MCA Circular issued today - Clarification on managerial remuneration

Ministry of Corporate Affairs has issued a clarificatory circular today (April 10, 2015) on Managerial remuneration:

Giving a brief background & impact as per my understanding. Friends may kindly correct if required:
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Background

As per MCA Circular dated 16th August 2012, Listed Companies were exempt from obtaining Central Govt approval for payment of remuneration exceeding the limits given in Sch XIII of Companies Act 1956. This exemption was applicable only for Director/ Employee of a Company holding shares of less than 0.5 % of the paid up share capital under any ESOP scheme or qualification shares.

Issue involved 

Stakeholders have raised query to MCA whether such Directors who were appointed earlier & were paid excess remuneration than Schedule XIII – whether they can continue to draw that salary even after 1.4.2014 (Effective date of Companies Act 2013), even though it is in excess of limits given under Schedule V of Companies Act 2013.

Clarification by MCA

MCA has now clarified vide today’s circular that Managerial personnel can continue to draw higher salary than what is provided under Schedule V of the Companies Act 2013 – till such term he was last appointed in the general meeting, even though a part of the period falls after 1st April, 2014.

Word of caution 

It has to be noticed that similar exemption is not available in Companies Act 2013 and this exemption will hold good only till the period for which the Director was appointed earlier ; when they need to be re appointed, they have to comply with the provisions of the Act and Schedule V ceiling limits.

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TEXT OF THE CIRCULAR ISSUED BY MCA TODAY

                                                                                                          General Circular No, O7/ 2O15 

To

All Regional Directors,
All Registrars of Companies,
All Stakeholders.


Subject : Remureration to Managerlal person under Schedule XIII of the Companies Act, 1956 - Clarification with regard to payment for the period


Sir,

          Stakeholders have drawn attention to the Provisions of Schedule XIll (sixth proviso to Para (C) of Section ll of Part ll) of the Companies Act, 1956 (Earlier Act) and as clarified vide Circular number 14l11/2O12-CL-VII dated 16th August,2012, which allowed listed companies and their subsidiaries to pay remuneration, without approval of Central Government, in excess of limits specified in para II Para (C) of such Schedule if the managerial person met the conditions specified therein. Stakeholders have expressed that since similar provisions are not available in the Schedule V of the Companies Act, 2013, there is a need for a clarification that a managerial person appointed in accordance with such provision of Schedule XIII of Earlier Act may receive relevant remuneration for the period as approved by the company in accordance with such provisions of Earlier Act.

2. The matter has been examined in the light of earlier clarifications on transitional matters issued by the Ministry. It is clarified that a managerial person referred to in para 1 above may continue to receive remuneration for his remaining term in accordance with terms and conditions approved by company as per relevant provisions of Schedule XIII of earlier Act even if the part of his/her tenure falls after 1st April, 2014. 3. This issues with the approval of the competent authority.

Yours faithfully

(K.M.S. Narayanan)
Assistant Director (Policy) 23347263

Copy to:-
l. e-Governance Section and web contents Officer to place this circular on the Ministry website
2. Guard File.

Test your knowledge : 20 Questions on Management & Administration

Friends,

We share the quiz questions conducted in Chennai West Study Circle of ICSI - SIRC on the topic "Management & Administration"

You may please give your answers in the comment Section. Correct answers & the one who gave the right
answer will be announced tomorrow in the blog's comment section:


QUESTIONS

1 As per Sec. 166 of Companies Act 2013, the Business hours for conducting AGM is ____ AM to ____ PM.

2 All items transacted at EGM are special business. Is this Statement True or False?

3 Annual return & Register of Debenture holders need to be maintained for a minimum period of _______ years.

4 If Chairman is not available, the “ Report on AGM” can be signed by _______________

5. Proxy is entitled to vote by show of hands or Poll, but he cannot speak in the meeting. Is this Statement True or False ?

6. Return in changes of Promoters & Top 10 shareholders to be filed with ROC within _____

7. Scrutinizer’s report in case of Postal ballot shall be submitted to the Company within  _____days

8. As per Sec. 91, for book closure, previous notice shall be given before _____days

9. If a PCS certifies Annual return erroneously, he is liable to a fine of _____

10. First AGM of a Company shall be held within _____

11.When a shareholder asks for the Minutes of the AGM, it shall be sent to him within _____ days

12 Public Company with more than ____shareholders shall provide its members facility to vote through electronic means in General meeting.

13 Listed Cos & cos with more than 1000 shareholders need to covert their current records into electronic form within _________

14. A Public Company with 2000 shareholders shall have a quorum of _____ for its AGM

15. A Person can act as a proxy for a maximum of _____ no. of members.

16. As per Sec. 117, resolutions which need to be filed with ROC should be filed with ROC with additional fees within _____ days.

17. What are the kind of Companies for which Annual return need to be certified by PCS as per Sec. 92 (2)?

18. Which Section provides for filing of report of AGM with ROC?  Within what time the said report shall be filed?

19. Who are the signatories to the Annual return as per Sec. 92 (1)?

20. What are the Registers that need to be maintained permanently?

Quiz (22 questions ) on "Action points for Listed, Private & Public Companies"

Friends,

Thank you very much for your enthusiastic participation for our earlier quiz " Questions on Incorporation".

We share herewith the quiz questions conducted in Chennai West Study Circle of ICSI - SIRC on 31st May

2014.

You may please give your answers in the comment Section. Correct answers & the one who gave the right
answer will be announced tomorrow in the blog's comment section:

Quiz (22 questions ) on "Action points for Listed, Private & Public Companies"

Compiled by : CS. Mohan Kumar 

1. Certain Board Resolutions are required to be filed with ROC in Form ____

2. Auditor rotation provision ( 5 years for individual, 10 years for firm) will be applicable if the Pvt Co’s paid up capital is more than ___ crores.

3. An independent director who resigns or is removed from the Board shall be replaced by a new independent director at the earliest but not later than the immediate Board meeting or ______ months from the date of such vacancy, whichever is later.

4. Dividend once declared need to be deposited in a separate bank account within __days of declaration.

5. Share Transfer Forms have to be submitted to the company within -- days of execution by the Transferor and Transferee.

6. If the preference shareholder’s dividend is in arrear for more than ______, they can vote on all resolutions of the company.

7. The gap between 2 Board meetings in a Private Limited Company shall not exceed ___ days

8. Companies which have borrowed money in excess of ___________ crores from banks & Financial institutions shall establish a Vigil mechanism

9. Every listed company shall file a return in the prescribed form with the registrar the change , Increase or decrease of _____% in number of shares held by promoters and top ten shareholders of such company, within fifteen days of such change.

10. Shares other than _______can not be issued at discount

11. Listed Companies need to rename their Compensation committee as_________.

12. In section 8 Company, only a person who is a member of the Company can act as a Proxy. Is this statement true?

13. Notice for Board meeting shall be sent to __________, before ______ days of the date of Board meeting.

14. A public Limited shall have a Nomination & Remuneration committee when its paid up capital is more than ____ crores or its Annual turnover is more than _____ crores

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

16. What is meant by Transaction done through Arms length basis?

17. A transaction with a related party shall be considered material if the transaction / transactions collectively during a financial year exceeds __% of the annual turnover or __of the net worth of the company as per the last audited financial statements of the company, whichever is higher.

18. As per Sec. 186, a Company is prohibited from making Investments through more than ____ layers of Investment Companies.

19. E-Voting facility shall be kept open for a minimum of one day & maximum ___ days. E Voting shall be closed before __ days of AGM

20. What is the important change that Companies need to do from current financial year on the method of charging Depreciation?

21. What shall the Company do - when notice of Board meeting is given less than 7 days before the meeting?

22. Public Limited Companies shall have woman Director in their Board within one year, if their paid up capital is more than _____ crores and Turnover is more than _____ crores

Various Limits under Companies Act 2013

Limits under Companies Act 2013

CS. Mohan Kumar, Company Secretary, Chennai 

Companies Act 2013 has prescribed various limits for each of the Section. In this article, we have tried to compile most of the "Limits" mentioned under the Companies Act 2013.

In case if this article misses out any limit , you may kindly write to  - needamohan@gmail.com and I shall be much obliged & add it in this article.

Particulars	Provision
Annual return. Sec. 92 Certification by PCS is mandatory for….	Listed company or a company having paid-up share capital of 10 crore or more  or  turnover of 50  crore or more, shall be certified by a PCS
Women Directors – Existing companies to comply within 1 year from commencement of the Act. (Listed – 1st Oct)	1.Every Listed Company 2. Every public limited company having        i. Paid up share capital of 100 crore        ii. Turnover of 300 Crore or more
Independent Directors – Sec. 149 (4)	Min. 2 Ind. Director for all Public companies  having i)                paid up share capital of 10 crore rupees or more ii)               turnover of 100 crore rupees or more iii)             outstanding loans, debentures, deposits , exceeding 50 crores.
Vigil Mechanism is mandatory for… Sec 177(9)	a)      Listed Company b)      Companies which accept deposits from the public c)       Companies which have borrowed money from banks and public financial  institutions in excess of 50 crore rupees
OPC  to convert itself into a private co/ Small Company	Where paid up share capital of OPC exceeds 50 lakh or average annual turnover during the relevant period exceeds 2 crore. (Same limit for Small co definition also- “ Not to exceed these limits”)
Companies to have KMP- Sec. 203	1.Every Listed Company 2. Every public ltd co having Paid up share capital of 10 crore or more
Secretarial audit report Sec. 204	Listed Co & Public company having paid-up share capital of  50 crore or more  or Public company having a turnover of 250 crore or more
CSR applicability Sec. 135	Every Co having                       i)  Networth of 500 crore or more   or                                           ii) Turnover of 1000 crore or more   or                     iii)     Net profit of 5 crore or more
Audit Committee & Nomination and Remuneration Committee must	i)  All listed Companies ii) All public companies with a paid up capital of 10 crore or more; iii) All public companies having turnover of 100 crore or more; iv) All public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding 50  crore
Annual performance evaluation of Board must…	1.Every Listed Company 2. Every public limited company having  Paid up capital of 25 crore
Companies required to appoint internal auditor (Sec.138) Existing Companies to comply within 6 months from 1.4.2014	(a) every listed company; (b) every unlisted Public company having- (i)                  paid up share capital of 50 crore or more (ii)                turnover of 200  crore or more iii)                 outstanding loans /borrowings exceeding 100 crore or more iv)                  outstanding deposits of 25 crore or more (c) every private company having- (i) turnover of 200 crore rupees or more or (ii) outstanding loans /borrowings exceeding 100 crore or more
Companies which need to rotate auditors	Compulsory rotation:  All Listed Companies Fully excluded:  OPC... As regards Public & Private Companies, following Companies alone need to compulsorily rotate auditors .... (a) all unlisted public companies having paid up share capital of rupees ten crore or more; (b) all private limited companies having paid up share capital of rupees twenty crore or more; (c) all companies having paid up share capital of below threshold limit mentioned in (a) and (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more.

Top 10 Action Items for Listed Companies post Cos Act 2013

SEBI has recently amended the listing Agreement, to be in line with some of the provisions of the new Act.

In this article, we have compiled the important changes applicable from the attached circular and the Action points for  most of the listed Companies. The current circular also talks about many points which are already there in the current Clause 49 and hence not touched upon in this article. 

Please note that most of these changes shall be given effect before 1^st October, 2014.

1. E Voting facility to Shareholders in General Meeting

Company shall provide e-voting facility to its shareholders for all shareholders' resolutions, to be passed at General Meetings or through postal ballot. Such e-voting facility shall be kept open for such number of days as the relevant Rules prescribe.

Action point : Listed Companies need to include E Voting from the current AGM.

2. Whistle Blower Mechanism to be implemented

The company should devise a Whistle Blower Mechanism enabling stakeholders, including individual employees to freely communicate their concerns about illegal or unethical practices.

Action point : Listed Companies need to devise & introduce a Whistle Blower policy before 1^st October, 2014

3. Mandatory appointment of Women Director

Company shall have one women Director. (She may or may not be Independent Director).

Action point : Listed Companies need to have a Women Director in the Board before 1^st October, 2014

4. An independent Director can hold office for a maximum of 10 years

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. 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.

A person shall not serve as an independent director in more than seven listed companies.

Action point : The ensuing AGM Notice shall specify that the Independent Directors are appointed for 5 years term. 

5. Formal issue of appointment letter to Independent Directors & Performance evaluation

The company shall issue a formal letter of appointment to the  independent directors in the manner as provided in the Companies Act, 2013. The letter of appointment along with the detailed profile of independent director shall be disclosed on the websites of the company and the Stock Exchanges not later than one working day from the date of such appointment.

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. The performance evaluation of independent directors shall be done by the entire Board of Directors (excluding the director being evaluated).

Action point : Company need to issue formal letter of appointment to Independent Directors. It shall be placed in website.

6. Separate meeting of Independent Directors made Compulsory

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.

Action point  : Company shall conduct one separate meeting of Independent Directors in a year.

7. Vacancy in office of Independent Directors - to be filled in 3 months or next Board meeting

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.

Action point : No immediate action is required. But going forward, any vacancy in the office of Independent Director shall be filled within 3 months or next Board meeting whichever is later.

8. Remuneration Committee to have 3 Non executive Directors

The company shall set up a nomination and remuneration committee which shall comprise at least three directors, all of whom shall be non-executive directors and at least half shall be independent. Chairman of the committee shall be an independent director.

9. Related party transactions – Shareholders approval required…

The company shall formulate a policy on materiality of related party transactions and also on dealing with Related Party Transactions.

Provided that a transaction with a related party shall be considered material if the transaction / transactions to be entered into individually or taken together with previous transactions during a financial year, exceeds five percent of the annual turnover or twenty percent of the net worth of the company as per the last audited financial statements of the company, whichever is higher.

All Related Party Transactions shall require prior approval of the Audit Committee.

All material Related Party Transactions shall require approval of the shareholders through special resolution and the related parties shall abstain from voting on such resolutions.

Existing Related party transactions which are likely to continue beyond 31 March 2015 shall be placed for approval in the first General Meeting subsequent to October 01, 2014. However, a company may choose to get such contracts approved by the shareholders even before October 01, 2014.

Action point : CS need to check if the current Related party transactions with subsidiaries will fall under this criteria; if so, need to place before Shareholders.

10. Constitution of Risk management committee for Top 100 Companies

The company shall constitute a Risk Management Committee. The Board shall define the roles and responsibilities of the Risk Management Committee and may delegate monitoring and reviewing of the risk management plan to the committee 

Action point: This is currently applicable for Top 100 Companies only.

Cos Act 2013 : Important changes you need to know : Part II

Important provisions post implementation of Cos Act on 26^th March 2014 : Part II

                    Cs. Mohan Kumar. Company Secretary, Chennai 

In this article, let us look at the important Sections & provisions from Sec. 149 to Sec. 470. Also we can look at some other incidental points including what are the areas a Professional need to understand first in this Act.

1.       Section 149 :

A Company can have upto 15 Directors in its Board; if it wants to increase it further, it can do so by passing a Special Resolution.

Specified Companies (To be notified in Rules) to have One women Director in the Board..

Every company shall have at least one director who has stayed in India for a total period of not less than 182 days in the previous calendar year.

Independent Directors

Definition being provided.  Apart from listed Company, specified Public Companies to have Independent Directors.

Declarations to be obtained from Ind. Directors at the first instance of their appointment and annually thereafter – they need to confirm that they comply with the criteria of “Independent Director”

Independent Directors are not entitled to stock options.

They shall hold office for 5 years at a time; entitled for another 5 year term on passing of Special resolution. Not entitled to continue beyond 10 years. Cooling of period of 3 years required before being appointed again.

2.       Section 152 – Appointment of Directors

Consent to act as Director to be obtained even for Private Limited Companies.

3.       Section 160 –  Right of persons other than retiring Director to contest

A member other than retiring Director who wish to contest for Directorship need to pay Rs. 1,00,000 as Security deposit, which will be refunded to him only if gets elected or atleast gets 25 % of votes.

4.       Section 161 –Appointment of Alternate Director

Alternate Director may be appointed where the Original Director is absent from India for more than 3 months.

5.       Section 164:  Disqualification of Director

If a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of 7 years or more, he shall not be eligible to be appointed as a director in any company.

6.       Section 165 : Number of Directorships

A person can be a Director in a maximum of 20 Companies, out of which 10 can be Public Companies.

A company may, by special resolution, specify any lesser number of companies in which a Director of the company may act as Directors (Not sure how far this is going to practically used..)                         

7.       Section 168 : Resignation of Directors

Directors while resigning shall send a copy of resignation to ROC

8.       Section 170 : Register of Directors and Key Managerial Personnel

Company to keep a register of Directors and Key Managerial personnel and shall write details about them including the shares held by them in its Holding, Subsidiary and Associate Companies.

9.       Section 173: Meetings of Board

i)                    First board meeting : To be held within 30 days of incorporation.

ii)                   For all Companies, Time gap between 2 Board Meetings should not exceed 120 days. (Similar to Listing agreement); Exceptions – One person Company, Small Company and Dormant Company – They can conduct 2 meetings in an year.

          iii)          Participation of Directors in Board Meeting can be either:

                              a) in person    

                              b) Video conferencing     

                              c) Audio Visual means

iv) 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.

v) 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 Final 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 ie: Not through Video Conferencing or audio visual means.

10.  Section 174: Quorum

Participation of the Directors by video conferencing or by other audio visual means shall also be counted for the purposes of quorum.

11.   Section 175: Circular resolution

Circular resolution- If 1/3 of Directors ask it to be passed in Board meeting, matter cannot be passed through Circular resolution and shall be transacted in a Board meeting only.

  

12.   Section 177: Audit Committee

Listed Companies and other prescribed Companies to have Audit Committee, with minimum 3 Directors, majority of them being Independent Directors.

 Every listed company or such class or classes of companies, as may be prescribed shall establish a vigil mechanism for directors and employees to report genuine concerns

13.   Section 178: Nomination and Remuneration Committee

Listed Companies and other prescribed Companies shall constitute the Nomination and Remuneration Committee consisting of three or more Non-Executive Directors out of which not less than one-half shall be Independent Directors.

14.   Section 188: Related Party transactions

Central Government approval is dispensed with for Related party transactions. Shareholders’ approval required for many Related party transactions.

Related party Transactions entered in its ordinary course of business & on an arm’s length basis is exempt from this provision.

15.   Section 196: Appointment of MD, WTD

MD, WTD who are appointed in a Company – Their age shall be above 21 years & less than seventy years. 70 years can be relaxed by passing Special resolution.

16.   Section 203: Appointment of KMP

Specified Companies shall have

i)                    MD or CEO or Manager or in their absence, Whole time Director

ii)                   Company Secretary

iii)                 Chief Financial Officer

Certain restrictions are imposed by this section for a person holding the dual role of Chairman and Managing Director.

A person can be appointed as Chairman & MD only if the articles authorize or if the Company does not carry on multiple businesses. Further, Companies doing multiple businesses & which has appointed separate CEO for each business can have a Chairman cum Managing Director. 

17.   Section 204: Secretarial audit

Secretarial audit to be applicable for bigger Companies (Rules to give the kind of Companies for which Secretarial audit is applicable).

18.   Section 211 & 212: Serious Fraud Investigation office

Central Govt shall establish Serious Fraud Investigation office to investigate into the affairs of the Company. It has powers to investigate into the affairs of the Company.

19.   Section 228: Investigation of affairs of Foreign Companies

Even the affairs of Foreign Companies can be investigated by Serious Fraud Investigation office under this Section.

20.   Section 381:

Every Foreign Company shall in each Calendar year prepare a Balance sheet and Profit and Loss account and deliver a copy of it to ROC.

21.   Section 455: Dormant Company

A Company formed for future project or hold an asset & which does not have any significant A/c transaction can utilize this Section . It can make an application to ROC to be declared as Dormant Company. It can hold minimum Directors, pay fees and retain Company status. It can be active company again on making an application to ROC.

If a Company has not filed Balance sheet and Profit and Loss Account for 2 years, ROC can itself move a Company into Dormant Status.

Other Important matters:

1.       All schedules of the Act are notified.

2.       Rules are yet to be notified, which is expected to be done soon. As we are aware, unless the Rules are notified, it is difficult to implement the Act.

3.       The analysis made in Part I  (Published earlier) & Part II (This analysis) has been done considering the Act that was published in Official Gazette. Central Govt may change any of the provisions of the Act utilizing the power it has under Sec. 467, in which case the analysis done by us here needs to be re- drafted/ changed depending upon the portions changed by Central Govt.

4.       The Sections that are yet to be notified are mostly pertaining to NCLT or other funds that will be created under the Act later and other Sub sections where Tribunal (NCLT) is referred to.

5.       Professionals are requested to first read and understand fully the provisions pertaining to Sec. 1 to 205.  These sections contain the heart and soul of the Act. 

Imp. provisions post implementation of Cos Act on 26th March : Part I

Important provisions post implementation of Cos Act on 26th March 2014 : Part I

Cs. Mohan Kumar. Company Secretary, Chennai 

Let us look at some of the important changes made post the MCA notification on 26th March 2014.

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.

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.

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.

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The Second part from Sec. 149 till the conclusion will be published shortly !! 

Prevention of Sexual Harassment Act : What you must know...

Prevention of Sexual Harassment Act- Has this come into effect?

What activities are considered as "harrassment?"

It applies to almost all the Limited Companies; if you are a Company Secretary reading this article, you need to certainly constitute a Committee in your Company & formulate a policy

Internal complaints Committee- Who can be the members ?

Can there a compromise arrived on a Complaint of Sexual harrassment ?

Duties of employer...

Prevention of Sexual Harassment Act : What you must know        

                                                                            CS. Mohan Kumar

The Sexual Harassment  of Woman at Workplace (Prevention, Prohibition & Redressal) Act  has been passed by the Indian Parliament few months back. It has obtained President assent and has been notified 0n 9th December 2013. Consequently all the Companies need to comply with the provisions of this legislation.

The Supreme Court of India in Vishaka and Others Vs State of Rajasthan mandated that all the organizations to implement measures in their workplace to prevent sexual harassment against women including setting up of Internal Complaints Committee. Since there is no existing law relating to workplace harassment, the Supreme Court passed the said ruling, regarding the workplace harassment.

The said Supreme Court ruling is mandatorily to be implemented; however as there was no monitoring mechanism, many companies have not implemented the requirements under the ruling. Since the Prevention of Sexual Harassment Act is passed now, it is imperative for all the organizations to implement the same. 

While the Act talks about the roles and responsibilities of different agencies – an Internal Complaints Committee – constituted within the Company, Local committee , District officer, Central Government, etc, let us look at the requirements mainly from the Company perspective. 

Applicability

Sexual harassment in any workplace will fall under the purview of this Act. The definition of workplace in the Act is very broad and it covers Government offices, Private sector organizations, hospitals and any other place that the employee visits during the course of employment.

What constitutes Sexual Harassment ?

Section 3 provides for prevention of Sexual harassment. It provides that no woman shall be subjected to sexual harassment at any workplace.

Sexual Harassment [Sec 2 (m)] includes such unwelcome sexually determined behaviour (whether directly or by implication) such as—
             
               (i) physical contact and advances; or
                (ii) a demand or request for sexual favours; or
                (iii) sexually coloured remarks; or
                 (iv) showing pornography; or
                 (v) any other unwelcome physical, verbal or non-verbal conduct of sexual nature.

Constitution of Internal Complaints Committee

As per Sec. 4, every Company to which this Act is applicable shall constitute an Internal Complaints Committee. The only exception that is being provided is in Sec. 6:  if Constitution of a committee is not feasible owing to the fact that the Company has less than 10 employees, then complaints if any from such Company shall be heard by a Local Committee which will be constituted by the appropriate Government.

The Internal Complaints committee shall have women members in majority and will be headed by a woman employee (who is at a senior level). The Committee shall also have an independent member who is committed to the cause for women.

Complaint on Sexual harassment :

Any aggrieved woman may, at her option, make in writing a complaint of sexual harassment at workplace to :

i) the Internal Committee if so constituted, or

ii) the Local Committee if an internal committee is not constituted or if the complaint is against the employer himself.

In case the aggrieved woman is unable to give a Complaint owing to physical or mental incapacity or death or otherwise, her legal heirs or other person as may be prescribed by Government may make a Compliant.

Provision for Conciliation

Before initiating enquiry under Sec. 11, at the request of the aggrieved woman, the Internal Committee can take steps to settle the matter between her and the respondent through conciliation. If a settlement has been arrived at through such conciliation, the Internal Committee shall record the settlement and forward the same to the employer or the District Officer to take action as specified in the recommendation.

The Act also provides the manner in which enquiry is to be conducted and the powers of the Committee in this regard.

The Committee may also recommend that the Complainant or the respondent be transferred to a different division or branch pending enquiry.

The report of the Committee shall be sent to the employer or the District officer and it shall be made available to the concerned parties (Complainant and respondent). The matter being a sensitive issue, the report shall not be published in any other form.

Duties of employer: 

There are various duties that are cast on every employer in this Act. Sec 19 of the Act lists as many as 8 duties that are to be done by every employer to comply with this legislation such as – Providing a safe working environment, displaying the Order constituting the Internal Complaints Committee, undertake trainings to the employees to sensitize about this legislation, etc.

General:

It would also be a good step if the employer drafts an Anti Sexual Harassment Policy and make it available to all the employees as the same will bring transparency to this issue. It is also imperative to put posters in the office premises giving details about the Internal Complaints Committee to make people aware about the said Committee. Also, every employer should make it very clear that the Organisation has zero tolerance for any type of sexual harassment. Further, the employer shall also need to ensure that there is no retaliation in any form against the complainant even if the compliant is against an employee belonging to the highest echelons of the Organisation (the role of the independent member is crucial in this respect). In fact, if any complaint is received from a female employee, the employer should consider whether her reporting structure has to be changed if the alleged harasser is her manager.

Conclusion :

Since the Act is already implemented, the Company Secretaries in employment shall advise their Management and HR Division about this new legislation and being the Compliance officer, should ensure that the provisions of the Act are complied with in their organization. The Practicing Company Secretaries also may advise their clients to constitute the Internal Complaints Committee as provided in the Bill and to comply with the various provisions of the Act.

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Note to Chennai CS Friends:

SIRC - ICSI is organizing a half day seminar on this important topic on Coming Saturday- and one of the speaker is our good friend Mr. Venkata Krishnan, GM Legal & CS - ESAB India.

Please try to attend this seminar and get to know more details on this topic. 

CSR Section & Rules Notified – What has changed & What remains the same

1. Foriegn Companies and Subsidiaries also need to do CSR activities if they have a branch or project office in Inda.

2. Hunger need not be extreme; Ordinary hunger also is fine....

3. Private Companies and unlisted Public companies are exempt from appointing Independent Director in CSR Committee

4. Private Companies also need to comply with CSR and the can have 2 Directors in its committee (if there are only 2 Directors in its Board)

Please read.............

CSR Section & Rules Notified – What has changed & What remains the same

By : CS. Mohan Kumar Company Secretary, Chennai 

1. Sec. 135 of the Companies Act dealing with CSR is notified vide Notification dated 27th Feb, 2014. It will be effective from 1st April 2014.



2. Every Company having networth of 500 crores or Turnover of 1000 crores or Net profit of 5 crores need to constitute a CSR committee. It shall have minimum of 3 Directors and one of them shall be independent Director.

3. Unlisted Public Company or a private Company which needs to comply with CSR provisions shall have CSR committee without the Independent Director

4. A private Company having 2 Directors alone can constitute CSR committee with 2 such Directors alone.

5. CSR Committee shall have a transparent monitoring mechanism for implementation of CSR projects.

6. 2 % of average annual net profits of last 3 years are to be spent on CSR activities.

7. CSR Rules are effective from 1st April 2014. 31st March 2014 will be the date for the purpose of “Block of 3 calendar years”.

8. CSR activities should not include the activities undertaken by the Company in its normal course of business.

9. CSR policy as approved by the committee and Board shall be displayed in the Company’s website, if any.

10. CSR activities can be done through a trust or registered society or Company established by the Company – or its Holding or subsidiary Company. If such trust is not established by the Company or its Holding or subsidiary Company, it shall have a track record of 3 years in undertaking similar projects.

11. Schedule VII of the Companies Act 2013 (remember, it was in the Act not in the Rules) - which lists out the activities that may be undertaken by the Company is modified. The first point on it earlier stated that “ To eradicate extreme hunger”, which many of the speakers at various forums (including me) used to criticize. Now the word “extreme” is removed and now companies can do CSR activities for eradicating hunger. It need not be extreme hunger.

12. Three important additions that I could see in the list of activities are:

a. Measures for the benefit of armed force Veterans, war widows and dependents.

b. Contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government.

c. Rural development projects.

There was an item is Schedule VII “Combat HIV, Malaria or other diseases”, which has been removed.

13. Projects or programs relating to activities undertaken by Board based on the recommendations of the CSR committee or Board will also be included (Subject to one condition – CSR Policy to state that it will cover subjects mentioned in Schedule VII )

14. For calculating Net profit of the Company, the following shall be omitted/ need not be included:

a. Any profit arising from overseas branch – whether operated as a separate Company or otherwise

b. Any dividend received from other Companies in India

15. A Foreign Company or Holding or Subsidiary Company having a branch office or project office in India shall also comply with Sec. 135 and related Rules. Turnover, Netprofit or Networth of such Company for the purpose of this calculation shall be made as per Sec. 198 and Sec. 381 of Companies Act 2013.

16. An annual report on CSR activities is to be included in Board’s report; the format of the same has been provided by MCA.

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This is a very quick analysis; any comments, observations or errors in this analysis/ interpretation may be kindly informed to us & we shall stand corrected. Thanks