companies act.ppt
TRANSCRIPT
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COVERAGE
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Objectives
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The
CompaniesAct, 1956
(notcovering)
The Companies Act, 2013(wider coverage + so many
novelties.. )
A PARADIGM SHIFT FOR THE
CORPORATE
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SomeImportant
Pointers
New
33 Definitions
470 Sections
Vs. 658 in Act-1956
29 Chapters
Vs. 13 parts in Act-1956
7 Schedules
Vs. 15 schedules inAct-1956
Substantial Part of the Act in form of Rules
(416 places it has as prescribedword)
COMPANIES ACT, 2013
16% in Rules earlier vs. 74% of Rules coverage now
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COMPANIES ACT, 2013
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Contemporary
EasyUnderstandability
Preventive
AdaptableInvestor
Protective
Self Regulatory
BusinessOriented
COMPANIES ACT, 2013
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The
Influencers
IPOScam
StockMarketScam
Satyam
SaharaPradeepOverseas
SesaSterlite
Peerless
PROMINENTINFLUENCERS TO THE
NEW COMPANY LAW
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Introduced for the
first time and New
Concepts
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Introduction of One Person CompanyStipulation of Woman Director (Listed + Share Cap-100, Turnover -300cr)
Provision ofClass Action suits
Introduction of Registered Valuer
Fast Track Mergerfor Holding & Subsidiary Companies
Cross Border Merger
Concept of Dormant Company
Further Use of electronic mode: Maintenance of Documents, Records, Registers,
Books of Accounts, etc. in e-Form
Meeting through Video Conferencing
Summary Procedure for Winding up of Company
Conciliation panel & special courts
Corporate Social Responsibility
NOVELTIES
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Overview Status as on Sep, 2014
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Overview Status as on Sep , 2014
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Overview Status as on Sep , 2014Chapter Coverage Sections Rules ( if any)
Chapter 1 Preliminary 1 to 2 Rules are issued
Chapter 2
Incorporation Of Company And Matters Incidental
Thereto 3 to 22 Rules are issued
Chapter 3 Prospectus And Allotment Of Securities 23 to 42 Rules are issued
Chapter 4 Share Capital And Debentures 43 to 72 Rules are issued
Chapter 5 Acceptance Of Deposits By Companies 73 to 76 Rules are issued
Chapter 6 Registration Of Charges 77 to 87 Rules are issued
Chapter 7 Management And Administration 88 to 122 Rules are issued
Chapter 8 Declaration And Payment Of Dividend 123 to 127 Rules are issued
Chapter 9 Accounts Of Companies 128 to 138 Rules are issued
Chapter 10 Audit And Auditors 139 to 148 Rules are issued
Chapter 11 Appointment And Qualifications Of Directors 149 to 172 Rules are issued
Chapter 12 Meetings Of Board And Its Powers 173 to 195 Rules are issued
Chapter 13
Appointment And Remuneration Of Managerial
Personnel 196 to 205 Rules are issued
Chapter 14 Inspection, Inquiry And Investigation 206 to 229 Rules are issuedChapter 15 Compromises, Arrangements And Amalgamations 230 to 240 pending
Chapter 16 Prevention Of Oppression And Mismanagement 241 to 246 pending
Chapter 17 Registered Valuers 247 pending
Chapter 18
Removal Of Names Of Companies From The Register Of
Companies 248 to 252 pending
Chapter 19 Revival And Rehabilitation Of Sick Companies 253 to 269 pending
Chapter 20 Winding Up 270 to 365 pending
Chapter 21 Companies Authorised To Register Under This Act 366 to 378 Rules are issued
Chapter 22 Companies Incorporated Outside India 379 to 393 Rules are issuedChapter 23 Government Companies 394 to 395 pending
Chapter 24 Registration Offices And Fees 396 to 404 Rules are issued
Chapter 25 Companies To Furnish Information Or Statistics 405 pending
Chapter 26 Nidhis 406 Rules are issued
Chapter 27 National Company Law Tribunal And Appellate Tribunal 407 to 434 pending
Chapter 28 Special Courts 435 to 446 pending
Chapter 29 Miscellaneous 447 to 470 Rules are issued
Other Rules issued are on - CSR
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New Concepts and Def in i t ions covered
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WHATS IN & OUT
IN
Key managerial personnel
Resident Director
Auditor Rotation Dormant company
NFRA
Vigil mechanism
SFIO
Definition of Subsidiary
Secretarial Audit
Recasting of Account
Private Placement
OUT
Sole selling agents
Commencement certificate
Statutory meetings
Convert share into stock
Qualification shares
Treasury stocks
KEY CHANGES INTRODUCED
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KEY CHANGES INTRODUCED Change
KEY CHANGES INTRODUCED Ch
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KEY CHANGES INTRODUCED Change
KEY CHANGES INTRODUCED Ch
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KEY CHANGES INTRODUCED Change
Appointment of Auditor [Sec 139] LLP eligible to become Auditor
Appointment for a term of 5 years and ratification in every AGM Requirement for rotation of Auditor introduced
Applicable to all companies except small companies and OPC
Individual Auditors - one term limited to 5 years
Firm Auditor - two terms limited to 10 years
Cooling Period of 5 years before the reappointment of the same
firm.
If no auditor re-appointed in AGM, existing auditor shall continue
Transition period of three years for complying with the requirement
Discussion
Period served by auditor earlier to this act counted in the number
of years
Whether rotation shall bring independence?
Whether rotation is desirable when no public interest is involved?
KEY CHANGES INTRODUCED Ch
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KEY CHANGES INTRODUCED Change
Disqualification of Auditors [Sec 141]
KEY CHANGES INTRODUCED Ch
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KEY CHANGES INTRODUCED Change
Disqualification/Removal of Auditors
Auditor Duties
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Auditor - Duties
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KEY CHANGES INTRODUCED Change
National Financial Reporting Authority [Sec 132]
Renamed National Advisory Committee on Accounting
StandardsFormulation and laying down of accounting and auditing
policies and standards
Monitor and enforce the compliance with accounting
standards and auditing standards
Oversee the quality of service of the professions
Suo motu or on reference made by Central Government-
professional or other misconductby CAs
Quasi-judicial body
15 member team with part-time & full-time members
Appeal available to Appellate Tribunal
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KEY CHANGES INTRODUCED Change
CSR ACTIVITIES
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CSR ACTIVITIES
CSR Activities:
Eradicating extreme hunger and poverty;
Promotion of education;
Promoting gender equality and empowering
women;
Reducing child mortality and improvingmaternal health;
Combating human immunodeficiency virus,
acquired immune deficiency syndrome,malaria and other diseases;
Ensuring environmental sustainability;
CSR ACTIVITIES
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CSR ACTIVITIES
CSR Activities:
Employment enhancing vocational skills;
Social business projects;
Contribution to the PM's National Relief Fund
or any other fund set up by the CG or the
SGs for socio-economic development andrelief and funds for the welfare of the SC, the
STs, other backward classes, minorities and
women; and Any other prescribed
Is provision to be made on unspent amount?
Tax implications ?
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Accounting Change
DEPRECIATION Schedule - II
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DEPRECIATION SCH - II
Shift from Schedule XIV to ScheduleII
Focus on Useful Life (similar to IFRS)
Focus on Component Accounting (similar to
IFRS)
DEPRECIATION SCH II
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No separate rates for shifts. Double shiftincreaseby 50%, triple shift100%
100% on assets below 5Knot required
Useful lives changedEg: Building from 58Yrs
to 30 Yrs: General FF15 to 10
On commencementasset would be depreciated
over remaining useful life
Where remaining useful live - niltrf to Surplus Component Accounting mandatory where relevant
& material
DEPRECIATION SCH - II
DEPRECIATION SCH II
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DEPRECIATION SCH - II
Useful life of the Asset cannot be more than the useful life
specified in Part C
The residual life of the Asset cannot be more than 5 per cent of
the original cost of asset.
For Intangible Assets, amortizations shall be guided by Accountin
Standards expect for Toll roads under PPP programe for which thamortization method is defined in Part A.
In case the useful life or residual value is notified by Regulatory
authority or CG, then it shall be applied for calculation
ExampleUseful life Computers/Laptops3 years
General Furniture & Fittings10 years
Motor Car (not for hire)8 years & (used for hire)6 year
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Private Placement Sec (42)
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Private Placement Sec (42)
P i Pl S ( 42)
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Private Placement Sec ( 42)
P i t Pl t S ( 42)
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Private Placement Sec ( 42)
REQUISITES FOR PRIVATE PLACEMENT
Requisites for Private Placement Sec ( 42)
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Requisites for Private Placement Sec ( 42)
Requisites for Private Placement Sec ( 42)
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Requisites for Private Placement Sec ( 42)
2
RE-ENACTING THE NEW
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Bringing Flexibility &
Adoption of
Internationally
Accepted Practices
Self Regulation with
more disclosures
Stringent Punishment
for violation
Efficient enforcement
of law
Healthy Growth of
India Inc.
Effective protection for
different sections of
Society
COMPANIES LAW
VARIOUS ENTITIES UNDER
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Entity Structure Recognized under the law
Access toCapital
Listed
Unlisted
Members
OPC
Privatecompany
Publiccompany
Control
Holding
Company
SubsidiaryCompany
AssociateCompany
Liability
Limited
Shares
Guarantee
Unlimited
Others
Nidhi
Company
ProducerCompany
ForeignCompany
Size
Small
Company
Activity
Dormant
Company
Government
Company
THE ACT
CATEGORIZATION OF RULES
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CATEGORIZATION OF RULES
S. No Prescription of With respect to
1. Manner/Form of documents Return of Allotment
Instrument of Transfer statements
Appeal
Secretarial Audit Report
Disclosures
Quarterly Reports
Declarations
Charge Documents
Resignation Registers
Reports
Takeover Offer Statement
Annual Report
CSR Policy particulars
Notices
Intimation
Applications
License to Company
Verification of Declaration Documents of Company
Statement by Board
Auditors Report
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S. No Prescription of With respect to
2 Time limit for various processesFilings
Various processes
3 Manner of Administration Funds
4 Conditions to be complied
Issue
Appointment of auditor
Entering into contract
Various other things
5 Details in Special Resolution
6 Fees
Obtaining copies
Requests
AGM report
Appeals
DIN
Sitting fees
Application
Revised Authorized Capital
Inspections
CATEGORIZATION OF RULES
CATEGORIZATION OF RULES
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S. No Prescription of With respect to
7. Composition NFRA
Other committees, bodies
8. Class of Companies Processes
Committees
Various other things
9. Appointment of people NFRA
ID
Experts for SFIO
Valuer
Members to mediation &
conciliation panel
10. Procedure of Issue
11. Limits Number of companies
Managerial remuneration
Class action
Number of directors
CATEGORIZATION OF RULES
CATEGORIZATION OF RULES
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S. No Prescription of With respect to
12. Manner of maintenance Books
Accounts, etc.
13. Documents to be annexed or attached
14. Information to be furnished
15. Manner of certification/authentication
16. Salary, allowances, conditions of service
CATEGORIZATION OF RULES
5 Step Incorporation of a Company
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5 Step Incorporation of a Company
5 Step Incorporation of a Company
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5 Step Incorporation of a Company
1. Name ReservationINC1
2. MOA and AOApreparationObject clause changed
3. Consent of DirectorsDIR 12
4. Statutory Declaration for Compliances (INC8)
5. Obtain certificate of Incorporation (INC1)
5 Step Incorporation of a Company
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5 Step Incorporation of a Company
MANAGEMENT & ADMINISTRATION
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MANAGEMENT & ADMINISTRATION
DEFINITIONS
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Director
Director appoin ted by board ofcomp any Section 2(34)
Board of DirectorsOr
Board
Col lect ive body of director s of the
comp any Section 2(10)
DEFINITIONS
ROLES OF DIRECTOR
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ROLES OF DIRECTOR
Managing Director
Key Managerial Personnel
Whole time Director
Officer who is in Default
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MANAGING DIRECTOR
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MANAGING DIRECTOR
Managing Directo r
Director
Art ic les Agreements Sharehold ings
By
+
Entrusted with sub stant ial powers of m anagement
+
Occup ying posit ion o f managing director by whatever name
called
MANAGER
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MANAGER
Manager
Indiv idual
Subject to
Superintendence
Contro l
Direct ion of the BoD
Having Management of whole of af fairs of the Company
Includ es director occupy ing posit ion o f manager by whatever name cal led
and
KEY MANAGERIAL PERSONNEL
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CEO OR Managing Director
Company Secretary Whole time DirectorCFO+ +
OR
Such other officer as may be prescribed
KEY MANAGERIAL PERSONNEL
Key Managerial
Personnel
OFFICER IN DEFAULT
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Whole t ime DirectorKMPs &
If no KMPs
All Directors if no one appointedDirectors appointed as OD Or
Any Person Author ized by
Board or KMPs
Any Person w ho advices,
d i rects or inst ructs BoD
Every Director w ho is aware of
Contravent ion
For Issue or transfer of Shares
Share Transfer Agent Registrar to Issue Merchant Banker
OFFICER IN DEFAULT
STRENGTHENING BOARD FRAMEWORK
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STRENGTHENING BOARD FRAMEWORK
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BOARD FRAMEWORK
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The Act now prescribes the duties of the directors towards the company
Matters to be considered in the Board Meeting provided for in detail
Act provides for constitution of the Audit committee by every listed companyor other prescribed class of company
Constitution of Nomination and Remuneration Committee by listed and otherprescribed class of the companies
Stakeholders Relationship Committee for companies which consist of morethan 1000 shareholders, debenture-holders, deposit-holders and othersecurity holders at any time during a FY
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BOARD FRAMEWORK
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BOARD FRAMEWORK
Directors also covered under Officers in Default
Public and private companies cannot give any loan or provide any security orguarantee in connection with a loan to a Director or any interested person,except by way of passing a special resolution
Voting in electronic mode allowed
AGM- Listed Company AGM to be reported to ROC
ADDITIONAL/ALTERNATE/NOMINEE DIRECTOR
NOTIFIED
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NOTIFIED - (SECTION 161)
Person who fails to get appointed as a director in a general meeting cannot beappointed as an Additional Director
Alternate director can only be appointed in case director leaves India for periodof not less than 3 months
Subject to Articles, Board can appoint director nominated by any institution inpursuance of any law or agreement has been specified in the law specifically
Person to be appointed as Alternate Director shall be a person other than oneholding any alternate directorship for any other Director in the Company
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WOMAN DIRECTOR & SMALL
S O C O
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As per the Draft Rules: Listed Companies, andevery other public company with paid up capital> Rs 100 cr; or turnover > Rs 300 cr.
At least 1 woman director
for prescribed class or
classes of companies. 2nd
pro viso to Section 149(1)
As per Draft Rules: A listed company may suomoto or upon the notice of > 500 or 1/10thof thetotal number of small shareholders, whichever islower, elect a small shareholders director fromamongst the small shareholders)
Companies with prescribednumber of smallshareholders or paid upcapital and listed
Companies to have 1director elected by SmallShareholders
Sectio n - 151
SHAREHOLDER DIRECTOR
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DIRECTORS OTHER REQUIREMENTS
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DIRECTORS OTHER REQUIREMENTS
(As per Draft Rules: Rules
prescribe for manner of notice of
candidature of a person for
directorship)
Amount to be deposited along with notice
of nomination of any person to the office
of director has been increased from Rs
500 to Rs 100000 or such higher amount
as may be prescribed
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RESIDENT DIRECTOR (Secti on 149 (2)
At least 1 director to be a person who has
stayed in India for atleast 182 days in the
previous calendar year
NUMBER OF DIRECTORS
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NUMBER OF DIRECTORS
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NUMBER OF DIRECTORS(SECTION 149)
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Board of Directors consisting individuals as directors.
Private Company : Min. 2 Directors
Public Company : Min. 3 Directors
One Person Company : 1 Director
Maximum number :15 (earlier 12)
( )
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NUMBER OF DIRECTORSHIPS
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NUMBER OF DIRECTORSHIPS(SECTION 165)
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Director in maximum 20 companies
Directorship to include alternate directorship
Of these 20 companies, cannot be a Director in more than 10public companies (including private companies which are
holding or subsidiary companies of public companies)
No. of members specify lesser number by passing specialresolution
Penalty for contravention: Minimum Rs. 5,000, and Maximum Rs.25,000 for every day during which the default continues
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(SECTION 165)
APPOINTMENT & REMOVAL OF
DIRECTORS
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DIRECTORS
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APPOINTMENT OF DIRECTOR
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Appointment of Managing Director, Whole Time Director or Manager to beapproved by special resolution in a General Meeting
Appointment to be Voted individually (Notified). Section 162
Consent for appointment to be filed by directors of private company tothe ROC
When appointment not in accordance with Schedule V, approval ofCentral Government also required
Independent directors not to be included in the total number of directorswhile calculating retiring directors i.e. 2/3rdof the total number ofdirectors
(SECTION 152)
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APPOINTMENT OF DIRECTOR
(SECTION 1 2)
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Until the director duly appointed as per provisions in the OPC,individual being member shall be deemed to be its first director
Whole Time Director shall not be appointed for more than 5 years
Provisions to apply to Private Companies as well
In case of default the Company, such individual or director to bepunishable with imprisonment upto 6 months or with fine which shallnot be less than fifty thousand rupees but which may extend to fivehundred rupees for every day after the first during which the defaultcontinues.
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(SECTION 152)
DISQUALIFICATION & REMOVAL
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NEW DISQUALIFICATIONS FOR DIRECTORSSECTION 164
Conviction for offence dealing with Related Party Transaction anytimeduring previous 5 years
Not having obtained Director Identification Number
Conviction for any offence and sentenced for an imprisonment extendingto 7 years or more
No power to central government to exempt the application of particulardisqualification on any person
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DISQUALIFICATION & REMOVAL
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VACATION OF OFFICE OF DIRECTORSECTION 167 When Director fails to attend all Board Meetings for consecutive period
of 12 months. This even when the leave of absence has been granted
When Director is disqualified by an order of court or Tribunal under any
Act not only the Companies Act.
When all directors have vacated the office:
the promoter shall appoint minimum number of members
Central Government may appoint Directors till company makesappointment in General Meeting
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DISQUALIFICATION & REMOVAL
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REMOVAL OF DIRECTOR- SECTION 169
Notice of Removal can be given only by the following:
In Company Having Share Capital:
Member(s) having not less than 1/10th
of the total voting power orholding shares the aggregate value of which is not less than Rs. 5 lakh
In any other Company:
Member(s) having not less than 1/10thof the total voting power
In case of default, company and every director or employee who isresponsible for such contravention to be punishable with fine which shall
not be less than Rs. 50,000 but which may extend to Rs. 5 Lac
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INDEPENDENT DIRECTOR
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INDEPENDENT DIRECTOR SECTION 149
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SECTION 149
Every listed public Company to have at least one-third of the total number
of directors as Independent Directors (ID)
Central Government to prescribe the minimum number of Independent
Directors in case of any class or classes of public Companies.
(As per Draft Rules: Public Companies having paid up share capital of Rs.
100 cr or more, Public Companies having turnover of Rs. 300 cr or more,
Public Companies which have, in aggregate, outstanding loans or
borrowings or debentures or deposits, exceeding Rs. 200 cr)
Every existing company to have IDs within one year from commencementof
the Act or from the date of notification of the Rules (whichever is first)
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INDEPENDENT DIRECTOR
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BOARD TO ENSURE - Appropriate balance of skills, experience and knowledge inone or more fields of finance, law, management, sales, marketing, administration,research, corporate governance, technical operations other disciplines related to thecompanysbusiness AND DISCLOSE IN BOARD REPORT
DATA BANK with details of the person eligible and willing to be appointed asindependent director to be prepared by any body, institutions as authorized by CG(as may be notified by CG).
Responsibility of due diligence for appointment of independent directors to beon company.
As per the draft rules :
Name of Independent Directors who are holding directorship as
independent director in beyond 10 Listed Co's
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independent director in beyond 10 Listed Co s
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S.No.Name of
Independent
Director
Number Name of Companies
1 R A Shah 14
Asian Paints Ltd,
Atul Ltd,
BASF India Ltd,
Bombay Dyeing & Manufacturing Company Ltd,
Century Enka Ltd
2 Anil Harish 13
Ashok Leyland Ltd,
Hotel Leela Venture Ltd,Ador Welding Ltd
Unitech Ltd,
Advani Hotels & Resorts (India)
3 Dilip J Thakkar 12
Essar Ports Ltd,
Garware Polyester Ltd
Premier Ltd,
4 R Srinivasan 12
Graphite India Ltd, Shalimar Paints Ltd,
Sundram Fasteners Ltd,
Williamson Magor & Company Ltd,
TTK Healthcare
APPOINTMENT OF DIRECTOR(SECTION 152) NOTIFIED
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Appointment of Managing Director, Whole Time Director or Manager to beapproved by special resolution in a General Meeting
Appointment to be Voted individually (Notified). Section 162
Consent for appointment to be filed by directors of private company tothe ROC
When appointment not in accordance with Schedule V, approval ofCentral Government also required
Independent directors not to be included in the total number of directorswhile calculating retiring directors i.e. 2/3rdof the total number ofdirectors
12/20/2014 89
(SECTION 152) . NOTIFIED
APPOINTMENT OF DIRECTOR(SECTION 152) NOTIFIED
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Until the director duly appointed as per provisions in the OPC,individual being member shall be deemed to be its first director
Whole Time Director shall not be appointed for more than 5 years
Provisions to apply to Private Companies as well
In case of default the Company, such individual or director to bepunishable with imprisonment upto 6 months or with fine which shallnot be less than fifty thousand rupees but which may extend to fivehundred rupees for every day after the first during which the defaultcontinues.
(SECTION 152) . NOTIFIED
12/20/2014 90
SITTING FEE OF DIRECTORS
SECTION 197
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A Director may receive remuneration by way of fee for attending meetings of the board orcommittee
Independent director shall not be entitled to any stock options
Reimbursement of expenses for participation in the board and other meetings and profit relatedcommission as may be approved by the members
As per the draft rules-
Amount of sitting fees payable to a director for attending meetings of the Board or committees tobe a maximum of Rs.1 lakh per meeting of the Board or committee
Board may decide different sitting fee payable to independent and non-independent directorsother than whole-time directors
SECTION 197
DECISION MAKING BY DIRECTORS
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DECISION MAK ING BY DIRECTORS
Board meeting
Resolution by circulation
Committee meetings
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BOARD MEETINGSECTION 173
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First Board Meeting to be held within 30 days of incorporation.
Notice of Board meeting shall be given to all directors, whether he is in India oroutside India by hand delivery or by post or by electronic means.
At least one independent director to be present at a Board Meeting called at shorternotice to transact urgent business.
In case of absence of independent directors from board meeting, decisions taken atmeeting shall be circulated to all the directors and shall be final if ratified by aindependent director.
Director can participate in the Board meeting through video conferencing or otheraudio visual mode as may be prescribed.
Draft Rules provide for the procedure and manner of such process
BOARD MEETINGS: VIDEO CONFERENCING
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The procedure of conduction of Board Meetings through Video Conferencing isspecifically provided for, with major responsibilities casted upon the Chairman of theCompany and Company Secretary.
An important provision provides that every director who attended the meeting,whether personally or through video conferencing or other audio visual means,shall confirm or give his comments, about the accuracy of recording of the
proceedings of that particular meeting in the draft minutes, within seven days afterreceipt of the draft minutes failing which his approval shall be presumed.
This provision is very important as far as the liability of Directors is concerned.
MATTERS NOT TO BE DEALT IN MEETING THROUGH VIDEO
CONFERENCING To approve the annual financial statements; and
To approve the boardsreport.
BOARD MEETINGSECTION 173
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At least 4 Board meetings should be held each year, with a gap of not more
than 120 days between two Board meetings
No requirement of holding the Board Meeting in every quarter
For One Person Company (OPC), small company and dormant company atleast 1 Board meeting must be held in each half of a calendar year with a gapof not less than 90 days between two Board Meetings
In case of only One Director in OPC, requirement of holding meeting will notapply
Resolution by circulation shall be approved if consented by majority ofDirectors instead of the requirement of consent of all Directors present inIndia or by majority of them (as was provided in the Companies Act 1956)
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MATTERS TO BE DISCUSSED INBOARD MEETINGS ONLY (SECTION 179)
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BOARD MEETINGS ONLY (SECTION 179)
To issue securities whether in India or outside.
To grant loans or give guarantee or provide security in respect of loans;
To approve financial statement and the directors report;
To diversify the business of the company;
To approve amalgamation, merger or reconstruction;
To take over a company or acquire a controlling or substantial stake inanother company
12/20/2014 96
MATTERS TO BE DISCUSSED IN
BOARD MEETINGS ONLY (SECTION 179)
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Other matters prescribed in Draft Rules-
To make political contributions; to fill a casual vacancy in the Board; to enter into ajoint venture or technical or financial collaboration or any collaboration agreement;
To commence a new business; to shift the location of a plant or factory or the
registered office;
To appoint or remove key managerial personnel (KMP) and senior managementpersonnel one level below the KMP;
To appoint internal auditors;
To adopt common seal;
12/20/2014 97
BOARD MEETINGS ONLY (SECTION 179)
MATTERS TO BE DISCUSSED IN
BOARD MEETINGS ONLY (SECTION 179)
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To take note of the disclosure of directors interest and shareholding;
To sell investments held by the company (other than trade investments), constitutingfive percent or more of the paidup share capital and free reserves of the investee
company;
To accept public deposits and related matters and;
To approve quarterly, half yearly and annual financial statements.
12/20/2014 98
BOARD MEETINGS ONLY (SECTION 179)
MEETINGS AND RELATED MATER
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General Meetings
Quorum
Proxies
Statement to be annexed with notice
Postal ballot
Resolution requiring special notice &closure of register of members
GENERAL MEETINGS
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OPC not required to hold AGM
First AGM to be held within 9 months fromclosure of first FY
AGM to be held on between business hoursi.e. 9 AM to 6 PM
Notice of GM may be sent through electronic mode
To be sent to all Directors
21 clear days notice to be given
In case of AGM Shorter notice can be given by consentof 95%of members who are entitled to vote (like forEGM)
Secretarial Standards mandated
Report of AGM, prepared in prescribed manner, tobe filed with RoC
REPORT ON AGM(Sec 121)
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( )
Every Listed Public Company to prepare a Report on each AGM.
Report to contain confirmation that the meeting was convened, held andconducted as per the provisions of the Act / Rules.
The company to file the Report with the Registrar within 30 days of the conclusionof the AGM.
Proceedings at the AGM of a listed co. thus becomes a public document.
QUORUM FOR MEETINGS
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Publ ic Company
5 members personal ly
present 1000 members
15 members personal ly
present
> 1000 members bu t
5000 members
30 members personal ly
present > 5000 mem bers
Private Company 2 members personal lypresent
PROXIES (SECTION 105)
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Single person not to be proxy for more than 50 members
Proxy cannot vote by show of hands
Member of Private Limited company cannot appoint more than 1proxy to attend on same occasion
STATEMENT TO BE ANNEXED WITH
NOTICESEC 102
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Nature of
interest/
concern
RelativesKMP
Director
and
Manager
Other
Interest
Financial
Interest
Explanatory Statement in case of special
business to specify
Liability in case of non-disclosure or insufficient
disclosure in Explanatory Statement
Non-
disclosure
/insufficient
disclosure
Promoter KMP
Director
and
Manager
ProfitBenefit
Explanatory statement to specify shareholding %
of Promoters/directors/manager/KMP whose
shareholding is not less than 2% of paid up
capital
Liable to compensate to Company to the
extent of such profit/benefit
POSTAL BALLOTSECT 110
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Postal ballot applicable to all companies
Postal Ballot resolutions to be prescribed by CG. (Other thanany businesses in which directors/auditors have the right to beheard at the meeting and ordinary business)
To maintain minutes
RESOLUTIONS REQUIRING SPECIAL NOTICE &
CLOSURE OF REGISTER OFMEMBER
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RESOLUTIONS REQUIRING
SPECIAL NOTICESEC 115
CLOSURE OF REGISTER OFMEMBER
SECTION 88
Listed Company / Company which intends toget listed to give notice of atleast 7 days (orsuch lesser days as specified by SEBI)before closure of Register of security holders
IS CLOSURE OF REGISTER OF
MEMBERS STILL REQUIRED INTODAYS CONTEXT ?
Not less than 1% of voting power orMember holding min Rs. 5,00,000paid up share capital can moveSpecial Notice
COMMITTEE OF BOARD
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NOMINATION AND RENUMERATION
COMMITTEESECTION 178
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1.
For listed and other prescribed class of Companies
As per Draft Rules: Nomination and Remuneration Committee ofthe Board for every listed company, and every other publiccompany having paid up capital of >Rs. 100 cr; or which haveoutstanding loans or borrowings or debentures or deposits > Rs200 cr
2.
Shall consist of 3 or more non-executive directors out of which notless than one half shall be IDs
3.
The Committee to formulate the criteria for:
Determining qualifications, positive attributes and independenceof directors;
Recommending to the board a policy relating to remuneration fordirectors, KMP and other employee.
SHAREHOLDERS GRIEVENCE
COMMITTEESECTION 178
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Committee shall
consider and
resolve the
grievances of
security holders of
the company
For companies >
1000 shareholders,
debenture-holders,
deposit-holders
and other security
holders at any time
during a FY
Chairperson : non-
executive director
and other members
as may be decided
by the Board
AUDIT COMMITTEESECTION 177
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Every listed company and such other class of company shall constitute an
Audit committee. (As per Draft Rules: Audit Committee of the Board for everylisted company , and every other public company having paid up capital of Rs.100 cr or more; or which have, in aggregate, outstanding loans or borrowingsor debentures or deposits exceeding Rs. 200 cr)
Committee shall consist of minimum three director with the independentdirector forming majority
Auditors and KMP have right to be heard in the meeting of committee
Boards report to disclose
1. Composition of the audit committee and
2. Any recommendation which has not been accepted by the board.
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AUDIT COMMITTEE.VIGIL
MECHANISM
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Every listed company or such class of companies shallestablish a vigil mechanism
As per Draft Rules: Companies which accept deposits frompublic and Companies which have borrowed money frombanks and public financial institutions > Rs 50 Cr
Mechanism facilitates directors and employees to reportgenuine concerns
Adequate safeguards against victimisation of persons whouse such mechanism
Provision for direct access to the chairperson of the auditcommittee
12/20/2014 111
Whistle
Blower (a
non
mandatory
item as per
Cl 49) is now
made
mandatory,
in the name
of Vigil
Mechanism
DUTIES OF DIRECTORS
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DUTIES OF DIRECTORS- SECTION 166
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A director to act in accordance with the articles of the company
A director to act in good faith in order to promote the objects of the company for the benefit ofits members as a whole, and in the best interest of the company, its employees, theshareholders, the community and for the protection of environment.
A director to exercise his duties with due and reasonable care, skill and diligence and shallexercise independent judgment
A director not to get involved in a situation he may have direct or indirect interest that conflicts,or possibly may conflict, with the interest of the company
A director not to achieve or attempt to achieve any undue gain or advantage either to himself orto his relatives, partners, or associates
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RISK MANAGEMENT
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Sectio n 138(1)
Prescribed class of companies shall conduct the internal
audit of the functions and activities of the company.
As per Draft Rules: Every listed company, every public
company with paid up share capital > Rs 10 cr, and havingany outstanding loans or borrowings from banks or public
financial institutions > Rs. 25 cr or which has accepted
deposits of > Rs. 25 cr at any point of time during the last
financial year)
IDs to satisfy themselves about integrity of financialinformation and robust risk management system
GOVERNANCE - ENHANCINGSTAKEHOLDER PROTECTION
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GOVERNANCE
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For protection of shareholders concept of ClassAction suitinserted
Exit opportunity by the promoters to the dissenting shareholders in caseof variation in the terms of the contracts or in objects of prospectus
Provision for Internal audit of certain companies
Provision for rotation of auditors in listed and in certain other class ofcompanies
Onus on the Independent Director for the fulfillment of conditionsspecified in the Act for the appointment casted on the board to specify inthe explanatory statement for such appointment
GOVERNANCE
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Onus to ensure compliance with all applicable laws has been casted on the
board of directors of a company
Along with the members and auditors, even directors are required to be sentnotices of the meeting
Set up of Investor Education and Protection Fund (IEPF) for transferamount lying in unpaid dividend accounts of the company to such fund
To minimize risks, certain restrictions has been implied on the board ofcompany which were earlier not mentioned in the Companies Act, 1956
Establishment of Serious Fraud Investigation Office (SFIO)
RESTRICTIONS FOR DIRECTORS
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RESTRICTION ON NON-CASH TRANSACTIONSINVOLVING DIRECTORS APPLICABLE TO:
(NOTIFIED) SECTION 192
Any Director of a company; or
Director of the Holding Company; or
Any person connected with such person
Director cannot acquire assets for the consideration other than
cash from the company & vice versa without the approval in
general meeting
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RESTRICTIONS FOR DIRECTORS
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PROHIBITION ON FORWARD DEALING IN SECURITIES(NOTIFIED) SECTION 194
Director and KMP prohibited w.r.t. to following in a Company, or its
holding, subsidiary or associate Company
Right to call/make for delivery at specified price and within a specified
time, of a specified number of relevant shares /debentures.
Right to call for delivery or make delivery at a specified price and within
a specified time, of specified number of relevant shares/debentures.
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RESTRICTIONS FOR DIRECTORS
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PROHIBITION ON INSIDER TRADING OF SECURITIES
(NOTIFIED) SECTION 195
Director and KMP shall not enter into act of insider trading concerning
Subscribing, buying, selling, dealing or agreeing to subscribe, buy,
sell or deal in any securities either as principal or agent if such person
is reasonably expected to have access to any non- public price
sensitive information in respect of securities of company
Counseling about, procuring or communicating directly or indirectlyany non- public price sensitive information to any person.
12/20/2014 121
LOAN TO DIRECTORSNOTIFIED SECTION 185
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Public and private companies cannot give any loan or provide any security
or guarantee in connection with a loan to a Director or any interestedperson, except to MD & WTD under prescribed circumstances
No exemption for giving loan, guarantee or providing security by holdingcompany to its subsidiary
12/20/2014 122
However, Section 186 (Not yet notified)
empowers the company to give loan or
guarantee or provide security in
connection with the loan to any
person; hence Directors may also be
included here. It prescribes the limit,
sanctioning authority and fulfillment of
other prescribed terms thereof.
RELATED PARTYNOTIFIED SECTION 2(76)
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i. Director or his relative;
ii. A key managerial personnel or his relative
iii. A firm, in which a director, manager or his relative is a partner;
iv. A private company in which a director or manager is memberor director ;
v. A public company in which a director or manager is a directoror holds along with his relatives more than 2%. Of its paid up
capital
vi. Any body corporate whose Board of Directors, managingdirector or manager is accustomed to act in accordance with the
advice, directions or instructions of a director or manager;
RELATED PARTYNOTIFIED SECTION 2(76)
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vii. Any person on whose advice, directions or instructions a
director or manager is accustomed to act:
Provided that nothing in sub-clauses (vi) and (vii) shall applyto the advice, directions or instructions given in a
professional capacity
viii. Any company which is-
A holding, subsidiary or an associate company of suchcompany ; or
A subsidiary of a holding company to which it is also a subsidiary;
ix. Such other persons as may be prescribed
RELATED PARTY TRANSACTIONSECTION 188
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Disposing of, orbuying, property
Leasing of propertyRestriction on non cash
transaction
Appointment of anyagents
Appointment of
any related party
to any office orplace of profit
Contract for underwriting
the subscription ofsecurities or derivatives
Board approval required for following RPTs
Companies with the prescribed Capital require approval
by Special resolution for entering into defined relatedparty transactions
FRAUD
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Criminal liability for fraud for mis- statement in
prospectus- Liability of every person who authorizesissue of misleading prospectus.
Promoter, director, expert or any other person whohas either assented to be director of the company orwho has authorized the issuance of prospectus, to beheld liable for fraud.
Definition Officer in Default includes KeyManagerial Personnel
In case of frauds, all the professionals and expertsrendering independent services to the Company areto be held liable.
CLASS ACTION SUITS(Sec 245)
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Suit may be filed by members or depositors or any class of them;
If management or conduct of the affairs of the company are being conducted in a
manner prejudicial to the interest of the company, its members or depositors;
Suit may be filed by more than
100 in number or
more than a percentage of the total number of depositors, whichever is less,
or any depositor or depositors to whom the company owes such percentage of
total deposits of the company.
Damages or compensation or any other suitable action from or against
The company or its directors for any fraudulent, unlawful or wrongful act or
omission.
Any expert or advisor or consultant or any other person for any incorrect or
misleading statement or for any fraudulent, unlawful or wrongful act or conduct.
TRANSPARENCY AND DISCLOSURE
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Every listed company to prepare a report on AGM, such report to containconfirmation that the meeting was convened, held and conducted as per theprovisions of the Act / Rules
Requirement for Enhanced Disclosures in prospectus has been incorporated inthe Act of 2013
Contracts with managing and whole time directors required to be kept atregistered office, which shall be open for inspection by members of the company
Disclosure of interest of all directors
ANNUAL RETURN - Contents(Sec 92)
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Registered office,principal business
activities
securities and
shareholding
pattern
Indebtedness
Members and
debenture
holders
Promoters,directors, key
managerial
personnel
Meetings of
members
Meeting ofboard and
committees
Remuneration of
directors and
KMP
Penalty or
punishment &
details of
compounding
shares held by or
on behalf of the
FIIs
other matters as
may be
prescribed.
BOARDS REPORT
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Extract of Annual
Return
No. of BMs
Declaration by
Independent
Director
Directors
Responsibility
Statement
Comments/explanation by BOD on
Secretarial Audit
Report
Particulars of
loan/guarantee/
investment
Particulars ofcontracts/arrange
ments with
related party
Material changes
from end of FY to
date of Report
Statement on risk
management
policy
Details of CSR
policy developed
and implemented
BOD/Committees
performance
evaluation
Other such
matters
BOARDS REPORT:OTHER MATTERS PRESCRIBED
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financial
summary/highligh
ts
change in the
nature of
business,
Details of
directors or KMPCompanies ceased
to be Subsidiaries,
JVs or associate
companies;Details relating
to Deposits
Details of significant
and material orders
passed by the
Regulators or courts
DISCLOSURES IN PROSPECTUS(Section 26)
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Name and address of CFO
Management perception of Risk Factors, gestation period, progress in
the Project and deadline for completion of the project.
Pending litigation against the promoters by Govt Dept./Statutory Body
during the last 5 years.
Detailed Fact Sheet, mentioning all the basic facts and financials about
the Company and other related persons/entities.
REPORT ON MANAGERIALREMUNERATION (Section 197)
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The ratio of the remuneration of each directorto the median employees remuneration; and
Such other details as may be prescribed.
Every ListedCompany to disclose
in its BoardsReport:
DIRECTORS RESPONSIBILITYSTATEMENT (Section 134)
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DRS to also include the following:
In the case of listed companies, director had laid down internalfinancial controls which have been complied with.
The directors had devised systems to ensure compliance withprovisions of applicable laws
PROMOTERS STAKE CHANGES(Section 93)
Listed companies required to file Return with the Registrar regardingchange in the number of shares held by the Promoters and top tenshareholders within 15 days of change.
CORPORATE SOCIAL RESPONSIBILITY
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PROMOTING WELFARE
INITIATIVES
CORPORATE SOCIAL RESPONSIBILITY(SECTION - 135)
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Every Company having net worth of rupees five hundred crore or more,or turnover of rupees one thousand crore or more or a net profit ofrupees five crore or more during any financial year to constitute aCorporate Social Responsibility Committee of the Board consisting ofthree or more directors, out of which at least one director shall be anindependent director
The Boards report to disclose the composition of the CorporateSocial Responsibility Committee
CORPORATE SOCIAL RESPONSIBILITY(SECTION - 135)
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Committee shall formulate and recommend to the Board, a CSR Policyindicating the activity or activities to be undertaken by the Company as
specified in Schedule VII of the Law
Recommend the amount of expenditure to be incurred on the activities aboveand
Monitor the Corporate Social Responsibility Policy of the Company from time
to time
CORPORATE SOCIAL RESPONSIBILITY(SECTION 135)
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Based on recommendations from CSR Committee, Board of such Companyto approve the CSR Policy for the Company and disclose contents of suchPolicy in its report and on the Companyswebsite
Every year in the Boards Report, details about the policy developed andimplemented by the Company on CSR initiatives taken during the year to beincluded
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CORPORATE SOCIAL RESPONSIBILITY
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12/20/2014 140
As per the draft rules
Net Profit: defined as net profit before tax as per books of accounts and does not include profits from
branches outside India
CSR Policy of the company to include:
Specify the projects and programmes that are to be undertaken.
Prepare a list of CSR projects/programmes which a company plans to undertake during the
implementation year , specifying modalities of execution in the areas/sectors chosen and implementation
schedules for the same.
CSR projects/programmes of a company may also focus on integrating business models with social and
environmental priorities and processes in order to create shared value.
CSR Policy of the company should provide that surplus arising out of the CSR activity will not be part of
business profits of a company
CORPORATE SOCIAL RESPONSIBILITY
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141 12/20/2014
CSR Policy would specify that the corpus would include the following:.a. 2% of the average net profits,
b. any income arising there fromc. surplus arising out of CSR activities
2% CSR to be computed as 2% of average net profits made by company during every block of 3 years
Format prescribed for Annual Report in CSR Initiatives to be included in the Board report
CSR activities to be conducted as projects or programmes excluding activities undertaken in normal
course of business
CSR Committee to prepare transparent monitoring mechanism for implementation
Company may conduct CSR activities through trusts, societies, or non profit companies operating in
India, not set up by company itself
CSR activities to be within India only
Companies may collaborate resources with other companies to undertake CSR
CSR activities not to benefit only the employees of the company
List of Companies who are required to make CSR contribution
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12/20/2014 142
S.No. Name of CompanyAverage PAT for last 3
Years2 % of Average PAT
1 Reliance Industries Ltd20,443.00
408.86
2 Oil & Natural Gas Corpn Ltd20,271.49
405.43
3 State Bank of India11,358.93
227.18
4 Tata Consultancy Services Ltd10,444.10
208.88
5 NTPC Ltd9,018.17
180.36
6 Infosys Ltd8,009.67
160.19
7 Bharti Airtel Ltd7,624.37
152.49
8 Coal India Ltd7,518.51
150.37
9 ICICI Bank Ltd6,647.37
132.95
Amount in INR Crores
CYNOSURE TO ALL EYES
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As per the analysis of the companies listed on Bombay stock exchange it is
found that :
Average net profit of three financial
years of these companies amounts:
Approx INR 3,90,000 crore
CSR spending which shall be 2% of
such average net profits amounts:
Approx INR 7800 crore
ROLE OF CA
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CA Eish Taneja 14412/20/2014
Chartered Accountants included in the definition of expert who has been
assigned specific responsibilities and liabilities under the Act
Appointment as Internal Auditors for companies requiring mandatoryinternal audits
Appointment as Liquidator in Winding up proceedings
Immense opportunities for CAs with respect to M&A transactions
CA may act as insolvency practitioner, administrator and also representstakeholders before Tribunal
CA to act as Statutory Auditor in companies
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IMPACT OF CHANGE
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CA Eish Taneja
Quality of functioning of the board will increase
Beginning of new era of corporate Governance
Enhanced responsibility of top management
Increase in trust of investors and stakeholders
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