Companies Amendment Act,2014 & Important Provisions
1. Companies (Amendment)
Bill,2014
& Important Provisions
By
CS.P.Eswaramoorthy, B.Sc., FCS.,
Company Secretary in Practice & Registered Trade Mark
Agent,| 5th Street | Ramalinga Jothi Nagar| Near
Corporation Office| Nanjundapuram Road
Ramanathapuram |Coimbatore-641 045 |
+91 422 23 22 333 | Cell: +91 9443419246
| eswarfcs@gmail.com, eswar@asvika.in
2. Companies (Amendment) Bill,
2014
Omitting requirement for minimum paid
up share capital, and consequential
changes. (For ease of doing business).
Making common seal optional, and
consequential changes for authorization
for execution of documents. (For ease of
doing business)
4. (a) the company shall, in addition to the payment of the
amount of deposit or part thereof and the interest due, be
punishable with fine which shall not be less than one crore
rupees but which may extend to ten crore rupees; and
(b) every officer of the company who is in default shall be
punishable with imprisonment which may extend to seven
years or with fine which shall not be less than twenty-five
lakh rupees but which may extend to two crore rupees, or
with both:
Provided that if it is proved that the officer of the company
who is in default,has contravened such provisions knowingly
or wilfully with the intention to deceive the company or its
shareholders or depositors or creditors or tax authorities, he
shall be liable for action under section 447.”.
6. Filing Board resolutions
• Authorize buy-back of securities under section 68;
• Issue securities, including debentures, whether in or outside
India;
• Borrow monies;
• Invest the funds of the company;
• grant loans or give guarantee or provide security in respect
of loans;
• Approve financial statement and the Board’s report;
• Diversify the business of the company;
• Approve amalgamation, merger or reconstruction;
• Take over a company or acquire a controlling or substantial
stake in another company;
• Make political contributions;
7. Filing Board resolutions..
• Appoint or remove key managerial personnel (KMP);
• Take note of appointment(s) or removal(s) of one level below the Key
Management Personnel;
• Appoint Internal auditors and secretarial auditor;
• Take note of the disclosure of director’s interest and shareholding;
• Buy, sell investments held by the company (other than trade investments),
constituting five percent or more of the paid up share capital and free reserves of
the investee company;
• Invite or accept or renew public deposits and related matters;
• Approve quarterly, half yearly and annual financial statements or financial results
as the case may be.
8. Companies (Amendment) Bill,
2014
Including provision for writing off past
losses/depreciation before declaring dividend
for the year. This was missed in the Act but
included in the Rules. 123
Rectifying the requirement of transferring
equity shares for which unclaimed/unpaid
dividend has been transferred to the IEPF even
though subsequent dividend(s) has been
claimed. (To meet corporate demand)
9. Companies (Amendment) Bill,
2014
Enabling provisions to prescribe thresholds
beyond which fraud shall be reported to the
Central Government (below the threshold, it will
be reported to the Audit Committee).
Disclosures for the latter category also to be
made in the Board’s Report. (Demand of
auditors) threshold limit yet to be notified
10. Companies (Amendment) Bill,
2014
Exemption u/s 185 (Loans to Directors)
provided for loans to wholly owned subsidiaries
and guarantees/securities on loans taken from
banks by subsidiaries. (This was provided under
the Rules but being included in the Act as a
matter of abundant caution).
11. Companies (Amendment) Bill,
2014
Empowering Audit Committee to give
omnibus approvals for related party transactions
on annual basis. (Align with SEBI policy and
increase ease of doing business)
Replacing ‘special resolution’ with ‘ordinary
resolution’ for approval of related party
transactions by non-related shareholders. (Meet
problems faced by large stakeholders who are
related parties)
12. Companies (Amendment) Bill,
2014
Exempt related party transactions between
holding companies and wholly owned
subsidiaries from the requirement of approval of
non-related shareholders. (corporate demand)
Special Courts to try only offences carrying
imprisonment of two years or more. (To let
magistrate try minor violations).
13. Expect few amendment by way of
circular, notification, amendment etc
at least for PVT Companies
14. Other amendments
• Change in Small Company as per ROD removal of difficulties
dated February 13, 2015 issued by the Ministry of Corporate
Affairs
• 85) ‘‘small company’’ means a company, other than a public
company,—
• (i) paid-up share capital of which does not exceed fifty lakh
rupees or such higher amount as may be prescribed which shall
not be more than five crore rupees; and
• (ii) turnover of which as per its last profit and loss account does
not exceed two crore rupees or such higher amount as may be
prescribed which shall not be more than twenty crore rupees:
15. Small Company
• Provided that nothing in this clause shall apply to— (A)
a holding company or a subsidiary company; (B) a
company registered under section 8; or (C) a company
or body corporate governed by any special Act;
• In view of the above it now stands clarified that, a
company will be considered as a small company only if
both the conditions specified at (i) and (ii) are met. For
eg., a company with paid up share capital of Rs. 25
lakhs and turnover of Rs. 20 crore, is not a small
company in terms of section 2(85) as only one criteria
with regard to capital is met. Similarly, if the paid up
capital of the company is Rs. 60 lakhs and its turnover
is Rs.1 crore, it would not be a small company.
16. Director Resignation
• In the Companies (Appointment and Qualification of
Directors) Rules, 2014, in rule 16, the following proviso
shall be inserted, namely:— “Provided that in case a
company has already filed Form DIR-12 with the
Registrar under rule 15, a foreign director of such
company resigning from his office may authorise in
writing a practising chartered accountant or cost
accountant in practice or company secretary in practice
or any other resident director of the company to sign
Form DIR-11 and file the same on his behalf intimating
the reasons for the resignation.”
17. Books of account
• Notice of address at which books of account
are to be maintained.- For the purposes of the
first proviso to sub-section (l) of section 128,
the notice regarding address at which books
of account may be kept shall be in Form AOC-5
19. Cost
Records
Overall turnover Rs.35 Crores
Sectors Specified
Cost Audit
overall annual turnover is Rs.50
Crores or more and the aggregate
turnover of the individual product
or services for which cost records
are required to be maintained is
Rs.25 Crores or more.
(falling under Table A )
overall annual turnover is Rs.100
Crores or more and the aggregate
turnover of the individual product
or services for which cost records
are required to be maintained is
Rs.35 Crores or more
falling under Table B
20. • For companies engaged in sectors covered by
Serial No.12 (coffee and tea), Serial Nos.24 to
32 (milkpowder, pesticides, plastics and
polymers, tyres and tubes, papers, textiles,
glass, other machinery, electrical or
electronics machinery) of Table B, the Rules
will apply only from 01st April, 2015
30. Board’s Report 134
• Extract of the Annual Return in Form MGT 9.
– Registration Details
– Principle Business Activities
– Details of Holding , Subsidiary & Associate
– Shareholding Pattern
– Indebtedness
– Remuneration of Directors & KMP
– Penalties/Punishment/Compounding
31. Board’s Report 134.......
• Number of Meetings of the Board
• Directors responsibility statement
• Independent Directors statement ( 149(6)
• Extract of the Annual Return in Form MGT 9.
• Statement of Declaration of Independence by
Independent Directors that he meets the
criteria provided u/s 149(6)
32. Board’s Report 134.......
• For specified companies: Company’s Policy on Directors’
appointment and remuneration, criteria for determining
qualifications/ independence of a Director & matters covered u/s
178(3) (which also covers KMP & senior management)
• This is applicable for companies covered u/s 178(1) relating to
Nomination & Remuneration Committee i.e.
• Every Listed Company
• Public company with paid up share capital of Rs 10 crores or more
• Public company with Turnover of Rs 100 crores or more
• Public company with outstanding loans/ deb/ deposits of > Rs 50
crores
• as on date of last audited accounts
33. Board’s Report 134.......
• Explanations or comments by the Board on every
qualification, reservation or adverse remark or disclaimer
made by auditors & the Company Secretary in practice in
his Secretarial Audit Report (such audit required for public
co with paid-up share capital Rs 50 crores or more OR
Turnover of Rs 250 crores or more
• Particulars of loans, guarantees or investments u/s 186.
• Particulars of RPTs referred to u/s 188(1) along with
justification for entering such contract/ arrangement in
form AOC - 2.
34. Board’s Report 134.......
• A statement indicating development and implementation
of a risk management policy including identification of
elements of risk which in the opinion of the Board may
threaten the existence of the Company
• CSR Policy and initiatives taken during the year and
reasons for not spending the money
• A statement indicating the manner in which formal annual
evaluation has been made by the Board of its own
performance and that of its Committees and individual
directors (applicable to listed cos. and specified public co)
35. Board’s Report 134.......
• Equity shares with differential rights, if any
• ESOP, if any, voting
• Details of Vigil mechanism, if applicable
(a) the Companies which accept deposits from
the public; (b) the Companies which have
borrowed money from banks and public
financial institutions in excess of fifty crore
rupees..
36. Board’s Report 134.......
• Penalty provisions u/s 134(8) Company Fine of
Rs 50000 to Rs 25 lakhs
• Every Officer in default Imprisonment up to 3
years Or
• with fine INR 50K to INR 5 lakhs Or
• with Both
38. RPT
• In the Companies Act,2013, considerable relaxations have been made
from Government for Approval in respect of related party transactions.
• Really, it is a big relief for the corporate. Now it is more disclosure as
against the approval procedures.
• However, Act and Rules governs RPT in details.
• In this presentation, I would like to cover the following areas.
• 1.Applicability
• 2. Definition/Meaning of Related Party
• 3. Transactions which are deemed as related party transactions 4.
Nature of approvals required
• 5. Disclosure norms
• 6. Exemptions/Non-applicability
• 7. Consequences of non-compliance
• 8. Maintenance of Register
39. RPT- Applicability
• Provisions relating to related party transaction
is applicable for Private Company and Public
Company as of now.
40. Definition/Meaning of Related Party
• Who is relative
• As per section 2(77) ‘‘relative’’, with reference to any person, means any one
who is related to
• another, if—
• (i) they are members of a Hindu Undivided Family;
• (ii) they are husband and wife; or
• (iii) one person is related to the other in such manner as may be prescribed
• According to the rules
• 1. Father including step father
• 2. Mother including step mother
• 3.Son including step son
• 4. Son’s wife
• 5.Daughter
• 6.Daughter Husband
• 7.Brother including step brother
• 8.Sister including step sister
41. Definition/Meaning of Related Party
• Who is related Party?
• As per section 2 (76) “related party”, with reference to a company, means—
• (i) a 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 a member or
• director;
• (v) a public company in which a director or manager is a director or holds along with his
relatives, more than two per cent. of its paid-up share capital;
• (vi) any body corporate whose Board of Directors, managing director or
• manager is accustomed to act in accordance with the advice, directions or instructions
of a director or manager;
• (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 apply to the advice, directions or
instructions given in a professional capacity;
• (viii) any company which is—
• (A) a holding, subsidiary or an associate company of such company; or
• (B) a subsidiary of a holding company to which it is also a subsidiary;
• (ix) such other person as may be prescribed;
• According to the rules
• As per rule 2(e) “Related party” means a director or key managerial personnel of the
holding company or his relative with reference to a company, shall be deemed to be a
related party;
42. RPT Transactions are…
NATURE OF RELATED PARTY TRANSACTION THRESHOLD LIMIT
Sale, purchase or supply of any goods or materials
directly or through appointment of agents (or)
Exceeding 25% of Annual Turnover
Selling or otherwise disposing of, or buying,
property of any kind directly or through
appointment of agents (or)
Exceeding 10% of Net worth
Leasing of property of any kind (or)
Exceeding 10% of Annual Turnover
OR
Exceeding 10% of Net worth
Availing or rendering of any services directly or
through appointment of agents (or)
Exceeding 10% of Net worth
Appointment to any office or place of profit in the
company, its subsidiary company or associate
company (or)
Monthly Remuneration Exceeding Rs. 2.5
lakhs
Remuneration for underwriting the subscription of
any securities or derivative
Exceeding 1% of Net worth
43. Approvals...
• Approval: the Transaction of a company with
Related Parties which are Not in the Ordinary
Course of Business and which is Not on Arm
Length Price require following approval for
Entering into Such Transactions with Related
Party:-
• “arm’s length transaction” means a transaction
between two related parties that is conducted as
if they were unrelated, so that there is no conflict
of interest.
44. RPT – Board’s Approval
• For enter into transactions mention under this section Consent of Board of
Directors is Require by Passing of Resolution in the Meeting of Board of Directors.
• Note: Such resolution can’t be pass by circulation of resolution to the Board of
Directors.
• The agenda of the Board meeting at which the resolution is proposed to be
moved shall disclose-
• (a) the name of the related party and nature of relationship;
• (b) the nature, duration of the contract and particulars of the contract or
arrangement;
• (c) the material terms of the contract or arrangement including the value, if any;
• (d) any advance paid or received for the contract or arrangement, if any;
• (e) the manner of determining the pricing and other commercial terms, both
included as part of contract and not considered as part of the contract;
• (f) whether all factors relevant to the contract have been considered, if not, the
details of factors not considered with the rationale for not considering those
factors; and
• (g) any other information relevant or important for the Board to take a decision
on the proposed transaction.
45. RPT – Shareholders Approvals
• For entering Transactions with related parties
mention below Special Resolution is required
to be passed in GM
• When the Paid up Share Capital of Company is
10 Crore or More. Or
• Limits for sales, purchase, lease, services etc
46. RPT
• According to the section 188, sub section (1), any contact or arrangement must be
passed through Board Meeting or Shareholders Meeting, as case may be, Suppose,
the Contact has been made but the approval has not taken either in the Board
Meeting or Shareholders Meeting within 3 months from the date of Contract, In
that case the Contract shall be voidable at the option of the Board.
• In case of Loss in Result of Contract:
• If a director or employee entered into any contract and arrangement in
contravention of provision of this section then company can proceed against such
director and employee for recovery of any loss sustained by it from such contract.
• Penalty:
• Any director who enter any contact or any employee who is authorized to enter any
contact make any default for compliance of this provisions shall be penalized in
case of:
• Listed Company:- Imprisonment for a term which may extend to 1 Year ( or)
• fine which shall not be less than 25000/-but which may extend Rs. 5,00,000/- or
Both
• Unlisted Company: – Fine which shall not be less than 25000/- but which may
extend Rs. 5,00,000/-
•
47. Section 189: Register of Contract and
Arrangement in Director are interested
• Every Company shall maintain one or more register in Form MBP-4
• particulars of Contract or arrangement to which section 184(2) or188 applies.
• After entering the particulars, such register shall be Placed before the next Board
Meeting and Signed by all the directors Present at the meeting.
• Entry shall be made in chronological order, authenticated by Company secretary of
Company and person authorized by board.
• The register shall be kept at the registered office of the Company and preserved
permanently. Members may also take extracts from this register
• *Exemption:
• No entry required to be done in register if contract is for sale, purchase or supply of
goods, material or services , the value of such materials or the cost of such services
does not exceed Rs. 5 lakh in the aggregate in any year.
• Any contract or arrangement by banking company for the collection of bills in the
ordinary course of its business.
• Where in any company or companies or Bodies corporate in which a director
together with any other director holds 2% or less of the paid-up share capital.
48. LOAN TO DIRECTOR - 185
• Company shall not provide loan to :-
•
– Its Director
– Directors relatives
– Firm in which directors or their relatives are partners
– Private company of which any such director is a director or
member
– Any Company in which not less than 25% of the shares held by
any such director, or by two or more such directors.
• Earlier, this restriction applicable only for Public Limited
Company. Now, this restriction is applicable for private company
also. May be Intention of this restriction is directors should not
divert company’s funds.
49. LOAN TO DIRECTOR - 185
• any director of the lending company, or of a company
which is its holding company or any partner or relative of
any such director; or
• any firm in which any such director or relative is a partner;
or
• any private company of which any such director is a
director or member; or
• any body corporate at a general meeting of which not less
than 25% of the total voting power may be exercised or
controlled by any such director, or by two or more such
directors, together; or
• any body corporate, the Board of directors, managing
director or manager, whereof is accustomed to act in
accordance with the directions or instructions of the Board,
or of any director or directors, of the lending company.
50. Exemptions
• Any loan made by a holding company to its
wholly owned subsidiary company; or
• Any guarantee given or security provided by a
holding company in respect of any loan made
to its wholly owned subsidiary company
• Any guarantee given or security provided by a
holding company in respect of loan made by
any bank or financial institution to its
subsidiary company
51. Penalty - 185(2)
• Company
- Fine – not less than 5 laks - max -25 laks
• Director or other person to whom loan is
advanced
- Imprisonment - 6 motnhs
- Fine not less than 5 laks - max-25 laks or
- Both
52. Consolidation..
• Consolidated financial statement of all
subsidiaries and company shall be placed
before the AGM. (Section 129 (3)).
• Subsidiary includes Associates and Joint
venture companies.
• Consolidation - as per SH –III & AS
• Statement containing salient feature of FS of
subsidiaries in Form AOC 1
53. Annual Return
• AR Signing by CS
• Director & Company Secretary.
• If no CS, CS in Practice
• OPC & Small Company - no CS
• AR Certification by CS
• Listed Company, P/C 10 cr or Turover -50 Cr
55. Allotment
Private Placement
- 42 Rights issue - 62
Preferential offer
- Section 62 (1)
(c) read with Rule
13 of the
Companies
(Share Capital
and Debentures)
Rules, 2014
56. Private Placement
• Prior approval of Shareholders is required to be
obtained via Special Resolution
• Justification or basis for the offer price to be disclosed
in the Explanatory Statement calling General Meeting
• Minimum investment size of Rs 20,000 per person
• Cash receipt prohibited
• Allotment with 60 days
• Separate Bank Account
57. Private Placement
• Offer letter in form PAS-4
• Maintenance of records pertaining to offer letter
• Filing of offer letter to ROC in case of issue
through private placement in form PAS-4
• Return of allotment to be filed in form PAS-3.
• In case Company is not able to allot securities
within 60 days of receipt of application money, it
shall be repaid within 15 days from the date of
completion of 60 days otherwise pay 12% interest
per annum.
58. Rights...
• Offer letter to all the members on
proportionate
• Offer - 15-30 days
• Renouncement or not
• Board’s discretion to allot Maintenance of
records pertaining to offer letter
• Return of allotment to be filed in form PAS-3.
59. • Prior approval of Shareholders is required to be obtained via Special Resolution
• Allotment to be made within 12 months from the date of Special Resolution
• Mandatory Disclosures in the Explanatory Statement to the Notice calling
General Meeting:
• intention of the promoters, directors & KMPs
a. Change in control, if any, consequent to the preferential offer
b. Justification for the allotment proposed to be made for consideration other
than cash
c. Details of the proposed allottees along with post preferential shareholding
d. Basis on which price is arrived along with the report of Registered Valuer
Preferential Basis...
60. THANK YOU
2/25/2015 60
CS P Eswaramoorthy,B.Sc.,FCS.,Company
Secretary in Practice
Please send your comments to
eswarfcs@gmail.com