Companies Act, 2013 Everything you need to know.rna-cs.com/pdf/Handout on Companies Act 2013 -...

Companies Act, 2013 -

Everything you need to know.

Date: Friday 06th June, 2014Venue: FAPCCI (Surana Udyog Auditorium)

Federation House,11-6-841, FAPCCI Marg, Red Hills, Hyderabad - 500 004

Time : 3.00 pm to 7.00 pm

INDEXS. No. Particulars Page No.

1. New Concepts under Companies Act 2013 One Person Company……………………………………………………. Dormant Companies……………………………………………………... Associate Companies…………………………………………………….. Fast Track Mergers…………………………………………………………. Small Company……………………………………………………………. Registered Valuers………………………………………………………… Class Action………………………………………………………………… National Company Law Tribunal (NCLT)……………………………… National Financial Reporting Authority (NFRA)……………………… Private Placement…………………………………………………………. Rotation of Auditors……………………………………………………….. Secretarial Audit…………………………………………………………… Corporate Social Responsibility………………………………………… Women Director…………………………………………………………… Resident Director…………………………………………………………...

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16. Role and Duties of Directors and Key Managerial Personnel Who is KMP………………………………………………………………….. Appointment of KMP…………………………………………………….. General obligations of KMP……………………………………………... Duties & Liabilities of CFO………………………………………………... Functions of Company Secretary……………………………………… Obligations & Responsibilities of the Board of Directors…………… Duties of Directors…………………………………………………………. Key functions of the Board………………………………………………. Number of Directorships to be held by a Director………………….. Woman Director…………………………………………………………… Resident Director…………………………………………………………... Independent Directors……………………………………………………

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28. Compliance Calendar Immediate Compliances………………………………………………… Quarterly and Immediate Compliances……………………………… Annual Compliances……………………………………………………... Comparative Statement of Annual Return…………………………... Additional Disclosures in Annual Return……………………………….

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33. Provisions made applicable to Private Companies…………………………… 12-14

34. Disclosures to be made in Annual Report

As per Companies Act, 2013…………………………………………….

As per Listing Agreement…………………………………………………..

15-1920

New Concepts introduced under Companies Act, 2013

A. One Person Company (OPC) – One Man Show:

OPC is an entity in which the entire shareholding is owned by a single person. Only one person is required to form a One Person Company. That one person has to appoint a nominee to run the Company after his death.

Need not include Cash Flow Statement as a part of its financial statements.

OPC may hold only two board meetings in a year, i.e. one Board Meeting in each half of the calendar year with a minimum gap of ninety days between the two meetings

The annual return of an OPC shall be signed by the company secretary, or where there is no company secretary, by the director of the company.

OPC need not hold Annual General Meeting.

Where there is only 1 director on the Board of OPC, any business which is required to be transacted at the meeting of the Board, the resolution by such director is entered in the minutes-book and signed and dated by such director shall be deemed to be the date of the meeting of the Board.

Fewer compliances in comparison to Private Companies and Public Companies

B. Dormant Companies – Inactive Status

Where a company is formed and registered under this Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may choose to seek Dormant Status by applying to RoC. The advantages to such a Company is that it needs to file only a simple return annually and no other returns, forms, etc., are required to be filed under the Companies Act, 2013.

Need not include Cash Flow Statement as a part of its financial statements.

Dormant Company may hold only two board meetings in a year, i.e. one Board Meeting in each half of the calendar year with a minimum gap of ninety days between the two meetings

C. Associate Companies:

A company which can exercise significant influence on another company except subsidiary company and includes a joint venture.

Significant influence means control of at least 20% of total Share Capital A company shall consolidate its Financial Statements along with the Financial Statements of Associate

Company.

D. Fast Track Mergers :

Section 233 of the Companies Act, 2013 provides for simplified procedure for Mergers between small companies, holding and subsidiary Company or certain class of companies as may be prescribes. The concept of Cross Border Merger has been introduced.

E. Small Company

Which is not a Public Company; paid up share capital does not exceed Rs.50 lacs or such higher amount as may be prescribed which

shall not be more than five crore Turnover as per the last profit and loss account does not exceed Rs.2 crores or such higher amount as

may be prescribed which shall not be more than twenty crore rupees The annual return of a Small Company can be signed by the company secretary alone, or where

there is no company secretary, by a single director of the company. A small company may hold only two board meetings in a year, i.e. one Board Meeting in each half of

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the calendar year with a minimum gap of ninety days between the two meetings. A small company need not include Cash Flow Statement as a part of its financial statements. Rotation of Auditors is not applicable.

Company may be classified as a small company in a particular year but may become ineligible in the next year and may become eligible again in the subsequent year.

F. Registered Valuer:

Where a valuation is required to be made in respect of any property, stocks, shares, debentures, securities or goodwill or any other assets (herein referred to as the assets) or net worth of a company or its liabilities under the provision of this Act, it shall be valued by a person having such qualifications and experience and registered as a valuer under the Companies Act, 2013.

G. Class Action:

It is a Right to members or deposit holders or representatives of such members to file an application before Tribunal for restraining company from some specified acts;

Can claim damages or compensation against the Company, Directors, Auditors, Experts, Consultant or Advisor or any other person associated with the company for any wrongful conduct. As per the provisions of The Companies At 2013,

H. National Company Law Tribunal (NCLT)

There was a growing need for empowering the Company Law Board and reducing the burden of High Courts by constituting a high-power Tribunal, which could take up all matters relating to Company Law and other Corporate Laws at one Forum, Finally we see the reality of the constitution of National Company Law Tribunal and Appellate Tribunal under the Companies Act, 2013.

I. National Financial Reporting Authority (NFRA)

To recommend, monitor and enforce the compliances of Accounting and Auditing standards. Oversee the quality of service of the professionals associated with ensuring compliance with

standards.

J. Private Placement

The manner and procedure for making private placement of securities by all the prescribed companies has now been specifically provided with more stipulations and disclosures. Further, no company shall make an offer or invitation for subscribing to the securities of the company through private placement to more than 50 persons per transaction and exceeding 200 persons in a financial year.

K. Rotation of Auditors

All Listed companies; unlisted public companies having paid up share capital of rupees 10 crore or more; All private limited companies having paid up share capital of rupees 20 crore or more; All companies having paid up share capital of below threshold limit mentioned above, but having

public borrowings from financial institutions, banks or public deposits of rupees 50 crores or more.

have to rotate and change its statutory auditors as under :

In case of an Individual, after the completion of a term of 5 consecutive years; In case of an Audit firm after the completion of 2 terms of 5 consecutive years

L. Secretarial Audit

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Secretarial Audit has been introduced in lieu of the Compliance Certificate under the erstwhile Companies Act, 1956 and widened the scope of the compliance’s and entrusts for greater transparency to the stakeholders. It is now applicable to:

All Listed companies All unlisted Public Companies with a paid-up share capital of 50 crore rupees or more; or turnover of

250 crore rupees or more. Forms part of the Board's Report

M. CSR – Corporate Social Responsibility

Section 135 of the Act says that every company havingo Net worth of Rs. 500/- Crore or more; or

o Turnover of Rs. 1000/- Crore or more; or

o Net Profit of Rs. 5 Crore or more

Needs to form CSR Committee.

To frame a CSR Policy and contribute 2% of average of net profits of immediately preceding 3 years for the defined CSR activities

N. Women Director:

Every listed company Every other Public company:

having paid up capital of 100 crore or more or a turnover of 300 crore or more

shall appoint at least one woman director within one year from the commencement of the second proviso to Section 149(1).

O. Resident Director:

At least one Director of the Company has to be resident of India for not less than 182 days.

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Roles and Duties of Key Managerial Personnel (KMP) under Companies Act, 2013

A. Who is KMP?

a) the Chief Executive Officer or the managing director or the manager;b) the Company Secretary;

c) the Whole-Time Director;

d) the Chief Financial Officer.

B. Appointment of KMP (Section 203 ):

The following classes of companies shall have Whole-time key managerial personnel who shall not hold office in more than one company except in its subsidiary company at the same time:

i. Every Listed company.ii. Public companies having paid-up share capital of Rs. 10 Crore or more.

C. General Obligations of KMP’s:

Explanatory statement to be annexed to the notice calling the general meeting (Section 102): The statement concerning each item of special business to be transacted at a general meeting, annexed to the notice calling the meeting shall disclose the following:

i. The nature of concern or interest, financial or otherwise of the KMP and their relatives in respect of each item of special business to be transacted.

ii. Where any item of special business to be transacted at a meeting of the company relates to or affects any other company, the extent of shareholding interest in that other company of every KMP shall be disclosed, if the extent of such shareholding is not less than 2% of paid-up share capital of that company.

Prohibition on forward dealings in securities of the company by KMP (Section 194): KMP’s shall not enter into the forward dealings of the securities of the company in which he is a KMP including its holding, subsidiary or associate company.

Prohibition on insider trading of securities by a KMP (Section 195): A KMP of a company shall not enter into insider trading of securities of that company in which he is a KMP and who is expected to have access to any non-public price sensitive information in respect of securities of that company.

Further listed companies shall abide by the SEBI (Prohibition on insider trading) Regulations, 1992 as amended from time to time.

Officer in default: Key Managerial Personnel (KMP) is an officer of the company within the meaning of this Act and also the officer in default in case of contravention of any of the provisions of the Act and rules made there under. Hence, all the liabilities and penalties of Officers and Officers in default shall be applicable to KMP’s as well.

Further those provisions of Non-bailable offences applicable to every officer who is in default will also be applicable to KMP’s, some of the Non-bailable offences under the Companies Act, 2013 are as follows:

i. Furnishing or suppressing of any false or incorrect particulars or any other material information with the registrar at the time of registration of the company (Section 7(5)).

ii. Criminal liability for mis-statements in prospectus (Section 34).iii. Punishment for fraudulently inducing persons to invest money (Section 36).iv. Issue of duplicate share certificates with the intention to defraud (Section 46).v. Transfer of shares with an intention to defraud (Section 56).vi. Punishment for false statement (Section 448).

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D. Duties and liabilities of Chief Financial Officer (CFO):

CFO to ensure the safe keeping and maintenance at its registered office books of accounts and other relevant books and papers and financial statement giving true and fair view of the affairs of the company (In case of contravention: Imprisonment which may extend to 1 year or fine of minimum Rs. 50,000/- and maximum Rs. 5,00,000/- or with both).

1. CFO to ensure that the financial statement gives true and fair view of the affairs of the company with respect to:

i. Effective compliance of accounting standards.ii. Forms and formats of financial statement as provided under schedule III.iii. Financial statement is laid before the members at AGM.iv. Preparation of consolidated financial statements in case of subsidiaries.v. Financial statements specifying the deviations from accounting standards, if any.

(In case of contravention: Imprisonment which may extend to 1 year or fine of minimum Rs. 50,000/- and maximum Rs. 5,00,000/- or with both).

2. CFO to sign the financial statement including the consolidated financial statement, if any (In case of contravention: Imprisonment which may extend to 3 years or fine of minimum Rs. 50,000/- and maximum Rs. 5,00,000/- or with both).

3. CFO to ensure that the signed copy of every financial statement is issued circulated or published along with the auditor’s report, boards report and any notes forming part thereof (In case of contravention: penalty of Rs. 5,000/-).

4. CFO to ensure that the copy of every financial statement along with all the documents to be attached is filed with the registrar within 30 days of the AGM ( In case of contravention: Imprisonment which may extend to 6 months or with fine of minimum Rs. 1,00,000/- and maximum of Rs. 5,00,000/- or with both).

5. In case the AGM is not been held, CFO to ensure that financial statement are filed along with statement of facts and reasons for not holding AGM within 30 days of due date for holding AGM (In case of contravention: Imprisonment which may extend to 6 months or with fine of minimum Rs. 1,00,000/- and maximum of Rs. 5,00,000/- or with both).

6. CFO to ensure the certification as to the financial statements of the company pursuant to clause 49 of the listing agreement.

E. Functions of Company Secretary (CS) (Section 205):

1. Company Secretary to report to the board about the compliance with the provisions of the Companies Act, 2013 and rules made there under and other laws applicable to the company.

2. Company Secretary to ensure that the company complies with the applicable secretarial standards.

3. Company Secretary to provide to the directors of the company, collectively and individually, such guidance as they may require, with regard to their duties, responsibilities and powers

4. Company Secretary to facilitate the convening of meetings and attend Board, committee and general meetings and maintain the minutes of these meetings.

5. Company Secretary to obtain approvals from the Board, general meeting, the government and such other authorities as required under the provisions of the Act.

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6. Company Secretary to represent before various regulators, and other authorities under the Act in connection with discharge of various duties under the Act.

7. Company Secretary to assist the Board in the conduct of the affairs of the company.

8. Company Secretary to assist and advise the Board in ensuring good corporate governance and in complying with the corporate governance requirements and best practices.

Roles, Duties and Responsibilities of Board of Directors under Companies Act, 2013

A. Obligations & Responsibilities of the Board of Directors:

The Board of Directors of the company stands in a fiduciary position in relation to the company and its stakeholders and the directors are responsible for the better working of the management of the company in a prosperous manner with high endeavors. Though the Board of Directors of the company is entrusted with many fiduciary duties and responsibilities which the directors need to adhere and abide, following are the few obligations and responsibilities which the directors needs to take an extra care in discharging the same:

1. Board to ensure the additional disclosures with respect to annual return filed by the companies, boards report.

2. Board to ensure the additional disclosures in the Director’s Responsibility Statement regarding internal financial controls and regulatory compliance.

3. Board to ensure the constitution of various committee’s under the Act as may be applicable to the company and the functioning of the same with respect to the adoption of the policies framed and decisions taken there under, the committees for which the director of the company needs to look and adhere by the constitution of the same and functioning thereof are as follows:

i. Audit Committee.ii. Corporate Social Responsibility Committee.iii. Stakeholders Relationship Committee.iv. Nomination and Remuneration Committee.

4. Board to ensure the optimum mix of executive and non-executive directors including the composition of independent directors on the board.

5. Board to ensure the appointment of Whole-time key managerial personnel through a board resolution.

6. Board to define terms of reference for the Audit Committee.

7. Disclosure of information:

a. Members of the Board and key executives should be required to disclose to the board whether they, directly, indirectly or on behalf of third parties, have a material interest in any transaction or matter directly affecting the company.

b. The Board and top management should conduct themselves so as to meet the expectations of operational transparency to stakeholders while at the same time maintaining confidentiality of information in order to foster a culture for good decision-making.

B. Duties of Directors (Section 166):

1. A director shall act in accordance with the articles of association of the company and subject to the provisions of the Act.

2. A director of a company shall act in good faith in order to promote the objects of the company for the benefits of its stakeholders and for the protection of environment.

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3. A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.

4. A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.

5. A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.

6. A director of a company shall not assign his office and any assignment so made shall be void.

7. Penalty in case of contravention of the above: Minimum of Rs. 1,00,000/- and maximum of Rs. 5,00,000/-.

C. Key functions of the Board:

a) Reviewing and guiding corporate strategy, major plans of action, risk policy, annual budgets and business plans; setting performance objectives; monitoring implementation and corporate performance; and overseeing major capital expenditures, acquisitions and divestments.

b) Monitoring the effectiveness of the company’s governance practices and making changes as needed.

c) Selecting, compensating, monitoring and, when necessary, replacing key executives and overseeing succession planning.

d) Aligning key executive and board remuneration with the longer term interests of the company and its shareholders.

e) Ensuring a transparent board nomination process with the diversity of thought, experience, knowledge, perspective and gender in the Board.

f) Monitoring and managing potential conflicts of interest of management, board members and shareholders, including misuse of corporate assets and abuse in related party transactions.

g) Ensuring the integrity of the company’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards.

h) Overseeing the process of disclosure and communications.

i) Monitoring and reviewing Board Evaluation framework.

D. Number of Directorships to be held by a Director (Section 165):

i. No person shall hold office as a director, including any alternate directorship, in more than 20 companies at the same time.

ii. Out of the threshold of 20 companies, a person shall not be appointed as a director in more than 10 public companies.

iii. For reckoning the limit of public companies, directorship in private companies that are either holding or subsidiary company of a public company shall be included.

E. Woman Director (Section 149):

The following classes of companies shall have at least one woman director on the Board:

i. Every listed company.ii. Every public company having a paid-up share capital of Rs. 100 Crores or more.

iii. Every public company having a turnover of Rs. 300 Crores or more.

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F. Resident Director (Section 149 (3)):

Every company shall have at least one director who has stayed in India for a total period of not less than 182 days in the previous calendar year.

G. Independent directors (ID) (Section 149 & 150):

a) Constitution and composition of Independent Directors:

i. Listed Co. to have at least 1/3 of its directors as independent directors. ii. In case of below mentioned Public Co. appointment of 2 independent directors would suffice – Having paid up share capital of Rs. 10 Crore or more Having turnover of Rs. 100 Crore or more Having in aggregate, outstanding loans, debentures and deposits, exceeding Rs. 50 crore or

more.

b) Procedure of appointment of Independent Directors:

has to be appointed in General Meeting As a Special Business Through an Ordinary Resolution. Detailed explanatory statement along with declaration of Independence shall be given.

c) Manner and selection of Independent Directors:

1. Sec. 150 - The Independent Director may be selected from the Data bank of directors notified by CG.2. The onus of doing due diligence while selecting a Director from data bank lies with the Co.3. The director can be appointed for two terms of 5 years each4. After one term he is to be appointed again in the General Meeting this time by passing Special resolu -

tion.5. After 2 terms he cannot be appointed as a director for at least 3 years and he or his relative should

not have any kind of relationship with the parties mentioned above during this 3 year cool off period.6. The independent director appointed under these provisions is not liable to retire by rotation.

d) Declaration by the Independent Director:

Sec 149(7) – Every Independent Director shall give declaration saying that he fulfills the criteria men -tioned under Section 149(6) in his

a. First Board Meeting after his appointment andb. First board meeting in every financial year.

e) Separate Meeting of Independent Directors:

1. One meeting in every calendar year only of independent directors to be held.2. Non – Independent Directors not to be present in such meeting. (Promoters who have ap-

pointed such independent directors will be reviewed.)3. The quorum shall be of all the independent directors appointed by the Company.4. The meeting shall:

i. Review of performance of non-independent directorsii. Review of performance of boardiii. Review of performance of chair person.iv. The timeliness of flow of information from management to board to take informed de-

cisions.

f) Duties of Independent Directors:

undertake appropriate induction and regularly update and refresh their skills, seek appropriate clarification or amplification of information and, where necessary,

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strive to attend all meetings of the Board of Directors and of the Board committees participate constructively and actively in the committees of the Board strive to attend the general meetings of the company; keep themselves well informed about the company and its external environment ascertain and ensure that the company has an vigil mechanism report concerns about unethical behavior, actual or suspected fraud or violation of the company’s code of conduct or ethics policy; Acting within his authority to protect interests of the Stake holders. Not disclose confidential information expressly approved by the Board or required by law.

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LIST OF COMPLIANCE’S UNDER COMPANIES ACT, 2013

Immediate Compliances

S. No Section Particulars and Forms Description

1 12 Publication of Corporate Information of the company

As per the provisions of this section, every company shall get its:

Name. Address of its registered office and Corporate Identification Number (CIN). Telephone number. Fax number, if any. E-mail and website addresses, if any.

Printed in all its business letters, bill heads, and letter papers and in all its notices and other official publications.

2 60 Publication of authorised, subscribed and paid-up capital.

Where any notice, advertisement or other official publication, or any business letter, billhead or letter paper of a company contains a statement of the amount of the authorised capital of the company, such documents shall also contain a statement, in an equally prominent position and in equally conspicuous characters, of the amount subscribed and Paid up capital.

3 74 Return for outstanding Deposits(DPT-4)

A form containing information of deposits accepted by companies before commencement of this Act and outstanding as on 1st April, 2014 shall be filed within 3 months from 1st April, 2014 and shall be repaid within one year i.e. on or before 31st March, 2015.

4 93 Return to be filed by the Listed Company in case of promoter's

stake changes(MGT-10)

Return to be filed with ROC within 15 days of change in promoter's stake by 2%.

5 158 Obligation to indicate DIN In all the Returns, information or particulars as notices, resolutions, other papers where the name of Director is mentioned, DIN should also be indicated.

Quarterly and Immediate Compliances

6 173 Meeting of Board Conduct of Board Meetings: Minimum number of four meetings of its Board of Directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board.

7 179 Compulsory matters to be transacted at First Meeting of the

Quarter(MGT 14 and MR-1)

1. To take note of disclosures of interest of Directors. (Form MBP – 1)

2. To take note of declarations of Directors U/s. 164 of the Companies Act, 2013 (Form DIR – 8)

3. To appoint a KMP & a Women Director.

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Annual Compliance’s

S. No. Particulars and Forms

Section Due date to file the Form

Additional Information to be noted

1Annual Return

(MGT 7)92 Within 60 days

from the date of AGM

Annual return to include the detailed information about Directorships in other companies, remuneration of directors, Net worth etc. Certification to the Annual Return by the PCS in prescribed form and also the extract of the annual return to form a part of board's report.

2Annual General

Meeting(MGT 15 & AOC

4)

96 Within 30 days from the date

of AGM

AGM can be held on public holidays and Sundays between 09 A.M to 6. P.M. and cannot be held on National Holidays. Every Listed Company and Company having 1000 shareholders or more shall provide e-voting facility to their members to vote on resolutions transacted at Every General Meeting.

3 AuditorsAppointment

(ADT 1)

139 Within 15 days from the date

of AGM

Appointment of Auditors shall be for the tenure of Five years and ratify his appointment in Every Annual General Meeting in that tenure. Listed company and the following class of companies except one person companies and small companies:

i. All unlisted public companies having paid up share capital of Rs. 10 Crores or more.

ii. All private limited companies having paid up share capital of Rs. 20 Crores or more, and

iii. All companies having public borrowings from financial institutions, banks or public deposits of Rs. 50 Crores or more.

Shall not appoint or re-appoint:1. An individual as auditor for more than 1 term

of 5 consecutive years; and2. An audit firm as auditor for more than 2 terms

of 5 consecutive years.

Comparative Statement of Annual Return

S. No Disclosure in Annual Return under Companies Act, 1956

Disclosure in Annual Return under Companies Act, 2013

1 Particulars shall relate as on the date of AGM

Particulars shall relate as on the close of the Financial Year. Normally it should be as on 31st March unless F.Y. is ending otherwise.

2 Particulars of Registered Office of the Company

Particulars of Registered Office of the Company

3 Details of Members of the Company Details of Members of the Company (debenture holders, if any)

4 Particulars of Directors, Manager and Company Secretary

Particulars of Directors, Manager and Company Secretary

5 Statement of Indebtedness of Company Statement of Indebtedness of Company

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Additional Disclosures in Annual Return under Companies Act, 2013:

i. Principal business activities, particulars of its holding, subsidiary and associate companies;ii. Its shares, debentures and other securities and shareholding pattern;iii. Its promoters, directors, key managerial personnel along with changes therein since the close of the

previous financial year;iv. Meetings of members or a class thereof, Board and its various committees along with attendance

details;v. Remuneration of directors and key managerial personnel;vi. Penalty or punishment imposed on the company, its directors or officers and details of compounding

of offences and appeals made against such penalty or punishment;vii. Matters relating to certification of compliance’s, disclosures, etc.

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Provisions made applicable to Private Limited Companies under Companies Act 2013

Section Provision Penalty Person responsible

42 If a Company wants to place an offer to a select group of persons, then a allottee has to invest a minimum of Rs.20,000 and comply with certain conditions specified under the Act.

Up to amount involved in offer or invitation or Rs. 2 Crores, whichever is higher.

Company, Promoters and Directors

62 In case a Company has to go for further issue of Equity Shares/Debentures/ Preference Shares except Rights issue and Bonus Issue of Shares then shareholders approval is required for General Meeting.

Punishable with fine which may extend to Rs.10,000/- and if it is continuing one with further fine which may extend to Rs.1,000/- per every day after the first during which the contravention continues.

Company and every officer of the Company who is in default.

73 (2) A Private Company can accept deposits from its members only

Punishable with fine which may extend to Rs.5,000/- and if it is continuing one with further fine which may extend to Rs.500/- per every day after the first during which the contravention continues.


74 A Private Company has to file a form containing information of deposits accepted by companies before commencement of this Act and outstanding as on 1st April, 2014 shall be filed within 3 months from 1st April, 2014 and shall be repaid within one year i.e. on or before 31st

March, 2015.

Punishable with fine which shall not be less than Rs.1 Crore but which may extend to Rs.10 Crore and every officer the Company shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than Rs.25 lakhs but which may extend to Rs.2 Crore rupees, or with both.


92 Annual Return is a form in which the Company has to report all the compliances under Companies Act, 2013. In case a Company has a paid up capital of 10 Crores or more or turnover 50 Crores or more, then separately a Certificate has to be obtained from Practicing Company Secretary stating crucial compliances of the Act. The Extract of the Annual Return has to be attached to Board's Report.

Punishable with fine which may extend to Rs. 1,00,000/- and in the case of a continuing default, with a further fine which may extend to Rs.5,000/- for every day during which such default continues

Company and every officer of the company

101 Every Private Company has to give not less than 21 days notice before conducting General Meetings and a prior 7 days notice before conducting Board Meeting.

Shorter Notice: In case of General Meetings a shorter notice can be accepted if not less than 95% total members agree to it. In case of Board Meetings shorter notice can be given to transact urgent Business.

Company shall be punishable with fine which may extend to Rs.10,000/- and if it is continuing one with further fine which may extend to Rs.1,000/- per every day after the first during which the contravention continues.


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164(2) A Director is disqualified from being appointed as Director for a period of 5 years of any Company, if a Company in which he is a Director does not file financial Statements or annual return for any continuous period of three financial years or has failed to repay the deposits, debentures, dividends or interest on them and such failure continues for a period of one year or more.

The Director shall vacate the office and he shall be punishable with imprisonment for a term which may extend to 1 year or with fine which shal not be less than Rs.1 lakh rupees but which may extend to Rs.5 lakh, or with both


165 No person shall hold office as a director, including any alternate directorship, in more than 20 companies at the same time.

Punishable with fine which shall not be less than Rs.5,000/- but which may extend to Rs.25,000/- for every day after the first during which the contravention continues

Director in contravention

173 Meetings of Board of Directors have to be conducted every quarter and the gap between two meetings cannot exceed a period of one hundred and twenty days.

Who fails to do so shall be liable to a penalty of twenty-five thousand rupees.

Director in Contravention

179 Certain powers to be exercised at Board Meeting now includes approving financial Statements and Board's Report, approving Corporate Restructuring, making political contribution, Appointment and Removal of KMP, to take note of Director's Disclosure, etc.



180 This matters requires Special Resolution to be passed in General Meeting: to sell the undertaking of the Company

to borrow money in excess of aggregate of its paid-up share capital and free reserves, apart from temporary loans obtained from the company's bankers in the ordinary course of business

to remit, or give time for the repayment of, any debt due from a director.



184 Every Director has to disclose his interest or concern in other Companies, Firms and Body Corporate in which he is interested at the First Board Meeting of the Financial Year and also must disclose in a Board Meeting where any contract or arrangement is made with the parties in which he is interested.

Every officer of the Company who is in default is liable for a penalty which can extend to Rs.10,000.

Every officer of the Company who is in default.

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185 A Company cannot grant Loans to Directors or any other person in whom the Director is interest except under certain conditions.

In case of default, the Company shall be punishable with fine which shall not be less than Rs. 5 lakhs and can extend to Rs. 25 Lakhs and the person to whom the loan is given shall be punishable with imprisonment which may extend to 6 months or with fine which shall not be less than Rs. 5 lakhs and can extend to Rs. 25 Lakhs, or with both.

Company and the person who is granted Loan

186 Loan and Investment to be made by the Company requires Board's Approval and if it extent to certain prescribed limits of say, 60% of Paid up capital + Free Reserves + Securities Premium Account or 100% of Free Reserves + Securities Premium Account , whichever is higher, then Special Resolution is to be passed in General Meeting.

Every Company which contravenes the provisions of this Section shall be liable to a penalty which shall not be less than Rs. 25000/- but which may extend to Rs. 5 lakhs and every officer of the Company who is default shall be punishable with imprisonment for a term which may extend to 2 years and fine which shall not be less than Rs. 25000/- but which may extend to Rs. 1 lakhs.


196 Appointment of Managing Director, Whole Time Director or Manager cannot exceed for a period of five years and Schedule V of Companies Act 2013 will be applicable in case of inadequacy of profits.



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COMPANIES ACT 2013 – DISCLOSURE IN ANNUAL REPORT

Sl. No.

Section Brief Intro Details

Applicability

OPCSmall Co.

Private Co.

Unlisted Co.

Listed Co.

1

67(3)(c) & rule 16(4)

of that chapter

Loans given to Employ-ees for Subscribe fully Paid-up Shares in the Company or its holding company.

Employee shall not be beneficial owner of those shares and the details regarding the voting rights of those shares shall be dis-closed in prescribed format.

N.A. N.A. N.A. Yes Yes

292(3) &

134(3)(a)

Extract of the Annual Re-turn shall form part of Balance Sheet

To be given format pre-scribed in Form No. MGT – 9

Yes Yes Yes Yes Yes

3 131(1)Voluntary revision of Fin-ancial Statements or Board's Report

Details of the reasons for which such revision is made to be dis-closed.

Yes Yes Yes Yes Yes

4 134(3)(b)Number of Meetings of the Board

Yes Yes Yes Yes Yes

5 134(3)(c)Director's Responsibility Statement

Yes Yes Yes Yes Yes

6134(3)(d) & 149(6)

Statement of declara-tion given by independ-ent Directors

Applicability - Public co. having more than 10 cr. or turnover of more than 100 cr. Or outstanding loans, debentures and depos-its of more than 50 crore.


7 134(3)(e)

Sec. 178(1) - Criteria framed by nomination & remuneration commit-tee for appointment and remuneration of dir-ectors.

Applicability – Every Lis-ted Co. & Public co. having paid up capital of more than 10 cr. or turnover of more than 100 cr. Or outstanding loans, debentures and deposits of more than 50 crore.


8 134(3)(f)

Explanation and com-ments on every remark, qualification and dis-claimer made in Audit report and Secretarial audit report.

Applicability of Secret-arial Audit - Public co. having paid up capital more than 50 cr. or turnover of more than 250 cr.

Yes Yes Yes Yes Yes

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9 134(3)(g)

Particulars of loans, guarantees and invest-ments made under Sec. 186

Yes Yes Yes Yes Yes

10 134(3)(h)Particulars of contracts and arrangements made under Sec. 188

To be given format pre-scribed in Form No. AOC – 2

Yes Yes Yes Yes Yes

11 134(3)(i)State of Affairs of the Company

Yes Yes Yes Yes Yes

12 134(3)(j)Amounts proposed to be carried onto reserves

Yes Yes Yes Yes Yes

13 134(3)(k)Amounts recommended to be paid as dividends

Yes Yes Yes Yes Yes

14 134(3)(l)

Material changes and commitments effecting the financial position of the Company

Yes Yes Yes Yes Yes

15 134(3)(m)Conservation of Energy, Foreign Exchange, Tech-nology absorption

Disclosure should be made according to the details as prescribed in Rule 8(3) of Chapter IX

Yes Yes Yes Yes Yes

16 134(3)(n)

Statement indicating development and man-agement of Risk Man-agement Policy

Yes Yes Yes Yes Yes

17 134(3)(p)Statement indicating Annual Performance evaluation of its Board.

Applicability – Every Lis-ted Co. & Public co. having paid up capital of 25cr or more


18 135(2)Disclosing of Composi-tion of CSR committee

Yes Yes Yes Yes Yes

19 149(10)

Disclosure regarding re-appointment of an inde-pendent director after a term of 5 years by a spe-cial resolution.

Applicability – Every Public co. having paid up capital of more than 10 cr. or turnover of more than 100 cr. Or outstanding loans, debentures and depos-its of more than 50 crore.


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20 177(8)Disclosure of composi-tion of Audit Committee



21 177(8)

Disclosure of Non-ac-ceptance of recom-mendations given by Audit Committee



22 177(10)Details of vigil mechan-ism to be disclosed in the Board report

Applicability – Every Lis-ted Co. & companies which accepted de-posits from public or outstanding loans, debentures and depos-its of more than 50 crore.

Yes Yes Yes Yes Yes

23 188(2)

Every contract entered with a related party should be disclosed in the board's report along with the justification for entering into the con-tract.

Yes Yes Yes Yes Yes

24 197(12)

Disclosure regarding the ratio of remuneration of each director to the me-dian remuneration of employee's

Applicability – Every Lis-ted Co.

N.A. N.A. N.A. N.A. Yes

25 197(14)

Disclosure of the com-mission earned by the MD or WTD from its hold-ing or subsidiary com-pany.

Yes Yes Yes Yes Yes

26 204(1)Disclosure of Secretarial Audit Report

Applicability – Every Lis-ted Co. & Public co. having paid up capital of more than 50 cr. or turnover of more than 250 cr. Format - to be given in MR-3 form.


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27 Rule 8Disclosure of CSR Activit-ies in format given in CSR Rules

Company (CSR) Rules, 2014

Yes Yes Yes Yes Yes

28 Rule 4(4)Details about the shares issued with differential voting rights

Company (Share Capit-al and Debenture) Rules, 2014

Yes Yes Yes Yes Yes

29 Rule 5(2)

Details of every employ-ee earning a salary of Rs. 5 lakhs per month or Rs. 60 lakhs per annum

Company (Managerial Remuneration) Rules, 2014

Yes Yes Yes Yes Yes

30 Rule 8(5)(i)Financial Summary or highlights

Companies (Accounts) Rules, 2014

Yes Yes Yes Yes Yes

31Rule 8(5)

(ii)The change in the nature of business, if any


Yes Yes Yes Yes Yes

32Rule 8(5)

(iii)

The details of directors or KMP who were appoin-ted or have resigned during the year



33Rule 8(5)

(iv)

The companies which have become or ceased to be its Subsidi-aries, JV or Associate companies during the year


Yes Yes Yes Yes Yes

34Rule 8(5)

(v)Details relating to depos-its accepted


Yes Yes Yes Yes Yes

35Rule 8(5)

(vi)

Details of Deposits which are not in compliance with the requirements of Chapter V of the Act


Yes Yes Yes Yes Yes

36Rule 8(5)

(vii)

Details of significant and material orders passed by the Regulators or Courts or Tribunals


Yes Yes Yes Yes Yes

37Rule 8(5)

(viii)

Details in respect of ad-equacy of internal finan-cial controls with refer-ence to the Financial Statements


Yes Yes Yes Yes Yes

Board's report and Financial statements shall be approved in only in physical Board Meeting and it should not be con-vened through Video conferencing.

Board's report & its annexures shall be signed by chairperson, if so authorised by Board or by 2 directors out of which, one will be a MD, if present and by 1 director in OPC.

FINANCIAL STATEMENTS

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Financial statements in relation to a company, includes:1) A balance sheet at the end of Financial Year2) A statement of Profit and Loss for the Financial Year and if the Company is not for profit, then Income & Expenditure Account.3) Cash flow statement of the Financial Year4) A Statement of changes in equity, if applicable5) any explanatory statement, in regard to, forming part of document 1 to 4

OPC, Dormant and Small Companies need not include Cash flow statement as part of their Financial Statements.

The Financial Statement should be signed by:1. Chairperson, if so authorised by the Board or2. By 2 directors, out of which one shall be MD (if present) and other Director 3. Company Secretary (if present) and4. Chief Financial officer (if present) and 5. Chief Executive Officer (if he is a Director).

The Auditor report shall be attached to every Financial Statement.

Every Signed Financials, which are issued, Published or circulated, shall be sent along with1) Any annexures or notes forming part of Financial Statements2) Auditors Report3) Board's Report

PENALTY

For Company – A minimum penalty of Rs. 50,000/- which may go up to Rs. 25,00,000/-

For officer in default – 1) An imprisonment which may extend to 3 years or 2) A minimum penalty of Rs. 50,000/- which may extend to Rs. 5,00,000/- or 3) both imprisonment and penalty

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Disclosures in Annual Report as per revised Clause 49 of the Listing Agreement

The Companies Act, 2013 provides for a major overhaul in the Corporate Governance norms for all companies. SEBI has reviewed and devised the new set of norms for Corporate Governance under revised Clause 49 with an objective to align with the provisions of the Companies Act, 2013, adopting best practices on corporate governance and to make the corporate governance framework more effective. Disclosures and transparency forms main part of Corporate Governance.

Disclosures in Annual Report under Listing Agreement:

Committees of Board:

When committees of the board are established, their mandate, composition and working procedures should be well defined and disclosed by the board in the Annual Report.

Training of Independent Directors:

The details of training imparted to independent directors in respect to their roles, responsibilities and nature of industry in which Company operates, shall be disclosed in the Annual Report.

Whistle Blower Policy:

The details of establishment of vigil mechanism shall be disclosed by the company on its website and in the Board’s report.

Subsidiary Companies

The company shall formulate a policy for determining ‘material’ subsidiaries and such policy shall be disclosed to Stock Exchanges and in the Annual Report.

Related Party Transactions

The company shall disclose the transactions with Related Party in the Annual Report.

Nomination & Remuneration of Directors

The company shall disclose the remuneration policy to Directors and the evaluation criteria in its Annual Report.

All pecuniary relationship or transactions of the non-executive directors’ vis-à-vis the company shall be disclosed in the Annual Report.

The company shall disclose the number of shares and convertible instruments held by non-executive directors in the annual report.

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Head Office - HyderabadR & A Associates101 Saptagiri Residency, 1-10-98/AChikoti Gardens, BegumpetHyderabad, India. 500016Phone: 91 40 4003 2244 – 2247Email: [email protected]

Gurgaon Branch Address # 1304, Tower No.5, The Palms, South City-I, Sector 30 Gurgaon – 122 001, India.Phone: 99111 03883Email: [email protected]

Chennai Branch Address # 307, Block -1 Ceebros Boule-vard,Old Mahabalipuram Road, Gandhi Nagar, Okkiyam Thuraipakkam,Chennai -600097Phone: +91 9043003883Email: [email protected]

R & A Associates is a Corporate Legal Services Firm. R & A is registered as a Practicing Company Secretaries firm with the Institute of Company Secretaries of India (ICSI). Our legal and advisory services play a vital role in implementing robust control mechanisms to facilitate compliance of the challenging and ever changing regula-tions of the country.

R & A has immense knowledge and experience in dealing with matters relating to Company Law, Securities Laws, inbound and outbound Investment, Legal Due Diligence, Transaction documents, Joint Ventures, Foreign Collabo-rations, Technology Transfers, Mergers and Acquisitions, Listings and Capital Market Transactions.

R & A’s key offerings also include setting up complianc-es, approvals from all the government departments includ-ing approvals from the Registrar of Companies, Ministry of Corporate Affairs, Foreign Investment Promotion Board (FIPB), Secretariat of Industrial Approvals (SIA), Reserve Bank of India (RBI), Director General of Foreign Trade (DGFT), Software Technology Parks of India (STPI), approvals for establishment of 100% Export Oriented Units (EOU), approvals for establishment of units in the Special Economic Zones (SEZ), Foreign Exchange Regulations, Foreign Direct Investment (FDI) in Real Estate, Retail, Trading, Non-banking finance companies etc.

Headquartered in Hyderabad and having branches in Gurgaon & Chennai, R & A has been on the forefront of the corporate sector advising, guiding, servicing and representing many companies’ in India and across the globe. R & A has had a formidable track record and is distinguished by its people, its clients and timely delivera-bles.

The partners have an average experience of over 15 years in handling complex legal issues touching on almost all aspects of Indian Corporate law.

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