Important provisions post implementation of Cos Act on 26th March 2014 : Part I
This is the First Part covering important changes till Sec. 148 (Chapter X- Audit & Auditors).
1. Section 3 :
One person Company can be incorporated from 1st April, 2014
2. Section 4 - Memorandum
i) Objects clause henceforth will have “Objects for which Company is incorporated & any matter considered necessary in furtherance thereto”.
ii) Memorandum shall be in respective Forms as specified in Table A, B, C, D & E
3. Section 5 – Articles of Association
Articles can contain entrenchment provisions and Articles shall be in respective Forms as specified in Table F, G, H, I & J
4. Section 7 –Incorporation of Company
Forms to be filed for Incorporation to be completely changed; Additional Documents like Affidavit from subscribers to the Memorandum, Declaration by the Professional that all requirements relating to Incorporation are complied with need to be filed.
Companies to preserved documents relating to Incorporation till its Dissolution.
5. Section 8: Companies with Charitable objects
Earlier Sec. 25 is now Sec. 8 Company (Companies with charitable objects). Some of the changes made include “One person Company can be started as Sec. 8 Company; A firm can be a member of Sec. 8 Company; Increased penalty for non compliance”
6. Section 12 : Registered office of the Company
i) A company needs to have a registered office from the fifteenth day of its incorporation.
ii) Within 30 days of Incorporation necessary Form to be filed about Registered office.
iii) Every Company shall include the registered office and the Corporate Identity Number along with telephone number, fax number, if any, e-mail and website addresses in all the Communications being sent from the Company.
7. Section 18 : Conversion of Companies
Conversion of Companies from one form to another is permitted. So any of the existing Company may even be converted into One person Company (The word used in the section is “Company registered under the Act”. It is assumed Companies registered under 1956 Act can also get converted into another form.
8. Section 20 : Service of documents
A document may be sent by the Company by courier mode.
9. Section 26 to 28: Prospectus
Matters to be stated in prospectus detailed list are given in section 26.
As per Section 27, if the company is changing the objects for which a prospectus is issued, it needs to pass a special resolution; also it should give dissenting shareholder a right to exit the company.
10. Section 53 & 54: Prohibition on Issue of Shares at Discount
Except sweat equity shares (Section 54), shares shall not be issued at a discount.
11. Section 55: Preference Shares
A company can issue redeemable preference shares for a period not exceeding 20 years.
A company for infrastructure projects can issue Redeemable preference shares for a period exceeding 20 years.
12. Section 73: Deposits
Many changes are made under the section including taking deposit insurance, Creation of Deposit repayment reserve for not less than 15% of deposits maturing during a Financial year etc.
Cs. Mohan Kumar. Company Secretary, Chennai
Let us look at some of the important changes made post the MCA notification on 26th March 2014.
1. Section 3 :
One person Company can be incorporated from 1st April, 2014
2. Section 4 - Memorandum
i) Objects clause henceforth will have “Objects for which Company is incorporated & any matter considered necessary in furtherance thereto”.
ii) Memorandum shall be in respective Forms as specified in Table A, B, C, D & E
3. Section 5 – Articles of Association
Articles can contain entrenchment provisions and Articles shall be in respective Forms as specified in Table F, G, H, I & J
4. Section 7 –Incorporation of Company
Forms to be filed for Incorporation to be completely changed; Additional Documents like Affidavit from subscribers to the Memorandum, Declaration by the Professional that all requirements relating to Incorporation are complied with need to be filed.
Companies to preserved documents relating to Incorporation till its Dissolution.
5. Section 8: Companies with Charitable objects
Earlier Sec. 25 is now Sec. 8 Company (Companies with charitable objects). Some of the changes made include “One person Company can be started as Sec. 8 Company; A firm can be a member of Sec. 8 Company; Increased penalty for non compliance”
6. Section 12 : Registered office of the Company
i) A company needs to have a registered office from the fifteenth day of its incorporation.
ii) Within 30 days of Incorporation necessary Form to be filed about Registered office.
iii) Every Company shall include the registered office and the Corporate Identity Number along with telephone number, fax number, if any, e-mail and website addresses in all the Communications being sent from the Company.
7. Section 18 : Conversion of Companies
Conversion of Companies from one form to another is permitted. So any of the existing Company may even be converted into One person Company (The word used in the section is “Company registered under the Act”. It is assumed Companies registered under 1956 Act can also get converted into another form.
8. Section 20 : Service of documents
A document may be sent by the Company by courier mode.
9. Section 26 to 28: Prospectus
Matters to be stated in prospectus detailed list are given in section 26.
As per Section 27, if the company is changing the objects for which a prospectus is issued, it needs to pass a special resolution; also it should give dissenting shareholder a right to exit the company.
10. Section 53 & 54: Prohibition on Issue of Shares at Discount
Except sweat equity shares (Section 54), shares shall not be issued at a discount.
11. Section 55: Preference Shares
A company can issue redeemable preference shares for a period not exceeding 20 years.
A company for infrastructure projects can issue Redeemable preference shares for a period exceeding 20 years.
12. Section 73: Deposits
Many changes are made under the section including taking deposit insurance, Creation of Deposit repayment reserve for not less than 15% of deposits maturing during a Financial year etc.
13. Section 74: Repayment of Deposits
Deposits accepted by the company before the commencement of this Act shall be repaid within one year from 1st April, 2014.
Deposits accepted by the company before the commencement of this Act shall be repaid within one year from 1st April, 2014.
14. Section 76: Credit Rating
Specified Companies to get compulsory credit rating.
15. Section 77: Charges
Charges to be filed within 30 days. Late filing is possible up to 300 days on payment of additional fees.
16. Section 87: Power of Central Government
If a company is filing charge after 300 days of creation, application to be made to Central Government.
17. Section 92: Annual Return
Contents of Annual Report are modified.
Extract of Annual Return shall be attached to Board’s Report.
If a PCS certifies Annual Return without confirming to this Section or Rules, he should be punishable for Rs. 50,000 to Rs. 5,00,000/-.
18. Section 93: Return to be filed with Registrar
Listed Company to file with ROC change in Number of shares held by promoters and top 10 Share holders within 15 days of change.
19. Section 96: Annual General Meeting
First AGM of the company to be held within 9 months from the closure of first financial year.
AGM to be held during business hours (9 A.M to 6 P.M.)
AGM cannot be held on a National Holiday. (Since public holiday is removed, companies are free to conduct AGM on Sundays also)
20. Section 105: Proxy
A person can act as proxy only for a maximum of 50 Members.
Listed Companies with more than 5000 members need to have 30 members as quorum (This part was already given effect during earlier notification).
21. Section 121: Report on AGM
Listed company to file a report on AGM with ROC. It needs to confirm that the meeting was convened and conducted as per the provisions of the Rules and Act.
22. Section 123: Declaration of Dividend
The percentage of profits to be transferred to reserve before declaration of dividend is at the discretion of the company.
In case of interim dividend, if the company has incurred loss during current financial year till the last quarter, interim dividend not to exceed average dividend declared during last 3 financial years.
Dividend to be deposited in a separate bank account within 5 days of declaration.
23. Section 128: Books of Accounts
Books of Accounts can be maintained by electronic mode.
24. Section 129: Financial statements
Consolidation of Financials is mandatory if there are subsidiaries.
25. Section 134: Financial statement and Board Reports
Financial statements to be signed by 2 directors, CFO and company Secretary.
Contents of Directors report is enlarged to a large extent.
26. Section 138: Internal Audit
Internal Audit to be mandatory for specified companies. Can be done by CA, Cost Accountant or other professional authorized by the Board.
27. Section 139: Appointment of Auditors
For Listed Company and other specified companies, an individual can be an auditor for not more than 5 consecutive years (10 years in case of a firm of auditors). Companies to comply within 3 years from 1st April, 2014.
Auditors appointed for a period of 5 years at a stretch, ratification to be done at every AGM.
28. Section 141: Eligibility, Qualification of auditors
Certain new Disqualifications have been added for auditors like - he should not be a relative of Director or KMP, etc.
29. Section 144: Auditor not to render certain services
Statutory Auditor of the Company shall not render certain services like Accounting & Book keeping services, Internal audit, Actuarial services, Investment advisory services, Outsourced financial services, etc
30. Section 146 : Auditors to attend General Meeting
Auditors can nominate some representative to attend AGM on his behalf , but he shall also be qualified to be an auditor. (i-e Member of ICAI)
31. Section 148 – Cost Audit
The Section relating to Cost Audit is notified. We need to wait and watch the Rules for the Companies Cost Audit is going to be applicable.
Specified Companies to get compulsory credit rating.
15. Section 77: Charges
Charges to be filed within 30 days. Late filing is possible up to 300 days on payment of additional fees.
16. Section 87: Power of Central Government
If a company is filing charge after 300 days of creation, application to be made to Central Government.
17. Section 92: Annual Return
Contents of Annual Report are modified.
Extract of Annual Return shall be attached to Board’s Report.
If a PCS certifies Annual Return without confirming to this Section or Rules, he should be punishable for Rs. 50,000 to Rs. 5,00,000/-.
18. Section 93: Return to be filed with Registrar
Listed Company to file with ROC change in Number of shares held by promoters and top 10 Share holders within 15 days of change.
19. Section 96: Annual General Meeting
First AGM of the company to be held within 9 months from the closure of first financial year.
AGM to be held during business hours (9 A.M to 6 P.M.)
AGM cannot be held on a National Holiday. (Since public holiday is removed, companies are free to conduct AGM on Sundays also)
20. Section 105: Proxy
A person can act as proxy only for a maximum of 50 Members.
Listed Companies with more than 5000 members need to have 30 members as quorum (This part was already given effect during earlier notification).
21. Section 121: Report on AGM
Listed company to file a report on AGM with ROC. It needs to confirm that the meeting was convened and conducted as per the provisions of the Rules and Act.
22. Section 123: Declaration of Dividend
The percentage of profits to be transferred to reserve before declaration of dividend is at the discretion of the company.
In case of interim dividend, if the company has incurred loss during current financial year till the last quarter, interim dividend not to exceed average dividend declared during last 3 financial years.
Dividend to be deposited in a separate bank account within 5 days of declaration.
23. Section 128: Books of Accounts
Books of Accounts can be maintained by electronic mode.
24. Section 129: Financial statements
Consolidation of Financials is mandatory if there are subsidiaries.
25. Section 134: Financial statement and Board Reports
Financial statements to be signed by 2 directors, CFO and company Secretary.
Contents of Directors report is enlarged to a large extent.
26. Section 138: Internal Audit
Internal Audit to be mandatory for specified companies. Can be done by CA, Cost Accountant or other professional authorized by the Board.
27. Section 139: Appointment of Auditors
For Listed Company and other specified companies, an individual can be an auditor for not more than 5 consecutive years (10 years in case of a firm of auditors). Companies to comply within 3 years from 1st April, 2014.
Auditors appointed for a period of 5 years at a stretch, ratification to be done at every AGM.
28. Section 141: Eligibility, Qualification of auditors
Certain new Disqualifications have been added for auditors like - he should not be a relative of Director or KMP, etc.
29. Section 144: Auditor not to render certain services
Statutory Auditor of the Company shall not render certain services like Accounting & Book keeping services, Internal audit, Actuarial services, Investment advisory services, Outsourced financial services, etc
30. Section 146 : Auditors to attend General Meeting
Auditors can nominate some representative to attend AGM on his behalf , but he shall also be qualified to be an auditor. (i-e Member of ICAI)
31. Section 148 – Cost Audit
The Section relating to Cost Audit is notified. We need to wait and watch the Rules for the Companies Cost Audit is going to be applicable.
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The Second part from Sec. 149 till the conclusion will be published shortly !!
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