Friday, October 11, 2013

DORMANT COMPANY – A NEW ASSET SHIELDING CONCEPT UNDER COMPANIES ACT 2013


DORMANT COMPANY – A NEW ASSET SHIELDING CONCEPT UNDER COMPANIES ACT 2013

A Dormant Company offers excellent advantage to promoters who wants t to hold an asset or intellectual property under the corporate shield for its usage at a later stage . For instant , if a promoter wants to buy lands now for its future project at a comparatively lesser price , he may do the same through dormant company so that he use the land for its project latter. Thus , dormant company status is a new phenomenon in the Companies Act 2013 and is an excellent tool for keeping assets in the company for its future usage. A dormant company may be either a public company or a private company or a one person company.
According to Section 455 of the Companies Act 2013, where a company is formed and registered under this Act for a future projector to hold an asset or intellectual property and has no significant accounting transaction,such a company or an inactive company may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company.

According to section 455 of Companies Act 2013, “inactive company” means a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years;

According to section 455 of Companies Act 2013,significant accounting transaction” means any transaction other than—

(a) payment of fees by a company to the Registrar;

(b) payments made by it to fulfil the requirements of this Act or any other law;

(c) allotment of shares to fulfil the requirements of this Act; and

(d) payments for maintenance of its office and records.

In case of a company which has not filed financial statements or annual returns for two financial years consecutively, the Registrar of companies shall issue a notice , suo motto , to that company and enter the name of such company in the register maintained for dormant companies.

A dormant company shall have such minimum number of directors, file such documents and pay such annual fee as may be prescribed to the Registrar to retain its dormant status in the register and may become an active company on an application made in this behalf accompanied by such documents and fee as may be prescribed.

A Dormant Company need not enclose cash flow statements in its annual accounts.
A Dormant Company is required to convene at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days:

As per section 248 of the Companies Act 2013, the Registrar of Companies may remove the name of a company from the register of companies , if a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455.

As per draft rules , for the purposes of sub-section (1) of section 455, a company may make an application in Form No. 29.2 along with such fee as provided in Annexure ‘B’ to the Registrar for obtaining the status of a Dormant Company in accordance with the provisions of section 455 after passing a special resolution to this effect in the general meeting of the company.
The Registrar shall, after considering the application filed in Form No. 29.2, issue a certificate in Form No. 29.3 allowing the status of a Dormant Company to the applicant.
For the purposes of sub-section (5) of section 455, a dormant company shall have a minimum number of three directors in case of a public company, two directors in case of a private company and one director in case of a One Person Company:
Thus , one person company (OPC) can also be registered as a dormant company under section 455.
For the purposes of sub-section (5) of section 455, a dormant company shall file a declaration annually in Form No. 29.4 along with such annual fee as provided in Annexure ‘B’ within thirty days from the end of each financial year.
Application under sub-section (5) of section 455 for obtaining the status of an active company from that of dormant company shall be made in Form No. 29.5 along with such fee as may be provided in Annexure ‘B’ and shall be accompanied by a return in Form No. 29.4 in respect of the financial year in which the application for obtaining the status of an active company is being filed.

 
 
 

Wednesday, October 9, 2013

MANAGERIAL REMUNERATION UNDER SECTION 197 OF THE COMPANIES ACT 2013 – AN ANALYSIS


MANAGERIAL REMUNERATION UNDER SECTION 197 OF THE COMPANIES ACT 2013 – AN ANALYSIS

Section 197 of CA 2013 deals with the overall maximum managerial remuneration and managerial Remuneration in case of absence or inadequacy of profits. According to this section, the total managerial remuneration payable by a public company, to its directors, including managing director and whole-time director, and its manager in respect of any financial year shall not exceed eleven per cent. of the net profits of that company for that financial year computed in the manner laid down in section 198 except that the remuneration of the directors shall not be deducted from the gross profits.

However, a company in general meeting may, with the approval of the Central Government, authorise the payment of remuneration exceeding eleven per cent. of the net profits of the company, subject to the provisions of Schedule V:

However , the remuneration payable to any one managing director; or whole-time director or manager shall not exceed five per cent. of the net profits of the company and if there is more than one such director remuneration shall not exceed ten per cent. of the net profits to all such directors and manager taken together;

The remuneration payable to directors who are neither managing directors nor whole-time directors shall not exceed,—

(a) one per cent. of the net profits of the company, if there is a managing

or whole-time director or manager;

(b) three per cent. of the net profits in any other case.

If, in any financial year, a company has no profits or its profits are inadequate, the company shall not pay to its directors, including any managing or whole-time director or manager, by way of remuneration any sum exclusive of any fees payable to directors under sub-section (5) hereunder except in accordance with the provisions of Schedule V and if it is not able to comply with such provisions, with the previous approval of the Central Government.

Any remuneration for services rendered by any such director in other capacity shall not be so included if—
a)the services rendered are of a professional nature; and

b) in the opinion of the Nomination and Remuneration Committee, if the company is covered under sub-section (1) of section 178, or the Board of Directors in other cases, the director possesses the requisite qualification for the practice of the profession.

In calculation of the above , the sitting fees paid to directors for attending the board meeting will not be taken into account.

An independent director shall not be entitled to any stock option and may receive remuneration by way of fees provided under sub-section (5), reimbursement of expenses for participation in the Board and other meetings and profit related commission as may be approved by the members.

Thus , under the Companies Act 2013, independent directors of a public company can be paid commission other than sitting fees and reimbursement of expenses for attending the meeting provided if the shareholders approval is available for the same.

Any amount paid in excess to director other than prescribed under the above provisions shall be refunded by the director and a company cannot waive the same.
 
In case , if a company which has inadequacy of profits shall have to get the prior approval from Central Government in addition to shareholders approval in excess of the limits specified in the Schedule V ( Earlier Schedule XIII).

Every listed company shall disclose in the Board’s report, the ratio of the remuneration of each director to the median employee’s remuneration and such other details as may be prescribed.

Any premium paid on the insurance policy to cover the risk for managing director or other directors or Company Secretary shall not form the part of the above limit.

Section 197 of the Company Act 2013 also does not bar a managing or whole-time director of a company to receive compensation from its holding company or subsidiary provided the same should be disclosed in the director’s report.

Any contravention of the provisions of section 197 of CA 2013 shall end up with a fine of minimum of Rs 1 lac with a maximum of Rs 5 lacs.

Section 198 of Companies Act 2013 prescribes the method of calculation of net profits for the purpose of managerial remuneration.

Part II of Schedule V ( earlier Schedule XIII) – Remuneration Payable by a company in case where is no profit or inadequacy of profit without central government is detailed below


Where Effective Capital is
Limit of Yearly Remuneration payable shall not exceed (Rupees)
(i)Negative or less than 5 Crores
30 lakhs
(ii) 5 Crores and above but less than Rs 100 Crores
42 lakhs
(iii) 100 crores and above but less than 250 crores
60 lakhs
(iv) 250 Crores and above
60 lakhs plus 9.91% of the effective capital in excess of Rs 250 crores

A company with inadequate profit may pay to its managing director or whole-time director 200% of the above mentioned managerial remuneration if shareholders have given their approval through a special resolution.

Where the managerial person who is not holding Rs 5 lacs worth of shares or more or an employee or a director of the company not related to any director or promoter at any time during the two years prior to his appointment as a managerial person, In such cases , the company can pay to him up to maximum of 2.5% of the current relevant profits and up to 5% with the approval of shareholders by a special resolution.

Instances where Special Resolution is to be passed by a Company Under the Companies Act 2013


Instances where Special Resolution is to be passed by a Company Under the Companies Act 2013

 
Section 114 (2) of Companies Act 2013 defines a special resolution as
 
a)the intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting or other intimation given to the members of the resolution;
 
(b) the notice required under this Act has been duly given; and

(c) the votes cast in favour of the resolution, whether on a show of hands, or electronically or on a poll, as the case may be, by members who, being entitled so to do, vote in person or by proxy or by postal ballot, are required to be not less than three times the number of the votes, if any, cast against the resolution by members so entitled and voting.

Instances where Special Resolution is to be Passed under the Companies Act 2013

1) Section 12 (5) of CA 2013 states that for change of Registered office outside the local limits of any city, town or village where such office is situated can be made only by passing a special resolution.

2)Section 13 of CA 2013 states that alteration of Memorandum of Association can be made only by passing a special resolution except to increase the authorised share capital of the company.

3)Section 14 of CA 2013 states that the provisions of the Articles of Association of a company can be amended by passing a special Resolution.

4)Section 27 of CA 2013 states that variation in terms of contract or objects in prospectus can be made by passing a special resolution.

5)Section 41 of CA 2013 states that a company can issue Global Depository Receipt only after passing a special Resolution.

6) Section 48 of CA 2013 requires variation of shareholders rights can be made by passing a special resolution.

7) Section 54 of the CA 2013 requires a company  may issue sweat equity shares only after passing a special resolution.
 
8) Section 62 (1) (b) of CA 2013 states that  a company can issue shares under  employee stock option scheme (ESOP)  can do so by passing a special resolution.

9) Section 66 of CA 2013 states that a company may reduce its capital by way of passing a special resolution.

10)Section 68 of CA 2013 states that a company can engage in buy back of its shares by passing a special resolution.

11) Section 71 of the CA 2013 states that a company may issue debentures with an option to convert such debentures into shares, either wholly or partly at the time of redemption by passing a special resolution.

12) Section 94 of the CA 2013 states that the statutory registers and copies of annual return filed can be kept in a place other than the registered office of the company by passing a special resolution.

13) Section 140 of the CA 2013 says that an auditor can be removed from his office before the expiry of his term only by a special resolution of the company.

14) Section 149 of the CA 2013 states that a company may appoint more than 15 directors by passing a special resolution.

15) Section 149 (10) of the CA 2013 states that a company can reappoint an independent for a second term if he is eligible for reappointment on passing of a special resolution by the company.

16) Section 165 (1) of the CA 2013 states that a person can hold director position maximum in 20 companies only.  Section 165(2) of the CA 2013 states that a company may, by special resolution, specify any lesser number of companies in which a director of the company may act as directors.

17) Section 180 of the CA 2013 states that the board of directors can exercise certain powers only after passing a special resolution.


18) Section 185 of the CA 2013 states that for granting loan to managing or whole-time director under any scheme of the company shall be approved by a special resolution.

19) Section 186 of the CA 2013 states that loans or guarantee given to directors or to any person can be given only by prior special resolution if it exceeds the limits set by the above section.

20) Section 188 of the CA 2013 states that prior approval by a special resolution is necessary for any transaction which is in excess of the limits prescribed this section.

21) Section 196 of the CA 2013 states that if a person whose age is 70 or more , then , appointment of such person as the managing director or whole-time director of the company can be made only by passing a special resolution.


22) Section 210  of the CA 2013 states that a company may by passing a special resolution , may state that the affairs of the company out to be investigated.

23) Section 212  of the CA 2013 states that a company may by passing a special resolution , may state that the affairs of the company out to be investigated by the serious fraud investigating office.

24) Section 226 of the CA 2013 states that a company may by passing a special resolution, may state that it can be wounded up voluntarily.

25) Section 248   of the CA 2013 states that a company may by passing a special resolution, may request the Registrar of Companies to strike-off the name of the company from its register of members.


26) Section 262 of the CA 2013 states that a company may by passing a special resolution any scheme which relates to amalgamation of the sick company with any other company.

27) Section 271 of the CA 2013 states that a company by special resolution, can resolve that the company be wound up by the Tribunal.
 
28)Section 304 of the CA 2013 states that a company by special resolution, can resolve that the company be wound up by the Tribunal.

29)Section 314 of the CA 2013 states that a liquidator may call for a general meeting and pass a special resolution in the case of voluntary winding up.

30)Section 319 of the CA 2013 states that a company can authorise a liquidator to receive the consideration for sale of property of company by passing a special resolution.

31)Section 321 of the CA 2013 states that any arrangement other than the arrangement referred to in section 319 entered into between the company which is about to be, or is in the course of being wound up and its creditors shall be binding on the company and on the creditors if it is sanctioned by a special resolution of the company.

32)Section 343 of the CA 2013 states that Company Liquidator to exercise certain powers subject to sanction by a special resolution passed by the members.

33) Section 347 of the CA 2013 states that Company Liquidator may dispose its books and papers if he is authorised by a special resolution.

34) As per Table F and Article 6 of CA 2013, the rights attached to any class of shares can be varied by passing a special resolution by that class of shareholders.

35) As per Table F and Article 8 of CA 2013, redeemable preference shares can be issued by a company if it is authorised by special resolution.

36) As per Table F and Article 38 of CA 2013, a company may by passing a special resolution can reduce its share capital or any capital redemption reserve account; or any share premium account.

37) As per Table F and Article 38 of CA 2013, a company may by passing a special resolution can authorise a liquidator to divide the proceeds of winding up among the members.

38) Section 196 & 197 of the CA 2013 in conjunction with the Schedule V – Section , a company with no profit or without central government approval can pay 200% of the salary mentioned in that section to managerial personal if authorised by a special resolution for a period not exceeding three years.

 

Monday, October 7, 2013

BOARD MEETINGS UNDER SECTION 173 OF THE COMPANIES ACT 2013


BOARD MEETINGS UNDER SECTION 173 OF THE COMPANIES ACT 2013
1.After incorporation of a company, first board meeting has to be held within 30 days.

2.Four meetings have to be held in a year and gap between two board meeting shall not exceed 120 days.(Earlier 90 days).

3.Board Meeting can be held by either in person or through audio, video-conferencing.

4.A minimum 7 days notice is to be given for a board meeting and it should be either hand-delivery or by post or through e-mail or fax.

5.A shorter notice can be given provided if at least one independent director is present at such meeting . If no independent director is not present at the meeting , then , copy of the proceedings of such board meeting to be circulated among the directors and it should be ratified at least one independent director.

6.If there is a default in providing the notice , every officer (Company Secretary)  who is responsible to pay a fine of Rs 25,000 /=

7.One Person Company and Dormant companies shall have to convene at least two board meetings in a year.

8.A director who is attending the board meeting either through audio or video shall be counted for quorum for the board meeting.

9.As per draft rules , that it is compulsory for a director of a company to attend at least one board meeting in person  in a year.
10.Notice of the board meeting shall specify that a director can participate either through audio or video means instead of personal presence.
11.Directors who wants to attend the meeting through videoconference  or audio means shall communicate his intention at least 3 days before the meeting.

12.The draft minutes of the meeting shall be circulated among all the directors within seven days of the meeting either in writing or in electronic mode

13. Matters relating to Approval of accounts and approval of directors report shall have to be held in physical meeting .

14. A whole-time director has to attend at least one  board meeting personally  in a year  else he would lose his directorship.

15. Under Section 168 of the Companies Act 2013, if a director resigns, he has to send a copy of his resignation  letter to the concerned ROC stating the reason for his resignation.

16. Under CA 2013 , the office of the Chairman and Managing Director have been separated unless Articles permits .

17.For independent directors , there should be a separate board meeting exclusively to be attended by the independent directors during a year.

 

 

 

Sunday, October 6, 2013

STAKEHOLDE​R RELATIONSH​IP COMMITTEE AND CSR COMMITTEE UNDER COMPANIES ACT 2013

Under New Companies Act 2013 ,  Stakeholders Relationship Committee has to be established.

 

It is mandatory to create the above committe if number  of shareholders, deposit holders, debenture holders and other security holder exceeds 1,000 at any time during a Financial Year;

The Stakeholders Relationship Committee is entrusted with the responsibility to resolve the grievances of security holders. The Committee monitors and reviews the performance and service standards of the Registrar and Share Transfer Agents of the Company and provides continuous guidance to improve the service levels for investors.

Under New Companies Act 2013 , composition as determined by the board Corporate Social Responsibility (CSR) Committee

•companies meeting certain conditions should constitute a CSR committee of the Board, consisting of minimum of three directors where draft rules are yet to be released.

•CSR committee should consist of minimum of one Independent director.

•The CSR committee should formulate and monitor CSR policies and the same will be discussed in the Board’s report.

 

The above provision will be applicable to non-listed companies also.

NOW , YOU CAN REGISTER THE CHARGES WITH CONDONATION FEES UP TO 300 DAYS OF CREATION OR SATISFACTION OF CHARGES UNDER COMPANIES ACT 2013

NOW , YOU CAN REGISTER THE CHARGES WITH CONDONATION FEES UP TO 300 DAYS OF CREATION OR SATISFACTION OF CHARGES UNDER COMPANIES ACT 2013



More Rigorous fines and imprisonment if the Company fails to file Charge within the Deadline Under the New Companies Act

 

Registration of Charges under the Companies Act 2013

 

Section 77 (1) read with Section 78 & 79 – Registration of Charges

Form 6.1  within the period of 30 days

With the condonation fees up to 300 days ( 30 days + 270 days)


Satisfaction of Charges – Form No 6.4 with in 30 days

With condonation fees up to 300 days ( 30 days + 270 days)


Section 86 of CA 2013- If any company contravenes any provision of this Chapter, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to ten lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.

Directors fined under these provision may be disqualified to assume certain positions as prescribed in the other Acts.