BOARD OF DIRECTOR S REPORT Particulars of loans, guarantees or investments u/s 186 Particulars of contracts or arrangements with related parties A statement indicating development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the company The details about the policy developed and implemented by the company on CSR initiatives taken during the year
BOARD OF DIRECTOR S REPORT In case of a listed company & public co. having paid- up capital > 25 Cr - a statement indicating manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors Directors responsibility statement in case of listed company - internal financial controls and compliance systems DRS directors had devised proper systems to ensure compliance of all applicable laws adequate & operating effectively Other matters as may be prescribed
FS & DR LAYING IN AGM FS & CF to be approved before signed by BOD by: Chairperson or two directors out of which 1MD CEO if he is director CFO CS Every FS to be issued, circulated, published with: Notes Auditors report Board Report Non- compliance Co- 25K to 2500K; OID Imp. upto 3 yrs or fine 50K to 500k or both
CIRCULATION / FILING OF FS Circulation of FS /CFS - all listed co. & public co. which have net worth > 1Cr & turnover > 10 Cr: by electronic mode who positively consented in writing; by despatch of physical copies by any other recognised mode of delivery in all other cases Unlisted co to place FS of subs. on website, if any Non-compliance P- Co- 25K; OID 5K To be filed with ROC 30 days of AGM After 300 days co 1k p. d > 10 L; MD, etc in charge by Board- if no one all directors Imp. upto 6mnths or Fine 1L k to 5L or both
NFRA National Financial Reporting Authority (NFRA) make recommendations to CG on AS & SA monitor and enforce their compliance oversee quality of service of the CAs with ensuring compliance with such standards, such other functions as may be prescribed. No other body to continue proceedings If misconduct proved: Rs. 1 L, to 5 times of fees received -individuals; Rs. 10L to 10 times of the fees received -firms; debarring the member or firm for 6mnths 10 Yrs
NFRA COMMITTEE Chairperson CA Member Accounting Member Auditing Member Enforcement Representative of MCA Representative of RBI Representative of SEBI Retired Chief Justice of High Court -by CG President of ICAI (ex-offico)
NFRA - RULES Conduct quality review of audit of - Listed Companies; Unlisted co. net worth >Rs.500 cr or paid up capital >Rs.500 crores or annual turnover >Rs.1,000 crores Companies having securities listed outside India Audit firms who do: audit of 200 companies or more in a year; audit of 20 or more listed companies; Of company having net worth...; or Company having securities listed outside Suo moto
CSR CSR - Every company having net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more or a net profit of Rs. 5 crore or more during any FY shall constitute a CSR Committee. 2% of average net profits of the previous 3 Yrs will have to be spent on CSR activities with disclosure to shareholders about the policy adopted in the process, giving reasons on failure of implementation (135)
CSR ACTIVITIES CSR Activities: Eradicating extreme hunger and poverty; Promotion of education; Promoting gender equality and empowering women; Reducing child mortality and improving maternal health; Combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases; Ensuring environmental sustainability;
CSR ACTIVITIES Employment enhancing vocational skills; Social business projects; Contribution to the PM's National Relief Fund or any other fund set up by the CG or the SGs for socio-economic development and relief and funds for the welfare of the SC, the STs, other backward classes, minorities and women; and Any other prescribed Is provision to be made for unspent amount? Tax implications?
DEPRECIATION SCH - II No rate for Intangible assets as per AS The useful live of an asset is period over which an asset is expected to be available for use or the no of production unit expected to be obtained. 3 classes: Prescribed and follow AS Sch. II or different Class of Co or asset, where useful lives prescribed by regulator constituted by parliament or CG Others useful life / residual value not longer than sch II
DEPRECIATION SCH - II No separate rates for shifts. Double shift increase by 50%, triple shift 100% 100% on assets below 5K not required Useful lives changed Eg: Building from 58Yrs to 30 Yrs: General FF 15 to 10 On commencement asset would be depreciated over remaining useful life Where remaining useful live - nil trf to Surplus Component Accounting mandatory where relevant & material
CA. Pramod Jain pramodjain@lunawat.com +91 9811073867 2014 CA. Pramod Jain, Lunawat & Co