workshop on companies act 2013 08 august 2015 anagha anasingaraju partner, kanjmag & co company...
TRANSCRIPT
WORKSHOP ON COMPANIES ACT 2013
08 August 2015
Anagha AnasingarajuPARTNER, KANJMAG & COCOMPANY SECRETARIES
BOARD & COMMITTEE MEETINGS
(WITH SECRETARIAL STANDARDS)
Frequency of board meetings:
a.1st meeting within 30 days of
incorporation
b.At least 4 meetings in a year
c.Maximum gap between two meetings –
120 days
d.For OPC and small companies – at
least 2 meetings in a year – minimum
gap of 90 days between two meetings
Notice of board meetings:
a.At least 7 days’ notice
b.Proof of service of notice and delivery to
be preserved
c.Notice to contain serial number, day,
date, time, full address of venue of meeting
d.Meeting / adjourned meeting cannot be
held on national holiday
Agenda:
a.To be circulated at least 7 days before in
same manner as notice
b.Proof of service of agenda and delivery to
be preserved
c.Matters of UPSI may be given at shorter
period with majority consent
Agenda contd:
d. Each item requiring approval to have
note with details
e. Draft resolution to be circulated / placed
at the meeting
f. Each agenda item to be serially
numbered
g. Matters outside agenda only with
permission of the Chairman and consent of
majority directors present
Quorum:
a.1/3 or 2 whichever is higher
b.Quorum should be present throughout
the meeting
c.Interested directors not counted as
quorum*
d.Directors participating through electronic
mode form quorum except certain
transactions
e.For committee meetings – all members
unless provided by the Act / articles / other
law
Quorum contd:
Where number of directors falls below
2 / quorum, continuing director / s to act
only for the purposes of increasing the
number to 2 / quorum or for calling
general meeting [Section 174 (2)]
Attendance:
a.Separate attendance register to be
maintained for board and committee
meetings
b.Pages of register to be serially
numbered
c.If in loose leaf form, to be bound
periodically.
d.Contents – serial number, date of
meeting, place, time, names, signature
of director, invitees, CS
Attendance Register:
a.To be maintained at registered office
b.It is open for inspection only by
directors and auditor
c.Entries to be authenticated by CS /
Chairman
d.To be preserved for 8 years
e.Leave of absence granted only when
specifically requested for
Video conferencing
-Proceedings to be recorded – audio and video
-To be preserved till completion of audit
-Detailed procedure given in the Rules about
conduct of meeting through electronic means
-Meeting for accounts approval, approval of
directors’ report, approval of prospectus,
approval of corporate restructuring not
through video conferencing
CIRCULAR RESOLUTIONS
(WITH SECRETARIAL STANDARDS)
a. To be circulated to all directors with
supporting papers
b. Each resolution to carry serial number
c. By hand, post, courier, email, fax
d. Proof of sending and delivery to be
maintained
e. Resolution deemed to be passed when
approved by majority
f. Directors to respond within 7 days
a. Effective date of resolution – last day of
assent / dissent, day on which 2/3 have
assented / date specified
b. Directors to write date of signing
c. Where 1/3 directors wish the matter to be
decided at next BM, they need to
communicate as such before last date and
then matter only in next BM
d. Resolutions to be noted at next BM, text to
be included in minutes with dissent or
abstention.
Matters which cannot be passed in VC
meeting:
a.Accounts approval
b.Approval of directors’ report
c.Prospectus
d.Amalgamation, merger, demerger,
acquisition, takeover
Matters which cannot be passed by
circular resolution:
a.Accounts approval
b.Approval of directors’ report
c.Prospectus
d.Amalgamation, merger, demerger,
acquisition, takeover
e.Borrowing
f.Investing funds
g.Granting loans, giving guarantee, providing
security
Contd…
a.Making political contributions
b.Calls on shares
c.Approving remuneration of MD, WTD,
Manager
d.Appointment / removal of KMP
e.Appointment of a person as MD /
Manager in more than one company
f.Sanction to RPT
Contd…
a.Purchase / sale of subsidiaries / assets not
in ordinary course of business
b.Approve payment to director for loss of
office
c.Buy back
d.Issue of securities including debentures
e.Specific matters in listed companies
GENERAL MEETINGS WITH SECRETARIAL
STANDARD
Annual General Meetings:
-First AGM within 9 months from date of
closing first financial year
-AGM to be held within 9.00 a.m. to 6.00 p.m.
only
-AGM not to be held on National Holiday
-AGM CANNOT be held outside India
-Consent for shorter notice by at least 95% of
members entitled to vote at the meeting
Annual General Meetings contd:
-AGM notice to be given to each director,
auditor, secretarial auditor, debenture trustee
-Auditor to attend AGM unless specifically
exempt by the company
-Explanatory statement to contain details so as
to enable members to make informed decision
-Quorum now dependent on total number of
members
Annual General Meetings contd:
-Financials may be circulated at shorter notice
along with AGM notice
-If foreign subsidiary is not required to get
accounts audited as per local laws, Indian
holding company to place such unaudited
financials on website and file them with ROC;
format may be different
MINUTES OF MEETINGS WITH
SECRETARIAL STANDARD
- Separate minutes book for each type of
meeting
- Can be maintained in electronic form
- Should include time of commencement and
conclusion of meeting
- Draft minutes of board meeting to be
circulated within 15 days for comments –
proof to be maintained
- Directors to comment within 7 days of
circulation
- Alteration only by express approval at next
board meeting
POWERS OF THE BOARD
Powers of the Board
-List of matters to be transacted only by way of
a resolution passed at the board meeting given
in section 179 and Rules
-Restrictions on powers of the board in section
180 – not applicable to private companies w.e.f.
05 June 2015
-Contribution to bona fide charitable funds –
prior special resolution where amount exceeds
5% average NP of 3 years
Powers of the board contd….
Contributions to political party / purpose:
-Restriction on Govt companies and companies
in existence for less than 3 years
-Max. amount of contribution – 7.5% of average
net profits of last three years
-Prior board resolution required
-Amount and name of party to be disclosed in P
& L account
Powers of the board contd….
Contributions to National Defence Fund:
-No restriction on amount to be contributed
-Amount to be disclosed in P & L account
List of events for which Form MGT-14 to
be filed by private companies
-Special resolutions
-Board resolution for appointment /
reappointment / variation in terms of
appointment of MD
-Resolution for voluntary winding up
List of events for which Form MGT-14 to
be filed
-Calls on shares
-Buy back of shares
-Borrowing monies
-Investment of funds
-Grants loans, give guarantee, provide security
-Approve financial statements
-Approve directors’ report
List of events for which Form MGT-14 to
be filed
-Diversification of business
-Amalgamation, reconstruction, merger
-Takeover
-Acquisition of substantial stake in another
company
-Political contributions
-Appointment / removal of KMP
-Appointment of secretarial / internal auditor
DISCLOSURE OF INTEREST BY DIRECTORS
When to disclose interest:
-First meeting in which he participates as a
director
-First meeting in every financial year
-Whenever there is a change in disclosure
made, first board meeting held after such
change
-At the meeting in which contract or
arrangement is discussed
-Whenever he becomes concerned or interested
in the contract or arrangement after it is
entered into or 1st BM thereafter
Manner of disclosure:
-Disclosure to be made in Form MBP-1 – extent of
interest and date of change in interest
-Concept of annual notice done away with
-Applicable to all directors including independent
directors
-Interested director not to participate in
discussion on the contract / arrangement
-Disclosure should be noted in board minutes by
way of a resolution
Exemption?
-Applicable to all companies
-Not applicable to contracts / arrangements
between 2 companies where one director of a
company or two put together hold upto 2% of
paid up capital of other company
Contents of Form MBP-1
-Names of relatives
-Names of private companies in which director
-Names of private companies in which member
-Names of public companies in which director
-Names of public companies in which member, by
himself or with relatives
-Names of body corporates which are
accustomed to act as per his directions
Contents of Form MBP-1
-Names of BC at general meeting of which he
can exercise 25% or more voting power,
individually or with other directors
-Names of persons on whose instructions he is
accustomed to act
-Name of BC of which he is promoter /
manager / CEO
-Names of AOP / firms in which he is a partner
Relative under Companies Act 2013
-Spouse
-Father, Mother (including step father, mother)
-Son (including step son) and his wife
-Daughter and her husband
-Brother (including step brother)
-Sister (including step sister)
LOANS TO DIRECTORS – SECTION 185
Complete prohibition on companies to advance
any loan – including loan represented by a book
debt / give any guarantee / provide any security
in connection with loan to – either directly or
indirectly:
-Directors
-Any other person in whom director is
interested
-GOVERNMENT APPROVAL DONE AWAY
WITH
Person in whom director is interested:
-Director of lending company
-Director of a company which is holding
company of the lending company
-Any partner of such director
-Any relative of such director
-Any firm in which director is partner
-Any firm in which relative is partner
Person in whom director is interested
contd:
-Any private company of which such director is a
director
-Any private company of which such director is a
member
-Any body corporate of which 25% of voting
power may be exercised or controlled by
director, alone or with other director
-Any bode corporate whose BOD / MD / Manager
is accustomed to act in accordance with
instructions of the director / BOD of lending
company
Exceptions:
-Giving of loan to MD / WD
(a) as a part of conditions of service extended
to all employees
(b) pursuant to a scheme approved by
members by special resolution
- Company engaged in giving loans etc in
ordinary course of business and interest rate is
not less than bank rate of RBI
Exceptions contd…:
-Loan made / guarantee given / security
provided by holding company to WOS
-Guarantee given or security provided by
holding company in respect of loan made by
bank / FI to subsidiary
-Provided loans are utilized by subsidiary for its
principal business activities
Exceptions contd…:
-Private company
a.Which has no body corporate as shareholders
b.Borrowing from banks / FI / body corporate <
2 times its paid up capital or Rs. 50 crores,
whichever is lower
c.Has no default in repayment of such
borrowings at the time of making transaction
under Section 185
LOANS AND INVESTMENT BY
COMPANY
Similar to old Section 372A
-Applicable to private companies also
-Upto limits, unanimous board resolution
-Beyond limits, prior special resolution
-Disclose full particulars of loans etc in
financial statements
-Prior sanction of financial institution
necessary in case where loans etc beyond
limits and there is default in repayment of loan
or interest thereon
- Interest rate to be at least equal to prevailing
yield of 1 / 3 / 5 / 10 year government security
closest to the tenor of the loan
- Cannot give loan etc in case default in
repayment of deposits / interest under old or
new Act
- Employee loans exempted from this section by
way of circular dated 10th March 2015 if given
under a Scheme
Exceptions:
-Loan / guarantee / security by banking /
insurance / housing finance company in
ordinary course of business
-Loan / guarantee / security by company
engaged in business of financing companies
-Loan / guarantee / security by company
engaged in providing infrastructural facilities
Exceptions contd:
-Acquisition:
(a)By NBFC in respect of its investment and
lending activities
(b)By company whose principal business is
acquisition of securities
(c)Of shares under rights issue
RELATED PARTY TRANSACTIONS
Who is a related party:
-A director
-Relative of director
-KMP
-Relative of KMP
-Firm in which director is a partner
-Firm in which manager is a partner
-Firm in which relative is a partner
Who is a related party contd:
-Private company in which director is a
member
-Private company in which director is a director
-Private company in which manager is a
member
-Private company in which manager is a
director
-Private company in which relative is a member
-Private company in which relative is a director
Who is a related party contd:
-Public company in which director is a director
and holds more than 2% of paid up capital,
along with relatives
-Public company in which manager is a director
and holds more than 2% of paid up capital,
along with relatives
-Body corporate whose BOD / MD / Manager
accustomed to act in accordance with
instructions of director / manager
Who is a related party contd:
-Person on whose advise director or manager is
accustomed to act
-A holding company
-A subsidiary company
-An associate company
-A fellow subsidiary
-Director or KMP of holding company
Which are related party transactions:
-Sale, purchase, supply of goods or materials
-Sell or otherwise dispose of, buy, property of
any kind
-Lease property of any kind
-Avail or render any service
Which are related party transactions
contd….:
-Appointment of agent for purchase or sale of
goods /materials / services / property
-Related party’s appointment to office or place
of profit in the company / its subsidiary / its
associate company
-Underwriting subscription of any securities or
derivatives of the company
Difference in section 297 and section 188:
-Not limited only to common directors –
definition of related party widened
-Equally applicable to all types of companies
-Transactions related to immovable property
also included
-No relation to paid up capital
-Government approval done away with
How it works:
-Agenda / explanatory statement should contain
all details
-Prior Board approval required for entering into
any such transaction by the company with a
related party
-Prior shareholders’ resolution in specified cases
as per Rules
-Member who is a related party not to vote on
resolution in general meeting for approving the
transaction
How it works:
-Transaction already entered into may be ratified
within 3 months by board / shareholders
-Director not to remain present during discussion
on transaction in board meeting
Limits for special resolution:
-Sale, purchase, supply of goods or materials –
10% of turnover or Rs. 100 crores, whichever is
lower
-Sell or otherwise dispose of, buy, property of
any kind – 10% of networth or Rs. 100 crores,
whichever is lower
-Lease property of any kind – 10% of net worth or
Rs. 100 crores, whichever is lower
-Avail or render any service – 10% of turnover or
Rs. 50 crores, whichever is lower
Limits for special resolution contd…..:
-Related party’s appointment to office or place
of profit in the company / its subsidiary / its
associate company – monthly remuneration
exceeding Rs. 250,000
-Underwriting subscription of any securities or
derivatives of the company – 1% of the net
worth
Exceptions:
Section 188 is completely not applicable to:
-Transactions which are in the ordinary course
of business
-AND
-Transactions which are at arm’s length
-Shareholders’ resolution not required for
transaction between holding and WOS whose
accounts are consolidated and placed at AGM
Exceptions contd…:
Section 188 is completely not applicable to:
-Transactions arising out of compromises,
arrangements and amalgamations
-Contracts entered into before 01 April 2014
and still valid
What is ordinary course of business:
-Whether activity is frequent, regular
-Financial scale of activity vis a vis business
operations
-Revenue generated by the activity
-Resources committed to the activity
What may not be ordinary course of
business:
-Mere inclusion of activity in objects clause
-Sale made for business but no reasonable
connection with business
-Disposal of old machinery
NOT related party transactions?
-Acceptance of ICD in two companies
-Payment of / increase in sitting fees to
directors
-Leave and license agreement
-Reimbursement of expenses to director for
attending BM
APPOINTMENT AND REMUNERATION OF
MANAGERIAL PERSONNEL
Section 196
-Cannot have MD and Manager at the same
time
-Maximum term of appointment / re-
appointment of MD, WTD, Manager is five
years
-Reappointment not before one year of expiry
of term
-Minimum age 21 years and maximum age 70
years
-Beyond 70, pass special resolution for
appointment / reappointment
Other disqualifications for MD / WTD /
Manager:
-Undischarged insolvent / adjudged insolvent
-Suspended payment to creditors or made
composition with them
-Convicted by court of offence and sentenced
for more than 6 months
Appointment of MD / WTD / Manager in
public companies:
-Comply with provisions of Section 196, 197,
Schedule V
-Appointment by board, subject to approval by
members
-If terms of appointment in variance with
Schedule V, Central Government approval
-Form MR-1 to be filed within 60 days
Comparison of Schedule XIII with
Schedule V:
1.Part I – Appointments – almost similar –
addition of Prevention of money laundering Act
2.Minimum age 21 against 25 earlier
3.Part II – Section I – Remuneration by
companies having profits
4.Part II – Section II – Remuneration by
companies having inadequate or no profits
Comparison of Schedule XIII with
Schedule V:
1.Part II – Section III – Remuneration by
companies having inadequate or no profits in
special circumstances
2.Part II – Section IV – Perquisites not included
in remuneration
3.Part II – Section V – Remuneration payable to
managerial personnel in two companies
4.Part III – Provisions applicable to Part I and
II
Conditions of appointment in Schedule V –
Part I:
-Not sentenced to imprisonment / fine
exceeding Rs. 1,000 under listed statutes
-Not been detained under COFEPOSA
-Completed 21 years and not attained 70 years
-Managerial person in more than 1 company
and draws remuneration from 1 or more
companies within ceiling of Part II
-Is resident of India
Limits of remuneration – Section 197
A. In case of profits:
-Overall – not to exceed 11% of net profits as per
section 198
-Central Govt approval to exceed 11% s.t.
Schedule V Part II Section 1
-To 1 MD or WTD or manager – 5% of NP
-More than 1 – 10% of NP
-Other directors – 1% if MD / WTD / Manager
-3% in other cases
Limits of remuneration – Section 197
contd…
B. In case of inadequacy of profits:
-Remuneration as per Schedule V – Part II
Section II
-If not, previous Central Govt approval
-Remuneration can be doubled if special
resolution passed
Limits of remuneration – Section 197
contd…
B. In case of inadequacy of profits:
-In special cases, Schedule V – Part II Section III
a.Remuneration paid by another company
b. Newly incorporated company – upto 7 years
c.Sick company
d.Remuneration fixed by BIFR / CLB / NCLT
e.Company in SEZ s.t conditions
- Remuneration to directors may be paid as
monthly payment or percentage of net profits or
partly in both ways
- Remuneration to independent director – sitting
fees, reimbursement of expenses for attending
meeting, profit related commission approved by
members BUT NOT stock options
- MD / WTD who receives commission from the
company can receive remuneration or
commission from holding company or subsidiary
company, subject to disclosure in directors’
report [section 197 (14)]
- Premium for director liability insurance not
treated as part of remuneration, unless person
is proved guilty
QUERIES?
