1. 1. Note: This presentation uses the word prescribed in many - - PowerPoint PPT Presentation

1.

Note: This presentation uses the word “prescribed” in many slides. It refers to that part of the law, which will be prescribed later through Rules.

1.

INTRODUCTION

The Companies Act 2013 will impact some of below given areas of corporate behaviour & conduct of business:

INTRODUCTION

4.

RAISING OF MONEY

Fund Raising

Through Securities Through Deposits

Initial/ Follow on Public Offers (IPO/FPO) Private Placement Rights/ Bonus Shares

The Act seeks to regulate raising of money through all types of securities, and not just shares or debentures The Act also requires all listed companies or companies intending to get listed have to comply with the provisions of The SEBI Act, 1992

Only prescribed companies with a prescribed credit rating allowed this route

RAISING OF MONEY

Changes in provisions regarding fund raising through SECURITIES

6.

RAISING OF MONEY

PRIVATE PLACEMENT OFFER CONDITIONS

 To a section of public other than QIBs and Employees under ESOP  To not more than 50 people

• r such higher number as

may be prescribed  Should comply with prescribed terms & conditions  Invitation through private placement offer letter and not prospectus

Conditions fulfilled?

YES NO PUBLIC OFFER

Comply with provisions of Companies Act, Securities Contract Regulation Act, 1956 and SEBI Act, 1992

RAISING OF MONEY

PROCEDURAL ASPECTS OF PRIVATE PLACEMENT Funds to be received only through the banking channel, and not as cash Allotment to be made within 60 days of receipt of funds Offer to be made by name and to those whose name is recorded by the company prior to invitation Offer to be made

• nly after

allotments under any previous offer have been completed

RAISING OF MONEY

Significant changes in the provisions of PROSPECTUS

9.

VARIATION IN

OF PROSPECTUS OR WILL BE : Subject to Special Resolution Require Mandatory Exit Option to dissenting shareholders Face restriction on use of amount raised by it for buying, trading or dealing in equity shares of another company

RAISING OF MONEY

ISSUANCE OF

 The provision will no more be limited to Public Financial Institutions, Public Sector Banks or Scheduled Banks

RAISING OF MONEY

Separate Provisions with respect to offer of Sale by existing shareholders

Subject to prescribed conditions, Global Depository Receipts may be issued by passing a Special Resolution under the current scenario Preferential Guideline is to be followed

RAISING OF MONEY

A Company may pay commission to any person in connection with subscription

• f its securities but subject to prescribed

conditions

RAISING OF MONEY

Changes in provisions regarding fund raising through DEPOSITS

RAISING OF MONEY

The provisions relating to acceptance of deposits will not apply to NBFCs. They will be governed by rules issued by the Reserve Bank of India. Only those companies fulfilling the prescribed conditions and carrying a prescribed credit rating are eligible to accept deposits

RAISING OF MONEY

RAISING OF MONEY- By Deposits Prohibition on accepting deposits from public, except in the prescribed manner Accepting deposits from members subject to approval by shareholders only

16.

SHARES & SECURITIES

GENERAL CHANGES Changes regarding

VOTING RIGHTS

Changes regarding

ISSUE OF SHARES

Various changes regarding Shares & Securities

Act seeks to regulate all type of securities as

• pposed to equity and

debentures only, causing an

C

SHARES & SECURITIES

Company can issue shares with to other matters

VARIATIONS IN

SHARES & SECURITIES

SHARES & SECURITIES – General Changes

Recognition and

• r more

persons regarding transfer of securities, enabling

OF SHARES in Public Companies also

that comply with accounting standards prescribed for such companies

USE OF

SHARES & SECURITIES

GENERAL CHANGES

Changes regarding VOTING RIGHTS Changes regarding

ISSUE OF SHARES

Various changes regarding Shares & Securities

SHARES & SECURITIES

SHARES & SECURITIES – Voting Rights

Equitable voting rights for equity and preference shareholders with respect to their paid up capital

On resolutions affecting rights of both categories

Preference shareholders allowed to vote on every resolution placed before shareholders’ meeting

If dividend payable to any class of preference shareholders in arrear for more than 2 years

No classification between cumulative and non-cumulative preference shares

For identification of voting rights

GENERAL CHANGES

Changes regarding

VOTING RIGHTS

Changes regarding ISSUE OF SHARES

Various changes regarding Shares & Securities

SHARES & SECURITIES

Private companies have to comply with provisions for further issue of shares that were applicable to public companies only New provision for allotment of ESOP, rules will be provided soon

SHARES & SECURITIES

ISSUE OF

Shares cannot be issued at a discount, except as which can be issued at a discount even now

SHARES & SECURITIES

Company can dispose off only those shares in a Rights issue that haven’t been subscribed to by shareholders in a manner advantageous to the company OF RIGHTS SHARES

SHARES & SECURITIES

A company cannot go for a bonus issue if it has defaulted in payment of:

 Interest

• r

principal

• n

fixed deposits

• r

debt securities issued by it  Statutory dues of employees such as contribution to provident fund, gratuity and bonus

PROHIBITION ON

SHARES & SECURITIES

Issue price of shares offered to persons other than existing shareholders and employees under ESOP shall be computed

• n the basis of Registered Valuer’s report

CALCULATION OF

SHARES & SECURITIES

31.

RESTRUCTURING & REVIVAL

32. Sick Company Fast Track Merger Compromise or Arrangement Reduction of Capital

Reduction of Capital

accounting treatment proposed by the company for such reduction conforms with the accounting standards if the company is in arrears for payment of deposits

RESTRUCTURING & REVIVAL

Compromise or Arrangement

Notice of any meeting in this matter required by the Tribunal to also be given to the Central Government, Income Tax Authorities, RBI, SEBI and CCI Calling of meeting of members or creditors now mandatory (after consent received by postal ballot) for approval of compromise by persons representing at least 3/4th of the value of members of creditors

M E E T I N G S

RESTRUCTURING & REVIVAL

Additional Disclosures in the notice for Compromise/Arrangement

35. Valuation Report Effect on creditors, KMPs, members, debenture holders Effect on material interests of the directors

• r the debenture

trustees

RESTRUCTURING & REVIVAL

RESTRUCTURING & REVIVAL

Shares arising out of arrangement

• r compromise to be cancelled

and extinguished and not to be held by the transferee company in its

• wn
• r

a Trust’s name, whether on its behalf or on behalf

• f

a subsidiary

• r

associate company Compromise or Arrangement

Abolition of Treasury Stocks

Additional information to be included in affidavit for the compromise/arrangement application

• f company, if

any consented by at least 75% secured creditors

RESTRUCTURING & REVIVAL

Affidavit for Scheme of Corporate Debt Restructuring (CDR) should include

Safeguards for secured/ unsecured certifying that fund requirements post CDR will confirm to liquidity test

Statement if for CDR adopted

for all assets by a Registered Valuer

RESTRUCTURING & REVIVAL

Fast Track Merger

for merger between two or more small companies or a holding and its wholly owned subsidiary or some other class of companies to approve & effect the scheme if the Official Liquidator and the Registrar to the scheme have no objections

RESTRUCTURING & REVIVAL

between Indian companies and foreign companies incorporated in prescribed jurisdictions and the scheme must provide for payment to shareholders of the merging companies in any combination of cash and depository receipts

Fast Track Merger of certain Companies

RESTRUCTURING & REVIVAL

Sick Company : Any company, and not just an industrial unit, can be

declared as a sick company  Erosion of 50% of net worth no longer a criteria  Inability to repay 50% or more of secured debts within 30 days

• f being served notice by the creditors. Application to declare a

company sick may be moved by:  The company itself, OR  The creditors representing 50% or more of secured debts

RESTRUCTURING & REVIVAL

42.

ACCOUNTS & AUDIT

Financial Statements

and statement of changes in company’s equity now to be parts of Financial Statements i.e. Apr-Mar to be adopted by all the

• companies. (Relaxation only to foreign companies and subsidiaries of
• verseas companies subject to Tribunal’s approval)

combining accounts

• f

subsidiaries, associates and joint ventures

Re-opening/ Revising Books of Accounts

Allowed subject to Tribunal/ Court’s directions, which shall also notify Central Government & Income Tax Authorities Can also be done by Tribunal/Court in case of frauds, mismanagement or financial irregularities Revision allowed for up to three preceding financial years but detailed reasons for change to be mentioned in the Board’s report Change allowed to rectify mistakes or on change of accounting policy

ACCOUNTS & AUDIT

Auditors

To be appointed for a term of 5 years In case of an audit firm, the auditing partner and team to be rotated annually, if the shareholders desire

ACCOUNTS & AUDIT

Auditor’s Duty

Additional reporting in the Auditor’s report Reporting to the central government

Qualification/ reservation or remark regarding maintenance of accounts Remarks on adequacy & effectiveness of internal financial controls Addition disclosures requirements for certain companies to be prescribed by the central government

1 2 3

Any offence/ fraud committed by company’s officers noticed during the course of audit

ACCOUNTS & AUDIT

47.

MANAGEMENT & MEETING

The new law brings about changes to aspects of management of a company and infuses more accountability

DIRECTORS & KEY MANAGERIAL PERSONS SHAREHOLDERS’ MEEETING BOARD MEEETING

 Requirement for appointment  Maximum number  Condition for removal  Extended duties  Quorum  Postal Ballot  Notice  Participation of Directors  Number & Timing

MANAGEMENT & MEETING

A prescribed class of companies required to have: Managing Director/ CEO/ Manager Whole Time Director in the absence of MD/CEO/Manager Company Secretary Appointment of such persons to ensure better governance of the company

DIRECTOR’S

MANAGEMENT & MEETING

A company can have maximum 15 directors on the board instead of 12 earlier No need for the central government’s approval for increase in number of directors

DIRECTORS

Any increase beyond 15 will require the approval of shareholders by way

• f Special Resolution

MANAGEMENT & MEETING

DUTIES OF A DIRECTOR

To not assign his office (any such assignment will be void) To act in accordance with the Articles of Association To act in good faith to promote the objects of the company in the best interests of its members, shareholders, employees, community and environment To exercise duties with due and reasonable care, skill and diligence To avoid getting involved in situations in which he may have a direct/ indirect interest that conflicts or may conflict with the interest of the company To not achieve or attempt to achieve any undue gain or advantage to himself or his relatives/ partners or associates

MANAGEMENT & MEETING

EXPRESS DUTIES OF DIRECTORS

Bring accountability in the functioning of director Ease of finding the case of negligence by directors

MANAGEMENT & MEETING

Shareholders Meeting

MANAGEMENT & MEETING

QUORUM shall now be considered as: QUORUM

(No. of Members personally Present)

NUMBER OF MEMBERS AS

ON THE DATE OF MEETING

5 ≤ 1000 15 1000 < number ≤ 5000 30 ≥ 5000 A higher quorum, as compared to the earlier requirement, will ensure greater participation by shareholders

MANAGEMENT & MEETING

POSTAL BALLOT

Apart from the prescribed resolutions, any other resolution can be passed by postal ballot except that of ordinary business or that where a director /auditor has right to be heard Provision now applicable to all companies whether listed or not

MANAGEMENT & MEETING

Board Meeting

MANAGEMENT & MEETING

BOARD MEETING- SOME NEW PROVISIONS

Notice of the Meeting

• Minimum 7 days

notice

• To be given to all

directors, whether in India or not

• Can be sent through

any means: hand delivery, post or electronically

Participation

• f Directors
• In person, or
• By video

conferencing, or

• Any other audio-

visual means capable

• f recording,

recognizing and storing the participation of director with date & time

Number & Timing

• f Meetings
• At least 4 meetings in

a year

• Not necessary to be

held in every quarter

• Time gap of not

more than 120 days between two meetings

1 2 3

Meeting at shorter notice allowed, subject to attendance by at least one independent director

• r subsequent ratification of decision by all directors

59.

MANAGEMENT & MEETING

60.

COMPLIANCE & DISCLOSURES

Enactment of the Companies Act 2013 will bring:

Increased compliances and disclosures Stringent penalties for contravention of law

62.

Enhanced disclosures have been mandated in:

Annual Return Director’s Report

COMPLIANCE & DISCLOSURES

Additional disclosures required in the Annual Return of a company

Details regarding:

PRINCIPAL BUSINESS ACTIVITIES

• f the company, its subsidiary, holding and

associates PROMOTERS and KMPs

• f the company & changes regarding them

since closure of last financial year

COMPLIANCE & DISCLOSURES

FIIs’ shareholding, their names, addresses &

• ther details

PENALTIES imposed on the company, directors &

• fficers and the compounding of
• ffences

COMPLIANCE & DISCLOSURES

Additional Disclosures in the Director’s Report of the Company

Company’s policy and selection criteria for appointment of directors Details of Loans, Guarantees and Investments u/s 186

COMPLIANCE & DISCLOSURES

Contracts & arrangements with related parties & justification CSR policy and reason failure to spend 2%

• n CSR, if applicable

Remuneration policy for Directors and KMPs and ratio of each director’s remuneration to employees’ median remuneration

COMPLIANCE & DISCLOSURES

 A Return on change in shareholding of promoters and

top ten shareholders to be filed with Registrar within 15 days of such change

 A Report on every Annual General Meeting and inclusion

• f confirmation that meeting was convened, held and conducted as

per the Act and Rules there under.

Other Compliances

COMPLIANCE & DISCLOSURES

The increased disclosures will improve the manner in which annual general meetings are held and lead to more transparency

COMPLIANCE & DISCLOSURES

69.

GOVERNANCE

Considering the fact that Corporate Governance forms the main thrust of the Companies Act, various provisions have been modified or added relating to: Unpaid Dividend Internal Audit Loan & Investment Related Party Transaction Restrictions on Board Forward Dealing

Unpaid Dividend Every company to list names of shareholders, their addresses and dividend unpaid to them on the company’s website within 30 days

• f transferring funds to unpaid

dividend account Shares on which unpaid dividend

• r
• ther

amount have been transferred to IPEF, are to be transferred in the name of IPEF

GOVERNANCE

Forward Dealings Forward dealings in securities of the company by key managerial personnel now prohibited as listed companies already governed by insider trading laws

GOVERNANCE

Internal Audit Prescribed companies to appoint internal auditor being a chartered accountant or a cost accountant or any other prescribed professional Such professional to carry out internal audit functions and ensure establishment of internal financial control system

GOVERNANCE

Loan and Investment by any Company

Loans & advances to any company or person allowed

• nly if there is a specific purpose for the use of such

loans/advances Company in default of repayment of deposits

• r interest thereon not allowed to give loans/deposits

Capital market intermediaries not allowed to accept inter-corporate loans or deposits above a prescribed limit

GOVERNANCE

75.

NBFCs in the business of acquiring shares & securities exempt from these provisions in respect of such acquisition Companies restricted from making investment through more than 2 layers of investment companies. The provision will not effect:

Indian company acquiring an overseas company that has more than two layers of investment subsidiaries A subsidiary company with investment subsidiary for the purpose of compliance to a law in force

GOVERNANCE

Restrictions on the Board Private companies will now also be required to take permission of shareholders through special resolution for following matters:

Borrow money in excess of paid capital and capital reserves Remit or give time for a payment due from director Sell/lease or dispose whole or substantially whole

• f the undertaking

GOVERNANCE

Restrictions on the Board

77.

An undertaking has now been defined under the law. An undertaking under the Act means an undertaking:

That generates at least 20% of the company’s income In which the company’s investment exceed 20% of its networth as per the last audited Balance Sheet

GOVERNANCE

78.

NEW CONCEPTS

Constitution of CSR Committee by a company having any of the following:

NET WORTH

• f Rs 500 crore
• r more

TURNOVER

• f Rs 1,000

crore or more NET PROFIT

• f Rs 5 crore
• r more

Companies to spend on CSR activities at least 2%

• f the average net profit
• f the preceding 3

financial years. Reasons in case of failure to be disclosed in the Board report

NEW CONCEPTS

Who can seek registration as a Dormant Company:

• A future project
• Holding an asset
• Holding Intellectual Property

1.

• Not been carrying out any business or operation
• Not made any significant accounting transaction during last 2 financial years
• Not filed financial statements and annual returns during last 2 financial years

2.

NEW CONCEPTS

Dormant Company, which

• therwise

has very few compliance requirements, can become an active company by applying to the Registrar of Companies

NEW CONCEPTS

Who can file a class action?

Any class of members or depositors

When can it be filed?

If they believe that the conduct of the company’s affairs by its management:

Is prejudicial to the interests of : The company Any class of members Any class of depositors

NEW CONCEPTS

ORDERS THAT CAN BE SOUGHT

Declaration of a resolution altering MOA/AOA as void if passed with suppression of material information/ misstatement Restrain the company from breaching any provision of AOA or MOA Restrain the company from an act ultra vires the AOA or MOA Restrain the company from an act contrary to the provisions of the Companies Act Restrain the company from any action contrary to the resolution passed by members Claim any damages/ compensation

• r demand any other suitable

action in cases of wrongful/ fraudulent/ unlawful act by directors/ auditors/experts

NEW CONCEPTS

To operate as MCA’s premier agency for investigating frauds related to companies SFIO: To consist of experts from specified fields and other officers as prescribed

NEW CONCEPTS

The central government may also refer cases where investigation into affairs of a company is needed to the SFIO

In such a case, no other investigating agency of the state or central government will proceed with the concerned investigation

NEW CONCEPTS

33.