Newsletter April 2019 - ICSI · 2019. 4. 13. · I also acknowledge the support of CS Ranjeet...

NOIDA CHAPTER OF NIRC OF ICSI

Newsletter April 2019

Volume 1| Monthly Newsletter

INDEX S.No Particulars Page No.

1. Details of Management Committee and Newsletter Editors 03

2. Chairman‘s Message 04

3. Recent Initiatives of Noida Chapter 05

4. Benefits of Empanelment with Kailash Hospital and Neo Hospital 06

5. Activities during last two months for Members & Students 07

6. Proposed Activities in Coming Month(s) 08

7. Recent Amendments in Companies Act, 2013 09

8. Recent Amendments in Labour Laws 12

9. Recent Amendments in GST 13

10. General Updates 14

11. Article :- Emerging Opportunities for a CS: Valuation 16

12. Article :- Independent Director – A CS Perspective 19

14. Important System Settings to help in Professional Assignments 27

15. Photographs of Activities of Chapter 28

Volume 1| Monthly Newsletter|

Managing Committee (2019-20)

1. CS. Shivam Rastogi Chairman

2. CS. Nand Lal Thakur Vice Chairman

3. CS. Dhruv Khandelwal Secretary

4. CS. Pankaj Grover Treasurer

5. CS. Preeti Grover Member

6. CS. Manpreet Singh Member

7. CS. Nikhil Verma Member

Newsletter Editors

1. CS Pankaj Grover— Treasurer , Noida Chapter

Chairman- Research, Representation & Publication Committee

2. CS Nand Lal Thakur

3. CS Dhruv Khandelwal

4. Sameer Gahlot—Key Contributor

5. CS. Rajiv Bajaj (Past Central Council Member)

6. CS Alok Kuchhal (Past Chairman, Noida Chapter)

7. CS. Shivam Rastogi


CHAIRMAN’S MESSAGE

Dear Respected Seniors/ Professional Colleagues/ Students,

Greetings from Noida Chapter !!!

I feel privileged to pen the message in first edition of the Newsletter of Noida Chapter. At the outset I am

thankful to all my colleagues of Management Committee, Members and Students of the Noida Chapter,

who helped us to release the first edition of Newsletter.

I also acknowledge the support of CS Ranjeet Pandey, President ICSI, CS. GS Sarin, Chairman-NIRC, all

Central & Regional Council Members, all seniors and all past Chairmen and all past Managing Committee

Members of Noida Chapter for their support to Noida Chapter.

Further, on behalf of the team Noida Chapter, I assure you that we are working with full enthusiasm to

take our Noida Chapter to a newer heights with creative and innovative ideas and also set a vision to

establish our Noida Chapter as Education Hub of the ICSI.

We are committed to provide the best facilities to all our Members and Students.

In order to provide you the best facilities, we need your continuous support and guidance also. If you

have any suggestions please do not hesitate to write to us at [email protected]

Yours Truly,

CS. Shivam Rastogi

Chairman– Noida Chapter of NIRC of ICSI

Success comes to those who think beyond their comfort zone.

- CS. Shivam Rastogi


1. Empanelment of Noida Chapter with Kailash Hospital Noida & Greater

Noida. (Members/Students from any city can avail benefits)

2. Empanelment of Noida Chapter with Kailash Hospital for Special Discount

Package for various Investigations during the month of March on occasion

of Women’s Day.

3. Empanelment of Noida Chapter with Neo Hospital, Noida

4. Empanelment of Noida Chapter with Aktivhealth for Special Discount Pack-

ages for Members/Students.

5. Organized Seminars for Members and Students with more focus on Practical

Exposures.

6. Organized 1st Student Integration Programme “Samvaad” to felicitate “Rank

Holders and Passed Students” in December 2018.

7. Participation at Raahgiri with Members and Students as Brand Building Exer-

cise.

8. Adoption of theme for the year 2019-20 “A Step Towards Education Hub of

the ICSI”

9. Re-engineering of Various Internal Processes of Noida Chapter.

10. Negotiation with other Hospitals is under process.

RECENT INITIATIVES OF NOIDA CHAPTER


Benefits of Empanelment with Kailash Hospital

20% discounts on Room Rent (except ICU, CCU, ICCU, NICU & Nursery) and Inves-

tigations.

Hospital Rate List 2018-19 will be applicable for one year ending 31.03.2020.

Payment terms will on cash basis.

The above discount is applicable in their both Hospitals Noida and Greater Noida.

Benefits of Empanelment with Neo Hospital

OPD discount 20% (except medicine and implant)

IPD discount 20% (except medicine and implant)

Noida Chapter is thankful to CS. Ankit Sharma, Company Secretary, Kailash Hospitals

Limited and CS. Alok Kuchhal, Past Chairman, Noida Chapter for supporting us in finali-

sation of negotiation with Kailash Hospital and Neo Hospital respectively.


DATE PARTICULARS

26.01.2019 Republic Day Celebration

05.02.2019 Half Day Seminar on Interim Budget

09.02.2019 Half Day Seminar on Companies (Amendment) Ordinance, 2019

23.02.2019 Participation at Raahgiri Day, Noida

09.03.2019 Women’s Day Celebration

19.03.2019 Holi Celebration

ACTIVITIES DURING LAST TWO MONTHS

(For Members & Students)

ACTIVITIES DURING LAST TWO MONTHS

(For Students)

DATE PARTICULARS

09.02.2019 Professional Development Programme– 1 day


02.03.2019 1st Students Integration Programme– 1 day



07.03.2019 50th Management Skills Orientation Programme– 15 days


29.03.2019 Executive Development Programme– 8 days


DATE PARTICULARS

To be final-

ized

WORKSHOP ON GST

To be final-

ized

WORKSHOP ON NCLT

To be final-

ized

FULL DAY SEMINAR ON RECENT DEVELOPMENTs IN COMPANIES

ACT, 2013

08.04.2019 CAMPUS PLACEMENT For Qualified CS, Semi Qualified CS and

CS Trainees

10.04.2019 51st Management Skills Orientation Programme– 15 days

To be final-

ized

Professional Development Programme– 1 day

21.04.2019 Student’s Programme for Pre-Exam Motivations

- Negotiations with Other Renowned Hospitals

- Negotiations with Software Companies for the benefits of all Mem-

bers

PROPOSED ACTIVITIES IN COMING MONTH(s)

(For Members & Students)


Recent Amendment(s) in Companies Act, 2013

i. The Ministry of Corporate Affairs vide its Notification dated January 30, 2019 has notified the provisions of Section 465 of the Companies Act, 2013 which deals with Repeal of Certain Enactments and Savings. The said notification can be accessed at http://www.mca.gov.in/Ministry/pdf/NotificationSection465_31012019.pdf Analysis: All the provisions of Companies Act, 1956 shall stand repealed with effect from January 30, 2019.

ii. The Ministry of Corporate Affairs vide its Notification dated February 8, 2019 has amended the Companies (Significant Beneficial Owners) Rules, 2018. Objective of the Rules:

To track down the natural person holding significant beneficial interest in a

Company.

The said notification can be accessed at: http://www.mca.gov.in/

Ministry/pdf/CompaniesOwnersAmendmentRules_08020219.pdf

Applicability of the Rules:

These Rules shall not apply on the following companies:

1. The Authority constituted under Section 125 i.e. Investor Education and

Protection Fund

2. Its holding reporting company

Provided the details of such holding reporting company shall be reported

in Form No. BEN – 2.

3. The Central Government, State Government or any local authority


iii. The Ministry of Corporate Affairs vide its Notification dated February

21, 2019 has amended the Companies (Incorporation) Rules, 2014

Applicability: Every company incorporated on or before December 31, 2017

shall file particulars of the company and its registered office in E-Form AC-

TIVE (Active Company Tagging Identities and Verification).

4. A reporting company or a body corporate or an entity controlled by the Cen-

tral Government or by any State Government or Governments, or partly by

the Central Government and partly by one or more State Governments.

5. Securities and Exchange Board of India registered Investment Vehicles such as mutual funds, alternative investment funds (AIF), Real Estate In-vestment Trusts (REITs), Infrastructure Investment Trust (InVITs) regulated by the Securities Exchange Board of India.

6. Investment Vehicles regulated by Reserve Bank of India, or Insurance Reg-ulatory and Development Authority of India, or Pension Fund Regulatory and Development Authority.

Consequences in case of violation of provisions of this Section:

Where any person fails to make a declaration, he shall be punishable with im-

prisonment for a term which may extend to 1 year or with fine which shall not

be less than ₹1 lakh but which may extend to ₹10 lakhs.

Where any company violate provisions of this section, the company and its

officer shall be punishable with fine which shall not be less than ₹10 lakhs but

which may extend to ₹50 lakhs.

Where any person willfully furnishes any false or incorrect information or sup-presses any material information of which he is aware in the declaration, he shall be liable to action under Section 447 (i.e. Punishment for fraud).


Violation:

In case a company does not intimate the Registrar about the said particulars on or before April 26, 2019, the company shall be marked as Active Non-Compliant. In addition to that, the company shall not be allowed to file various E-Forms (like Return of Allotment, Change in Paid-up Capital, Change in Direc-tors, Change in Registered Office).

Filing the E-Form ACTIVE after April 26, 2019 shall be penalized with ₹10,000 also.

Things to be taken care of at the time of filing E-Form INC 22A (ACTIVE):

The following things needs to be taken care of at the time of filing the said form:

One photograph of Director showing external building of registered office along with name plate of company and registered office address who has affixed his/her DSC in the form prescribed by MCA.

One photograph of internal building of registered office showing at least one di-rector inside the office who has affixed his/her DSC in the form prescribed by MCA.

Make sure DIN of all the directors is in approved status and such other particu-lars as may be prescribed in this behalf by the MCA.

To take note of the aforesaid amendment, the Companies (Registration Office and Fees) Rules, 2014 and Companies (Incorporation) Rules, 2014 has been amended.

The Notification can be accessed at: http://www.mca.gov.in/Ministry/pdf/CompaniesIncorporationAmendmentRules_21022019.pdf.

iv. The Ministry of Corporate Affairs vide its Notification dated March 29, 2019

has amended the Companies (Incorporation) Rules, 2014

The Application (Spice) for Incorporation of a company shall be accompanied by a

linked e-form AGILE (Application for registration of the Goods and Service Tax

Identification Number (GSTIN), Employees’ State Insurance Corporation (ESIC) reg-

istration and Employees’ Provident Fund Organisation (EPFO) registration) with ef-

fect from 31st March, 2019.


i. The Ministry of Labour and Employment vide its Notification dated January 29, 2019 has amended the Payment of Bonus Rules, 1975.

Rule 5 (Annual Return) of Payment of Bonus Rules , 1975

Provision before amendment:

Every Employer shall send a return in Form D to the Inspector within 30 days after the expiry of:

In case of Dispute:

Within a month from the date on which amount becomes enforceable or the settlement comes into operation, in respect of such dispute.

In any other case:

Within a period of eight months from the close of the accounting year.

Provisions after amendment:

Every Employer shall, on or before the 1st day of February in each year, upload unified annual return in Form D on the web portal of the Central Government in the Ministry of Labour and Employment giving information as to the particulars specified in respect of the preceding year.

The Notification can be accessed at:

https://labour.gov.in/sites/default/files/The_Payment_of_Bonus%28Amendment%29Rules%2C2019.pdf

Recent Amendment(s) in Labour Laws

ii. The Ministry of Labour and Employment vide its Notification dated

February 7, 2019 has notified the Pradhan Mantri Shram Yogi Maan-

Dhan 2019.

Applicability of the scheme:

All the workers, working in the unorganized sector whose monthly income

does not exceed ₹15,000, have an option to become member of this Scheme.

This scheme shall come into force on February 15, 2019.

The Notification can be accessed at https://labour.gov.in/sites/default/

files/197105.pdf


iii. The Ministry of Labour and Employment vide its Note dated February

7, 2019 has amended the Model Factories Rules

As per the amendment, Sanitary Napkins of adequate quality conforming to

Indian Standards shall be provided and maintained in the women’s toilets for

their use, and the same replenished on daily basis. In addition to that, dispos-

able bins with lids shall be provided within the women’s toilets for the collec-

tion of the used napkins. The used napkins shall be disposed of as per the

procedure approved by the Inspector.

The Note can be accessed at

https://labour.gov.in/sites/default/files/Model_Factories_Rules.pdf

Recent Amendment(s) in GST

The following recommendations were made by the GST Council in its

33rd meeting dated February 24, 2019:

a. GST shall be levied at effective rate of 5% without Input Tax Credit (ITC) on

residential properties outside affordable segment.

b. GST shall be levied at effective rate of 1% without Input Tax Credit (ITC) on

affordable housing properties.

The new rates shall be effective with effect from April 1, 2019.

Affordable Housing shall be:

a. A residential house/flat of carpet area of up to 90 sq. meter in non-

metropolitan cities/towns and 60 sq. meter in metropolitan cities having value

up to ₹45 lacs (both for metropolitan and non-metropolitan cities).

b. Metropolitan Cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi,

Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata

and Mumbai (whole of MMR).


General Updates

1. The Securities and Exchange Board of India vide its Circular dated February

11, 2019 has relaxed the requirement from furnishing a copy of PAN card for

transfer of equity shares of listed entities executed by non-residents.

The Circular can be accessed at :

https://www.sebi.gov.in/legal/circulars/feb-2019/relaxation-from-requirement-to-

furnish-a-copy-of-pan-for-transfer-of-equity-shares-of-listed-entities-executed-by-non

-residents_42043.html

2. The Securities and Exchange Board of India vide its Circular dated

February 8, 2019 has accepted the recommendation of committee on

corporate governance headed by Shri Uday Kotak in order to increase

the efficiency of board functioning.

The following are the recommendation of this committee:

Secretarial Audit to be made compulsory for all listed entities under SEBI

(LODR) Regulations, 2015 in line with the provisions of Companies Act, 2013.

Secretarial Audit to be extended to all material unlisted Indian subsidiaries so

as to improve compliance at a group level for listed entities.

The Circular can be accessed at :

https://www.sebi.gov.in/legal/circulars/feb-2019/format-for-annual-secretarial-

audit-report-and-annual-secretarial-compliance-report-for-listed-entities-and-

their-material-subsidiaries_42015.html

3. The Department for Promotion of Industry and Internal Trade (DPIIT)

has issued a notification on February 4, 2019, wherein it has amended

the notification issued in April 2018 for easing the norms for providing

tax emption to the Startup companies.


As per the notification, an entity is considered as Startup:

Up to a period of 7 years from the date of Incorporation of Private Limited

Company or registered as a partnership firm or a limited liability partner-

ship in India. In the case of Startups in the biotechnology sector, the peri-

od shall be up to 10 years from the date of its incorporation/registration.

Turnover of the entity for any of the financial year since incorporation/

registration has not exceeded ₹25 crores.

Entity is working towards innovation, development or improvement of

products, processes or services, or if it is a scalable business model with a

high potential of employment generation or wealth creation.

Provided an entity formed by splitting up or reconstruction of an existing business

shall not be considered a “Startup”.

A Startup which is recognized by DPIIT is eligible to apply for the shares already

issued or proposed to be issued if the following conditions are fulfilled:

Aggregate amount of paid-up share capital and share premium of the startup

after the proposed issue of share, if any, does not exceed ₹10 crores.

The investor or proposed investor shall have –

Returned income of ₹50 lakhs or more for the financial year preceding the

year of investment or proposed investment and

Net worth exceeding ₹2 crores or the amount of investment made/

proposed to be made in the startup, whichever is higher, as on the last

date of the financial year preceding the year of investment or proposed in-

vestment.

After the amendment, an entity will be considered as a Start-ups up to a period of

10 years from the date of incorporation (in case of Company) and registration (in

case of LLP) in place of the earlier duration of 7 years. Similarly, an entity will

continue to be recognized as a Start-ups, if its turnover for any of the financial

years since incorporation and registration has not exceeded ₹100 crores in place

of ₹25 crores earlier.


CS. Raghav Agarwal FCS, LL.B., M.Com., EPCF (IIM-C), AWMC (IIBF) Registered Valuer (IBBI) Investment Adviser (SEBI)


Steps in Valuing:

1. Identification of type of

Value: Valuation bases

a. Fair Value

b. Participant Specific Value

c. Liquidation Value

2. Assessing how asset is

deployed: Premise of Val-

ue

a. Highest & Best Use (HABU)

b. Going Concern Value

c. As-is-where-is basis

d. Orderly Liquidation

e. Forced transaction

3. Valuation Approaches

a. Market Approach

i) Comparable Transaction

Multiple (CTM) Method

ii) Comparable Companies Multi-

ple (CCM) Method

iii) Other Market Approach Con-

siderations

b. Income Approach

i) Discounted Cash Flow (DCF)

Method

ii) Relief from Royalty (RFR)

Method

iii) Multi-Period Excess Earnings

Method (MEEM)

iv) With and Without Method

(WWM)

v) Option Pricing Models (Black

Scholes-Merton Model and

Binomial Model)

c. Cost Approach

i) Replacement Cost Method

ii) Reproduction Cost Method

iii) Net Asset Value (NAV) Meth-

od

4. VALUATION DATE

A new regulated start by IBBI

The new era of new professional has already geared up

with the advent of IBBI wherein two professionals are

recognized: the Insolvency Professionals & the Registered

Valuers.

Valuation is driven by the purpose of valuation, statutory

requirements, business factors, etc. Nowadays, valuation

of corporates has become a sensitive issue since Febru-

ary 1, 2019, wherein the recognition for valuation under

the Companies Act, 2013 rests with the Valuer, regis-

tered with the Insolvency & Bankruptcy Board of India

(IBBI). The time has started wherein the valuers need to

observe the standards, for valuing the companies or their

respective financial & non-financial assets or their tangi-

ble & non-tangible assets, to be notified by the Central

Government until then the internationally accepted valu-

ation standards i.e. International Valuation Standards

(IVS) issued by the International Valuation Standards

Council (IVSC); & valuation standards adopted by any

Registered Valuers Organisation (RVO).

In practice, valuation is guided by a number of methods/

approaches as may be required for the adjustment for

the respective business/asset. The purpose of valuations

in any enterprise may stretch from regulatory to non-

regulatory, M&A to Fair Value (Ind AS), voluntary assess-

ment to NCLT/Courts, Acquisition to mediation, etc.

Emerging Opportunities for a CS: Valuations!


The requirements that we are struggling today are under the Companies Act,

2013, where erstwhile no standard or guideline was being followed but now a

mandate from IBBI & RVO for the Valuers under the following sections:

Sl. No. Section Particulars

1 62(1)C Valuation report for further issue of shares

2 192(2) Valuation of assets involved in arrangement of non-cash transactions involving directors

3 230(2)(c)(v)

Valuation of shares, property and assets of the company under a scheme of corporate debt restructuring

4 230(3) Valuation report along with notice of creditors/ sharehold-ers meeting – under scheme of compromise/ arrangement

5 232(2)(d)

The report of the expert with regard to valuation, if any, would be circulated for meeting of creditors/ members

6 232(3)(h)

The valuation report to be made by the tribunal for exit op-portunity to the shareholders of transferor company – un-der the scheme of compromise/ arrangement in case the transferor company is listed company and the transferee company is an unlisted company

7 236(2) Valuation of equity shares held by the minority sharehold-ers

8 281(1) Valuing assets for submission of report by liquidator

FOCUS ON VALUATION APPROACHES

The most important decision the valuer must take is deciding upon the appropri-ate valuation model – which range from simple to highly sophisticated. Different models operate under very different assumptions, but also share common char-acteristics allowing them to be classified in broader terms. Such classification makes it easier to understand why different models provide different results, and when the fundamental assumptions are not suitable to the given situation. There are widely 3 accepted approaches to valuation namely:

1. Income Approach 2. Cost Approach 3. Market Approach Instead of explaining every approach, we would like to focus on Income Approach which is most seasoned approach & primarily followed by every Investment banker, strategist, Valuer, etc. is Income Approach wherein the most prominent method is Discounted Cash Flow (DCF) Method, which we have summarized be-low.


DCF: An empirical approach! One of the most commonly used approaches to value a company, project, or asset is the Discounted Cash Flow ap-proach (―DCF‖). The DCF method is based upon forward looking data and therefore requires a relatively large amount of predictions for the future business situation of the company and the economy in general. Minor changes in the underlying assumptions will result in large differences in the company‘s value. It is therefore very important to know which assumptions are used and how they influence the outcome of the analysis. It is actually a cash flow summary that it has to be adjusted to reflect the present value of money. This is equal to the discounted value of expected net future cash flows, with the discount reflecting the cost of waiting, risk and expected future inflation. There are two widely used variants of the DCF methodology, viz. Free Cash Flow to the Firm (―FCFF‖) and Free Cash Flow to Equity (―FCFE‖). While theory suggests that both variants of DCF should yield the same value for equity, given the same set of inputs, practitioners of valuation often come across situations where the equity values using the two ap-proaches do not converge. It is observed that none of the approaches can be concluded to be the ‗best‘ approach; therefore it is advisable to use an approach which captures the changes in leverage. Also, the analysis highlights that FCFE is comparatively more volatile and sensitive to chang-es in financial leverage over a period than FCFF, making the use of a constant discount rate difficult to justify. Further, there are divergent views on when a particular variant should be used versus the other. The most important step for the practitioner is to under-stand each business case and then proceed to eliminate or address the limitations by adjusting the technique in valuing the subject. It is also suggested that though none of the ap-proaches shall be used in isolation, a combination of the above can be applied to estimate the value, analyze and corroborate the results from each approach and arrive at the most accurate value possible. The DCF analysis is a very powerful tool that is not only used to value companies but also to price initial public offerings (IPOs) and other financial assets. It is such a powerful tool in finance, that it is so widely used by professionals in investment banks, consul-tancies and managers around the world for a range of tasks that it is even referred to as ―the heart of most corporate capital budgeting systems‖ (Luehrman, 1998, p. 51).

Contents of a Valuation

Report

a. background information

of the asset being valued

b. purpose of valuation and

appointing authority;

c. identity of the valuer and

any other experts in-

volved in the valuation;

d. disclosure of valuer inter-

est or conflict, if any;

e. date of appointment,

valuation date and date

of report;

f. inspections and/or ivesti-

gations undertaken;

g. nature and sources of

the information used or

relied upon;

h. procedures adopted in

carrying out the valua-

tion and valuation

i. standards followed;

j. restrictions on use of the

report, if any;

k. major factors that were

l. taken into account dur-

ing the valuation;

m. conclusion; and

n. caveats, limitations and

disclaimers to the extent

they explain or elucidate

the limitations faced by

valuer, which shall not

be for the purpose of

limiting his responsibility

for the valuation report.

Disclaimer: This article is shared for the pur-pose of enlightenment & sharing of knowledge regarding the subject & the author has taken reference from the well versed readers, stand-ards & guidance by dif-ferent agencies & should not be construed as opinion of the author & not to be reproduced anywhere for any pur-pose.

Alok Kumar Kuchhal, FCS Indiacorp Law, Advocates & Solicitors Corporate Lawyer, Registered Insolvency Professional [email protected]

Independent Director – A CS Perspective INTRODUCTION A person who is at liberty to decide over the matters based on his expert knowledge and being very independent and definitely not being influenced by any fact of matter. The person is assumed to have expert knowledge in the area where he will be acting as independent director and also that he being in a fiduciary position plays his roles for the best of those who are relying on his decisions. Doing statutory duties just for sake is not enough, performing every duty whether statutory or no in spirit is re-quired. Independent directors are in huge demand today, they are trend setters, eve-ry level of an organization like shareholders, employees, management, other stake-holders and even the corporate experts and analyst all have eyes on IDs, and they all are looking forward to them. IDs are powerhouse of a company; they light up the present and future and brighten up the image of a company. Regulatory bodies also rely on the decisions of an ID, there is huge responsibility on the shoulders of ID, and they certainly have to stand out the crowd to prove their profession. They act in a bo-nafide manner, without being biased and always for the betterment of the company. They should not be directly or indirectly related to the company as it may affect their independency. IDs should constitute their separate meetings also to discuss matters related to the company and that too without being under the management pressure. Being an ID seems to be fascinating to others but with such handsome remuneration and company pleasures, there comes a very sensitive sense of responsibility, which could make or break a company IDs are not an Indian concept; they can‘t be accepted here, due to its being so inde-pendent in nature, the Indian companies fear to give their confidential information to a complete stranger. They instead prefer any of their relative or any known person to appoint as ID so that the information stays safe and these IDs don‘t stand against their decisions. In a conversation with many Indian corporate the conclusion is that they don‘t consider this concept very seriously, for them IDs are just a puppet, some-times they even appoint there servants on the board as they are loyal and don‘t have any knowledge about company matters. They say that most of the contribution is their own; they don‘t want any outsider‘s interference in their company. Also the reg-ulatory here are not much concerned about IDs, as there are very few IDs in India and most are not .


even graduates, what attracts them here is good remuneration and VIP treatment, they are not at all concerned about minority shareholders interest. The Indian compa-nies are just fooling around in the name of compliance; they are just forced to do so; however only a few are complying in true spirit. Today, even most IDs admit that there is a little that they can do if the promoters are of the intention of committing any offence. In a recent debate of IDs including some reputed IDs they were just de-fending the present institution of IDs. Most of these eminent persons have no choice but to defend the institution of IDs, as they have to justify themselves being on board of directors and as also because most them are drawing a very handsome earnings from this profession. Many IDs have even admitted that they have joined in the company of an old friend. Now, in this case how can one expect them to be disloyal to their friends in the boardroom? Neither they are concerned with the interest of minority shareholders. An analysis of education qualification of IDs reveals that approx. 198 of them are non-graduates, 75% have not gone beyond schooling, and another 3500+ are only gradu-ates. Due to lack of expert knowledge, the promoters easily deceive these IDs may be by false and wrong presentation of information before them and can conclude a scam. Categories of IDs 1. Home directors As the promoters may not be comfortable in sharing company information, including confidential information, giving to a stranger, for fear of misuse. They may appoint any person like barber, driver also to secure their information and as there is no such technical qualifications mentioned in the act. Means any Indian above the age of 21 years may be appointed for such a professional and technical job. 2. Value directors Value Directors are those that either bring knowledge and expertise to the company lawyers, finance professionals, technocrats etc- or they provide networking to the company by opening doors to the government, politicians and institutions. The prob-lem is that this is not their primary task and they should, in fact, be called Value Di-rectors or Professional Directors and not IDs as almost all of such people are also ei-ther personally known to the promoters or have been referred by someone close to the promoters ( and are paid extremely well) . So despite their ability to identify promoters‘ wrongdoings, they would still by and Large support the promoters. 3. Celebrity Directors These directors are well known celebrities they can be of different field like film stars, lyricists, sportsmen, defense personnel, fiction writers etc. and whose main reason to be invited to become an ID is to add an aura of respectability and news value to the company, and also to impress both the institutional as well as the retail investors.


4. PSU Directors These people are appointed on the board of listed PSUs. They are either politicians or bureaucrats who protect the interest of dominant shareholders like government or those individuals to whom the politicians would like to favour. Hence, there main agenda is to benefit their respective ministries and are clearly not so concerned about the minority shareholders. WHO CAN BE AN INDEPENDENT DIRECTOR AS PER SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULA-TIONS, 2015 independent director" means a non-executive director, other than a nominee director of the listed entity: i. who, in the opinion of the board of directors, is a person of integrity and possesses

relevant expertise and experience; ii. who is or was not a promoter of the listed entity or its holding, subsidiary or asso-

ciate company; iii. who is not related to promoters or directors in the listed entity, its holding, subsid-

iary or associate company; iv. who, apart from receiving director's remuneration, has or had no material pecuni-

ary relationship with the listed entity, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year; 15

v. none of whose relatives has or had pecuniary relationship or transaction with the listed entity, its holding, subsidiary or associate company, or their promoters, or directors, amounting to two per cent. or more of its gross turnover or total income or fifty lakh rupees or such higher amount as may be prescribed from time to time, whichever is lower, during the two immediately preceding financial years or during the current financial year;

vi. who, neither himself, nor whose relative(s) — a. holds or has held the position of a key managerial personnel or is or has been

an employee of the listed entity or its holding, subsidiary or associate compa-ny in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed;

b. is or has been an employee or proprietor or a partner, in any of the three fi-nancial years immediately preceding the financial year in which he is proposed to be appointed, of —

i. a firm of auditors or company secretaries in practice or cost auditors of the listed entity or its holding, subsidiary or associate company; or ii. any legal or a consulting firm that has or had any transaction with the listed entity, its holding, subsidiary or associate company amounting to ten per cent or more of the gross turnover of such firm; c. holds together with his relatives two per cent or more of the total voting power of the listed entity; or d. is a chief executive or director, by whatever name called, of any non-profit or ganization that receives twenty-five per cent or more of its receipts or corpus from the listed entity, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent or more of the total voting power of the listed entity;


e. is a material supplier, service provider or customer or a lessor or lessee of the listed entity; (vii) Who is not less than 21 years of age. Applicable Following class of companies are required to appoint at least 1/3 of total number of directors on their Board of Directors as independent directors:

Listed Companies, Public Companies having paid up share capital of one hundred crore rupees or

more; or Public Companies having turnover of three hundred crore rupees or more; Public Companies which have, in aggregate, outstanding loans or borrowings

or debentures or deposits, exceeding two hundred crore rupees. It‘s very clear that the mandatory appointment of IDs is for limited companies. Companies which are unlisted which are larger than the largest don‘t require IDs. Which states that the interest of minority shareholders is at stake.

APPOINTMENT: Independent director may be appointed by such class of companies as prescribed as per the act, from a data bank, where eligible and directors willing to be appointed da-ta are maintained by any Institute or Association as may be prescribed by central government. Also appointment of IDs is not a big issue for companies as they present any stranger in front of shareholders, and shareholders being not aware about him, appoint him as an ID. It‘s in regular practice of companies nowadays, to fool the shareholders. Hence, saying this that the ID is appointed by the shareholders‘ approval is just a hol-low. TERM OF OFFICE: An Independent director can hold office for a term of 5 consecutive years and such term may be extended by shareholders approval through special resolution. Also the same person can be reappointed after a lapse of 3 years from the date of cessation of his directorship. ROLES AND RESPONSIBILITIES OF INDEPENDENT DIRECTOR Role and responsibility of IDs are a topic of debate as some consider his role for de-velopment of corporate strategy and to overview the performance of management with respect to their set goals. However, some argue that the role of IDs are not only to protect the interest on minority shareholders but also to protect the interest of all stakeholders. Here some obligations of ID as per the Companies act, 2013 are men-tioned below:


Obligations with respect to independent directors.

1. A person shall not serve as an independent director in more than seven listed

entities:

2. The maximum tenure of independent directors shall be in accordance with the

Companies Act, 2013 and rules made there under, in this regard, from time to

time.

3. The independent directors of the listed entity shall hold at least one meeting in

a year, without the presence of non-independent directors and members of the

management and all the independent directors shall strive to be present at

such meeting.

4. The independent directors in the meeting referred in sub-regulation (3) shall,

interalia-

a. review the performance of non-independent directors and the board of di-

rectors as a whole;

b. review the performance of the chairperson of the listed entity, taking into

account the views of executive directors and non-executive directors;

c. Assess the quality, quantity and timeliness of flow of information between

the management of the listed entity and the board of directors that is nec-

essary for the board of directors to effectively and reasonably perform their

duties.

5. An independent director shall be held liable, only in respect of such acts of

omission or commission by the listed entity which had occurred with his

knowledge, attributable through processes of board of directors, and with his

consent or connivance or where he had not acted diligently with respect to the

provisions contained in these regulations.

6. An independent director who resigns or is removed from the board of directors

of the listed entity shall be replaced by a new independent director by listed en

tity at the earliest but not later than the immediate next meeting of the board

of directors or three months from the date of such vacancy, whichever is later:

Provided that where the listed entity fulfils the requirement of independent di-

rectors in its board of directors without filling the vacancy created by such res-

ignation or removal, the requirement of replacement by a new independent di-

rector shall not apply.


7. The listed entity shall familiarize the independent directors through various pro-

grammes about the listed entity, including the following:

a. nature of the industry in which the listed entity operates;

b. business model of the listed entity;

c. roles, rights, responsibilities of independent directors; and

d. any other relevant information.

Provided that any person who is serving as a whole time director in any listed

entity shall serve as an independent director in not more than three listed enti

ties.

Liability

As directors hold fiduciary position in a company, he is exposed to liabilities as a con-

sequence of breach of their duties. Liability may arise due to various reasons. Liability

are of two types,

first- statutory in nature which is stated in the company act 2013. This could be

a civil or criminal liability resulting in fines or imprisonment.

Second- liabilities which arise from claims against director for not performing

the regulations of director‘s duties.

But Apex court has taken an entirely different view and had opined for equal liabil-

ity of Independent Directors in the matter of Jaiprakash Associates Limited- A

bench of Chief Justice Dipak Misra and Justices A M Khanwilkar and D Y Chandra-

chud said:

―Neither the independent directors nor the promoter directors shall alienate their

personal properties or assets in any manner, nor if they do so, will they not only

be liable for criminal prosecution but contempt of the court. That, apart, we also

direct that the properties and assets of their immediate and dependent family

members should also not be transferred in any manner, whatsoever. Needless to

say that the direction for deposit of Rs 2,000 crore shall remain as it is. The only

indulgence is to pay the same in installments.‖

Post this there is a strong requirement of an elaborated discussion with respect to

the liabilities and/ or immunities for Independent Directors.


Independent director’s liability insurance

Nowadays, various companies buy this directors and officers liability (D&O) insurance,

which provides assurance to the officers and boards with protection against claims

which are not indemnified by the company.

Due to rapid increase in law suits and their delayed and prolonged proceedings, has

increased the demand of D&O also.

Most D&O policies consist of three broad types of coverage:

Side A, which pays for claims against directors and officers who are not indem-

nified by the company;

Side B, which reimburses the company for indemnified claims; and

Side C, which covers securities claims against the company.

Company also buy extra coverage- or an additional Side A policy – to protect the

personal assets of directors and officers, because Side B and Side C claims can quick-

ly obliterate all limits.

A relief to IDs/NEDs with a circular of MCA

The non-executive directors cannot be prosecuted if the violation of the law or

any omission is on the part of the company or by any other offic-

ers of the Company and which have occurred without his knowledge and consent.

The directors who can be held liable are:

Independent Directors in listed companies

Government nominees in PSUs

Nominee directors of public sector financial institutions

Government director

The Circular provides a reliefto NEDs in the sense that the culpability is to be confirmed and verified by the ROC before issuing any notice to NEDs as officer in de-fault. The Circular, however, does not go as far as proposals discussed in the context of the Companies Bill, 2009 that call for complete immunity to in-dependent directors from prosecution. By conferring discretion on the ROC (to be exercised in an informed manner), the Circular adopts a principles-based approach by avoiding the rigidity involved in complete immunity.


CONCLUSION

Today the regulators impose new regulations on any new scam disclosed, this results in more disclosures, more filings, which worsen the situation. Now, the IPO prospec-tus is a 300 page document, to which many experts have accepted that it hides more than reveals. IDs are to be appointed by the promoters of the company, independen-cy is a myth. As the appointees can‘t stand against masters.

However, corporate governance should be in the DNA and heart of the promoter. Good behavior will be appreciated and respected in the market, and this will automat-ically empower the transparency of appointment and independence of the director. IDs focus should be on better compliance of regulations, timely filings and disclo-sures. Also make the company aware about severe punishments on non-compliance.

Ministry is trying all there level best to make a better business environment, now this is the discretion of the companies whether to maximize their profit or doing business in good faith, contributing to the society. IDs are a crucial part of management they should be appointed as per the company‘s need having sound knowledge in the com-pany matters and maintain their independency by not imposing promoters decisions on them. IDs should be free on mind to make their decisions.


Many of the professionals are facing problems to register DSC on MCA Website.

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steps to make it convenient to register your DSC on MCA.

Step I: JAVA Settings 1. Open Control Panel

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3. In Java Panel Click on Settings and Select "Security"

4. Select Option "High"

5. In Edit Site List add http://www.mca.gov.in

STEP II: SETTINGS IN TRUSTED SITES OF INTERNET OPTIONS

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3. Select Security Tab and Click on Trusted Sites

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HOW TO REGISTER YOUR DSC ON MCA WITH EMSIGNER


Republic Day Celebration on 26.01.2019 at

Noida Chapter

Republic Day Celebration on 26.01.2019 at

Noida Chapter

Shaheed ki beti Certificate presented to Mr. Gopal Krishana Agarwal Ji

on Budget Programme on 05.02.2019, with him CS. Shivam Rastogi,

Chairman Noida Chapter, CS. M.K. Rustagi, Past Chairman, Noida Chapter

and CA Rakesh Gupta Ji.

Budget Session at Noida Chapter on 05.02.2019, from left CA Shashank

Shekhar, CA Rakesh Gupta, Mr. Gopal Krishna Agarwal, CS M.K. Rustagi,

CS Rajiv Bajaj and CS. Shivam Rastogi

Half Day Seminar on Company (Amendment) Ordinance, 2019,

Guest of Honor CS. Abhay Shringi, VP (F&A, Uflex Limited)

Half Day Seminar on Company (Amendment) Ordinance, 2019,

Chief Guest CS. Nesar Ahmad, (Past President ICSI)


CS. Shivam Rastogi, Chairman-Noida Chapter with CS. Ranjeet

Pandey, President ICSI at 1st Leadership Summit “Sankalp”. Team Noida with CS. GS Sarin, Chairman, NIRC.

Participation of Noida Chapter with Members and Students at

Raahgiri Noida

Participation of Noida Chapter with Members and Students at

Raahgiri Noida

Women’s Day Celebration on 09.02.2019 Inaugration of 50th (Golden Jubilee) MSOP of Noida Chapter from Left

CS. Nand Lal Thakur (Vice Chairman– Noida Chapter), CS. Surya Gupta

(Regional Council Member), CS. GS Sarin (Chairman-NIRC), CS. Shivam

Rastogi (Chairman Noida Chapter), CS. Kushal Kumar (Executive Officer-

Noida Chapter)


CS. GS Sarin, Chairman—NIRC, addressing participants of 50th

MSOP of Noida Chapter Group Photo with Participants of 50th MSOP of

Noida Chapter

Group Photo with Participants of 50th MSOP of

Noida Chapter

Valedictory Session of 50th MSOP of Noida Chapter, Chief Guest CS.

Bhuvaneshwar Kumar Mishra and Guest of Honor CS. Manoj Kumar

Ishwar

Group Photo with Participants of 50th MSOP of

Noida Chapter

Holi Celebrations at Noida Chapter


Newsletter April 2019 - ICSI · 2019. 4. 13. · I also acknowledge the support of CS Ranjeet...

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Transcript of Newsletter April 2019 - ICSI · 2019. 4. 13. · I also acknowledge the support of CS Ranjeet...