Provisions of CA 2013

8/12/2019 Provisions of CA 2013

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Private & confidential

Companies Act 2013

A ct i o n h a s b eg u n

February 2014


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A g e n d a 1. Where are we

.

3. Related Party Transactions

4. Key Messages

5. Q&A

Slide 2February, 2014

Companies Act 2013


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S e c t i o n

Where are we

PwC

Slide 3February, 2014Companies Act 2013

PwC


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W h er e a r e w e

Passed by both houses of parliament and received the assent of thePresident.

Currently, 98 sections of the Companies have been notified; both theacts i.e. Companies Act, 1956 and Companies Act 2013 Act co-ex i s t

Draft rules and forms have been released for public comments.

ompan es c expec e o e u y no e y a r calong with the issuance of all the related Rules / Forms



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A st a t i st i ca l sn a p sh o t

In more than 73% of sections, the government has the power to prescribe rules Executive can get into legislative domain

Companies Act, 2013: A Statistical Snapshot

Number of Chapters 29

Number of times the phrase as may be prescribed is used 346

470



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S e c t i o n

Key highlights and analysis

PwC Slide 6February, 2014Companies Act 2013

PwC


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D i r ect o r s I n t er est i n g N ew Co n cep t s

1. Resident Director

2. Can not be a director in more than 10 public cos

3. Alternate Director

4. Continued absence could lead to vacation

5. Reasons of resignation

6. Duty towards community

Ambiguity laid to rest in case of alternate directors



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N ew d i scl o su r es m a n d a t ed i n d i r ect o r s r ep o r t

1. Risk management policy

.

3. Corporate Social Responsibility

4. Board Evaluation

5. Operating effectiveness of Internal Financial Controls*

6. Related party contracts with their justification

Good to have things have been made must have Applicable for listed cos



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B o a r d s Co n f i r m a t i o n o n co m p l i a n ce

1. Inventory of applicable laws & compliance obligations

2. Responsible persons for compliance

3. Compliance Reporting through Chief Compliance Officer

4. No red flags or non compliances in high risk category



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B o a r d s Co n f i r m a t i o n o n R P T

1. List of related parties

2. Transactions in ordinary course of business

3. Arms length Pricing

4. Approvals



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R o l e o f a Co m p a n y Secr et a r y

1. Report to the board about compliance with the provisions of the act

2. Report to t e oar a out comp iance wit ot er aws app ica e to t ecompany

3. To ensure that company complies with applicable secretarial standardsmee ng

4. To provide guidance to the directors of the company on their duties andresponsibilities

5. To discharge such other duties as may be prescribed

ompany ecretary to report to t e oar on ot er app ca e aws as we

Back



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K ey M a n a g er i a l Per so n n el ( K M P)

Every Listed company and every other company with paid up share capital of5cr or more to have following full-time KMPs :

(i ) The Chief Executive Officer or the managing director or the manager or WTD,

(ii) The company secretary ,

(iii) The Chief Financial Officer

Can a KMP be appointed as a KMP in any other company?

What all documents can be signed by KMP ?

Covered in definition of related party

Back



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O f f i cer i n D ef a u l t O p p o r t u n i t i es t o d el eg a t e

1. Whole-Time director/Key Managerial Personnel

2. Director or Directors specified by the Board3. Any person with the authority of Board/KMP, responsible for

maintenance / filing of records or accounts etc fails to takepreventive steps

4. eg strar erc ant an ers - ssue trans er o secur t es



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I m m u n i t y t o n o n -ex ecu t i v e a n d i n d ep en d en t

L i m i t ed i m m u n i t y n o t a v a i l a b l e i n ca se o f :

Lack of due diligence

Knowled e and consent or connivance

Limited immunit in s eci ied circumstances



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R el a t ed P a r t y T r a n sa c t i o n s: N ew co n cep t s

1. Related Party and Transactions expanded

2. No need for Central Government approval

3. Concept of interested member

4. Approval my majority of minority

5. Role of Independent Directors, Audit Committee, Company Secretary



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R el a t ed Pa r t y T r a n sa ct i o n s

Scope of transactions widened includes sale or purchase of anyproperty

Need for Central Government approval done away with Shareholders approval for specified transactions

Concept of interested member:

Member can not vote if it is a related party Exemption for contracts between Holding and WoS

Routine transaction at Arms length exempted

RPTs to be included in the Boards Report along with justification



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R el a t ed Pa r t i es - D ef i n ed

Related Party means: A director or his relative

A firm in which a director or his relative is a partner A private in which a director is a member or director

2% of paid up capital

Any body corporate whose board is accustomed to act instructionsof a director

A KMP or his relative Holding co/Subsidiary co / Associate co

Such other person as may be described



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Sco p e o f t r a n sa c t i o n s w i d en ed

Transactions covered: Sale urchase or su l of oods or materials

Selling or buying property of any kind Leasing of property of any kind

Appointment of any agent for purchase or sale of goods, materials,

services or property



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R el a t ed Pa r t y T r a n sa c t i o n s So m e t ea ser s

Company intends to pay royalty to the holding company?

rec or wan s o ren ou s proper y o e company

A Company Secretarys relative is proposed to be appointed asa Manager Finance?

CEO wants to buy the car which has been allotted to him by thecompany?

an a company ge a conso a e approva or mu p econtracts ?



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W h en d o I n eed t o g o t o sh a r eh o l d er s?

For each transaction, if paid up capital of the company exceeds onecrore, or,

Transactions exceed 5% of the annual turnover or 20% of net worth, whichever is higher or,

exceeding one INR 1 lakh or,

Underwriting fees exceeding INR 10 lakh

Approval of central government not required Exemption in case of transactions in the ordinary course of business if



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I n t er est i n g Co n cep t o f i n t er est ed sh a r eh o l d er

Member can not vote if it is a related party

Question

at w appen to contract etween o ng company an w o yowned subsidiary? Will there be a deadlock?

1. Define related party universe and possible transactions

2. Define mechanism to demonstrate Arms length basis

3. Obtain revised disclosures before start of FY 14-15

4. Prepare RPT guidance document for company and its employees



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L o a n s t o D i r ect o r s

Loans can only be given to WTD or MD: As a part of employment terms applicable to all employees Pursuant to a scheme approved by the special resolution

Exemption to cases where loan is given in ordinary course of business at bank rate

Interested person means: Director of the holding co an firm in Director or relative is a artner a private company where such director is a director or member Any body corporate whose Board / MD is accustomed to act in

accordance with the instructions of its Board / Directors of lending

company

PwC Slide 22January, 2014Companies Act 2013


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Q u e s t i o n s

1. Can section 186 / 372 A dilute the impact of section 185?

2. What about existing loans to subsidiaries and other companies?

3. Does interest need to be charged on existing loans?

4. Are Directors of subsidiary co accustomed to act in accordance withinstruction of board of holding company? In all cases?



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K ey M essa g es

Disclosure based regime

Focus on governance

C ear roa map & action p an or comp iance



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T h a n k Yo u

This publication does not constitute professional advice. The information in this publication has been obtained or derived from sources believed byPricewaterhouseCoopers Private Limited (PwCPL) to be reliable but PwCPL does not represent that this information is accurate or complete. Any opinions orestimates contained in this publication represent the judgment of PwCPL at this time and are subject to change without notice. Readers of this publication areadvised to seek their own professional advice before taking any course of action or decision, for which they are entirely responsible, based on the contents of

s pu ca on. w ne er accep s or assumes any respons y or a y o any rea er o s pu ca on n respec o e n orma on con a ne w nor for any decisions readers may take or decide not to or fail to take.

2013 PricewaterhouseCoopers Private Limited. All rights reserved. In this document, PwC refers to PricewaterhouseCoopers Private Limited (a limited

liability company in India), which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each member firm of which is a separate legalentity.


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Co r p o r a t e So ci a l R esp o n si b i l i t y ( Sch ed u l e V I I )

1) Eradicating extreme hunger and poverty;

2) Promotion of education ;

3) Promoting gender equality and empowering women;

4) Reducing child mortality and improving maternal health;

5) Combating human immunodeficiency virus, acquired immune deficiency syndrome,ma ar a an o er seases;

6) Ensuring environmental sustainability;

7) Employment enhancing vocational skills; oc a us ness pro ec s;

9) Contribution to the Prime Minister's National Relief Fund or any other Fund set up bythe Central Government or the State Governments for Socio-economic development andrelief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other

backward classes, minorities and women; and10) such other matters as may be prescribed.



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Cl a u se 4 9 r eq u i r em en t s

B o a r d D i scl o su r es R i sk m a n a g em en t

The company shall lay down procedures to inform Board members about the risk assessmentand minimization procedures. These procedures shall be periodically reviewed to ensure thatexecut ve management contro s r s t roug means o a proper y e ne ramewor

C o m p l i a n c e

The Board shall periodically review compliance reports of all laws applicable to thecompany, prepare y t e company as we as steps ta en y t e company to recti yinstances of non compliances.

CE O / C F O c er t i f i c a t i o n e , .e. t e anag ng rector or anager appo nte n terms o t e ompan es ct,

1956 and the CFO i.e. the whole-time Finance Director or any other person heading thefinance function discharging that function shall certify to the Board that:

-

A statement in summary form of transactions with related parties in the ordinary course of business shall be placed periodically before the audit committee



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I n t er n a l F i n a n c i a l Co n t r o l s

Internal Financial Controls has been defined in the Act as to mean policies and procedures adopted by thecompany for ensuring: The orderly and efficient conduct of its business The safeguarding of assets

R eq u i r em en t s a n d a p p l i c a b i l i t y ( f o r v a r i o u s cl a ss o f co m p a n i es)

The prevention and detection of frauds and errors The accuracy and completeness of the accounting records The timely preparation of reliable financial information

Requirement as per Companies Act 2013 ListedPublic Company with paidup capital >= 100 crore orDebt >200 Crore

Private &other Publiccompanies

A u d i t o r s r ep o r t t o co m m en t u p o n a d eq u a c y o f i n t er n a lf i n a n c i a l c on t r o l s sy s t em ( d esi g n a s w el l a s o p er a t i n geffec t iveness)

D i r ec t o r s R esp o n si b i l i t y St a t e m e n t t o state that directors, h a v el a i d d o w n a d eq u a t e i n t er n a l f i n a n c i a l co n t r o l s and suchc o n t r o l s a r e o p er a t i n g e f f ec t i v e l y .

x x

The I n d ep en d e n t D i r ect o r s shall satisfy themselves on thei n t eg r i t y o f f i n a n c i a l i n f o r m a t i o n , and that f i n a n c i a l co n t r o l sand the systems of risk management a r e r o b u s t a n d d e f en s i b l e

x xA u d i t Co m m i t t ees terms of reference to include ev a l u a t i o n o fi n t er n a l f i n a n ci a l co n t r o l s and risk mana ement s stems x


Auditors qualification Imprisonment up to 3 years Monetary penalty up to Rs. 25 lacs


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W o m a n D i r ect o r So m e i n t er est i n g St a t s

Analysis of a total of 404 companies which came out with IPOs from 2002and are listed on BSE

Gender No ofDirectors Percentage

Gender Categorisations of Board positions

FemalePresence

No ofCompanies Percentage

Gender Frequency and Board representation

,

Female 152 5%

Total 3,143 100%

1 Female Director 103 25%2 Female Directors 23 6%3 Female Directors 1 0%

Total 404 100%

5% Male Female

6%

0%No FemaleDirector

69%

25%

Director2 FemaleDirectors

3 Female


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