Not for every one

Hydroxychloroquine / HCQ Covid-19 and India

2020-04-11T13:00:00.000+05:30

When Donald Trump requested Modi to release Hydroxychloroquine [HCQ] consignments then it was a wonder and mystery. Why USA approached India? It is believed that HCQ is the wonder drug which is the potential weapon against COVID-19. India manufactures 70% of the world’s supply of hydroxychloroquine. The country has a production capacity of 40 tons of hydroxychloroquine (HCQ) every month, implying 20 crore tablets of 200 mg each. Chloroquine, which was discovered in 1934, is a synthesised variant of quinine.

Bengal Chemicals and Pharmaceuticals Limited [BCPL]

The Kolkata-based Bengal Chemicals and Pharmaceuticals Limited, whose founder was Acharya Prafulla Chandra Ray [Acharya] was the only public sector unit that used to manufacture this anti-malarial drug in India. HCQ contains Hydroxychloroquine Sulphate. BCPL has stopped the manufacturing of Hydroxychloroquine Sulphate and thereby HCQ decades ago and had started manufacturing Chloroquine Phosphate. The new drug Chloroquine Phosphate is equally effective as an anti-Malaria drug. HCQ is not a vaccine, Its a medicine. It is used for the treatment of Corona affected patient. On 10 Apr 2020 BCPL got clearance from drug control authorities to manufacture Hydroxychloroquine once again. BCPL has the capability to churn out 10 lakh hydroxychloroquine tablets per day.

Acharya the father of Indian chemistry, started Bengal Chemicals in 1901 with the capital of Rs 2 lakh. During his tenure, he never took any salary from the company. From having its first and second factories in Kolkata’s Maniktala in 1905 and the northern suburbs of Panihati in 1920, it set up a third factory in Mumbai in 1938. The Management of Bengal Chemical was taken over by the Government of India and the Union Government nationalized the Organization on December 15, 1980. A new BCPL as a Government Company was launched on March 27, 1981.

Acharya Sir Prafulla Chandra Raychowdhury (2 Aug 1861 - 16 Jun 1944)

With a capital of about Rs. 700, Acharya started the venture as a laboratory in 1892 in the name of Bengal Chemical Works and presented its herbal products before the Indian Medical Congress’ 1893 session held in Kolkata. He got a DSc degree from Edinburgh University in 1887 and started teaching chemistry at Presidency College. Acharya authored, among other books, the ‘History of Hindu Chemistry – From the Earliest Times to the Middle of the Sixteenth Century AD’, a book that documented India’s indigenous chemical practices starting from the Vedic era. Ray retired in 1936 at the age of 75 and died at the age of 82.

Ref. Wikipedia - Prafulla Chandra Ray

Role of Technology in education and Business

2017-01-22T15:27:00.001+05:30

Role of Technology in Education Because of Internet every knowledge is at our fingertip. He who wants to know can gain any knowledge by surfing internet. Modern means of communication has shrunk the world. Contacting any person in any part of the world is possible from the laptop at the most cost efficient way. Teaching methods have changed drastically. Now students can learn with the help of audiovisual techniques whereby understanding of the subject is very easy. Experts can deliver lectures through video conferencing devices and much larger group of students can participate in it. The queries of the students can be answered instantly over the video conference. Notes, thesis, study material can be down loaded from various educational sites free of cost.

Role of Technology in Business E-commerce is the new mantra for carrying out business without any physical boundaries. Because of the internet technology a new concept of virtual business has emerged. Now there is no need to invest in physical place of business. any one can start his own business from anywhere. This will enable prosperity at the village level. Because of e-commerce transfer of money is at a click of a button. Internet banking facilities are available at every village to assure safe transfer of money at high speed and cost effective way.

Board Meetings Through Video Conferencing.

2015-11-22T19:46:00.000+05:30

Matters which cannot be dealt through video conferencing

Approval of Financial statements
Approval of Board of Directors report

General Rules regarding quorum, venue and participation

~~Every director has to attend at least one Board Meeting in a financial year by participating in person (physical attendance).~~ As per the Companies Act 2013 read with Secretarial Standard SS1, a Director can attend all the meetings in a year through Video Conferencing and may not be present physically in any of the Board meetings.

Participation through video-conferencing will be counted for the purpose of quorum.

Venue specified in notice shall be taken as the venue of the meeting and all requisite registers to be kept at the venue.

Registers required to be signed by directors shall be deemed to have been signed by directors who are participating through electronic means once they give their consent and same is recorded in the minutes.

No person other than directors, Company Secretary, Chairperson and persons whose presence is required pursuant to a legal provision shall be allowed access to the place where any director is attending the meeting either physically or through video conferencing.

Requirements regarding notice

Notice to contain details regarding availability of facility of video conferencing.

Duties of Directors

Director to intimate, in writing, to Chairperson/CS regarding his intention to participate through video conferencing, at least 3 days in advance (unless waived by Chairperson), else he will be taken as participating in person.

At the beginning of the meeting, all directors participating through video conferencing to state on record – their name, location, confirmation regarding clarity in hearing/seeing other participants, confirmation regarding receipt of agenda of meeting and confirmation that no one other than the concerned director is attending or having access to the proceedings of the meeting at their location.

To identify themselves before speaking on any agenda.

To identify themselves before casting their vote on any motion which is objected to.

To confirm the draft minutes within 7 days of circulation.

Role of Chairperson/Company Secretary

Functions to be discharged by Chairman

To make roll call at the beginning of the meeting
To make a roll call and record the votes in case any motion is objected to.
To make roll call at the end of the meeting and after every break.
To summarise the decisions taken during the meeting on each item of agenda transacted along with the voting details, at the end of the meeting.

Functions to be discharged by Company Secretary

To maintain record of requests received from directors regarding their intention to participate through video conferencing.

Functions to be discharged either by Chairperson or Company Secretary

After roll call, to call out the name of persons who are attending meeting through permission of Chairperson and confirm regarding presence of quorum.
To state the identity of speaker of agenda, if the speaker fails to do so.

Requirements regarding minutes and secretarial records

Video recording of the part of the meeting where chairperson summarises the decisions taken at the meeting shall form part of the secretarial records and be preserved by the company.
Minutes shall disclose the particulars of the directors who attended the meeting through video conferencing or other audio visual means.
The draft minutes of the meeting shall be circulated among all the directors within 7 days of the meeting either in writing or in electronic mode as may be decided by the Board.
Directors to confirm the minutes within 7 days, else their confirmation will be presumed.
Thereafter, minutes to be entered in minutes book.

Credits: S.Dhanapal

Managerial Remuneration

2015-09-29T13:57:00.004+05:30

Section 197 of the Companies Act 2013 [CoAct] is applicable to remuneration paid to Managing Director, Whole-time Director, Part time Directors and managers. section 197 which deals with remuneration payable to managerial personnel is applicable to public companies only.

"Remuneration" is defined u/s 2(78) of CoAct as any money or its equivalent given or passed to any person for services rendered by him and includes perquisites as defined under the Income Tax Act, 1961. Section 17(2) of Income Tax Act, 1961 has given an inclusive definition of the term “perquisite”, which includes

Value of rent-free accommodation provided to the assessee by his employer.
Value of any concession in respect of rent for any accommodation provided to the assessee by his employer.
The value of any benefit or amenity granted or provided free of cost or at a concessional rate to employee directors; or to employees who have substantial interest and certain specified employees with some exceptions.
Sums paid by the employer in respect of any obligation which, but for such obligation, would have been payable by the assessee.
Sums payable by the employer to effect an assurance on the life of the assessee employee or to effect a contract for an annuity.
W.E.F assessment year 2010-11, value of securities / sweat equity shares allotted or transferred by the employer or former employer to the employee.
W.E.F assessment year 2010-11 a contribution made by an employer to an approved superannuation fund to the extent it exceeds Rs 1 lakh.
Value of any other fringe benefit or amenity as may be prescribed.
The first proviso states that certain medical benefits are not treated as perquisites in certain specific situations. Any expenditure incurred by the Company to affect any insurance on the life of, or to provide any pension, annuity or gratuity for, any of the persons aforesaid or spouse or child shall be included in managerial remuneration.

Definition of remuneration as well as perquisites are inclusive in nature and hence it covers every amount that the company pays or spends for or for the benefit of a Director, in whatever form and by whatever name.

Any remuneration for services rendered by such director which is of professional nature shall not be included in the managerial remuneration. Further, a director may receive remuneration by way of a fee for each meeting of the Board, or a committee thereof attended by him.

If insurance is taken by a company on behalf of its Key Managerial Personnel for indemnifying against any liability in respect of any negligence, default, misfeasance, breach of duty or breach of trust for which they may be guilty in relation to the company, (Directors and officers liability insurance) the premium paid on such insurance shall not be treated as part of remuneration. However if such Key Managerial Personnel is found guilty then such insurance shall be treated as income as part of remuneration.

If a manager or any director enjoys benefit or amenity without the company incurring any expenditure therefor, such benefit or amenity may not be included in the managerial remuneration.

An Independent director shall not be entitled to receive stock option. However, in case of other directors, Stock options would be part of remuneration.

Limit on remuneration as % of net profit.

Section 197 of the Companies Act, 2013 provides a way to pay managerial remuneration in case of Company’s having adequate profits. A Public Company can pay remuneration to its directors including Managing Directors and Whole-time Directors, and its managers which shall not exceed 11% of the net profit as calculated in a manner laid down in section 198 of the CoAct. Wherein a Company in which there is onlhy one Managing Director or Whole-time Director or Manager the remuneration to be paid shall not exceed 5% of net profits and where there are more than one of such Directors, remuneration payable shall not exceed 11 % of the net profit.

Payment of remuneration in excess of the above limit.

A company can pay more remuneration in accordance with Part II of Schedule V of CoAct.

Payment of remuneration in excess of above limits with the permission of shareholders.

A company with inadequate profit may pay remuneration @ 200% of the limit mentioned in Part II of Schedule V if shareholders have given their approval through a special resolution.
Where a managerial person does not hold Rs. 5 lacs worth of shares or more or an employee or a director of the company not related to any director or promoter at any time during the two years prior to his appointment as a managerial person, In such cases, the company can pay to him up to maximum of 2.5% of the “current relevant profits” and up to 5% with the approval of shareholders by a special resolution. The term “current relevant profit” means profit calculated under section 198 but without deducting the excess of expenditure over income as defined in section 4(1) of section 198 relating to all usual working charges in respect of those years during which the managerial person was not an employee, director or shareholder of the company or its holding and subsidiary companies.
However, Section IV Part II of Schedule V states that a managerial person shall be eligible for the following perquisites which shall not be included in the computation of the ceiling on remuneration specified in Section II and Section III:—

Contribution to provident fund, superannuation fund or annuity fund to the extent these either singly or put together are not taxable under the Income-tax Act, 1961 (43 of 1961);
Gratuity payable at a rate not exceeding half a month’s salary for each completed year of service; and
Encashment of leave at the end of the tenure.

When profit is adequate – the entire value of perquisites as per IT Act, 1961 will be considered in the managerial remuneration. However in the event of inadequacy of profits or nil profits, only the taxable amount of perquisites should be considered.

In case of expatriate the amounts paid under the heads of income mentioned below will not be considered as managerial remuneration.

Children’s education allowance
Holiday package studying outside India or family staying outside India
Leave travel concession

If any managerial personnel receives any amount in excess of limits mentioned under the provisions of the CoAct, It is his obligation to refund such amount to the company and until such sum is refunded, hold it in trust for the company.

Further, if a Company wants to pay remuneration exceeding Schedule V of the Act then approval from Central Government is compulsory.

Section 197 of the CoAct allows a managing or whole-time director of a company to receive compensation from its holding company or subsidiary provided the same shall be disclosed in the director’s report.

NO PROFIT OR INADEQUATE PROFIT IN SPECIAL CIRCUMSTANCES

In certain special circumstances, a company without profit or inadequate profit may pay managerial remuneration in excess of limits specified in Section II above and that too without the approval of Central Government. Provided:

The company paying managerial remuneration in excess of maximum specified limits is either a foreign company or a company who has got approval of its shareholders in this regard and the total managerial remuneration payable by such company is within the permissible limits of Section 197 of Companies Act’2013.
A company can pay managerial remuneration up to two times of the amount specified in Section II, given above, provided:

A newly incorporated company and is in existence for last seven years from the date of its incorporation, or
A sick company in respect of which a scheme for revival and rehabilitation has been ordered by BIFR or NCLT for a period of five years from the date of sanction of revival scheme

Where such excess managerial remuneration is fixed by BIFR or NCLT, subject to fulfilment of certain additional conditions apart from that given in Section 197 of Companies Act’2013

RESTRICTION ON INDEPENDENT DIRECTOR

Section 197(5) of the CoAct specifically permits different fees to be paid to Independent Directors, there is no such enabling provision with respect to profit related commission. This means profit related commission may be paid uniformly to all non-executive directors. A company may pay such commission within the limit of 1% or 3% of the net profits, as the case may be. Further, Independent Directors cannot be granted stock options.
A company resident in India, shall make payment in rupees to non Whole Time Directors who are resident outside India and is on visit to India for the company’s work and is entitled to payment of sitting fees or commission or remuneration, and travel expenses to and from and within India, in accordance with the provisions contained in the company’s MOA & AOA or in agreement entered into by it or in any resolution passed by the company in general meeting or by Board, provided the requirements of any law, rules, regulations, directions applicable for making such payments are duly complied with.

ADJUSTMENT OF MANAGERIAL REMUNERATION ACCORDING TO FOREX FLUCTUATIONS

Where an expatriate is occupying the position of managerial person he may be paid a remuneration taking foreign currency as a base. In case of devaluation of currency there was a need to compensate such non-resident managerial persons to maintain these remittances at the pre-devaluation level and such increase in remuneration is allowed even if the resultant increased remuneration exceeds the statutory limits imposed by the Companies Act.

REMUNERATION PAYABLE TO A MANAGERIAL PERSON FROM TWO COMPANIES

Subject to the provisions of sections I to IV, a managerial person shall draw remuneration from one or both companies, provided that the total remuneration drawn from the companies does not exceed the higher maximum limit admissible from any one of the companies of which he is a managerial person.

PENALTY TOWARDS NON-COMPLIANCE

If any person contravenes the provisions of the section 197, he shall be punishable with fine which shall not be less than 1 lakh rupees and may extend to 5 lakhs rupees If a company or any officer of a company or any other person contravenes any of the provisions of this Act or the rules made there under, the company and every officer of the company who is in default or such other person shall be punishable with fine which may extend to Rs.10,000/-, and where the contravention is continuing one, with a further fine which may extend to Rs.1,000/- for every day after the first during which the contravention continues.

independent director - companies act 2013

2015-09-20T19:43:00.000+05:30

Requirements:

An independent director is someone who does not have any material or pecuniary relationship with the company/directors. Section 149(6) of the Companies Act 2013 [Act] prescribes the criteria for independent directors which are as follows:

such individuals must possess integrity and relevant industrial expertise;
such individuals must not have any material or pecuniary relationship with the company or its subsidiaries;
they or their relatives should not have had any pecuniary relationship with the company or its subsidiaries, amounting to 2% or more of its gross turnover or total income or INR 5 million, whichever is less, during the two immediately preceding financial years or in the current financial year;
such appointees or their relatives should not have any key managerial position in the company or its subsidiary companies during any of the three preceding financial years;
such persons or their relatives should not have been an employee of the company or its subsidiary companies during any of the three preceding financial years;
they or their relatives must not be a director of a nonprofit organization, which receives 25% or more of its receipts from the company or its subsidiary companies or its promoters/directors or from anyone who holds 2% of voting rights in such companies;
such individuals must not be a promoter of the company or its subsidiaries;
they must not hold more than 2% voting rights in the company either by themselves or together with their relatives.

However 'independence' is not affected if a relative of the independent director holds a key position in a competitor entity. Both under the Companies Act and SEBI's Listing Agreement, it is possible for a director to be an independent director of a company, though his or her spouse/ relative is a director of a competitor company,

Remuneration:

The Act expressly disallows independent directors from obtaining stock options and remuneration other than sitting fees and reimbursement of travel expenses for attending the board and other meetings. Profit related commission may be paid to them, but subject to the approval of the shareholders. The reason for restricting the remuneration was to prevent personal financial nexus with the company and to safeguard their independence. However, the flip side is if the remuneration is not attractive then it would be difficult for companies to attract suitable and experienced persons for the position.

Private Companies can accept loan from Directors and Relatives of Directors

2015-09-16T16:53:00.001+05:30

Companies (Acceptance of Deposits) Second Amendment Rules, 2015

Ministry of Corporate affairs vide its notification dated 15/09/2015 has provided that with immediate effect a private company can accept unsecured loans from directors and also from a relative of Director provided that at the time of lending money the relative of director from whom money is received must furnish to the company, a declaration in writing stating that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others and the company shall disclose the details of money so accepted in the Board’s report (Annual Report). Further more such relative need not be a shareholder of the company.

With this amendment a private company is allowed to take loans, deposits from members, Directors and relatives of directors not exceeding aggregate of 100% of its paid up capital, free reserves and securities premium account..

Meaning of Director - Companies Act 1956

2015-08-09T23:12:00.000+05:30

Meaning of Director

As per section 2(13) of the Companies Act 1956, Directors includes any person occupying the position of Directors by whatever name called. The definition of Director is inclusive definition. It includes any person who occupies the position of a Director is known as Director whether or not designated as Director. It is not the name by which a person is called but position he occupies and the functions and duties which he discharges that determines whether he is a Director or not. Simply, Director means a person who controls or supervises the affairs of business. Therefore, the Director is liable for every act which he control.

He is duly appointed by the Company through Articles of Association or in general meeting, to control the business of the Company and authorised by Articles of Association to contract on behalf of the Company. A Director is a person charged with the conduct and management of the company’s activities. Under Companies Act, Directors are the primary agent of the Company to transact its business. He has to exercise strategic oversight over business operations while directly measuring and rewarding management’s performance. Simultaneously he has to ensure compliance with the legal framework, integrity of financial accounting and reporting systems and credibility in the eyes of the stakeholders through proper and timely disclosures.

Legal position of Director:

It is difficult to define the exact legal position of the Directors of a Company. The companies act does not define the actual position of Directors. The Director shall act as a agent or trustee or managing partner in the Company. In agency term, the Director acts on behalf of the Company. So the Company is liable for contracts executed by Director. Director also acts as a trustee. He stands in a fiduciary position towards the company in respect of his powers and capital under his control. There exists a relationship of a trustee and trust between the directors and the shareholders of the Company. The directors have been held trustees of the assets of the Company and in many cases the courts have directed them to reimburse the loss to the Company, where it was found that directors have applied the Company’s money for personal purpose or undue advantage. He shall exercise his powers in the interest of the Company. The Directors enjoys the vast power of management and acts as a decision making body.

Powers of Director

Director has no power to act on behalf of the company in any matter, except to the extent to which any power or powers of the Board have been delegated to him by the Board, within the limits prescribed under the Companies Act or any other law or memorandum and articles of association of the Company.

Rights of Director
As specified in the Secretarial Standards applicable under Companies Act 2013,

A Director is entitled to inspect the Minutes of a Meeting held before the period of his Directorship.

A Director is entitled to inspect the Minutes of the Meetings held during the period of his Directorship, even after he ceases to be a Director.

Privileges, Concessions to private companies

2015-06-13T23:40:00.001+05:30

The Ministry of Corporate Affairs has issued a notification to give exemptions to private companies under the Companies Act to improve ease of doing business in India.

Some important exemptions that have been provided in the Notification with respect to the private companies are that the transactions between any company which is holding, subsidiary or an associate of such company and subsidiary of holding shall not be treated as Related Party Transactions. With the removal of restrictions on the powers of Board, it would be easy for the private companies to operate their business.

The Notification provides that the interested directors of a private company may participate in such meeting wherein contract or arrangement or proposed contract or arrangement entered into or to be entered into is discussed after disclosure of interest. Also, the member of a private company can vote on such resolution, to approve any contract or arrangement which may be entered into by the company, if such member is a related party.

Further, Loan to Directors etc., may be provided by a private company in whose share capital another body corporate has invested any money and if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower, and such a company has no default in repayment of such borrowing subsisting at the time of making transactions under this section.

Now, a big relief to the private companies which will help in the capital formation is that the companies can accept deposits from members which is not exceeding 100 % of aggregate of the paid up share capital and free reserves.

The private companies need not file with the Registrar the resolutions passed by the Board with respect to Section 179 (3) which will in turn help the private companies to reduce cost of compliance.

For appointment of managing director, whole-time director or manager by a private company, there is no requirement that the terms and conditions of such appointment and remuneration payable be approved by the Board of Directors at its meeting and by the Central Government in case such appointment is at variance to the conditions specified in that Schedule.

The Private company can have its own regulations in its article of association for the following sections of companies Act, 2013:-

 Section 101 – Notice of general meetings
 Section 102 – Explanatory Statement
 Section 103 – Quorum for meeting
 Section 104 – chairman of meetings
 Section 105 – Proxies
 Section 106 – Restriction of voting rights
 Section 107 – Voting by show of hands
 Section 109 – demand for poll

When to file form MGT 14 under Companies Act 2013

2015-04-23T18:23:00.000+05:30

Passing of below mention Resolutions necessitates filing form MGT 14. The resolution should be filed with ROC within 30 days of passing the resolution.

Section- 8

For a company registered under Section- 8 to convert itself into a company of any other kind or alteration of its Memorandum or Articles

Section – 12

Shifting of Registered Office address

Section-13

Alteration in MOA.

Section - 14

Alteration in Article.

Section 13(8)

A company, which has raised money from public through Prospectus and still has any unutilized amount out of the money so raised, shall not Change its objects for which it raised the money through prospectus unless a special Resolution is passed by the company.

Section 27(1)

A company shall not, at any time, vary the terms of a contract referred to in the prospectus or objects for which the prospectus was issued, except subject to the approval of, or except subject to an authority given by the company in general meeting by way of special resolution.

Section 48(1)

Where a share capital of the company is divided into different classes of shares, the rights attached to the shares of any class may be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or by means of a special resolution passed at a separate meeting of the holders of the issued shares of that class.

Section 54

Issue of Sweat Equity Shares.

Section 62(1) (c)

Preferential allotment of shares.

Section 65

Conversion of Unlimited company into limited company.

Section 66(1)

Reduction of Share Capital.

Section 67(3) (b)

Special resolution for approving scheme for the purchase of fully-paid shares for the benefit of employees.

Section 68(2)(b)

Buy Back of Shares.

Section 71(1)

A company may issue debentures with an option to convert such debentures into shares, either wholly or partly at the time of redemption: Provided that the issue of debentures with an option to convert such debentures into shares, wholly or partly, shall be approved by a special resolution passed at a general meeting.

Section 76

Inviting deposits from person other then members.

Section-94

Keep registers at any other place in India.

Section 140(1)

The auditor appointed under section 139 may be removed from his office before the expiry of his term only by a special resolution of the company, May appoint more than 15 directors by passing of Special resolution.

Section- 149(10)

Re-appointment of Independent Director.

Section 165(2)

Subject to the provisions of sub-section (1), the members of a company may, by special resolution, specify any lesser number of companies in which a director of the company may act as directors.

Section- 180

The Board of Directors of a company shall exercise the following powers only with the consent of the company by a special resolution, namely-

To sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the company or where the company owns more than one undertaking, of the whole or substantially the whole of any of such undertakings.
to invest otherwise in trust securities the amount of compensation received by it as a result of any merger or amalgamation.
to borrow money, where the money to be borrowed, together with the money already borrowed by the company will exceed aggregate of its paid-up share capital and free reserves, apart from temporary loans obtained from the company’s bankers in the ordinary course of business.
to remit, or give time for the repayment of, any debt due from a director.

Section- 185

For approving scheme for giving of loan to MD or WTD.

Section- 188

To enter into related party transaction with the company if paid up capital of company exceed Rs.10/- Crore.

Section- 186(3)

Loan& Investment by company exceeding 60% of paid up share capital or 100% of free reserve.

Section- 196

Appointment of a person as Managerial Personnel if, the age of Person is exceeding 70 year.

Schedule V

Payment of remuneration to Managerial personnel if, profits of company are Inadequate.

Section 271(1)(b)

Special Resolution for winding up of the company by Tribunal.

Section 304(b)

Special Resolution for winding up of company

AS PER SECTION 179(3)

The Board of Directors of a company shall exercise the following powers on behalf of the company by means of resolutions passed at meetings of the Board, namely:—these resolutions are also necessary to file in MGT-14.

To make calls on shareholders in respect of money unpaid on their shares.
To authorize buy-back of securities under section 68.
To issue securities, including debentures, whether in or outside India;
To borrow monies;
To invest the funds of the company;
To grant loans or give guarantee or provide security in respect of loans;
To approve financial statement and the Board’s report;
To diversify the business of the company;
To approve amalgamation, merger or reconstruction;
Take over a company or acquire a controlling or substantial stake in another company;
Any other matter which may be prescribed.

In addition to the items mention above the following resolutions should also to be filed with ROC in MGT-14 per Rule 8 of Companies (Meetings of Board and its Powers), Rules 2014-

To make political contributions.
To appoint or remove key managerial personnel (KMP)
~~To take note of appointment(s) or removal(s) of one level below the Key Management Personnel;~~
To appoint internal auditors and secretarial auditor;
~~To take note of the disclosure of director’s interest and shareholding;~~
~~To buy, sell investments held by the company (other than trade investments), constituting 5% or more of the paid up share capital and free reserves of the investee company;~~
~~To invite or accept or renew public deposits and related matters;~~
~~To review or change the terms and conditions of public deposit;~~
~~To approve quarterly, half yearly and annual financial statements or financial results as the case may be.~~

Items 3, 5, 6, 7, 8 and 9 have been omitted vide Companies (Meetings of Board and its Powers) Amendment Rules, 2015

Resolutions required to be Filed Under Companies Act,2013 in form MGT 14

2015-04-23T18:16:00.000+05:30

Section 117(3) of the Companies Act 2013 specifies the list of resolutions that should be filed with the ROC along with Explanatory statement if any within 30 days of passing such resolution through filing of Form MGT 14.

List of Resolutions/Agreements given in Section 117(3)

Special Resolutions;

Resolutions which have been agreed to by all the members of a company, but which, if not so agreed to, would not have been effective for their purpose unless they had been passed as special resolutions;

Any resolution of the Board of Directors of a company or agreement executed by a company, relating to the appointment, re-appointment or renewal of the appointment, or variation of the terms of appointment, of a Managing Director;

Resolutions or agreements which have been agreed to by any class of members but which, if not so agreed to, would not have been effective for their purpose unless they had been passed by a specified majority or otherwise in some particular manner; and all resolutions or agreements which effectively bind such class of members though not agreed to by all those members;

Resolutions passed by a company according consent to the exercise by its Board of directors of any of the powers under clause (a) and clause (c) of sub-section (1) of section 180;

Resolutions requiring a company to be wound up voluntarily passed in pursuance of section 304;

Resolutions passed in pursuance of sub-section (3) of section 179 as listed below; and

Any other resolution or agreement as may be prescribed and placed in the public domain.

List of Resolutions given in Section 179(3)

to make calls on shareholders in respect of money unpaid on their shares;
to authorise buy-back of securities under section 68;
to issue securities, including debentures, whether in or outside India;
to borrow monies;
to invest the funds of the company;
to grant loans or give guarantee or provide security in respect of loans;
to approve financial statement and the Board’s report;
to diversify the business of the company;
to approve amalgamation, merger or reconstruction;
to take over a company or acquire a controlling or substantial stake in another company;
any other matter which may be prescribed (PRESCRIBED IN RULE 8 OF Companies (Meetings of Board and its Powers) Rules, 2014

List of Resolutions given in rule 8(5) read with Section 179(3)

to make political contributions;
to appoint or remove key managerial personnel (KMP);
~~to take note of appointment or removal of one level below the Key Management Personnel;~~ *
to appoint internal auditors and secretarial auditor;
~~to take note of the disclosure of director’s interest and shareholding;~~ *
~~to buy, sell investments held by the company (other than trade investments), constituting five percent or more of the paid up share capital and free reserves of the investee company;~~ *
~~to invite or accept or renew public deposits and related matters;~~ *
~~to review or change the terms and conditions of public deposit;~~ *
~~to approve quarterly, half yearly and annual financial statements or financial results as the case may be.~~ *

Vide circular issued on 5 June 2015 Private companies have been given certain privileges and hence Section 179 does not apply to Private companies and there is no need to file form MGT-14 for above listed resolutions.

Change in the address of statutory registers

As per rule 15(6) of Companies (Management and Administration) Rules, 2014 [Chapter-7 ], a copy of the proposed special resolution in advance to be filed with the registrar as required in accordance with first proviso of sub-section (1) of section 94, shall be filed with the Registrar, at least one day before the date of general meeting of the company in Form No. MGT.14.

* Please note that vide Companies (Meetings of Board and its Powers) Amendment Rules, 2015 dated 18-Mar-2015 Govt. has omitted the certain events from compulsory filing of MGT.14 those items are struck off from the above list.

Appointment of Company Secretary

2015-04-23T16:23:00.000+05:30

Whole-time Company Secretary

As per Companies Act 2013 every company should appoint a whole time company secretary whose paid up share capital is not less than Rs. 5.00 Crores.

A whole time Company secretary of a company can be appointed as a non executive Director of another company. However a Company secretary can not be appointed as whole-time company secretary of another company.

A whole time Company secretary can be appointed as a non-executive director of the same company provided there are more than two directors in the company.

Secretarial Audit Report

As per sub-section (1) of section 204 of the Companies Act 2013 every company that attracts the below listed criteria should carry out a Secretarial Audit and submit the Secretarial Audit Report in form No.MR.3

Every public company having a paid-up share capital of not less than Rs.50 crores or
Every public company having a turnover of not less than Rs.250 Crores

Inter-corporate Loans and Investments, Loans to employees

2015-03-12T10:29:00.000+05:30

Companies Act 2013

section 186 of Companies Act 2013 governs loans, investments and guarantees by a company. Section 186 provides that a company may give loans or provide security/guarantee up to 60% of its (paid up capital + free reserves + securities premium) or 100% of (free reserves + securities premium), whichever is higher. For transactions exceeding these limits, approval of members is required to be sought by way of a special resolution.
on 10th March 2015, Ministry of Corporate Affairs clarified that loans and/or advances made by the companies to their employees, other than the Managing or Whole time directors (which is governed by section 185) are not governed by the requirements of section 186 of the Companies Act, 2013, if it is in accordance with the condition of services to all employees and are also in accordance with the remuneration policy, in cases where such policy is required to be formulated. Due to this clarification now a Company is not required to maintain a register of loans given to its employees in the format MBP2 and does not disclose the details of loans given to its employees in the Directors report as specified u/s 186(9)

Companies Act 1956
The new provisions of section 372A (1956) is applicable only to Public Limited Companies and provide for a combined limit of sixty percent of the paid up share capital and free reserves (which term includes reserves free for distribution as dividend including the amount in the securities premium account) or one hundred percent of free reserves whichever is higher, for grant of loan (which term includes debentures) to any other body corporate, giving of any guarantee or provision of security in respect of a loan to or by any body corporate and acquisition of securities (which term includes shares, debentures, bonds and other marketable securities, etc.) of any other body corporate by way of subscription, purchase or otherwise. These powers are given to the board of a company by the statute .The scope of section 372A is much larger than the erstwhile section 372. Needless to say that there must a basic provision in the memorandum/articles of a company authorizing the board to make inter-corporate loans and investments.However, in exceptional circumstances, the board may provide guarantee without the previous authorization of shareholders. The Board needs to take approval of shareholders in the immediately succeeding meeting of members.

Conditions

No loan, provision of guarantee or security or investment can be made unless the resolution sanctioning the same is passed at a meeting of the board with the consent of all the directors present at the meeting and with the prior approval of the public financial institution where any term loan is subsisting. However, prior approval of the financial institution is not required, if the aggregate of the investments made, loan granted, guarantees given or security provided together with the proposals in this regard does not exceed 60% of the limit referred to above, provided there is no default in repayment of loan or interest thereon.
No loan can be given to any body corporate at a rate of interest lower than the prevailing bank rate.
If a company has defaulted in the matter of public deposits under section 58A of the Act, such a company is prohibited from availing of the provision in section 372A of the Act. This is a temporary restriction, as the prohibition does not apply when the default under section 58A is made good.

EXCEPTIONS

The regulatory provisions of section 372A are not applicable in the following cases : -

to any loan made, any guarantee given or any security provided or any investment made by a banking or insurance company or a housing finance company in the ordinary course of their business or to a company established with the object of financing industrial enterprises or of providing infrastructural facilities;
to a company whose principal business is the acquisition of shares, stock, debentures or other securities;
to a private company unless it is a subsidiary of a public company;
to any investment made in rights issue;
to any loan made, any guarantee given or security provided to or acquisition of shares by a holding company in its wholly owned subsidiary.

Depreciation - Companies Act 2013

2014-08-03T20:30:00.000+05:30

Companies Act 2013 [Act] has introduced the concept of useful life and depreciation will be calculated based on the useful life of any asset. Section 123 of the act specifies that depreciation shall be provided in accordance with the provisions of Schedule II.

Part C of Schedule II has provided useful life of 15 categories of tangible assets. The useful life mentioned under it is different than that of The Companies Act, 1956. Because of this change companies have to expedite the amortisation of asset at higher rate in order to comply with the useful life specified under the Act. No separate rates are prescribed for extra shift depreciation in Schedule II.

The Schedule XIV to the Companies Act, 1956 prescribes the rates of Straight Line Method [SLM] and Written Down Value[WDV] at which depreciation on various assets need to be provided. In Schedule II to the Act, only useful life is provided, therefore appropriate rate of depreciation as per the appropriate method used by it either SLM or WDV needs to be calculate separately.

In Companies Act, 2013 it is clarified that residual value of the asset can not exceed 5% of original cost of the asset. companies are now required to adopt what is known as the ‘component approach’ to compute depreciation on fixed assets. An assets needs to be split in to its components and based on the useful life of each component the depreciation % will be identified.

Appointment of Managing Director

2014-06-13T12:13:00.000+05:30

Appointment of Managing Director

Every Public company having a paid up share capital of Rs. 5.00 crores or more must appoint a Whole time director or Managing Director.
A managing Director must essentially be a Director of the Company. In case the proposed MD is not a Director he must be appointed as Additional Director.
Being an Additional director he will assume the office of Director till the next AGM, wherein he has to be reappointed.
Managing director can be appointed for the period of 5 years. [Sec. 317]
A copy of Board resolution appointing MD should be filed with the ROC within 30 days. [Sec. 192 (1)]
Section 269 applies to every Public Company and Pvt. Co. which is a subsidiary of Pub. Co.
After appointment of MD form 25-C should be to be filed as specified u/s 269(2) within 90 days of appointment.
In case of omission of filing such form the appointment does not become void.
Schedule XIII specifically provides that appointment of MD should be approved by shareholders in General meeting.
Approval of Central Govt. is necessary in case the appointment is not according to Sch. XIII. An application in form 25A has to be submitted within 90 days of such appointment. U/s 269(6), even in case Central Govt. rejects the appointment, the individual can continue occupying the position by payment of Fine / Penalty.
The above-mentioned provisions do not apply to Pvt. Company.
There is no restriction on Remuneration payable to MD of a Pvt. Company.
Restrictions on Appointment: An individual cannot be managing director or manager of more than two companies, public or private, where out of two companies at least one is a public company or private company, which is a subsidiary of a public company. An individual may hold the office of managing director or manager in any number of private companies, which are not subsidiaries of public company. But if the office is held in a public company or a private company which is subsidiary of a public company, the same individual can not, in addition thereto, hold the office of managing director in more than one company whether such company is a public company or private company which is subsidiary of public company or any private company. (Section 316)
Terms of Office: The term of office of a managing director must not exceed 5 years at a time. The term, however, may be extended for further period not exceeding 5 years at a time. (Section 317)
It is important to note that the person ceases to be managing director with a censure of directorship on account of his retirement by rotation at the Annual General Meeting. But if such a person is re-elected as director at the AGM and thereby he continues as the director of the company, he shall continue as a managing director also for the period for which he is so elected by the AGM and for the unexpired period of present term of appointment as managing director.
Disqualifications for appointment: A managing director must be a director and therefore, all the disqualifications rendering impossibilities for the appointment of a person as director (Section 274) will apply in the case of appointment of a managing director. Section 267 specifically provide that company must appoint or continue the appointment of a person as managing or whole time director who is:

An undischarged insolvent or has at any time been adjudged insolvent;
Suspends or has at any time suspended payment to his creditor or has made a composition with them or
Has at any time been convicted of an offence involving moral turpitude. Meaning of the term moral turpitude: According to American encyclopedia of Law, it comprises anything contrary to justice, honesty, and principle of good morals, an act of baseness, vileness or depravity in the private and social duties, which a man owes to his fellowmen or society in general. The term also comprises anything contrary to the accepted and customary rule of right and duty between humans.

u/s 117(3) of the Companies Act 2013 any resolution of the Board of Directors of a company or agreement executed by a company, relating to the appointment, re-appointment or renewal of the appointment, or variation of the terms of appointment, of a Managing Director needs to be re filed with ROC within 30 days of passing the same.

Buy Back of shares under Companies Act 2013

2014-06-01T23:08:00.000+05:30

Section 68(1) of the new Act, deals with the issue of ‘buy-back’. The corresponding provision in the old Act is Section 77A. There has been no significant change in the laws regarding buy-back. The changes have only been in terms of

the procedure of odd-lots applicable to listed stocks: The same has been done away with and
the punishment for contravening the section has been enhanced.

The old Act provided that any offer of buy-back cannot be made within a period of 365 days reckoned from the date of the preceding offer of buy-back. Under the new Act, this period of 365 days has been provided as one year which has to be reckoned from the date of the closure of the preceding offer of buy-back. Furthermore, Rule 17 of the Companies (Share Capital and Debentures) Rules, 2014 also makes certain deviations from the erstwhile Private Limited Company and Unlisted Public company (Buy Back of Securities) Rules,1999 prescribed under the old Act in respect of buy-back. These are-

Vide rule 17(1)(n)(iii) the new Act requires that a report addressed to the Board of directors by the company’s auditors should state that the audited accounts on the basis of which calculation for the purpose of buy-back is made, is not more than six months old from the date of the Offer Document;

Rule 17(14) of the Companies (Share Capital and Debentures) Rules, 2014 requires that a Certificate of Compliance in respect of buy-back of securities has to be annexed to the return filed with the Registrar in Form No. SH.11. This Certificate of Compliance has to be signed by two directors of the company including the managing director, if any, certifying that the buy-back of securities has been made in compliance with the provisions of the Act and the rules made thereunder. The above requirement was there in the old Act.

High seas sale

2014-03-31T17:38:00.003+05:30

A High Sea Sales contract/ agreement should be signed after dispatch of goods from origin & prior to their arrival at destination. The agreement should be on stamp paper. On concluding the High Sea Sales agreement, the bill of lading (B/L) should be endorsed in favor of the new buyer. In respect of air shipment, High Sea Sales seller should write to the airline / consol agent informing that an High Sea Sales agreement has been established with the High Sea Sales buyer and that the carrier document should therefore be considered as endorsed in favour of the High Sea Sales buyer and further the Import General Maniface (IGM) should be filed by the carrier in the name of the High Sea Sales buyer. If the electronicdata interchange (EDI) system allows name of High Sea buyer to be entered in the system, then there may not be any need to amend the Import General Maniface (IGM). In this case, the bill of entry/exchange (B/E) is filed in the name of the original importer as the IGM is in thisimporter name. However, the bill of entry/exchange (B/E) shows the name of High Sea buyer under a separate head in the B/E format. If the system has no provision for showing the name of High Sea buyer on the B/E, then the IGM should be got amended and B/E filed in the name of the High Sea buyer.

In the case of High Sea Sales, the cargo in freight (CIF) value for calculation of duty is taken to be the High Sea Sales value.

There is a practice followed in customs that in case the High Sea Sales transfer takes place at import invoice value only , the custom would add 4% of cargo in freight (CIF) value as High Sea Sales loading factor . There have been cases where High Sea sellers have sold at two percent more than import CIF but custom have added 4% of cargo in freight (CIF) as High Sea Sales value addition. Such practice of customs can be challenged at the customs duty is chargeable on genuine transaction value. In High Sea Sales contracts, the High Sea seller may not like to disclose the importvalue to the High Sea buyer. However, the customs can call for the original import invoice, in which case the High Sea seller may have to part with this information. To overcome this, High Sea seller should take on the responsibility of custom clearance and site delivery. After custom clearance, the High Sea seller could withdraw import invoices and only hand over clearance documents with High Sea Sales agreement to the High Sea buyer. The custom bill of entry does not indicate original import value and is prepared on High Sea Sales value.

Sometime High Sea buyers buy goods after their arrival. Such sale are not High Sea Sales. The stamp paper on which the HSS agreement is executed must not bear thestamp paper purchase date as being post cargo arrival date. Such a case can easily be detected by customs as being a post arrival sale.

If the High Sea Sales does not mind disclosing original import values to High Sea buyer, in such case it is better from custom clearance point of view for the seller to endorse the Bill of Lading, invoice , packing list in favour of the High Sea buyer. The endorsement should read “Transferred on High Sea Sales basis to M/S ——– for a sales consideration of (currency and amount in that currency) “. Such endorsement should be stamped and signed by the High Sea seller.

High Sea Sales is considered as a sale carried out outside the territorial jurisdiction of India. Accordingly, no sales tax is levied in respect of High Sea Sales. The CENVAT credit in respect of CVD paid on import is entitled to High Sea buyer.

The bill of lading is considered to be document of title to goods and the sale can be made by endorsement delivery or by mere delivery of a blank bill of lading before the goods cross the customs frontier.

The following is the procedure and the documentation required to make a High Seas Sale:-

Importer (XYZ) and High Seas buyer (ABC) shall enter into an agreement of sale to effect the sale on high seas of specific goods.
The document of title i.e. Bill of Lading shall be endorsed by the XYZ as follows:

Please deliver to M/s ABC or order

Place: sd/-

Date: XYZ

It may be noted that airway bill is not a document of title to goods. However, delivery order issued by banker is recognised as a negotiable document. In the Case ofB. M. Shah & Co. (SA no. 139 of 1989 dated 7-2-1992)
XYZ to retain a copy of the endorsed Bill of Lading and hand over original Bill of Lading to ABC under covering letter.
ABC shall file Bill of Entry and pay customs duty, clearing charges etc. ( The assessable value for the purpose of custom duty would be sale price as mentioned in High Seas Agreement).
ABC to arrange for clearance of goods and arrange for transportation.
Documents to be kept on record by importer:

Purchase order placed on foreign supplier.
Import licence.
Foreign supplier’s sale invoice.
Letter from foreign supplier informing about dispatch of goods and giving the particular of Bill of lading, Packing list etc.
Purchase order placed by the High Seas Buyer i.e. High Seas Sale agreement.
Endorsed copy of Bill of Lading or banker’s delivery order as the case may be.Acknowledged copy of the letter, under which the endorsed Bill of Lading/ Delivery Order has been sent to the High Seas buyer.
Sales invoice on the buyer.
Letter by the importer to the customs authorities, intimating that the goods will be cleared by the High Seas buyer.Letter by the High Seas buyer to the customs authorities, intimating that he being the purchaser, he will be clearing the goods.
Declaration signed by the High Seas Buyer about fulfilling the obligations attached to import of goods purchased on High Seas.
A copy of the Bill of Entry filed by High Seas Buyer.
Letter from High Seas buyer informing that he has taken delivery of the goods, sold under High Seas agreement, from the shipping company.
Proof of payment received from High Seas Buyer.

Corporate Social Responsibility

2014-02-28T11:00:00.000+05:30

Corporate Social Responsibility [CSR]

Under CSR regime companies above certain threshold needs to spend 2% of their average 3 years Net profit towards activities that will bring betterment of society.

The threshold specified under Companies Act 2013 is companies with

at least R.5 crores of net profit in any year or
Rs. 1,000 crore of Turnover or
Rs.500 crore Net worth.

Funds given to political parties and spending towards benefit of companies own empoyees and their families will not count as CSR spending.

Companies are required to have a CSR policy approved by its Board of Directors and must have a monitoring mechanism. CSR policy must be displayed on company's website.

Reverse Charge Mechanism

2014-01-15T19:45:00.001+05:30

Services covered under reverse charge system vide Notification No. 30/2012-ST Dated-20^th June, 2012 with effect from 01.07.2012:

#	Description of a Service	Service provider	Service Receiver	Percentage of service tax payable by the person providing service	Percentage of service tax payable by the person receiving the service
1.	Insurance Services: in respect of services provided or agreed to be provided by an insurance agent to any person carrying on insurance business	Insurance Agent	Business man carrying on insurance business	Nil	100
2.	GTA: in respect of services provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road	Goods transport agency	Consignor or Consignee is specified person	Nil	100
3.	Sponsorship: in respect of services provided or agreed to be provided by way of sponsorship	Any person	Body corporate or partnership firm	Nil	100
4.	Arbitral Tribunal: in respect of services provided or agreed to be provided by an arbitral tribunal	Arbitral tribunal	Business entity	Nil	100
5.	Advocate Services: in respect of services provided or agreed to be provided by individual advocate	Individual Advocate	Business entity	Nil	100
5A.	A director of a company: In respect of services provided or agreed to be provided by a director of a company to the said company	A director of a company	To the said company	Nil	100
6.	Support Services: in respect of services provided or agreed to be provided by way of support service by Government or local authority	Government	Business entity	Nil	100
7.	Rent a Cab Service: (a) In respect of services provided or agreed to be provided by way of renting or hiring any motor vehicle designed to carry passenger on abated value. (b) In respect of services provided or agreed to be provided by way of renting or hiring any motor vehicle designed to carry passenger on non-abated value.	Individual/HUF/ Proprietary or partnership firm/AOP	Company under Companies Act, 1956	Nil 60	100 40
8.	Supply of Manpower/ security services: in respect of services provided or agreed to be provided by way of supply of manpower for any purpose	Individual/HUF/ Proprietary or partnership firm/AOP	Company under Companies Act, 1956	25	75
9.	Works Contract Services: in respect of services provided or agreed to be provided by way of works contract	Individual/HUF/ Proprietary or partnership firm/AOP	Company under Companies Act, 1956	50	50
10.	in respect of any taxable services provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory	Any person	Any person	Nil	100

Availment of Cenvat Credit by service receiver:

Service receiver may claim the credit of service tax paid based on the invoice issued by the service provider. For service tax paid on reverse charge, credit may be claimed based on the TR-6 challan by which payment is made. Service receiver will not pay the service tax from cenvat credit under the reverse charge mechanism.

Chief Financial officer [CFO] - Companies Act 2013

2014-01-11T20:21:00.002+05:30

Position of CFO under companies Act 2013

CFO is identified as Key Managerial Personnel u/s 2(19)
CFO is identified as ‘officer in default’ u/s 2(59) and 2(60).
CFO to be appointed by means of a Board Resolution u/s 203
CFO shall not hold office in more than one company unless it is a subsidiary u/s 203(3)
CFO to be named in the prospectus or information memorandum for issue of securities u/s 26.
CFO is responsible for statements in prospectus, if he authorises the issue. section 34, 35.
CFO is directly responsible for maintenance of books of accounts sec. 128(6).
CFO is responsible for furnishing ‘true and fair’ view of the state of affairs in the financial statements u/s 129.
CFO is responsible for filing financial statements with Registrar of Companies sec. 137.
CFO authorises financial statements sec. 134.
CFO is responsible for adhering to accounting standards Sec. 133.
A director may be appointed as CFO (Table A -77). CFO can be a director.
Where a CFO has to authorise a statement, and if the CFO is also a director, he shall authorise the statement as CFO. (Table A – 78)

Contribution to Political Parties – section 182 of Companies Act, 2013

2013-12-22T22:52:00.000+05:30

Section 182 of the Companies act, 2013 which has been notified with effect from 12th September 2013 provides for prohibitions and restrictions regarding political contributions. Salient features of this section are given below:

All companies except Government companies and companies in existence for less than 3 years are covered by this section;
The maximum amount that a company can contribute towards a political party in a year shall not exceed 7.5% of its average net profits during the three preceding financial years;
Before making the contribution, the Board should approve of the same by way of resolution passed at its Board meeting;
Subscription, donation or payment made to a person who is carrying on such activity which affects public support for a political party shall also be deemed to a contribution to a political party;
Expenditure incurred directly or indirectly by a company on a publication, souvenir, journal, pamphlet for or on behalf of a political party shall also be construed as making a contribution to a political party;
Every company should disclose in its profit and loss account any amount contributed to a political party in any financial party, giving the particulars of the total amount contributed and also name of the political party;
If a company makes a contribution in contravention of the provisions of section 182, then the company shall be punishable with a fine which shall not be less than 5 times the amount so contributed and also every officer in default is liable to imprisonment for a term which may extend to six months and also fine of 5 times the amount so contributed.
Political party means a party registered under section 29A of the Representation of People’s Act, 1951

Ministry of Corporate Affairs has issued a clarification vide its circular no. 19/2013 dated 10/12/2013 that

where companies make contribution to “Electoral Trust companies” rather than directly to political parties then they need not disclose separately the amounts paid to each Electoral Trust company. It would be sufficient if a consolidated figure is mentioned in the accounts as paid to Electoral Trust Company;
Companies making contribution directly to a Political Party will be required to make the disclosures as required by section 182(3) of the Act;
Electoral Trust Companies in turn should make disclosures regarding contributions made by them to political parties as required under section 182(3).

Process of merger under Companies Act 1956

2013-12-22T21:46:00.002+05:30

Whether merger is allowed?

The Memorandum of Association [MOA] of both the companies must provide the power to amalgamate. If MOA is silent, the first step will be to amend the MOA.

Board Meeting

A Board Meeting shall be convened to consider and pass the following resolutions:

approve the draft scheme of amalgamation;
to authorize filing of application to the court for directions to convene a general meeting;
to file a petition for confirmation of scheme by the High Court.

Application to the Court

An application shall be made to the court for directions to convene a general meeting by way of Judge's summons (in Form No.33) supported by an affidavit (in Form No.34) The proposed scheme of amalgamation must be attached to such affidavit.

The summons should be accompanied by:
- A certified copy of the M&A of both companies
- A certified true copy of the latest audited B/S and P&L A/c of transferee company
- The application to convene meeting under s.391 (1) is required to be made to the respective jurisdictional High Court by the company concerned depending on the location of its registered office. Similarly an application for the scheme of arrangement will have to be made to the concerned High Court [HC] where the company’s registered office is situated.

Submission of copy to Regional Director [RD] of ROC

A copy of application made to concerned HC shall also be sent to the RD of the region. Although, such notice is supposed to be sent by the HC, usually the company sends it without waiting for the H.C. to send it.

Order of High Court

On hearing of the summons, the HC shall pass the necessary orders (in Form No.35) which shall include:

(a) Time and place of the meeting,

(b) Chairman of the meeting,

(d) Procedure to be followed in the meeting for voting by the proxy,

(e) Advertisement of notice of the meeting,

(f) Time limit for the chairman to submit the report to the court regarding the result of the meeting.

Where the court observes that any of the following circumstances exist in the case of the merger it may not order a meeting when shareholders are few in number; or where the membership is restricted to a single family, HUF or close relatives; or where shareholding pattern of transferor and transferee companies is identical.

Notice of the Meeting

The notice of the meeting (in Form No.36) shall be sent to the creditors and/or all the shareholders individually (including preference shareholders) by the chairman so appointed by registered post enclosing:

(a) A statement setting forth the following:
- Terms of amalgamation and its effects
- Any material interests of the director, MDs or Manager, in any capacity
- Effect of the arrangement on those interests.
(b) A copy of the proposed scheme of amalgamation,
(c) A form of proxy (in Form No.37)(d) Attendance slip (e) Notice of the resolution for authorizing issue of shares to persons other than existing shareholders

Computation: The notice that is required to be given u/s.393 of the Act for the meeting of the members/ creditors shall be by 21 clear days notice.

Advertisement of Notice of Meeting

The notice of the meeting (in Form No.38) shall be advertised in English and Hindi Newspapers as the court may direct by giving not less than 21 clear days notice before the date fixed for the meeting. However in some instances, the 21 days period can be condoned if reasons are found justifiable.

Notice to Stock Exchange

In case of the listed company, 3 copies of the notice of the general meeting along with enclosures shall be sent to the Stock Exchange where the company is listed.

Filing of Affidavit for the Compliance

An affidavit not less than 7 days before the meeting shall be filed by the Chairman of the meeting with the Court showing that the directions regarding the issue of notices and advertisement have been duly complied with.

General Meeting
The General Meeting shall be held to pass the following resolutions:

(a) Approving the scheme of amalgamation by ¾th majority e.g. if a meeting is attended by say 100 members holding 100 shares, the scheme shall be deemed to have been approved only when it is supported by at least 51 members holding together 750 shares amounts themselves;

(b) Special Resolution authorizing allotment of shares to persons other than existing shareholders or an ordinary resolution be passed subject to getting Central Government's approval for the allotment as per the provisions of Section 81(1A) of the Companies Act, 1956,

(c) The resolution to empower directors to dispose of the shares not taken up by the dissenting shareholders at their discretion;

(d) An ordinary/special resolution shall be passed to increase the Authorized share capital, if the proposed issue of shares exceeds the present authorized capital. The decision of the meeting shall be ascertained only by taking a poll on resolutions.

Reporting Of Result Of The Meeting:-

The Chairman of the meeting shall report the result of the meeting to the court (in Form No.39) within the time fixed by the judge or within 7 days, as the case may be. A copy of proceedings of the meeting shall also be sent to the concerned Stock Exchange.

Formalities with ROC
The following documents shall be filed with ROC along-with the requisite filing fees:

a. Form No. 23 of Companies General Rules & Forms along with the copy of Special Resolution,

b. Resolution approving the scheme of amalgamation,

c. Special resolution passed for the issue of shares to persons other than existing shareholders.

Petition

For approval of the scheme of amalgamation, a petition shall be made to the HC within 7 days (in Form No.40) of the filing of report by the chairman. If the Regd. Offices of the companies are in same state - then both the companies may move jointly to the

High Court. If the Regd. Offices of the companies are in different states - then each company shall move the petition in respective High Court for directions.

Sanction of the Scheme
The Court shall sanction the scheme (in Form No.41) on being satisfied that:

(i)The whole scheme is annexed to the notice for convening meeting. (This provision is mandatory in nature)

(ii) The scheme should have been approved by the company by means of ¾th majority of the members present.

(iii) The scheme should be genuine and bona fide and should not be against the interests of the creditors, the company and the public interest. After satisfying itself, the court shall pass orders in the requisite form. The requirement of law is permission or approval of court to the scheme. The application made by the company is to seek court’s approval to the company scheme of amalgamation and not merely ordering a meeting.

The court may order a meeting of members too. The court must consider all aspects of the matter so as to arrive at a finding that the scheme is fair, just and reasonable and does not contravene public policy or any statutory provision.

Stamp Duty
A scheme sanctioned by the court is an instrument liable to stamp duty. The stamp duty will be payable at both the states if the Registered office of the amalgamating companies are located in two different states. however an application will be made to the HC for exemption from either of the states.

Filing with ROC
The following documents shall be filed with ROC within 30 days of order:
a) A certified true copy of Court's Order
b)Form No. 21 of Companies General Rules & Forms

Copy of Order to be annexed

A copy of court's order shall be annexed to every copy of the Memorandum of Association issued after the certified copy of the order has been filed with as aforesaid.

Allotment of shares

A Board Resolution shall be passed for the allotment of shares to the shareholders in exchange of shares held in the transferor-company and to fix the record date for this purpose.

Merger and Amalgamation Companies Act 1956 and 2013

2013-12-22T19:42:00.000+05:30

What is merger?

In merger two or more existing companies combine into one company. The transferor company merges its identity into the transferee company by the transfer of its business (assets and liabilities). The shareholders of the transferor company receive shares in the merged company in exchange for the shares held by them in the transferor company as per the agreed exchange ratio.

What is Amalgamation?
In amalgamation two or more existing transferor companies merge together to form a new company, whereby all the transferor companies lose their existence and their shareholders become the shareholders of the new company.

Who can object the scheme of merger.

As per the newly introduced Companies Act 2013 an objection to scheme of merger can be raised only by persons holding not less than 10% of the shareholding or persons holding outstanding debt amounting to not less than 5% of the total outstanding debt as per the latest audited financial statement. These provisions are intended to ensure that insignificant minority interest do not hold the majority at ransom. This will also enable a faster approval of scheme with the reduction of number of objections.

The Merger and Amalgamation [M&A] is allowed under the Companies Act [CA] 1956 vide section 391 to 394. The Companies Act 2013 contains 10 clauses i.e. from 230 to 240 regarding M&A whereas Companies Act, 1956 contained only 7 sections of which only 4 particularly dealt with M&A.

Types of Mergers

Horizontal merger is the merger of firms engaged in the same line of business.

Vertical Merger is backward or forward expansion. In a Conglomerate, there is a merger of firms engaged in unrelated businesses.

Process

High court of respective state where the registered offices of the companies are located has the jurisdiction to sanction the scheme.

Merger of Foreign company

By virtue of Sec. 584 of Companies Act 1956 a foreign company having a place of business in India, is eligible to be merged with an Indian Co. U/s 394(4)(b) a foreign incorporated company could be a transferor company in the scheme of merger.

The Companies Act 2013 has opened doors for cross- border mergers by allowing both ways merger subject to certain conditions. Permission of Reserve Bank of India shall also be a pre-requisite in cross-border Mergers. The RBI is empowered in to analyze cross border mergers.

It is necessary that the law under which the foreign company is incorporated allow the foreign company to merge with an Indian Company. Merger can’t take place in case the foreign laws do not allow the foreign company to merge with Indian companyIn case a foreign company does not have a place in India the Indian courts have no jurisdiction to sanction the merger. However if the foreign co. has a branch office in India the respective court has the jurisdiction. Ever branch of a foreign company needs to register with ROC and submit returns to ROC at Delhi. Although the foreign company is filing the returns at Delhi ROC the High court of the state where the branch office is located shall have the jurisdiction over the M&A scheme and not the Delhi High court.

The Indian Company can carry forward the losses of the foreign company u/s 72A of the Income Tax act, after the merger of the foreign company with Indian company.

Before issue of shares to the shareholders of the foreign company under the scheme the Indian company needs to get permission from RBI under FEMA for the issue of shares to NRI and must give declaration that the merged entity will not indulge in the business of Agriculture, plantation, Real estate etc.

Stamp Duty

Only in the state of Maharashtra the order of the High court sanctioning the M&A attracts Stamp duty at the rate applicable on the Conveyance of Property. When the tranaferor and the transferee companies are located at two different states and if stamp duty is applicable at both the states the double payment of stamp duty can be avoided by applying for exemption in either state.

Income Tax Act 1961

It provides for not only carry forward and set off of accumulated losses but also un-absorbed depreciation allowance of the amalgamating company.

Registered Valuer - Companies Act 2013

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Section 247 of the Companies Act, 2013 contains provisions regarding registered valuers.

Definition (Rule 17.1):

‘Registered Valuer’ means a person registered as a Valuer under Chapter XVII of the Act.

Who can act as a registered valuer?

A person who is registered as a Registered Valuer in pursuance of Section 247 of the Act with the Central Government and whose name appears in the register of Registered Valuers maintained by the Central Government or any authority, institution or agency, as may be notified by the Central Government only can act as a registered valuer. An application for registration as valuer shall be made in Form No. 17.1 by individuals and firms and Form No. 17.2 by others, along with the fee as provided.

The following persons shall be eligible to apply for being registered as a valuer:

A chartered accountant, company secretary or cost accountant who is in whole-time practice, or retired member of Indian Corporate Law Service or any Indian Citizen holding equivalent Indian or foreign qualification as the Ministry of Corporate Affairs may by an order recognize.

A Merchant Banker registered with SEBI and having in his employment persons having qualifications as mentioned above to carry out valuation services by such qualified persons

A member of the Institute of Engineers and who is in whole-time practice

A member of the Institute of Architects and who is in whole-time practice

5 years of continuous post membership experience is mandatory in all the above cases.

In the case of merchant banker the valuation report shall be signed by the qualified person.

For the purposes of this rule, a person shall be deemed “to be in whole-time practice”, when individually or in partnership or in limited liability partnership or in merchant banker with other persons in practice who are members of other professional bodies, he, in consideration of remuneration received or to be received:

(i) engages himself in the practice of valuation; or

(ii) offers to perform or performs services involving valuation of any assets with the object of arriving at financial value of the asset being valued; or

(iii) renders professional services or assistance in or about matters of principle or detail relating to valuation.

A person or entity possessing necessary competence and qualification as may be notified by the Central Government from time to time.

Where valuation by a registered valuer is required?

Any property, stocks, shares, debentures, securities or goodwill or any other assets or net worth of a company or its liabilities which requires valuation under the provision of the Companies Act, 2013 shall be valued by a registered valuer.

In the Act, specific mention about valuation by registered valuer has been made in the following Sections:

Section 62(1)(c) – Further issue of share capital, other than Rights Issue and Issue under a Scheme of Employee Stock Option.

Section 192(2) – Non cash transaction involving directors

Section 230(2) – Valuation report in case of a scheme of compromise or arrangement with creditors or members

Section 236(2) – Purchase of minority shareholding

Section 281(1)(a) proviso – Submission of report by company liquidator

Section 305(2)(d) – Declaration of solvency in case of proposal to wind up voluntarily

Section 319(3)(b) – Power of Company Liquidator to accept shares, etc., as consideration for sale of property of company.

Methods of valuation

Before adoption of the methods of valuation, the registered valuer shall decide the approach to valuation based upon the purpose of valuation:

(a) Asset approach;

(b) Income approach;

The valuer shall consider the following points while undertaking valuation

(a)Nature of the business and the History of the Enterprise from its inception;

(b) Economic outlook in general and outlook of the specific industry in particular;

(d) Earning capacity of the company;

(e) Dividend –paying capacity of the company;

(f) Goodwill or other intangible value;

(g) Sales of the stock and the size of the block of stock to be valued

(h) Market prices of stock of corporations engaged in the same or a similar line of business;

(i) Contingent liabilities or substantial legal issues, within India or abroad, impacting the business;

(j) Nature of instrument proposed to be issued, and nature of transaction contemplated by the parties.

Methods of valuation:

(a) Net asset value method – represents the value of an entity’s assets less the value of its liabilities

(b) Market Price method: Under this method the current price at which the subject of valuation is bought or sold in the market between unrelated third parties is taken into account;

(c) Yield method / Profit Earning Capacity Value (PECV): Under this method the value is calculated by capitalizing the average of the after tax profits for the preceding three years (or such other period. Provided adequate justification is available for choosing another period) at capitalisation rates specified in the report

(d) Discounted Cash Flow Method (DCF): This method expresses the present value of the business as a function of its future cash earnings capacity.

(e) Comparable Companies Multiples Methodology (CCM): This Method uses the valuation ratios of a publicly traded company and applies that ratio to the company being valued (after applying appropriate discount or premium, as the context may require).

(f) Comparable Transaction Multiples Method (CTM) – entails valuation on the basis of similar transactions among unrelated parties in the peer group companies.

(g) Price of Recent Investment method (PORI) – entails valuation on the basis of recent investment received in the company from an independent investor.

(h) Sum of the parts valuation (SOTP) – where each part of the business is valued according to method(s) appropriate to that business, and the results are summed up to obtain total value of the business

(i) Liquidation value – if the value is being calculated in a liquidation scenario

(j) Weighted Average Method – Under this method the weights are assigned to the values calculated under different valuation approaches.

(k) Any other method accepted or notified by the Reserve Bank of India, Securities and Exchange Board or Income Tax Authorities.

(l) Any other method(s) that the valuer may deem fit to adopt in the given circumstances of the case, provided that adequate justification for use of such method(s) (and not any of the methods above) must be included in the report.

A registered valuer shall make a valuation of any asset as on valuation date, in accordance with the applicable standards, if any, as may be stipulated for this purpose.

For the purposes of this rule, ‘valuation date’ means the date on which the estimate of value is applicable. It may be different from the date of the valuation report or the date on which the investigations were undertaken or completed.

Appointment of registered valuer [Section 247(1)]:

The registered valuer needs to be appointed by the audit committee or in its absence, by the Board of Directors.

Duties of Registered Valuer [Section 247(2)]:

(a) make an impartial, true and fair valuation of any assets which may be required to be valued;

(b) exercise due diligence while performing the functions as valuer;

(d) not undertake valuation of any assets in which he has a direct or indirect interest or becomes so interested at any time during or after the valuation of assets.

Contents of Valuation Report

The report of valuation by a registered valuer shall be as near to and shall contain such information as set out in Form No. 17.3.

Conditions that lead to cessation as "Registered Valuer"

Where any person who is registered as a valuer under section 247 or who has made an application for registration as a valuer under that section is, at any time thereafter,—

(a) sentenced to a term of imprisonment for any offence; or

(b) found guilty of misconduct in his professional capacity by any association or institute or other body of which he is a member or with which he is registered;

he shall immediately after such conviction or finding, intimate the particulars thereof to the Central Government, institution or agency with which he is registered as a valuer and cease to act as valuer unless

permitted by the Central Government, institute or agency with which he is registered as a valuer, or
the order imposing penalty/sentence has been stayed by competent authority.

In case valuer is found guilty of professional misconduct or otherwise by the Institute of which he is a member or by NFRA or where the SEBI removed the registration of the merchant banker, such valuer shall cease to be the valuer automatically and their name shall be removed from the register of valuer unless such order has been stayed by the Competent Authority.

Any ongoing assignment of such valuer, who has ceased to be a valuer, shall be assigned to other valuer from the panel maintained by Central Government or any authority or institution to complete the assignment, if no stay is granted on such appeal, if any.

Removal and restoration of names of valuers from register

Removal:

The name of a registered valuer can be removed from the register by the Central Government if the government is satisfied –

that his name has been entered in the register by error or on account of misrepresentation or suppression of a material fact
that he has been convicted of any offence and sentenced to a term of imprisonment or has been guilty of misconduct in his professional capacity which, in the opinion of the Central Government or any authority, institution or agency, renders his name unfit to be kept in the register.
that his performance is such that his name should not remain on the register of valuers, satisfied, after giving that person a reasonable opportunity of being heard and after such further inquiry, if any, as it thinks fit to make.

The Central Government or any authority, institution or agency may appoint one or more competent persons as enquiry officer(s) for conducting an enquiry as referred above. The officer(s) conducting an enquiry shall have the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 while make an enquiry and he may also call upon such experts from the field of law, economics, business, finance, accountancy, international trade, management, technology or such other discipline as he deems necessary to assist him in conducting the enquiry.

Appeal:

A registered valuer aggrieved by an order passed for removal of name may prefer an appeal in accordance with the procedure laid down in the respective Acts, regulations or bye-laws governing the respective professional. An appeal against the order of the Central Government shall be preferred to the Tribunal.

Restoration:

The name can be restored on sufficient cause being shown to the satisfaction of the Central Government.

Penal Provisions [Section 247(3) & (4)]:

If a valuer contravenes the provisions of this section or the rules made thereunder, the valuer shall be punishable with fine which shall not be less than Rs. 25,000/- but which may extend to Rs. 1,00,000/-.
If the valuer has contravened such provisions with the intention to defraud the company or its members, he shall be punishable with imprisonment for a term which may extend to 1 year and with fine which shall not be less than Rs. 1,00,000/- but which may extend to Rs. 5,00,000/-.
Where a valuer has been convicted as above, he shall be liable to—

(i) refund the remuneration received by him to the company; and

(ii) pay for damages to the company or to any other person for loss arising out of incorrect or misleading statements of particulars made in his report.

Duties Responsibilities and Liabilities of auditors as per Companies Act 2013

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As per Companies Act 2013, Section 139 provides for appointment of auditors, Section 143 deals with powers and duties of auditors, Section 144 deals with certain services which an auditor cannot render and Section 145 is on signing of audit report and other documents by auditor.

Penalties towards non compliance by Auditor:

Auditor shall be punishable with fine which shall not be less than Rs. 25,000/- but which may extend to Rs. 5,00,000/-. If an auditor has contravened such provisions knowingly or willfully with the intention to deceive

the company or its shareholders or creditors or tax authorities, he shall be punishable with imprisonment for a term which may extend to 1 year and with fine which shall not be less than Rs. 1,00,000/- but which may extend to Rs. 25,00,000/-.

Convicted auditor shall refund the remuneration received by him from the Company and pay for damages to the company, bodies or authorities or to any other persons for loss arising out of incorrect or misleading statements of particulars made in his audit report.

Penalty for failure to disclose fraud

As per Section 143(12), if in the course of the performance of his duties as auditor has reason to believe that an offence involving fraud is being or has been committed against the company by officers or employees of the company, Auditor shall immediately report the matter to the Central Government. In case of any failure on his part to comply with this duty, he shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs. 25,00,000/-.

Penalty for professional misconduct

National Financial Review Authority [NFRA] shall have power to investigate, either suo motu or on a reference made to it by the Central Government into the matters of professional or other misconduct committed by any member or firm of chartered accountants, registered under the Chartered Accountants Act, 1949.

Where professional or other misconduct is proved, NFRA shall have the power to make order for

imposing penalty of

not less than Rs. 1,00,000/-, but which may extend to five times of the fees received, in case of individuals; and
not less than Rs.10,00,000/-, but which may extend to ten times the fees received, in case of firms;

Debarring the member or the firm from engaging himself or itself from practice as member of the Institute of Chartered Accountant of India referred to in clause (e) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 for a minimum period of 6 months or for such higher period not exceeding 10 years as may be decided by the NFRA.

Action in case of fraud by auditors

Change of auditors by NCLT:

The NCLT either suo motu or on an application made to it by the Central Government or by any person concerned, if it is satisfied that the auditor of a company has, whether directly or indirectly, acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to, the company or its directors or officers, it may, by order, direct the company to change its auditors. Such an auditor, shall not be eligible to be appointed as an auditor of any company for a period of 5 years from the date of passing of the order and the auditor shall also be liable for action under section 447.

Disqualification for appointment as auditor:

A person who has been convicted by a court of an offence involving fraud and a period of 10 years has not elapsed from the date of such conviction shall be disqualified to be appointed as auditor of any company.

Any person who is found to be guilty of fraud, shall be punishable u/s 447 with imprisonment for a term which shall not be less than 6 months but which may extend to 10 years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to 3 times the amount involved in the fraud.

Liability of firm: Where, in case of audit of a company being conducted by an audit firm, it is proved that the

partner or partners of the audit firm has or have acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to or by, the company or its directors or officers, the liability, whether civil or criminal as provided in this Act or in any other law for the time being in force, for such act shall be of the partner or partners concerned of the audit firm and of the firm jointly and severally.

Companies Act 2013 has introduced Class Action Suits:

Any 100 or more members/deposit holders of the company or 10% of the total number of members/deposit holders of the company can file a class action suit to claim damages or compensation or demand any other suitable action against the auditor in the manner prescribed under Section 245 of the Companies Act 2013. Action under this section can be initiated against the auditor including audit firm of the company for any improper or misleading statement of particulars made in the audit report or for any fraudulent, unlawful or wrongful act or conduct.

Where the members or depositors seek any damages or compensation or demand any other suitable action from or against an audit firm, the liability shall be of the firm as well as of each partner who was involved in making any improper or misleading statement of particulars in the audit report or who acted in a fraudulent, unlawful or wrongful manner.

PROCEDURE OF INCORPORATION OF A PRIVATE LIMITED COMPANY IN A SIMPLE WAY (IN LAYMAN LANGUAGE)

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Steps in incorporating a company

For incorporating a private limited company, there must be:

At Least 2 Promoters: Promoters who will promote/ incorporate the company. Promoters may be individual or body corporate. AND
At Least 2 Directors: Directors should be individual only. No Body corporate/ HUF or Partnership Firm can be appointed as Directors. For this the individuals will apply for DIN i.e. Director Identification Number in Form DIN 1 along with affidavit of Rs. 10 (Depending upon the stamp duty rates of the States) as an attachment along with PAN card copy and address proof (Driving Licence/ Passport copy/ Voter ID Card/ Electricity Bill/ Telephone Bill) which should either be self attested by Individual or notary attested. This DIN 1 has to be certified by the Professional i.e. CA/ CS/CMA who will certify that the documents attached arethe true copies of the original documents and the photo attached is of the individual who is applying DIN and that individual is known to such Professional or has come to him along with the original documents. The DIN will have then to be applied and will get approved on the basis of Certification of Professional as if correct information is being filed.

Promoters and Directors may be the same.

At least 1 director must have DIGITAL SIGNATURE. This Digital Signature has to be affixed on all the E Forms i.e. Form 1A, Form 1, Form 32 and Form 18 required for incorporation of Company.

Then the promoters should apply for the name of the company to be approved with the concerned ROC of the State where the company has to be formed in E Form 1A by payment of Rs. 1000 through Credit Card or Net Banking, describing the capital of company, main objects, state in which the company is to be incorporated and to affix the digital of Applicant. The promoter can apply for 6 names amongst which the ROC will approve only 1. If the ROC rejects all the names, the applicant have another two chances to apply the name again with the same fees he has incurred while filing Form 1A.

After the name is approved, the Directors/ promoters are to draft MOA and AOA. In MOA, the 5th clause mainly i.e. Name Clause, Registered Office Clause, Main Object Clause, Capital Clause and Subscribers Clause will have to take into consideration. And in Articles all the bye laws of the company corresponding to Companies Act, 1956 have to be considered. The names of First Director are mandatory to be given in AOA.

5. These MOA and AOA should be followed by the tables of subscribers to be signed by subscribers in their own handwriting along with the shares to be subscribed by them before any person who will act as witness and will sign in the witness column that the subscribers have signed in his presence. The word subscribers here used is because of the reason that these subscribers will subscribe for the shares in the company at time of incorporation and will invest the minimum capital i.e. Rs. 1, 00, 000. They will contribute the amount by way of cash or cheque when the company gets incorporated and shares will be allotted to them followed by the share certificates

6. After the MOA and AOA are drafted, Director will take the Professional Service i.e. from CA/ CS/ CWA to incorporate the company. Professional Service is mandatory as for incorporation, E Forms 1, 18 and 32 are to be filed which are to be Digitally signed by any One Director followed by Digital Signatures of Professional who certify that all the documents and information is correct one.

7. Form 1, 18 and 32 are to be filed online after the MOA and AOA are drafted. The E Forms have been described as follows:

E Form 1: In such form, the Director is to give declaration that he is going to incorporate the company and the information filled is true and to the best knowledge to him. Information entered in E Form 1 is: The Authorised and Paid up capital of the company, Particulars of Promoters along with information of at least 2 Directors, The information about the companies in which such promoters are already acting as directors, The Stamp Duty fees to be paid and to attach the scanned copies of MOA and AOA along with their tables, duly signed by all the directors

E Form 32: In this E Form, the applicant is to give information about the first Directors of the company i.e. email id etc along with their

(i) DESIGNATION i.e. Director/ Additional Director/ Managing Director

(ii) Category i.e. Promoter/ Professional/ Independent/ Chairman/ Executive Director/ Non Executive Director

This E Form 32 is then digitally signed by one Director followed by signatures of Professional who will give verification that the appointed director has given declaration to the company that he/ she is not disqualified and not declared as an offender by any Court. The attachment in case of Private Limited Company in form of consent by Director to act as Director is optional but it is better to attach the same.

E Form 18: The Applicant is to give here the office address as well as nearby police station address. Here the Applicant is required to attach the scanned copies of Rent Agreement for the office in case the office is taken on rent OR NOC from the person/ entity if the office is not taken on rent. The Proof of registered office address is mandatory which can be electricity bill/ telephone bill on any individual name but must be of that building where the office is to situate exhibiting that the building is in existence and not a fake one. This documents is to be digitally signed by the Director followed by Professional certifying that he has visited the particular address given in E Form 18 and verified the same.

8. The Applicant will then make the payment of Government Fees as well as Stamp Duty Fees through Credit Card or Net Banking after the E Forms are filed if the Government Fee is less than Rs. 50, 000 and can pay by challan to be deposited in bank if the fee is more than Rs. 50, 000. The E Forms then will be checked by the ROC at their level. And will approve if found all the information in order or may not approve if require some extra information or of the information is not in order. Then the applicant is to give that information and to file the necessary documents if requisite E Form 61 or to re-submit the forms if any form is not found in order.

9. If the E Forms are found to be in order and gets approved by ROC,Certificate of Incorporation will be generated and will be dispatch online at the email id of the person/ entity given in the e forms.

10. The Directors are to get the MOA AOA printed and to comply all the compliances after the company gets incorporated.

Conclusion: Hope this above article will serve the purpose of incorporation of the Private Limited Companies for those Individuals/ Professional/ Business Man who does not find the required matter/ detailed Practical information etc. over the internet or somewhere else.