Changes & Impacts Of Companies Act, 2013 On Listed Companies

Required Changes & Impacts

Of Companies Act, 2013 On

Listed Companies

Immediate Changes:

1.      Corporate Social Responsibility 2.      E-Voting facility to share holders in General Meeting 3.      Whistle Blower Mechanism 4.      Women Director 5.      Independent Director 6.      Related party transactions 7.      Nomination and remuneration committee 8.      Stakeholders relationship committee 9.      Auditors Tenure 10.  Appointment of KMP 11.  Appointment of New Director

Other Changes and requirement

1.      Reporting the changes to Board 2.      Report on Annual general meeting to ROC 3.      Secretarial Audit report 4.      Independent Directors                                    i.            Vacancy                                  ii.            Separate Meeting - Mandatory requirement 5.      Directors a)      Loan to Director b)      Meetings of the Board c)      Disclosure in Directors Report d)      Other Changes relating to Directors 6.      Articles of Association – Need to change? 7.      Proxy – Maximum no. prescribed 8.      Declaration of Dividend 9.      Others

ITEMS REQUIRING IMMEDIATE ATTENTION

S No	Particulars	Provision/ Remarks	Action Points
1	Corporate Social Responsibility (CSR)	Every Company, having a)      Net worth of 500 Crore or more (or) b)      Turnover of 1000 Crore or more (or) c)      Net profit of 5 Crore or more Should undertake corporate social responsibility. It should consist of Minimum 3 directors out of which one should be an Independent Director 2%  of Average Net Profit of last 3 years is to be spent on CSR	Company to constitute a committee if it gets attracted in one of the criteria.
2	E-Voting facility to share holders in General Meeting	E-Voting Facility should be provided to all shareholders a)      The resolutions passed at the meetings should be through e-voting a)      Such e-voting facility shall be kept open for min 1 day & maximum 3 days. To be closed before 3 days of AGM	Need to include E Voting from the current AGM. To be  included in the AGM notice & approved by Board.
3	Whistle Blower Mechanism	The company should devise a Whistle Blower Mechanism enabling stakeholders, including individual employees to freely communicate their concerns about illegal or unethical practices.	Company shall devise & introduce a Whistle Blower policy before 1st October, 2014.
4	Women Director	Company shall have one women Director. (She may or may not be Independent Director).	Company needs to have a Women Director in the Board before 1st October, 2014

5. Independent Director

Particulars	Remarks	Action Points
Tenure	An independent director shall hold office for a term up to five consecutive years on the Board of a company and shall be eligible for reappointment for another term of up to five consecutive years.	Company need to appoint Independent Directors for 5 years in the Coming AGM
Existing Director(s) Tenure	A person who has already served as an independent director for five years or more in a company as on October 1, 2014 shall be eligible for appointment, on completion of his present term, for one more term of up to five years only.
Ceiling	A person shall not serve as an independent director in more than seven listed companies
Issuance of Appointment letter	The company shall issue a formal letter of appointment to the independent directors in the manner as provided in Cos Act, 2013.	The letter of appointment along with the detailed profile of independent director shall be disclosed on the websites of the company & Exchanges within one working day from the date of such appointment.
Evaluation of Independent Director	n  The Nomination Committee shall lay down the evaluation criteria for performance evaluation of independent directors. The company shall disclose the criteria for performance evaluation, as laid down by the Nomination Committee, in its Annual Report. n  The performance evaluation of independent directors shall be done by the entire Board of Directors (excluding the director being evaluated).

6. Related Party Transactions

Particulars	Remarks	Action Points
Policy Formulation	The company shall formulate a policy on materiality of related party transactions and also on dealing with Related Party Transactions.	Company need to check if the current Related party transactions with subsidiaries will fall under this criteria; if so, need to place before Shareholders.
What is considered as Material Transaction?	A transaction with a related party shall be considered material if the transaction / transactions collectively during a financial year exceeds 5 % of the annual turnover or 20% of the net worth of the company as per the last audited financial statements of the company, whichever is higher.
Exemptions	Related party Transactions entered in its ordinary course of business & on an arm’s length basis is exempt from this provision.
Requirement of approval	a)      All Related Party Transactions shall require prior approval of the Audit Committee & Board. b)      Material Related Party Transactions shall require approval of the shareholders through special resolution and the related parties shall abstain from voting on such resolutions. c)      Material Related Party Transactions shall require approval of the shareholders through special resolution and the related parties shall abstain from voting on such resolutions.

S No	Particulars	Remarks	Action Points
7	Nomination and remuneration committee	Every Listed Company and Every other Public company- Having Paid up capital of Rs. 100 Crores or more; or Which have, in aggregate, outstanding loans or borrowings or debentures or deposits exceeding Rs.200 Crores shall have a nomination and remuneration committee The company shall set up a Stakeholders Relationship Committee for hearing the grievances of Stakeholders	Committee name to be changed. (Earlier name – Investors Relations committee)
8	Auditors Tenure	No Listed Company shall appoint or re-appoint n  an individual as auditor for more than one term of five consecutive years; and n  an audit firm as auditor for more than two terms of five consecutive years: n  To comply with this provision within 3 years.	Need to appoint a new auditor within 3 years if the existing auditor has completed 10 years already.
9	Appointment of Key Managerial personnel (KMP)	Listed Companies shall have i)   MD or CEO or Manager or in their absence, Whole time Director ii)   Company Secretary iii)  Chief Financial Officer	Every listed Company shall name the KMP in the first quarter Board meeting  & shall file the relevant Form with the ROC
10	Deposit to be made while Appointment of New Director	To deposit Rs. 1,00,000 as deposit;  To be refunded only when he gets elected or gets 25 % votes	Applicable for any new Director; Either he can deposit or some other member proposing him can deposit

                       

Other Changes & Requirements

S No	Particulars	Remarks
1	Reporting the change of shareholding	Every listed company shall file a return in the prescribed form with the registrar the change (Increase or decrease of 2%) in number of shares held by promoters and top ten shareholders of such company, within fifteen days of such change.
2	Report on each AGM	n  Every listed public company shall prepare in the prescribed manner a report on each annual general meeting including the confirmation to the effect that the meeting was convened, held and conducted as per the provisions of this Act and the rules made there under. n  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.
3	Secretarial Audit Report	n  All Listed Companies to obtain Secretarial audit report from a company secretary in practice. n  Applicable from FY ending 31.3. 2015
4	Independent Directors	i.   Vacancy n  An independent director who resigns or is removed from the Board of the Company shall be replaced by a new independent director at the earliest but not later than the immediate next Board meeting or three months from the date of such vacancy, whichever is later. n  Any vacancy in the office of Independent Director shall be filled within 3 months or next Board meeting whichever is later. ii.                   Meeting Mandatory  Requirement The independent directors of the company shall hold at least one meeting in a year, without the attendance of non-independent directors and members of management. All the independent directors of the company shall strive to be present at such meeting.

Other Changes Contd.,

S No	Particulars	Remarks
5	Directors	a)      Loan to Director ·         No Company can make directly or indirectly any loan to any of its Directors or to any other person in  whom the Director is interested ·         Exception is the Loans given to Wholly owned subsidiaries (WOS) b)      Meetings of the Board ¯  Length of Board meeting notice – shall be sent not less than 7 days in advance to every Director at his registered address with the Company. ¯  Shorter Notice for Board meeting– permitted for urgent business – provided at least one Independent Director (if any) must be present. If Independent Director could not be present, decision taken at the meeting to be circulated to all the Director and it is finalized only when ratified by at least one Independent Director. ¯  Physical presence of Director – Every Director to attend a minimum of 1 meeting per year physically i.e., Not through Video Conferencing or audio visual means. c)      Disclosure in Directors Report 6  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. 6  Directors report to contain “Extracts of Annual return” 6  Applicable from FY ending 31.03.2015 d)      Other Changes relating to Director [  Independent Directors are not entitled to stock options. [  Directors while resigning shall send a copy of their resignation to ROC [  Director who is punished for any offence & sentenced to imprisonment for 7 years. Then Life time ban to be appointed in any Company’s Board
6	Articles of Association	{  Articles shall be in respective Forms as specified in Table F, G, H, I & J {  We need to amend articles to be in alignment with the current provisions later. It is not mandatory, recommendatory only.

Other Changes Contd.,

S No	Particulars	Remarks
7	Proxy	n  A person can act as proxy only for a maximum of 50 Members. n  Listed Companies with more than 5000 members need to have 30 members as quorum.
8	Declaration of Dividend	Ë The percentage of profits to be transferred to reserve before declaration of dividend is at the discretion of the company. Ë 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. Ë Dividend to be deposited in a separate bank account within 5 days of declaration.
9	Other Changes	– CIN No & e- Mail ID to be mentioned in all Communications of the Company. To be implemented from 1/ 04/2014 – AGM can be held on Sunday also (Cannot be conducted on National holidays alone ) – Any Company where 20 % capital is held, it will be considered as Associate Company & its financials need to be consolidated. – Risk management Committee – Currently for Top 100 Companies – Voluntary revision of accounts is possible (Upto last 3 years) – Can be done only once in financial year – Class action suit can be filed by shareholders with 1/10 of voting power or 100 members joined together – Deposit holders, Deb. Holders included – All Forms, Form Numbers to be filed with ROC are changed. – Statutory Registers to be maintained by Company– Formats have changed

Compiled by: Christina Pauline Beulah, Company Secretary, Chennai