Governance, risk, compliances final

59
GOVERNANCE, RISK & COMPLIANCES

Transcript of Governance, risk, compliances final

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GOVERNANCE, RISK &

COMPLIANCES

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APPOINTMENT OF WOMAN DIRECTOR

Appointment of at least one Woman Director on Board of the

Company.

Rule 3 Companies (Appointment and Qualification of Directors)

Rules, 2014.

provide the class of company to appoint one woman director:

Every listed company and

Every Public company with the paid up capital of Rs. 100 cr or

more, or with turnover of Rs. 300 cr or more.

within 1 year from the notification of provision.

Company which has incorporated under the Act , and which fall

under above mentioned limit shall comply with the requirement

within period of 6 months form the date of incorporation.

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APPOINTMENT OF INDEPENDENT DIRECTOR

Total no. of Directors shall be independent director in case of listedcompany.

Rule 4 of Companies (Appointment and Qualification of Directors)Rules, 2014

The following class or classes of companies shall have at least twodirectors as independent directors:

(i) the Public Companies having paid up share capital of ten crorerupees or more; or

(ii) the Public Companies having turnover of one hundred crorerupees or more; or

(iii) the Public Companies which have, in aggregate, outstandingloans, debentures and deposits, exceeding fifty crore rupees:

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RESIDENT DIRECTOR

Every company shall have at least one Director who

stayed in India for a period of not less than 182 days in

previous calendar year.

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NOMINEE DIRECTOR

The Act provides that subject to Articles, Board can

appoint a Director nominated by any institution in

pursuance of any law or agreement or government in

case of government company.

Lenders nominee will be covered in this section.

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ALTERNATE DIRECTOR

Articles of association should authorise the appointment of alternate

director or has been authorised in general meeting.

The Act provides that an Alternate Director can only be appointed in

case a Director leaves India for a period of not less than 3 months.

A person cannot act as alternate director to more then one director

in company.

Provision of automatic reappointment as director shall be applicable

to original director and no on alternate director.

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ADDITIONAL DIRECTOR

Subject to power given in its articles of association, the board may

appoint additional director in the company.

Additional Director will hold office till next annual general meeting or

the last date on which such meeting should have held in accordance

with law

A person, who fails to get appointed as a director in a general

meeting, cannot be appointed as an Additional Director.

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MAXIMUM NO. OF DIRECTORS IN A COMPANY

Maximum limit of Directors in Public Company and Private Company

has been limited to 15.

The number can be increased beyond 15 by passing special

resolution, CG approval not required.

Independent directors will not be counted in the total number of

Directors, for calculation of retiring director by rotation.

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NO. OF DIRECTORSHIPS FOR AN INDIVIDUAL

A person cannot become Director in more than 20.

The maximum number of Public Companies in which a person can

be appointed as a Director shall not exceed 10, Including

directorship in Private Companies that are either Holding or

Subsidiary Company of a Public Company.

All existing directors, if holding such office in more than specified

limits shall be under an obligation to comply with this limit within a

period of one year from commencement of act by resigning from

excess companies.

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CONSENT TO ACT AS DIRECTOR

Rule 8 Companies (Appointment and Qualification of Directors)

Rules, 2014

Every person who has been appointed to hold the office of a director

shall on or before the appointment furnish to the company a consent

in writing to act as such in Form DIR-2.

A company shall within 30 days of appointment file such consent

with ROC in From DIR-12

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RESIGNATION OF DIRECTOR

Director may resign form the board and Company will have to

intimate the ROC within 30 days form receipt of notice of

resignation in DIR-12 and also post the information on its website ,

if any. (Rule 15 of Companies Appointment and Qualification of

Directors)

Directors are required to mandatorily forward their resignations,

along with detailed reason for resignation, to the Registrar within 30

days of resignation in Form DIR-11. (Rule 16 of Companies

Appointment and Qualification of Directors)

Resignation is effective from the date of receiving by company or

the date, if any specified by director in the notice, whichever is later.

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REMOVAL OF A DIRECTOR

Special notice is required to be given by the members to

be considered by board for the removal of director :-

Provided such special notice shall be given by such no.

of members:

holding not less that 1% of total voting power or

holding share on which aggregate sum not exceeding

Rs. 5 Lakh has been paid up.

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VACATION OF OFFICE OF DIRECTOR ( S

167)

A director shall vacate his office if :-

he incurs any of the disqualifications specified in section 164;

he absents himself from all the meetings of the Board of Directors

held during a period of 12 months with or without seeking leave of

absence of the Board;

he acts in contravention of the provisions of section 184 relating to

entering into contracts or arrangements in which he is directly or

indirectly interested;

he fails to disclose his interest in any contract or arrangement in

which he is directly or indirectly interested, in contravention of the

provisions of section 184;

he becomes disqualified by an order of a court or the Tribunal;

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VACATION OF OFFICE OF DIRECTOR

he is convicted by a court of any offence, whether involving

moral turpitude or otherwise and sentenced in respect thereof

to imprisonment for not less than six months:

he is removed in pursuance of the provisions of this Act;

he, having been appointed a director by virtue of his holding

any office or other employment in the holding, subsidiary or

associate company, ceases to hold such office or other

employment in that company.

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NOMINATION OF A PERSON FOR THE OFFICE OF

DIRECTOR IN GENERAL MEETING SECTION 160

A person who is not a retiring director in terms of section 152 shall,

be eligible for appointment to the office of a director .

has, not less than 14 days before the meeting, left at the registered

office of the company, a notice in writing under his hand signifying his

candidature as a director or, as the case may be, the intention of

such member to propose him as a candidate for that office.

The company has to follow the process as defined u/s 160 for

regularization of additional director on the board in general meeting

of company.

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NOMINATION OF A PERSON FOR THE OFFICE OF

DIRECTOR IN GENERAL MEETING

The amount of 1 Lakh or such higher sum as may be prescribed, to

be deposited along with notice of nomination of any person for the

office of director on his own or by any member.

The amount so deposited will be refunded in case the person so

proposed gets more than 25% of the total votes cast, irrespective of

whether he is appointed or not.

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NOMINATION OF A PERSON FOR THE OFFICE

OF DIRECTOR

Rule 13 of Companies Appointment and Qualification of Directors)

The company shall, not less than 7 days before the general meeting,inform its members of the candidature of a person or the intention ofa member to propose such person as a candidate for that office:

1. by serving individual notices,; and

2. by placing notice of such candidature or intention on the website ofthe company.

Provided that individual notice shall not be required if companypublish such candidature of a person, not less than 7 days before themeeting ,in one vernacular newspaper and one in Englishnewspaper circulating in the district where registered office of thecompany situated.

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DUTIES OF DIRECTORS

A director of a company shall act in accordance with the articles.

A director shall act in good faith in order to promote the objects of thecompany as a whole, and in the best interests of the company andfor the protection of environment.

A director exercise his duties with due and reasonable care, skill anddiligence and independent judgment.

A director shall not involve in a situation in which he may have adirect or indirect interest that conflicts, with the interest of thecompany.

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DUTIES OF DIRECTORS (CONT…)

A director of a company shall act in accordance with the articles.

A director shall act in good faith in order to promote the objects of the

company as a whole, and in the best interests of the company and

for the protection of environment.

A director exercise his duties with due and reasonable care, skill and

diligence and independent judgment.

A director shall not involve in a situation in which he may have a

direct or indirect interest that conflicts, with the interest of the

company.

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Disclosure in Director reports,

Annual Return

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DISCLOSURE IN BOARD REPORT

Financial Information Corporate information

Information about BOD and committees

Managerial Personnel

Disclosure in Board Report

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DISCLOSURE IN BOARD REPORT

Financial Information

Particulars of Loan, guarantees or investments [section 186]

Contracts or agreements with related parties [section 188 (1)]

Explanation or comments by the Board on every qualification

reservation or adverse remark or disclaimer made by the auditor in

the report

The amount, if any, which proposes to carry to any reserve.

The amount if any, which it recommends should be paid as dividend.

material changes and commitments, if any, affecting the financial

position of the company

Financial summery/highlights

Directors Responsibility Statement.

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DISCLOSURE IN BOARD REPORT

Details relating to Deposits.

Detailed reasons for revision of financial statement

and Board report.

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DISCLOSURE IN BOARD REPORT-

CORPORATE INFORMATION

The state of company's’ affairs

Number of meetings of the Board.

Extract of annual return;

Explanation or comments by board on every qualification

resolution or adverse remarks or disclaimer made by the

company secretary in practice in his secretarial audit report.

Conservation of energy, technology observation, foreign

exchange earnings and outgo

a statement indicating development and implementation of a

risk management policy including element of risk

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DISCLOSURE IN BOARD REPORT-

CORPORATE INFORMATION

The Details about policy developed and implemented on CSR

initiatives taken during the year and reason for not spending the

requisite amount.

A Report on the performance and financial position on subsidiaries,

associates and joint venture

Change in nature of business

Name of Companies which have become or ceased to be its

subsidiaries, associates and joint venture during the year and the

reason therefore.

Details of Significant and material orders passed by the regulators or

courts and tribunals impacting the going concern status and

companies operations in future.

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DISCLOSURE IN BOARD REPORT-

CORPORATE INFORMATION

Details of establishment of vigil mechanism.

Disclosure of reasons for not accepting the recommendation

of audit committee for appointment of auditor.

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INFORMATION ABOUT BOARD OF DIRECTORS

AND COMMITTEES

Every listed company and

every public company having PSC 100 Cr. or more or o/s loans orborrowings or debentures or deposits exceeding 200 Cr.

Have to disclose companies policy on director’s appointment andremuneration with criteria for determining qualification, positiveattributes, independence of directors etc.

Statement of declaration given by independent directors.

Every listed company and every public company having PSC of 25 Cr.or more calculated as at the end of the preceding F.Yr.

shall include a statement indicating the manner in which annualevaluation have been made by the Board of its own performanceand that of its committees and individual directors.

Details of directors or KMP who have appointed or have resignedduring the year.

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INFORMATION ABOUT BOARD OF DIRECTORS

AND COMMITTEES

Composition of Audit Committee

Disclosure of non- acceptance of recommendation of auditcommittee.

Disclosure of policy formulated by nomination and remunerationcommittee relating to remuneration for the directors, KMP and otheremployees.

Composition of CSR Committee.

Disclosure of content of policy of CSR.

Disclosure of appointment of independent Director

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INFORMATION ABOUT BOARD OF DIRECTORS

AND COMMITTEES

Disclosure of commission to be received by Managing or whole

time director of the company from its holding or subsidiary company

Disclosure about the facts of resignation of director.

The Directors Responsibility Statement shall also include the

statement that the directors had devised proper systems to ensure

compliance with all applicable laws and operating effectively.

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DISCLOSURE IN BOARD REPORT -COMPANIES

(APPOINTMENT AND REMUNERATION OF MANAGERIAL

PERSONNEL) RULES, 2014 – RULE 5

Every listed company shall disclose in the Board’s report-

(i) the ratio of the remuneration of each director to the medianremuneration of the employees of the company for the financialyear;

(ii) the percentage increase in remuneration of each director, ChiefFinancial Officer, Chief Executive Officer, Company Secretary orManager, if any, in the financial year;

(iii) the percentage increase in the median remuneration of employeesin the financial year;

(iv) the number of permanent employees on the rolls of company;

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DISCLOSURE IN BOARD REPORT -COMPANIES (APPOINTMENT AND

REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 – RULE 5

(v) the explanation on the relationship between average increase inremuneration and company performance.

(vi) comparison of the remuneration of the Key Managerial Personnelagainst the performance of the company;

(vii) variations in the market capitalisation of the company, priceearnings ratio as at the closing date of the current financial yearand previous financial year and percentage increase overdecrease in the market quotations of the shares of the company incomparison to the rate at which the company came out with thelast public offer in case of listed companies, and in case ofunlisted companies, the variations in the net worth of the companyas at the close of the current financial year and previous financialyear;

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DISCLOSURE IN BOARD REPORT -COMPANIES (APPOINTMENT AND

REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 – RULE 5

(viii) average percentile increase already made in the salaries ofemployees other than the managerial personnel in the lastfinancial year and its comparison with the percentile increase inthe managerial remuneration and justification thereof and point outif there are any exceptional circumstances for increase in themanagerial remuneration;

(ix) comparison of the each remuneration of the Key ManagerialPersonnel against the performance of the company;

(x) the key parameters for any variable component of remunerationavailed by the directors;

(xi) the ratio of the remuneration of the highest paid director to that ofthe employees who are not directors but receive remuneration inexcess of the highest paid director during the year; and

(xii) affirmation that the remuneration is as per the remuneration policyof the company.

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DISCLOSURE IN BOARD REPORT [RULE 5(2)]

Every Listed company in its board’s report shall include astatement showing the name of every employee of thecompany who-

(i) if employed throughout the financial year, was in receipt ofremuneration for that year which, in the aggregate, wasnot less than sixty lakh rupees;

(ii) if employed for a part of the financial year, was in receiptof remuneration for any part of that year, at a rate which,in the aggregate, was not less than five lakh rupees permonth;

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DISCLOSURE IN BOARD REPORT [RULE

5(2)CONT..]

(iii) if employed throughout the financial year or part thereof, was inreceipt of remuneration in that year which, is in excess of thatdrawn by the :

managing director or

whole-time director or

manager and

holds by himself or along with his spouse and dependent children,not less than two percent of the equity shares of the company.

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DISCLOSURE IN BOARD REPORT

[RULE 5(2)CONT..]

Provided that :

particulars of employees outside India, not being directors or theirrelatives, drawing more than Rs. 60 lakh per financial year or Rs. 5lakh p/m, decided by the Board, shall not be circulated to the membersin the Board’s report,

such particulars shall be filed with the ROC with the financial statementand Board Reports.

such particulars shall be made available to any shareholder on aspecific within three days from the date of receipt of such request fromshareholders.

in case of request received after the date of completion of AnnualGeneral Meeting, such particulars shall be made available to theshareholders within seven days from the date of request.

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Meeting, Quorum, Additional

Returns

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MEETING OF BOARD

AND ITS POWERS

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NUMBER OF BOARD MEETINGS IN AN YEAR

At least 4 meetings should be held each year for Public and

Private Companies

For One Person Company, Small Company and Dormant

Company at least 1 meeting of the Board of Directors must be

held in each half of a calendar year

Gap between 2 meetings

Not more than 120 days shall elapse between two meetings in

case of Board Meeting of Public and Private Companies.

For One Person Company, Small Company and Dormant

Company, the gap between the two Meetings shall not be less

than 90 days.

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NOTICE OF BOARD MEETING

A Meeting of Board shall be called by giving at least 7 days

notice to each Director, however shorter notice of a meeting

for urgent matters be called, if one Independent Director is

present in the Meeting, if any.

Even if Independent Director is not present then such

resolution has to be ratified by one of the Independent

Directors, if any.

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RULE 3

MEETINGS OF BOARD THROUGH VIDEO

CONFERENCING OR OTHER AUDIO VISUAL MEANS

For convening and conducting Board meetings through video

conferencing or other audio visual means:

Every company shall make necessary arrangements to avoid

failure of any video or audio visual

Chairman and CS shall take due and reasonable care about the

integrity , ensure availability of proper equipments, ensure

quality of audio and video, record the proceeding, safekeeping

of tape recording , no unauthorized person attending or have

access to proceeding of the meeting

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RULE 3

MEETINGS OF BOARD THROUGH VIDEO

CONFERENCING OR OTHER AUDIO VISUAL MEANS

Notice shall inform the availability of option

Director intends to avail the option shall send the confirmation

as sufficiently in advance before schedule date of meeting .

Director may given advance intimation for attending the

meetings through video conference for each calendar year.

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MEETINGS OF BOARD THROUGH VIDEO

CONFERENCING OR OTHER AUDIO VISUAL MEANS

The following matters shall not be dealt with in any meeting

held through video conferencing or other audio visual

means:

to approve the annual financial statements; and

to approve the Board’s report.

approval of prospectus;

audit committee meeting for consideration of accounts;

approval of amalgamation, merger, Demerger, takeover,

acquisition

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RESOLUTION BY CIRCULATION

Resolution by circulation shall be approved if it is consented by

majority of Directors.

Such circular resolution is to be sent to all the directors of

company at their usual Indian registered address by post,

courier, hand delivery, electronic means.

All resolutions passed by circulation shall have to be mandatorily

noted in the next Board Meeting and should be made part of the

Minutes

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ADDITIONAL RETURNS

Return of changes in shareholding position of promoters and top

ten shareholders.-

Every listed company shall file with the Registrar, a return in Form

No.MGT.10 along with the fee with respect to changes relating to

either increase or decrease of two percent, or more in the

shareholding position of promoters and top ten shareholders of the

company in each case, either value or volume of the shares, within

fifteen days of such change.

As per MCA Circular 17/ 2014 dated 11.06.2014, till an e-form for

MGT 10 is available, the stakeholders are required to file form MGT

10 physically with all other attachments with Form GNL 2.

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REPORT ON ANNUAL GENERAL MEETING.

The report in pursuance of the provisions of sub-section (1) of

section 121 shall be prepared by every listed company in the

following manner, namely:-

the report in addition to the minutes of the general meeting;

the report shall be signed and dated by the Chairman of the meeting

or in case of his inability to sign, by any two directors of the company,

one of whom shall be the Managing director, if there is one and

company secretary of the company

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REPORT ON ANNUAL GENERAL MEETING.

the report shall contain the details in respect of the following,

namely:-

the day, date, hour and venue of the annual general meeting;

confirmation with respect to appointment of Chairman of the

meeting;

number of members attending the meeting;

confirmation of quorum;

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REPORT ON ANNUAL GENERAL MEETING.

confirmation with respect to compliance of the Act and the Rules,

secretarial standards made there under with respect to calling,

convening and conducting the meeting;

business transacted at the meeting and result thereof;

particulars with respect to any adjournment, postponement of

meeting, change in venue; and

any other points relevant for inclusion in the report.

The copy of the report prepared in pursuance of sub-section (1) of

section 121 and sub-rule (1), shall be filed with the Registrar in Form

No. MGT.15 within thirty days of the conclusion of the annual general

meeting along with the fee.

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RESOLUTION TO BE FILED WITH ROC

SECTION 117

A copy of every resolution or any agreement, in respect of matters

specified in sub-section (3) together with the explanatory

statement under section 102.

Every special resolutions;

any resolution of the Board of Directors of a company or

agreement executed by a company, relating to the

appointment, re-appointment or renewal of the appointment, or

variation of the terms of appointment, of a managing director;

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RESOLUTION TO BE FILED WITH ROC

SECTION 117

resolutions requiring a company to be wound up voluntarily passed

in pursuance of section 304

resolutions passed in pursuance of sub-section (3) of section 179;

and

(h) any other resolution or agreement as may be prescribed and

placed in the public domain.

In Form No. MGT.14 along with the fee. Rule 24 Companies

(Management and Administration) Rules, 2014

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RESOLUTION TO BE FILED WITH ROC

SECTION 117 PURSUANT TO SEC 179(3)

to make calls on shareholders in respect of money unpaid on their shares;

to authorise buy-back of securities under section 68;

to issue securities, including debentures, whether in or outside India;

to borrow monies;

to invest the funds of the company;

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RESOLUTION TO BE FILED WITH ROC

SECTION 117

to grant loans or give guarantee or provide security in respect

of loans;

to approve financial statement and the Board’s report;

to diversify the business of the company;

to approve amalgamation, merger or reconstruction;

(j) to take over a company or acquire a controlling or

substantial stake in another company;

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RULE 8 OF COMPANIES (MEETINGS OF

BOARD AND ITS POWERS) RULES, 2014 to make political contributions;

to appoint or remove key managerial personnel

to take note of appointment(s) or removal(s) of one level below theKey Management Personnel;

to appoint internal auditors and secretarial auditor

to take note of the disclosure of director’s interest andshareholding;

to buy, sell investments held by the company (other than tradeinvestments), constituting five percent or more of the paid upshare capital and free reserves of the investee company;

to invite or accept or renew public deposits and related matters;

to review or change the terms and conditions of public deposit;

to approve quarterly, half yearly and annual financial statements orfinancial results as the case may be.

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Secretarial Standards

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SECRETARIAL STANDARDS 118(10)“ UNIFORM WAY TO MAINTAIN PROCEEDINGS”

For the First time, Secretarial Standards has been introduced

and provided statutory recognition in the law.

“Every company shall observe Secretarial Standards with

respect General and Board Meetings specified by the Institute

of Company Secretaries of India constituted under section 3 of

the Company Secretaries Act, 1980 and approved by the

Central Government”.

Yet to be prescribed and notified.

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DISCLOSURE IN ANNUAL RETURN

[SECTION 92 ]

Every company shall prepare an annual return in the prescribed formcontaining the particulars as they stood on the close of the financialyear regarding-

its registered office, principal business activities, particulars of itsholding, subsidiary and associate companies.

its shares, debentures and other securities and shareholdingpattern.

its indebtedness

its members and debenture holders along with changes thereinsince the close of the previous financial year;

its promoters, directors, key managerial personnel along withchanges therein since the close of the previous financial year;

meetings of members or a class thereof, Board and its variouscommittees along with attendance details;

remuneration of directors and key managerial personnel;

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DISCLOSURE IN ANNUAL RETURN

[SECTION 92 ]

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;

matters relating to certification of compliances, disclosures as may be

prescribed;

details, as may be prescribed, in respect of shares held by or on behalf

of the Foreign Institutional Investors indicating their names, addresses,

countries of incorporation, registration and percentage of shareholding

held by them; and

such other matters as may be prescribed

and signed by a director and the Company Secretary, or where there is no

Company Secretary, by a Company Secretary in practice.

IN case of Small company and one person company, no

company secretary then annual return can be signed by another

director of company.

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DISCLOSURE IN ANNUAL RETURN

[RULE 11 ] COMPANIES (MANAGEMENT AND

ADMINISTRATION) RULES, 2014 Every company shall prepare its annual return in Form No MGT 7.

the annual return, filed by a listed company or a company having paid-

up share capital of

Ten crore rupees or more or

turnover of Fifty crore rupees or more,

Shall be certified by a Company Secretary in practice.

The certificate shall be in Form No. MGT. 8 and specifying that the

annual return discloses the facts correctly and adequately and that the

company has complied with all the provisions of this Act.

Extract of annual return [Rule 12]

The extract of the annual return to be attached with the Board’s Report

shall be in Form No. MGT.9.

A copy of the annual return shall be filed with the Registrar .

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MCA NOTIFICATION(GENERAL CIRCULAR NO. 22/ 2O14 , DATED 25.06.2014)

Form MGT 7 shall not apply to annual return in respect of

companies for the F.Y. ended on or before 1st April, 2014

and for annual return pertaining to earlier years.

These companies may file their annual return in form

applicable as per the Companies act, 1956.

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Thanks

Arun Gupta

managing counsel

factum legal , advocates & solicitors

Tel : (O) 011-41066313 (M) 9810275571

www.factumlegal.com;

[email protected]

“All Great Changes are preceded by CHAOS”