1400573514CO ACT 2013-ADA-PRT-1

ASHU DALMIA & ASSOCIATES, CHARTERED ACCOUNTANTS

Web: www.ada.org.in, [email protected], [email protected]

The Companies Act 2013: An overview

S.No Agenda Action to be taken

Reference

1. Printing of new Stationary of the

Company

Disclosure of the following to display a board outside the registered office and every office or place in which business is carried out, on the letterhead/bills or other official communications: Name (including previous name for up to 2 years), registered address, Corporate Identity Number(CIN), Telephone No., Fax No., website address email address, if any;

Section 12 of the CO ACT 2013

2. Resident Director

Every company to have compulsorily one director who has stayed in India for at least 182 days in the previous calendar year.

Section 149 (3) of the CO ACT 2013

3. Digital Signature for all Proposed

directors

Each proposed director is required to procure a digital signature certificate applying for his DIN. The DIN application prescribes for the proposed director to digitally sign his/her application by using his/her digital signature certificate.

Companies Appointment and qualification of Directors) Rules 2014

4. Automatic Vacation of the

office of Director

• A Director who does not attend any meetings of the Board in a year (with or without leave of absence) will automatically lose office.

• Recognizing that Board positions are

held by employees, for the first time, the New Act provides that an employee will cease to hold Board position upon separation of employment with the Company as well as any affiliate Company such as the holding or subsidiary or any associate Company

Section167 of the CO ACT 2013



5. Board Meetings

• New act allows participation of Directors

in Board Meeting through video conferencing and through other audio visual means by complying the prescribed procedures;

• At-least 7 days notice to be given for Board meeting;

• Notice of Board meeting may be given by electronic mode;

• Not more than 120 days shall be intervene between 2 consecutive board Meetings;

• Participation through video conferencing shall be counted for quorum;

• The Rules provided certain matters which cannot be dealt with in a meeting through video conferencing or other audio visual means.


6. Resolution by Circulation

• Under the new Act, resolution by circulation has to be approved if it is consented by majority of directors in contrast to corresponding provision of the Old Act, which required consent of all directors present in India or majority by them.

• Ratification of circular resolution shall be noted at a subsequent board meeting and shall be made part of the minutes of such Board meetings.

• Where more than1/3 of the total director of the company requires, resolution to be passed at a Board Meeting, the same shall not be passed by circulation.




7. Board Power • New powers are added in the list of

powers which can be exercised by the Board only by passing a resolution at Board meeting such as:

issue of shares, approval of financial statements, diversification of the business of the

Company, takeover of other companies, etc.

to approve amalgamation, merger or reconstruction

• Additionally, the restriction on the Board to exercise certain powers without the prior approval of the shareholders has now been extended even to private limited companies.

• Now, certain Board resolutions are also required to be filed with the ROC in form MGT-14 within 30 days.

Section179 and Section 180 of the CO ACT 2013

8. Loan to Directors

No Company shall directly or indirectly advance/give/provide to any of its director or to any other person in whom director is interested:

1. any loan ( including loan represented by book debts)

2. Guarantee 3. any security in connection with such loan

however this restriction is not applicable : Loan given to MD/WTD as a part of

service extended by company to its entire employee and pursuant to scheme approved by members by special resolution.

Loan given in normal course of its business and interest charged not less than bank rate declared by RBI.

Transactions between holding company and its wholly owned subsidiary company provided such loans are utilized by the subsidiary company for its principal business activities.

Section 185 of the CO ACT 2013 & Rule 10 of Companies (Meetings of Board and Its Powers) rules 2014-Chapter XII



9. Loans and

Investments by the Company

Inter Corporate Investment: Inter-corporate investments not to be made through more than two layers of investment companies. However this is not applicable when:

Company acquires any Company which is incorporated outside India. Such Company has Investment Subsidiary beyond Two layers as per the law of such country.

A subsidiary Company from having any investment subsidiary for the purpose of meeting of the requirement under any law framed under any law for the time being in force.

Limits for Loans /Guarantee /Security/Investment: Company shall not directly or indirectly give:

any loan to any person or other body corporate,

give any guarantee or provide security in connection with a loan to any other body corporate or person and

acquire by way of subscription, purchase or otherwise, the securities of any other body corporate:

• exceeding 60% of its paid-up share capital plus free reserves plus securities premium account, or

• 100% of its free reserves plus securities premium account, whichever is more.

However transaction beyond above limits can be done through prior approval of members by passing a special resolution. A register containing particulars of loan or guarantee given or security provided or investment made should be maintained by the




company. 10. Financial year The 1956 Act provides companies to elect

financial year. The 2013 Act eliminates the existing flexibility in having a financial year different than 31 March. The 2013 Act provides that the financial year for all companies should end on 31 March, with certain exceptions approved by the National Company Law Tribunal. Companies should align the financial year to 31 March within two years from 01 April 2014.

Section 2(41) of the CO ACT 2013

11. Acceptance of deposits/unsecured loan

Company cannot accept any kind of deposit/unsecured loan other than its members and from director during the tenure of his directorship.

Following compliance has to be followed in case of outstanding deposits as on 31st March 2014–

File a return of such deposits/loans till 30th June 2014, AND

Repay all such deposits/loans on or before 31st March 2015.


12. Allotment of Shares

The money payable on subscription of subscription not to be made in cash.

The subscription amount shall be kept in separate bank account with a scheduled bank.

Companies are required to allot shares within a period of two months. And the share certificates shall be issued within two months in the new Form SH 1.


13. Corporate Social Responsibility

Every Company having: Net worth of Rs 500 cr or more; or Turnover of Rs 1000 cr or more: or Net profit of Rs 5 cr or more

during any financial year than Compliance for CSR policy formation, spending and reporting need to be complied with.




14. Consolidated

financial statements

The 2013 Act now mandates consolidated financial statements (CFS) for any company having a subsidiary or an associate or a joint venture, to prepare and present consolidated financial statements in addition to standalone financial statements.


15, Obligation to indicate DIN

Every person or Company should mention the DIN in all forms, information or particulars which relates to the director or containing any reference of any director while furnishing the same.


16. Provisions on fraud prevention and consequences Fraud and auditor’s obligations and Punishment for fraud

If the statutory auditor detects any fraud in the Company, he is to mandatorily report the same directly to the authorities. If any loss has occurred due misleading or incorrect statements in the audit reports, the auditor has to pay damages to the other concerned stakeholders and statutory bodies. If the auditor has acted in a fraudulent manner or colluded with Company’s management, then the partners concerned and the audit firm will have joint and several responsibilities. The New Act imposes very strict punishment on persons involved in perpetrating a fraud in a Company. The prescribed punishment is (i) imprisonment for a term not less than six months which may extend to ten years along with (ii) fine being not less than the amount involved in the fraud and which may extend to three times the amount involved.

Section 143 of the CO ACT 2013 Section 447 of the CO ACT 2013

17. Legal recognition to other forms of companies

For the first time, the New Act recognizes certain additional categories of companies such as ‘One Person Company’ (similar to ‘proprietary firm’ but these can be formed only by an Indian citizen and resident), ‘Small Company’ (which has paid in share capital and turnover less than the prescribed thresholds and are hence exempted from certain compliances under the New Act) and ‘Dormant Company’ (which can be formed for a future project, to hold assets/intellectual property, etc., subject to undertaking certain basic compliances).



18. Additional

disclosures in annual return

The annual return to be filed every year with the ROC after the Annual General Meeting (“AGM”) should have additional disclosures on the Board and shareholders meetings held in that year along with attendance details of the participants, the remuneration paid to directors and key managerial personnel, etc. Additionally, the annual return should be signed by the CS of the Company or in his/her absence, by a CS in private practice.


19. Certification of Forms Registrar of Companies is empowered by Companies (Registration offices and Fees) Rules 2014 to examine the applications, forms, filed by companies. As per the new forms introduced by the Ministry duty of the professionals on certification of forms has been taken away to some extent since the certification of professionals is required for only few forms. With this change responsibility of a Director or Key Managerial Person is increased as the Forms are required to be signed by them. As per Rule 8 (7) it shall be the sole responsibility of the person signing the form and also the professional who is certifying the Forms to ensure that all the requirements of the Act are complied with and all attachments made to the forms are also in accordance with the Act and Rules applicable. If at any instance the form file contains any wrong statements or misleading statements or omission of material fact, person signing the Form is liable for penalty under section 448 and 449 of the Act and the digital signature of the person who has signed will be blocked by the Central Government till a final decision is reached. the forms which are file for mere intimation purpose to Registrar such forms will be approved automatically on filing the Form and Registrar can suo moto or on receipt of compliant at any time verify the contents of the form and if the form is found to be defective then an intimation will be sent the last available e-mail id or such communication address to file a fresh form within 30 days. If the company does not file a fresh form then the old form will be treated as invalid.

1400573514CO ACT 2013-ADA-PRT-1

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