Lab Project Ppt

7/27/2019 Lab Project Ppt

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LEGAL ASPECTS OF BUSINESS

PROJECT WORK Group 2

Analysis of Directors Report

Sector: Civil Aviation

Companies: SpiceJet & JetAirways

Presented By:

Ashish Chopra 12PGDM013

Avineet Sadani 12PGDM014


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Managerial Remuneration

As per companies act, 1956, managerialremuneration should include all the payment andbenefit whichever is being incurred by the company

on behalf of its management. It might include: Salaries

Commission

RFA

Life insurance policies

Membership fee club

Cost of car facilities

Any other allowances or benefits


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Section 198 Companies Act, 1956

Total managerial remuneration not to exceed11% of Net profits

Remuneration of directors cannot be deducted

from gross profits This percentage is exclusive of fees paid for

meetings under section 309(2)

In the case of inadequate profits, except for thefees to be paid for the meetings, no otherremuneration needs to be provided


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Section 309(2) Directors

A director may receive remuneration by way of afee for each meeting of the Board, or acommittee

They can be paid on a monthly basis

Continued to be paid until 2 years or remainderof term of office, whichever is less


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Section 387 Managers

The manager of a company may, subject to theprovisions of section 198, receive remuneration

either by way of a monthly payment, or by way ofa specific percentage, ofthe net profits


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Spicejet

Compensation committee 3 Directors

Since the company reported losses during the

year, they did not pay any remuneration to theirdirectors except for the sitting fees for themeetings

This is in accordance with Section 309(2) of

Companies act 1956


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Pay split-up of the executive director

of the company

Basic Salary - Rs.2,71,250 per month

Conveyance Allowance - Rs.10,000 per month

Supplementary Allowance - Rs.324,325 permonth

Other Allowance - Rs.135,625 per month

Medical reimbursement - Rs.15,000 per annum


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Jet Airways

Compensation committee 5 Non-executive Directors

Remuneration Policy for Non-executive Directors:

Sitting Fees - The Non-executive Directors are paid SittingFees of 20,000 for each Board and Committee Meetingattended by them.

Commission - In any year that the Company makesadequate profit, a fixed sum is payable as Commission to the

Non-executive Directors, with the prior approval of theMembers.

Due to the losses made by the Company for the year ended31st March, 2012, no Commission is payable to the Non-executive Directors for the financial year 2011-12


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Benefits & Remuneration

For the Executive Director

The remuneration of the Executive Director is

recommended by the Remuneration andCompensation Committee after taking intoaccount the experience, qualifications, dutiesand responsibilities and prevailing industry

practices


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Net Profits


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Section 349 in The Companies Act, 1956

In computing for the purpose of section 348, thenet profits of a company in any financial year-

Credit shall be given for the sums specified insub- section (2), and credit shall not be givenfor those specified in sub- section (3); and

The sums specified in sub- section (4) shall bededucted, and those specified in sub- section (5)shall not be deducted.


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Section 349 in TheCompanies Act, 1956

Jet Airways Spice Jet

(3) In making thecomputation aforesaid,credit shall not be given

for the following sums:-

(a) profits, by way ofpremium, on shares ordebentures of the company,

which are issued or sold bythe company;

(b) profits on sales by thecompany of forfeited shares;

(c) profits of a capital natureincluding profits from the saleof the undertaking

(d) profits from the sale of anyimmovable property or fixedassets of a capital naturecomprised in the undertaking

Securities Premium inBalance Sheet (Reserves

and Surplus)

Profit on Sale and LeaseBack of Engines (onlyamount exceedingW.D.V. in Profit andLoss Statement)

Complied

Securities Premium inBalance Sheet (Reserves

and Surplus)

Profit on sale of aircraftunder sale and leaseback arrangements (onlyamount exceedingW.D.V. in Profit andLoss Statement)

Complied

*(d) Point to note:

Provided that where the amount for which any fixed asset is sold exceeds the written-down value thereof, credit shall be given for so much of the excess


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Jet Airways

Clause (a): Profits, by way of Premium, on shares ordebentures of the company, which are issued or sold by thecompany;

Reserves and Surplus : Securities Premium Account

Clause (d): Profits from the sale of any immovable propertyor fixed assets of a capital nature

Non-Operating Revenues

Particulars 31st Mar, 2012 31st Mar, 2011As per last Balance Sheet 141,418 141,418

Particulars 31st Mar,

2012

31st Mar,

2011

Profit on Sale and Lease Back of

Engines

7,609 -


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Spice Jet

Clause (a): Profits, by way of Premium, on shares ordebentures of the company, which are issued or sold by thecompany;

Reserves and Surplus

Securities Premium Account

Particulars 31st Mar,

2012

31st Mar,

2011

Opening balance

Add: Premium Received duringthe year on account of

Add: Reversal of premium on

redemption of FCCBs

6,316.80

-

-

2,200.77

2,246.96

1,372.54


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(4) In making thecomputationaforesaid, thefollowing sums shall

be deducted:-(a) all the usual workingcharges;

(b) directors'remuneration;

(c) bonus or commissionpaid or payable to

any member of thecompany' s staff, or to anyengineer, technician orperson employed orengaged by the company,

whether on a whole- time

or on a part- time basis;

Aircraft Fuel ExpenseAircraft Lease Rentals

Employee ExpensesEmployee BenefitExpensesSalaries, Wages,

Bonuses, Allowances

Complied

Aviation Turbine FuelLease Charges Aircraftand Engines

Salaries, Wages, BonusEmployee BenefitExpensesContribution to PF

GratuityLegal and ProfessionalFees

Complied


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(f) interest on debentures

issued by the company;

(g) interest on mortgagesexecuted by the company

(h) interest on unsecured

loans and advances;

(i) expenses on repairs,whether to immovable or tomovable property, providedthe repairs are not of acapital nature;

(k) depreciation to theextent specified in section350;

Finance Cost

Interest Expense

Aircraft Maintenance

Depreciation+On Tangible Assets+On Intangible Assets

Complied

Interest to Others

Interest to Banks

Repairs andMaintenance+Building+Plant and Mach.Aircraft Repair andMaintenance

Depreciation andAmortization Expense

Complied


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(m) any compensation or

damages to be paid invirtue of any legalliability, including aliability arising from abreach of contract;

(n) any sum paid by wayof insurance against therisk of meeting anyliability such as isreferred to in clause (m);

(o) debts considered badand written off oradjusted during the yearof account.

Aircraft Insurance andother Insurance

Bad debts written off

Complied

Aviation InsurancePersonal AccidentInsurance

Complied


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(5) In making the

computationaforesaid, thefollowing sums shallnot be deducted:-

(a) the remuneration

payable to the managingagent;

(c) any compensation,damages or paymentsmade voluntarily

(d) loss of a capital natureincluding loss on sale ofthe undertaking or any ofthe undertakings of thecompany or of any part

thereof not including anyexcess

Loss on sale of FixedAssets other thanAircraft (only amountexceeding W.D.V. inProfit and Loss

Statement)

Complied

Loss on sale of assets(only amount exceedingW.D.V. in Profit andLoss Statement)

Complied


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SCHEDULE XIV - RATES OF DEPRECIATION UNDER

COMPANIES ACT,1956

Straight Line Method (%)

S. No Nature of Asset Percentage

1.2.

3.

4.

5.

6.

Aircrafts/ AeroplaneOffice Equipment

Computers

Furniture and Fixtures

Motor Vehicles

Plant and Machinery

5.60%4.75%

16.21%

6.33%

9.50%

4.75% - 5.28%



Depreciation at the ratespecified in ScheduleXIV(mentioned below)

Complied as per thetable shown below

(Aircraft depreciatedon S.L.M. w.e.f. 1st

April, 2010)

Complied as per thetable shown below


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Dividends

Rate recommended by board of directors andapproved by shareholders in AGM.

Jet Airways

Reported a net loss of Rs.123,610 lakhs after tax

in the year 2011-12, hence no dividend wasdeclared, complying with the provisions ofsection 205 of Companies Act.


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The company has also declared that they wouldtransfer the unclaimed dividend lying in their

account since 7 years to Investor Education and

Protection Fund, complying with section 205C Accordingly, the due dates for transfer of the

unclaimed dividend to IEPF are as follows:

Financial Year Due Date for transfer

2004-05 26thSeptember 2012

2005-06 19th September 2013

2006-07 26th September 2014


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SpiceJet

Reported a net loss of Rs.6,0576.80 lakhs aftertax in the year 2011-12

Hence no dividend was declared, complying withthe provisions of section 205 of Companies Act


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Foreign Exchange Earnings


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Foreign Exchange Earnings

According to Section 217-Boards ReportCompanies Act, 1956,

(1) There shall be attached to every balance sheetlaid before a company in general meeting, areport by its Board of directors, with respect to:

(e) the conservation of energy, technologyabsorption, foreign exchange earnings and outgo,in such manner as may be prescribed


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Earnings in foreign exchange classified under thefollowing heads:

(I)Export of goods calculated on F.O.B. basis;

(II)Royalty, know-how, professional and consultationfees;

(III)Interest and dividends; and

(IV)Other income, indicating the nature thereon.

Activities relating to exports; initiatives taken to increaseexports ; development of new export markets for products

and services ;and export plans; Total foreign exchange used and earned

Earnings in foreign exchange from professional fees shouldbe on accrual basis


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Jet Airways

Jet airways has abided to Companies Act 1956,Sec 217(1)(e) and included the ForeignExchange Earnings and Outgoings in the notes

forming a part of the balance sheet and P&Laccount.

The total net gain and loss on each transactionhas been mentioned in the profit and loss

account for the year ended 31st march 2012.


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The company also made additional disclosures with

respect to all the transactions of foreign exchange


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SpiceJet

Foreign Exchange Earnings & Outgo:

The Company had foreign exchange earnings of

Rs.591.56 million while the outgoings were Rs.8,831.29 million during the year under review


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Compliance with the Act: Liabilities side of the balance sheet


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Assets side of the balance sheet


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The following has been included in the P&L account


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As more detailed in note 26 of the financial statements,the Company has not accounted for the foreignexchange differences on foreign currency borrowings tothe extent they are regarded as an adjustment to

interest cost as defined under paragraph 4(e) ofAccounting Standard 16 Borrowing Costs, as requiredunder the said standard. In the absence of informationrelating to interest on comparable local borrowings, weare unable to comment on the consequential effect of the

above on the loss for the year ended March 31, 2012. Hence the auditors could not provide a clear comment

on the consequences of the loss.

Auditors Report


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Conclusion about Foreign Exchange Earnings

Hence, both the companies have complied with theprovisions section 217(1)(e) of the companies act

1956.All the expenditure and income has been shown inthe P&L account. The unamortised amount and otheramount has also been mentioned in the balance sheet ofthe company.


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Technology Absorption

As Per Section 217(1)(e) of companies act1956:

A Report By Board Of Directors, with respect tofollowing must be attached:

Conservation Of EnergyTechnology AbsorptionForeign Exchange Earnings And OutgoIn A Prescribed Manner


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SpiceJet

As Per Section 217(1)(e) of companies act1956:

Section 11 of directors report highlight the

following:

Management highly conscious of criticality of

conservation of energy at all operational levelsEnergy efficient systems implementedSubject matter stated and disclosed as perprescribed manner


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Jet Airways

As Per Section 217(1)(e) of companies act 1956:

Company has embraced the best operational, technological &maintenance practices & recommendations to reduce fuel burnContinuous modernization of fleet

regular replacement of older aircrafts by new ones to improve fuelefficiencyMonitoring weight on board & continuous implementation of weightreduction programIntegrated emissions management system -> monitoring & optimizing the

use aviation turbine fuelCarbon footprint assessment for both direct & indirect emissions as pergreenhouse gas protocol standard developed by world resources institute(WRI) and world business council for sustainable development (WBCSD)


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Conclusion in terms of Technology Absorption

Clearly jet airways has been more stringent andproactive:

Embraced best operational, technological & maintenancepractices

Modernized fleet with older aircraft retiredWeight monitoring system for catering, cabin & galley items Development of items to monitor after consumptionCarbon foot print assessment as per standards of greenhousegas protocol

While both, spice jet & jet airways comply with section 217(e) of companies act, jet airways has been more proactive andclear in its technology absorption initiatives


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