Monthly Archives: June 2014

CS is the backbone of any company

http://freepressjournal.in/cs-is-the-backbone-of-any-company/

 

Hailing the role of ICSI, PK Malhotra, Secretary at Ministry of Law & Justice says the NDA govt will soon be launching a Service Delivery Act in which an officer will be held responsible if a particular task is not done in a stipulated time

Mumbai

The institute of Company Secretaries of India (ICSI) kick started a two-day program for CS, on Friday in Mumbai, with the theme PCS (Practicing Company Secretaries) – The facilitator for corporate growth.

P. K. Malhotra, Secretary at Ministry of Law & Justice Government of India, was the chief guest at this event. He appreciated efforts of the ICSI and complimented the governing council on their task to always produce and provide the best CS.  He started on a lighter note by saying that, “I am the only one in this room who is not a CS.”

He said that, “CS is the backbone of any company and they should arrive to the occasion. I appreciate the hard work and the efforts taken by ICSI”

He also spoke about how the NDA government was looking at the economy differently and always asked for ideas from the officers. He said, “NDA has got a clear mandate and the PM has a good vision that will boost the economy. The PM always asks for ideas from we officers which will benefit the people at the ground level”. “The PM says that you are working for millions of people and not me,” he further added.

He also mentioned initiatives taken by the NDA government to improve work culture and quoted an example saying, “We will be launching a Service Delivery Act in which an officer will be held responsible if a particular task is not done in stipulated time. This will make sure that deadlines are met and people won’t have to run from pillar to post. In case of a delay, the officer concerned officer would be questioned and might be punished on dissatisfactory reasoning. ”

CS R Sridharan, President of ICSI, expressed his happiness over 2013 Companies Act and said that, “I, as a President, welcome this new Companies Act 2013 for CS”.

Now a CS is equivalent to a company director or a COO and enjoys being a key managerial personnel. Even the new syllabus has been designed as per the new companies act 2013. He said that, “Expectations from the CS are very high from the stake holders and the corporate world. Steep competition and an uninformed consumer is one of the biggest challenges and the CS needs to be equipped with specific skill sets to tackle this. Global economic growth is changing fast and we need to match our pace.” He further mentioned that ICSI is involved in a lot of capacity building activities for the CS by organizing seminars, conferences, awareness program’s etc.

“On an average there are 4 lakh students who are pursing CS course across all the levels and every year around 60 thousand register for our courses. We ensure that they are trained on soft-skills and other training aspects which makes them more competitive in the professional world” he further added.

Earlier, Anil Murarka, past president of ICSI, while welcoming all the delegates and guest’s said that, “PCS is relevant and important.” “The world is looking at a young and rejuvenated India and together we can bring acche dinn (good day’s) if we respond to the corporate and market requirement.”

P.K.Malhotra also launched four books related to CS during this event like Competition Law in India, One-person Company, Guidance note on Annual return and Guidance note on Secretarial Audit.

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Revised format of annual return of foreign assets & liabilities

RBI has revised the format of annual return of foreign assets & liabilities vide its circular no. 145 dated 18th June 2014. Now the new format can be assessed by going to the site viz. http://www.rbi.org.in/home.aspx,

click on Forms

go to Fema Forms 

and download the XLS version of the form

This annual return is required to be filed by all companies who have received foreign investment and is required to be submitted online on or before 15th July 2014. The return is made out as on 31st March, 2014. 

Copy of above RBI circular can be found here viz. http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8945&Mode=0

The new format has been modified marginally and it is therefore advised to use only the new form for uploading the annual return. 

 

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Partial exemption to private companies – MCA draft notification

The MCA has issued a draft notification dated 24/6/2014 inviting public comments thereon in respect of several proposals to give partial exemption to private companies from the rigorous compliance provisions of the Companies Act, 2013. The salient features of the draft proposals are :

1) Private companies are allowed to accept unsecured loans from their shareholders not exceeding 25% of the paid-up share capital and free reserves or 100% of free reserves, whichever is more, of course subject to disclosure requirements;

2) sections 101 to 107 and 109 regarding notice of general meeting, explanatory statement, quorum, chairman, proxies, etc. which were hitherto exempted for private companies are being restored;

3) The auditor limit of 20 companies is being removed for private companies, which means they can be appointed for as many private companies and the 20 company limit will be applicable only to public companies;

4) Section 160 regarding requirement of a notice proposing the nomination of a director in a general meeting alongwith fees thereof is being dispensed with;

5) Section 162 which is voting for appointment of directors individually is being done away with, which means more than one director can be appointed in one resolution in a private company;

6) section 180 the erstwhile section 293 – i.e. restrictions on the power of board of directors will not apply to private companies with less than 50 members;

7) Section 185 – loans to directors will not apply to private companies 

(a) which have borrowings from banks or financial institutions or any bodies corporate not more than twice of their paid up share
capital or Rs. 50 crore, whichever is lower; and

(b) in whose share capital no other body corporate has invested any money”.

 

8) section 188 – related party transactions will not apply to private companies 

9) section 203(3) is not made applicable to private companies – this sub-section provides for restricting the employment of a whole time key managerial personnel in more than one company except subsidiary companies. 

Many of these proposals are not clear as yet so waiting for the final notification from the MCA. Please note that this is only a draft notification at the present stage and nothing in this draft notification shall apply unless the final notification is in place. 

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common KYC in the financial sector

The SEBI Board met today and decided among other matters to expand the common KYC requirements to the financial sector as well. Presently common KYC is prevalent among the SEBI registered intermediaries i.e. capital market participants, but does not extend to other sectors like banking, insurance etc. Common KYC is beneficial because once the KYC is registered with a central KYC registry, there is no need to keep doing the KYC again and again while transacting in the market. 

This is the extracts of the SEBI Press Release in the subject. 

Common KYC in Financial Sector

The centralized KYC system introduced by SEBI has evolved and stabilized with data of about 1.95 crore KYCs of investors. The client who has already done the KYC with any SEBI registered intermediary need not undergo the same process again when he approaches another intermediary. The system has benefited the investors. So now the KYC data base will be shared with other financial sector regulators like RBI, IRDA, PFRDA etc. 

Currently, the facility of sharing of KYC information is available only among SEBI registered intermediaries. Board has now approved the amendment to SEBI {KYC (Know Your Client) Registration Agency} Regulations, 2011 for sharing of KYC information available on the centralised system with the entities regulated by other financial sector regulators. This would further facilitate the KYC process for the investors in the entire financial sector. This will  not only reduce the paper-work and bring down cost of operations for the investors as well as for the intermediaries, but will also save the investors from the hassle of getting KYC done again by the intermediaries regulated by other financial sector regulators.

 

The full text of the SEBI Board meeting press release is available at this link.

http://www.sebi.gov.in/sebiweb/home/detail/28252/yes/PR-SEBI-Board-Meeting

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conversion of public company into private company

The Companies Act, 2013 vide its 2nd proviso to section 14(1) provides that conversion of public company into private company shall take only with the approval of the Tribunal which shall make such order as it may deem fit.

Now Ministry of Corporate Affairs (MCA) has clarified vide its circular no. 18 dated 11th June, 2014 that the provisions of section 14(1) and (2) having not been notified so far, the corresponding provisions of Companies Act, 1956 shall apply to such conversion of public company into private company. The Government has vide its notification of 10th July 2012 delegated such approval powers to the Registrar of Companies and such delegations are still in force. 

So this means that public companies which want to convert themselves into private companies can do so with the approval of the Registrar of companies until the section 14(1) and (2) of the 2013 is notified. 

With the increase in compliance requirements for public companies especially with respect to key managerial personnel, audit committee, managing director appointment and remuneration etc. public companies have been given the leeway to convert themselves into a private company while the 1956 provisions are still in force. 

The relevant circular is available at 

Click to access General_Circular_18_2014.pdf

 

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e-voting by shareholders deferred – MCA circular

Ministry of Corporate Affairs (MCA) has vide its circular no. 20 dated 17th June, 2014 deferred the mandatory requirement of e-voting by the shareholders until 31st December, 2014. They have also issued some clarification on the e-voting procedure, such as:

1) voting by show of hands is not applicable where e-voting takes place. So there is compulsory voting by poll at the general meetings.

2) Shareholders who have voted electronically, will be allowed to participate physically in the general meetings, but they cannot vote on the resolutions;

3) Where certain items are required to be transacted only by postal ballot, there is no leeway in those matters – it has to be decided only by postal ballot and not at the general meeting;;

4) Where a person is unable to vote electronically and not able to attend the general meeting also, then he would not get any facility to vote by postal ballot.

5) Para IV and para VI of the said circular is not clear

Copy of the said circular is given in this link http://www.mca.gov.in/Ministry/pdf/General_Circular_20_2014.pdf 

 

 

 

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Filing of resolutions with the ROC – old section 192/ form 23

The old section 192 of Companies Act, 1956 has undergone a metamorphosis of sorts with the new section 117 of the Companies Act, 2013. Section 117 refers to filing of certain resolutions or agreements together with explanatory statements, if any under section 192 of the CA 2013 within 30 days of the passing thereof. 

Section 117(3) provides that this section applies to 

(a) special resolutions;
(b) resolutions which have been agreed to by all the members of a company, but which, if not so agreed to, would not have been effective for their purpose unless they had been passed as special resolutions;
(c) any resolution of the Board of Directors of a company or agreement executed by a company, relating to the appointment, re-appointment or renewal of the appointment, or variation of the terms of appointment, of a managing director;
(d) resolutions or agreements which have been agreed to by any class of members but which, if not so agreed to, would not have been effective for their purpose unless they had been passed by a specified majority or otherwise in some particular manner;
and all resolutions or agreements which effectively bind such class of members though not agreed to by all those members;
(e) resolutions passed by a company according consent to the exercise by its Board of Directors of any of the powers under clause (a) and clause (c) of sub-section (1) of section 180;
(f) resolutions requiring a company to be wound up voluntarily passed in pursuance of section 304;
(g) resolutions passed in pursuance of sub-section (3) of section 179; and
(h) any other resolution or agreement as may be prescribed and placed in the public domain.

Now for resolutions passed in pursuant of section 179(3), we turn to that section:

Section 179(3) provides for folllowing matters which can be passed only at Board meetings and not otherwise. 

(3) The Board of Directors of a company shall exercise the following powers on behalf of the company by means of resolutions passed at meetings of the Board, namely:—
(a) to make calls on shareholders in respect of money unpaid on their shares;
(b) to authorise buy-back of securities under section 68;
(c) to issue securities, including debentures, whether in or outside India;
(d) to borrow monies;
(e) to invest the funds of the company;
(f) to grant loans or give guarantee or provide security in respect of loans;
(g) to approve financial statement and the Board’s report;
(h) to diversify the business of the company;
(i) to approve amalgamation, merger or reconstruction;
(j) to take over a company or acquire a controlling or substantial stake in another company;
(k) any other matter which may be prescribed:

Explanation II.—In respect of dealings between a company and its bankers, the exercise by the company of the power specified in clause (d) shall mean the arrangement made by the company with its bankers for the borrowing of money by way of overdraft or cash credit or otherwise and not the actual day-to-day operation on overdraft, cash credit or other accounts by means of which the arrangement so made is actually availed of.

So this means that any borrowings from any banks by way of cash limits/ overdrafts/ bills discounting limits including borrowing for car loans. It would ipso facto also include inter corporate borrowings and unsecured loans. 

For matters specified in section 179(k), we have to refer to Rule 8 of the Companies (Meetings of the Board and its Powers) Rules, 2014 which specify the following matters.

(1) to make political contributions;
(2) to appoint or remove key managerial personnel (KMP);
(3) to take note of appointment(s) or removal(s) of one level below the Key Management Personnel;
(4) to appoint internal auditors and secretarial auditor;
(5) to take note of the disclosure of director’s interest and shareholding;
(6) to 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;
(7) to invite or accept or renew public deposits and related matters;
(8) to review or change the terms and conditions of public deposit;
(9) to approve quarterly, half yearly and annual financial statements or financial results as the case may be.

So Board resolutions pertaining to all these matters specified in Rule 8 and section 179(3) and Board/ general meeting resolutions specified in section 117 needs to be filed within 30 days of the Board meetings/ general meetings as aforesaid. 

The penalty for non compliance with these regulations is fine of not less than Rs.5 lakhs but which may extend upto Rs.25 lakhs for the company and for every officer in default, fine of not less than Rs.1 lakh but may extend to Rs.5 lakhs.

The filing has to be done in form MGT-14 with the enclosures. 

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Filing of Disclosure of Directors Interest

As per the Companies Act, 2013 all Directors have to give disclosure regarding their general notice of interest in other entities as specified below and they have to give this disclosure in form MBP-1 before the first Board meeting of the new financial year. Disclosure of interest should be in company or companies, or bodies corporate or firms, or other association of individuals which should include his shareholding.

In the new form MBP-1, the Directors have to give 

  • list of all their directorships held in Indian and foreign companies, 
  • partnerships or proprietorships held, 
  • member of Association of Persons, 
  • shareholdings in private companies, 
  • shareholdings in public companies if the shareholdings if the director alongwith his relatives two percent or more of the paid up share capital of such public company. 
  • interest or concern in other body corporates.

The definition of “body corporate” as given in section 2(11) of the Companies act, 2013 includes a company incorporated outside India, so the disclosure above shall include list of directorships and shareholdings held outside India also. 

Further under section 117 read with section 179 and Rule 8 of the Companies (Meetings of the Board and its Powers) Rules, 2014, the Board resolution which takes on record the disclosure of directors interest in the first Board meeting is required to be filed with the Registrar of Companies, in form MGT-14 within 30 days of the Board meeting. The form MGT-14 is required to enclose the extracts of the Board resolution. The forms i.e. MBP-1 forms is not required to be enclosed along with the said form MGT-14. This was corroborated recently by ROC, Mumbai which approved three forms which i had filed recently where i had enclosed only the Board resolutions and not the MBP-1 forms. 

Nevertheless it is advisable to name the Directors whose forms i.e. MBP-1 forms have been received and are being taken on record at the said Board meeting. 

The list of relatives is also required to be given as per the new definition of the “relatives” under the new Act.

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