2) As per General Circular 08/2014, the financial statements (and
3) My comments: Although audit report in respect of financial years
4) Kindly note that those who have already appointed under Companies
2) a) However, if loan is received from any other company by any co., than it is not covered as deposits under both Co Laws read with both deposit Rules.
b) If loan is received from directors or shareholders or director’s relative by pvt ltd co, than these were not covered as deposits under Co Act, 1956 read with deposit Rules, 1975. However, if such loan is received by Public Ltd co than these were covered as deposits under Co Act, 1956 read with deposits Rules, 1975.
Under New Company law, if loan is received by any company (both Public & Pvt) from directors, than it will not be covered as deposits. However, If loan is received from shareholders or director’s relative by any Co, than these will be covered as deposits.
c) If loan is received from other individuals by either Pvt Ltd Co or Public Ltd Co, than these will be covered as deposits under both Co Law read with both deposit Rules.
3) a) As per sec 74 of Co Act, 2013, If deposit or any interest remains unpaid on commencement of this Act, co. shall file, within 3 months, with ROC a statement in “Form DPT4”of all deposits accepted & sums remaining unpaid and Co repay the dues within 1 year i.e. by 31st march, 201
b) Tribunal may, on application made by co., allow further time to repay the deposit.
c) Penalty - Company – shall pay deposit and interest along with fine Rs. 1 crore to Rs. 10 crores and officer in default - Imprisonment upto 7 years or fine Rs. 25 Lakhs to Rs. 2 Crores, or both.
4) A question arise if any loan is received by Pvt Ltd Co. from shareholder or director’s relative under Co Act, 1956 should we include these as deposit in Form DPT4 or not?
a) ONE VIEW: Yes, include these as deposits in Form DPT4.
Reasons:
i) The meaning of the term “deposit” under sec 74 under Co Act, 2013 will be as per sec 2(34) of the Co Act, 2013. Hence, these will be included as deposits in Form DPT4.
ii) The intention of introduction of sec 74 is to repay all old deposits within one year time or extended time. MCA wants that all deposits accepted have to follow new Act & New Rules.
iii) This view can also be supplemented by the fact that legislature is giving enough time i.e. 1 year time to repay the deposits existing on 1st April, 2014 to comply with new Act & New Rules.
iv) ROC is expected to take this view .
b) ANOTHER VIEW: No, do not include these as deposits in Form DPT4.
Reasons:
i) These were not deposits at the time when these loans have been received. Hence, sec 74 will not be applicable for such deposits.
ii) What was not a deposit at the time of receiving deposits cannot & should not be subsequently compelled to repay by bringing it under ambit of deposits.
1. Now, the Appointment of Company Secretary is required only for Public Limited Companies having paid up capital more than 10 Crores whereas Private Limited Companies are exempted from appointment of Key Managerial Personnel.
2. Form MGT 7: Annual Return with exhaustive verification and authentication is mandatory by the Company Secretary in Whole time Practice for all the companies not having a Company Secretary in Employment in Form No. MGT 7 comprising the Registration Details, Name and Location of the Company and other clauses relating to Principal Business Activity of the Company, Particulars of Holding, Subsidiary and Associates Company, Changes in Authorised, Issued, Subscribed and Paid-up Share Capital including Preference Share Capital, Debentures, etc., Turnover and Net Worth of the Company, Shareholding Pattern and changes thereof, Indebtness, Details of Members, Debenture holders, etc. Composition of Board of Directors, Key Managerial Personnel, CFO, Full details of Meeting of Members/Board/Committees of Directors alongwith Attendance particulars, Remuneration details of MD, WTD, Other Directors and Key Managerial Personnel covering particulars of Gross salary, Value of perquisites, Profits in lieu of salary, commission, etc, Details of Penalties/Punishment/Compounding of Offences by company/directors and other officers, Details of Compliances with respect to Returns filed with ROCs, Disclosures of Closure of Register, Declaration of Interim/Final Dividend, Particulars of Inter-corporate Loans, Investments, Contracts in which Directors are interested/related party transaction, Resolutions passed by Postal Ballot, Details of Shares held by or on behalf of FII, Details regarding Corporate Social Responsibility, Limits on Loans and Investments and Restrictions on Powers of Board, etc.
3. THE COMPANY HAS TO FILE FORM MGT 9 WITH THE DIRECTORS REPORT COMPRISING EXTRACTS OF ANNUAL RETURN AS GIVEN IN FORM MGT 7.
4. Form MGT 8: Annual Return Certification is compulsory from Practicing Company Secretary for Listed Companies and the Companies having Paid Up Capital more than 10 crores or Turnover 50 Crores in Form MGT 8.
5. As per Section 204(1) Secretarial Audit in Form MR-3 from Practicing Company Secretary is compulsory for every Listed Company and Public Limited companies having Paid Up Capital more than 50 Crores or Turnover 250 Crores or more. This requires compliances under various other Acts, also namely the Companies Act, 2013, the Securities Contact Regulation Act, 1956, the Depositories Act, 1996, the Foreign Exchange Management Act, 1999 and rules and regulations made thereunder and the Securities and Exchange Board of India Act, 1992 and the rules and regulations made thereunder.
6. As per Section 12(3)(c) every company shall ensure that its name, address of its registered office and the Corporate Identity Number (CIN) along with telephone number, fax number, if any, e mail and website addresses, if any, shall be printed in all its business letters, billheads, letter papers and in all its notices and other official publications. CIN to be printed on all letter heads and printed material of company like invoice etc along with its registered office and corporate office address.
7. Borrowings should be only from Directors. If taken from others then it will be treated as Deposit and Deposit rules have to be followed.
8. Unsecured Loan can be taken from Promoters only if any stipulation is imposed by the Financial Institution or Bank.
9. As per Section 185 Loan to Directors or the companies in which there are common directors or shareholders is prohibited.
10. All companies will have to pass Special Resolution under Section 180 for taking approval from Shareholders for approving
11. As per Section 177 Audit Committee, and as per Section 178 Remuneration Committee and Nomination Committee is required to be constituted in case of Public companies having Paid up capital of Rs. 10 crores or more or the companies having turnover more than Rs. 100 crores or more or having outstanding loans/ debentures/deposit exceeding Rs. 50 crores or more.
12. As per Section 149(4) every Listed Company shall have at least one third of the total number of directors as Independent Directors and every public companies having paid up capital of Rs.10 crores or more or Public companies having turnover of Rs.100 crores or more or Public companies having, in aggregate, outstanding loans, debentures and deposits exceeding Rs.50 crores shall have at least two Independent Director.
13. Consolidation of accounts is mandatory in case of subsidiary or associate companies. Where associates companies are those in which a company having control of 20% or more in share capital of other company.
14. As per Section 135 Corporate Social Responsibility(CSR) the companies having profit more than Rs. 5 Crores in any of the end of Financial Year, the company is required to incur the expenses on CSR equal to 2% of Average profits of last 3 years. For this CSR, Committee of 3 directors is required to be constituted where there will be at least 2 independent directors who will formulate the CSR Policy and the same will have to be published on the Website of the Company.
Rule 9 of Appointment and Remuneration of Personnel Rules provides no clarity whether the AR filed after the forthcoming AGM has to be accompanied by the secretarial audit report.
However:
(a) In terms of sec 179 (3), the appointment of secretarial auditor has to be done in a board meeting. This does not surely have to be the first board meeting held in the current year.
(b) Form MR-3 clearly refers to secretarial audit report for a financial year. One of the primary reporting obligations of the secretarial auditor is compliance with Companies Act 2013, which mostly applied only from 1st April 2014.
(c) The secretarial audit report is annexure with the board report. Many companies may be placing their board report soon. Listed companies only have 60 days window.
Clearly, the secretarial audit pertaining to compliances spanning over an entire financial year cannot be completed within days or weeks - it is an effort stretching over a period.
Considering above, we would hold a prima facie view that the secretarial audit report applies on financial year basis, and therefore, applies only for FY 2014-15
LOAN GIVEN BY HOLDING CO TO SUBSIDIARY CO DOES NOT ALWAYS ATTRACT SEC 185: BY CA Nitesh More
There is a general conception that if subsidiary co do not utilize loan given by its holding co for its principal business, provisions of sec 185 is attracted each & every time. In other words, if loan given or guarantee given or security provided by holding co to its subsidiary is not exempted by the Rule 10 of the Companies (Meetings of Board and its Powers) Rules, 2014, Sec 185 is violated.
The above view is not correct. One should first examine whether the provision of 185 is attracted by examining shareholding & directorship of holding and subsidiary company. There can be many instances when the basic provisions of sec 185 is not attracted, if any loan is given by holding co to Its subsidiary co.. This can be explained as follows:
Provisions of Section 185(1): “Save as otherwise provided in this Act, no company shall, directly or indirectly, advance any loan, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person.
Explanation: For the purpose of this section, the expression “to any other person in whom director is interested” means –
(a) Any director of the lending company, or of a company which is its Holding Company or any partner or relative of any such director;
(b) Any firm in which any such director or relative is a partner;
(c)Any private company of which any such director is a director or member;
(d) Any body corporate at a general meeting of which not less than twenty five percent two or more such directors, together or
(e) Any body corporate, the Board of directors, managing director or manager, whereof of the total voting power may be exercised or controlled by any such director, or by is accustomed to act in accordance with the directions or instruction of Board, or of any director or directors, of the lending company.
Let us take an example & examine a situation:
Example: H Ltd has given a loan of Rs 10 crores to S Ltd. There is neither any common director nor any common shareholder in between these two companies. Examine applicability of sec 185.
Ans: Assuming that there is neither any common shareholder nor any common director in holding co and subsidiary company, Sec. 185 is not attracted.
SUCH LOAN WILL NOT BE COVERED IN CLAUSE (a),(b),(c),(d) & (e)
• Clause (a) (as applicable for individual) or
• Clause (b) (as applicable for Firm),
• Clause (c) (for Pvt Ltd co., only if director is a director or member),
• Clause (d) (only if the director either by himself or two or more such directors hold 25% or more of total voting power in the borrowing company,
• Clause (e) (only if borrowing company /its Board/Directors are accustomed to act as per the Directors of the board/Directors of the lending company. It is very difficult to prove that the board of subsidiary co has not only actually acted, but also accustomed to act as per the Directors of the board/Directors of the lending company.
Note: Any interest of director (or other person) in his “personal capacity (not holding as nominee of company)” is relevant to attract Sec. 185. Interest of holding co. in subsidiary is not relevant.
SPECIFIC EXEMPTIONS PROVIDED TO LOAN GIVEN BY HOLDING CO TO SUBSIDIARIES: There can be many instances when the loan or security provided by holding company to subsidiary is attracted by the provisions of sec 185. Let us illustrate such situations:
Example 1: When subsidiary company is a pvt Ltd Co. & some shares of subsidiary co is held by one or more director(s) of holding Co.
Example 2: When subsidiary company is a pvt Ltd Co. & One of the director of holding co is also a director in subsidiary Co.
Example 3: When one or more of such directors hold 25% or more of total voting power in the subsidiary company
In such cases, Rule 10 provides specific exemptions from attractions of sec 185 provisions subject to some conditions mentioned in the said Rule. Rule 10 of the Companies (Meetings of Board and its Powers) Rules, 2014 states the following:
(1) Any loan made by a holding co to its wholly owned subsidiary co or any guarantee given or security provided by a holding co in respect of any loan made to its wholly owned subsidiary co is exempted from the requirements under this section; and
(2) Any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company is exempted from the requirements under this section:
Provided that such loans made under sub-rule (1) and (2) are utilised by the subsidiary company for its principle business activities.
Conclusion:
1) Every loan by holding co to its subsidiary co is not attracted by sec 185 even if money is not utilized for principal business activities.
2) One should first examine whether the basic provision of 185 is attracted by examining shareholding & directorship pattern of holding and subsidiary company.
3) If provisions of sec 185 is attracted, than one should examine whether such loan is exempted under Rule 10 of the Companies (Meetings of Board and its Powers) Rules, 2014.
4) If it is not exempted under Rule 10, than only there will be violation of sec 185.
Incorporating a new private limited company
INC-1 (Name approval)
1.) DIN and DSC of the proposed directors
a. For DIN
i. DSC
1. PAN card copy attested by Bank
2. Address Proof copy attested by bank
3. Filled up form
ii. Attested PAN card copy
iii. Attested copy of Passport / Driver’s License / Aadhar / Election ID / Electricity / Telephone not older than 1 month
iv. Scanned photograph of the applicant
v. DIR-4 application filed by the applicant as a affidavit
2.) 6 proposed names in order of choice
3.) Proposed activity to be undertaken in the company
INC-7 (Incorporation of Company)
1.) Educational Qualification of all the proposed signatories to the memorandum
2.) Attested address proof of all the proposed signatories to the memorandum
3.) Duration of stay at the present address. If less than one year then previous address also
4.) Contact numbers of the proposed applicants
5.) Proof of identity and Residence of applicants
6.) Ratio of shares to be held by each applicant
7.) CIN of companies in which the director is already a director / promoter
8.) Memorandum and Articles
a. Last pages to be signed and written in his own handwriting by the subscribers
9.) Declaration by the professional involved in INC-8
10.) Signed and attested INC-10
11.) Affidavit in INC-9 by the promoters
INC-22 (Registered Office)
1.) Proposed registered address of the company
2.) Whether the address is
a. Owned by the company (Proof of the same) OR
b. Owned by Director and not taken on lease OR
c. Taken on lease (Rent agreement along with Rent receipts) OR
d. Owned by other but not taken on lease (Proof that the company is allowed to use)
3.) Proof of address (Telephone / Gas / Electricity / Mobile) not older than 2 months
4.) List of all companies registered at the same address
DIR-12 (Appointment of Directors)
1.) Affidavit by each proposed director in INC-9 and DIR-2
Dhruv Seth | F.C.A., D.I.S.A. (ICAI) | Seth & Associates | Chartered Accountants | 90, Pirpur Square, Narahi, Lucknow-226001 | Phone :- 0522-2288287 (o) , +91 9935522611 (m) | Website - www.sethspro.com
Onus of annual reports on directors
M Allirajan, TNN | Apr 29, 2014, 01.18AM IST
The new Companies Act spells serious trouble for directors of
any private or public company that has not filed for three years its annual returns or audited financial statements, and the board's report. The new Act, which came into effect from April 1, disqualifies such directors for a period of five years, including the company in which the default has occurred. Private companies were not included in disqualification provisions under the Companies Act, 1956.About 13.95 lakh companies were registered with the Registrar of Companies (RoC) at the end of March 2014. Of this, about 9.52 lakh companies remain active. Interestingly, just 25 directors were disqualified under the Companies Act, 1956, till March 25, according to data with the ministry of corporate affairs (MCA). Of these, 16 were disqualified as their companies failed to file annual accounts and returns, the MCA data showed.
About 25-30% of the active registered companies would be in default if the new provisions are applied, says K S Ravichandran, partner, KSR & Co Company Secretaries. Many private and public companies have not filed returns, statements and reports for several years.
1) Loan is covered under definition of deposits under both Company Act, 1956 & 2013 read with both deposit Rules, 1975 & 2014.
2) a) However, if loan is received from any other company by any co., than it is not covered as deposits under both Co Laws read with both deposit Rules.
b) If loan is received from directors or shareholders or director’s relative by pvt ltd co, than these were not covered as deposits under Co Act, 1956 read with deposit Rules, 1975. However, if such loan is received by Public Ltd co than these were covered as deposits under Co Act, 1956 read with deposits Rules, 1975.
Under New Company law, if loan is received by any company (both Public & Pvt) from directors, than it will not be covered as deposits. However, If loan is received from shareholders or director’s relative by any Co, than these will be covered as deposits.
c) If loan is received from other individuals by either Pvt Ltd Co or Public Ltd Co, than these will be covered as deposits under both Co Law read with both deposit Rules.
3) a) As per sec 74 of Co Act, 2013, If deposit or any interest remains unpaid on commencement of this Act, co. shall file, within 3 months, with ROC a statement in “Form DPT4”of all deposits accepted & sums remaining unpaid and Co repay the dues within 1 year i.e. by 31st march, 2014.
b) Tribunal may, on application made by co., allow further time to repay the deposit.
c) Penalty - Company – shall pay deposit and interest along with fine Rs. 1 crore to Rs. 10 crores and officer in default - Imprisonment upto 7 years or fine Rs. 25 Lakhs to Rs. 2 Crores, or both.
4) A question arise if any loan is received by Pvt Ltd Co. from shareholder or director’s relative under Co Act, 1956 should we include these as deposit in Form DPT4 or not?
a) ONE VIEW: Yes, include these as deposits in Form DPT4.
Reasons:
i) The meaning of the term “deposit” under sec 74 under Co Act, 2013 will be as per sec 2(34) of the Co Act, 2013. Hence, these will be included as deposits in Form DPT4.
ii) The intention of introduction of sec 74 is to repay all old deposits within one year time or extended time. MCA wants that all deposits accepted have to follow new Act & New Rules.
iii) This view can also be supplemented by the fact that legislature is giving enough time i.e. 1 year time to repay the deposits existing on 1st April, 2014 to comply with new Act & New Rules.
iv) ROC is expected to take this view .
b) ANOTHER VIEW: No, do not include these as deposits in Form DPT4.
Reasons:
i) These were not deposits at the time when these loans have been received. Hence, sec 74 will not be applicable for such deposits.
ii) What was not a deposit at the time of receiving deposits cannot & should not be subsequently compelled to repay by bringing it under ambit of deposits.
Dear All,
I would like to compile the procedure for appointment of Additional Director in Private Company (Purely Private) taking the route of appointment of Director by Board. Please go through the procedure and relevant documentation listed below and share your opinion/correct the procedure.
1. Check whether articles of the Company contain power/authorisation to appoint Additional Director read with Section 161(1) of the Companies Act, 2013.
2. Collect DIN number of the proposed director u/s 153 read with from DIR-3 and DIR-4.
3. Collect following Documents/Consent/Declaration from the proposed director:
i. Consent in writing to act as Director in form DIR-2 pursuant to Rule-8 of Companies (Appointment & Qualification of Directors) Rules, 2014.
ii. Intimation in Form DIR-8 pursuant to Rule-14 in terms of Companies (Appointment & Qualification of Directors) Rules, 2014, to the effect that he/she is not disqualified u/s 164(2) of Companies Act, 2013.
iii. Disclosure of Interest in Form MBP.1 pursuant to section 184(1) read with rule 9(1) of Companies (Meetings of Board and its Powers) Rules, 2014.
4. Hold a board meeting to pass following 2 resolutions:
i. Board Resolution for appointment of Additional Director u/s 161 of Companies Act, 2013.
ii. Board Resolution for taking note of Disclosure of Interest in Form MBP.1 u/s 184 of Companies Act, 2013.
5. File form DIR.12 with ROC as return of appointment of Additional Director within 30 days of passing board resolution for appointment.
6. File form MGT.14 with ROC for filing resolution passed for taking note of Disclosure of Interest in Form MBP.1 u/s 184 of Companies Act, 2013.
7. Make necessary entries in the Register of Directors along with their Shareholding, if any, maintained u/s 170 of Companies Act, 2013.
Regularisation of Additional Director
Additional Director appointed by a Private Company Shall be regularized at the ensuing AGM u/s 160 of the Companies Act, 2013. In erstwhile Companies Act, 1956, corresponding section for Regularisation of Additional Director was Section 257 which was not applicable to a Private Company.
However, under Companies Act, 2013, section – 160 is available to Private Company for the purpose of Regularisation of Additional Director.
Request you all to guide about the procedure mentioned above.
COMPANY LAW UPDATE 4: System rectified to file DIR 11 as well DIR 12
STEPS IN CASE OF RESIGNATION BY EXISTING AUDITORS
01. Receive the Resignation Letter with Form No.ADT-3 From the resigning Auditor
02. Call a Board Meeting for acceptance of the resignation and give power for filing the same with the ROC
03. File the Form GNL-2 WITH ROC, Kolkata having ADT-3 and resignation letter as attachment.
04. Call a Board Meeting for filing the Casual Vacany and approve the notice for EOGM .
05. Held the EOGM and pass approve the Auditor’s Appointment
06. Now file Form No.MGT-14 for the filing of the Resolution passed at EOGM
07. Now file GNL-2 with SRN of MGT-14 having ADT-1, Auditor;s Acceptance as attachment
I have started taking the following declaration on the letter head of the company from any director of the company.Request members to suggest improvements
TO WHOMSOEVER IT MAY CONCERN
I, ……………………………. S/o. Shri ………… R/o ………………….. being director (DIN: ……………..) of the company named ……………………. Private Limited, (CIN: ………………………….), am duly authorized to represent the said company.
I declare that I am fully aware, conversant and engaged in the day to day the management and administration of affairs and all financial matters relating to said company.
I further declare that I am competent to state the facts and delegate authorization in the manner as follows:
In respect of Board Meeting:
1. That a meeting of board of directors was actually held on ……………..2014 at 11.00 am at the head office of the company at ……………… Road, Kanpur - 208001 at which unanimous resolution has been passed for allotment of 187500 (no. of) equity shares of Rs. 10 each at a premium of Rs. 30 per share.
2. That Notice calling the said meeting was served on all the members of the Board of the company through ordinary post /courier/by hand on 15.03.2014 and the following Directors /shareholders were present at that meeting:
| Name of the Director | Address | No of Equity Shares held | Present or Absent |
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In respect of Extraordinary General Meeting:
1. That an extraordinary general meeting was actually held on 20.03.2014 at 01.00 pm at the head office of the company at ……………….. Road, Kanpur - 208001 at which unanimous resolution has been passed to increase the authorised share capital from Rs. 20 Crore to Rs. 20 Crore 25 lacs.
2. That Notice calling the said meeting was served on all the members of the Board of the company through ordinary post /courier/by hand on 20.02.2014 and the following Directors /shareholders were present at that meeting:
| Name of the Director/Member | Address | No of Equity Shares held | Present or Absent |
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3. That I have authorized Mr. ………… S/o …………………. R/o ………………. (Practicing Company Secretary, FCS No. …………) to acquire and apply digital signature for and on my behalf, if required and use the same for purpose of filing appropriate forms and papers with the office of the Registrar of companies and for all matters incidental or consequential thereto.
All forms and papers digitally signed by me shall be deemed to have been actually signed by me and shall have full force as if the same were physically signed by me.
For ………………………….. Private Limited
(Managing Director)
Warm Regards
"Team" CA.Nitesh More | FCA, |
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