“MANAGEMENT, ADMINISTRATION & CORPORATE GOVERNANCE ” UNDER THE COMPANIES ACT, 2013 16/11/2013 1
INDEX COMPANIES ACT,2013 MANAGEMENT & ADMINISTRATION GOVERNANCE A paradigm shift for Definition Governance Corporate Prominent Influencers Roles of director Restrictions for Directors Re-enacting the law Strengthening Board Framework Loan to Directors Entities Structure Number of Directors Related Party Transaction Novelties Number of Directorships Fraud What's in & out Appoint & Removal of Directors Class Action Suits Independent Director Transparency & Disclosures Role & Responsibility of CA Decision making by Director Meetings and Related Matter Committees of Board Duties of Director 16/11/2013 2
COMPANIES ACT, 2013 16/11/2013 3
A PARADIGM SHIFT FOR THE CORPORATE The Companies The Companies Act, 2013 Act, 1956 16/11/2013 4
COMPANIES ACT, 2013 470 Sections 29 Chapters New 7 Schedules 33 Definitions Facts about the Act Substantial Part of the Act in form of Rules (418 places it has prescribed word) 16/11/2013 5
COMPANIES ACT, 2013 Contemporary Business Easy Oriented Understandability Self Regulatory Preventive Investor Adaptable Protective 16/11/2013 6
PROMINENT INFLUENCERS TO THE NEW COMPANY LAW IPO Scam Stock Peerless Market Scam The Influencers Sesa Satyam Sterlite Pradeep Sahara Overseas 16/11/2013 7
RE-ENACTING THE NEW COMPANIES LAW Effective protection for Bringing Flexibility & different sections of Adoption of Society Internationally Accepted Practices Self Regulation with Healthy Growth of more disclosures India Inc. Stringent Punishment Efficient enforcement for violation of law 8 16/11/2013
VARIOUS ENTITIES UNDER THE ACT Entity Structure Recognized under the law Access to Others Control Liability Size Activity Members Capital Holding Small Dormant Nidhi Listed Limited Unlimited OPC Company Company Company Company Foreign Subsidiary Private Unlisted Shares Company Company company Producer Public Associate Company Guarantee company Company Government Company 16/11/2013 9
New Concepts 16/11/2013 10
NOVELTIES • Introduction of One Person Company • Stipulation of Woman Director • Provision of Class Action suits • Introduction of Registered Valuer • Fast Track Merger for Holding & Subsidiary Companies • Cross Border Merger • Concept of Dormant Company • Further Use of electronic mode: Maintenance of Documents, Records, Registers, Books of Accounts, etc. in e-Form • Meeting through Video Conferencing • Summary Procedure for Winding up of Company • Conciliation panel & special courts • Corporate Social Responsibility 16/11/2013 11
WHAT’S IN & OUT IN • Key managerial personnel OUT • Resident Director • Sole selling agents • Auditor Rotation • Commencement certificate • Dormant company • Statutory meetings • NFRA • Convert share into stock • Vigil mechanism • Qualification shares • SFIO • Treasury stocks • Definition of Subsidiary • Secretarial Audit • Recasting of Account • Private Placement 16/11/2013 12
MANAGEMENT & ADMINISTRATION 16/11/2013 13
DEFINITIONS “Board of Directors” Director Or “Board” Director appointed by board of company Section 2(34) Collective body of director s of the company Section 2(10) 16/11/2013 14
ROLES OF DIRECTOR Managing Director { Section 2(54)} Key Managerial Personnel { Section 2(51)} Whole time Director { Section 2(94)} Officer who is in Default { Section 2(60)] 16/11/2013 15
MANAGING DIRECTOR [SECTION 2(54)].. NOTIFIED Managing Director Director By Shareholdings Articles Agreements + Entrusted with substantial powers of management + Occupying position of managing director by whatever name called 16/11/2013 16
MANAGER [SECTION 2(53)].. NOTIFIED Manager Individual Subject to Superintendence Direction of the BoD Control Having Management of whole of affairs of the Company and Includes director occupying position of manager by whatever name called 16/11/2013 17
KEY MANAGERIAL PERSONNEL [SECTION 2(51)].. NOTIFIED Key Managerial Personnel CEO OR Managing Director OR Manager OR Whole time Director + + Company Secretary CFO OR Such other officer as may be prescribed 16/11/2013 18
OFFICER IN DEFAULT [SECTION 2(60)].. NOTIFIED & Whole time Director KMPs If no KMPs All Directors if no one appointed Directors appointed as OD Or Any Person Authorized by Any Person who advices, Every Director who is aware of Board or KMPs directs or instructs BoD Contravention For Issue or transfer of Shares Share Transfer Agent Registrar to Issue Merchant Banker 16/11/2013 19
STRENGTHENING BOARD FRAMEWORK 20 16/11/2013
BOARD FRAMEWORK The Act now prescribes the duties of the directors towards the company Matters to be considered in the Board Meeting provided for in detail Act provides for constitution of the Audit committee by every listed company or other prescribed class of company Constitution of Nomination and Remuneration Committee by listed and other prescribed class of the companies Stakeholders Relationship Committee for companies which consist of more than 1000 shareholders, debenture-holders, deposit-holders and other security holders at any time during a FY 21 16/11/2013
BOARD FRAMEWORK Companies having specified net worth / turnover/ net profit will come under CSR and has to constitute Corporate Social Responsibility committee thereof Directors also covered under ‘Officers in Default’ Public and private companies cannot give any loan or provide any security or guarantee in connection with a loan to a Director or any interested person, except by way of passing a special resolution Voting in electronic mode allowed AGM- Listed Company AGM to be reported to ROC 22 16/11/2013
ADDITIONAL/ALTERNATE/NOMINEE DIRECTOR … NOTIFIED – {SECTION 161 except sub section 2 (alternate director )} } Person who fails to get appointed as a director in a general meeting cannot be appointed as an Additional Director Alternate director can only be appointed in case director leaves India for period of not less than 3 months Subject to Articles, Board can appoint director nominated by any institution in pursuance of any law or agreement has been specified in the law specifically Person to be appointed as Alternate Director shall be a person other than one holding any alternate directorship for any other Director in the Company 16/11/2013 23
WOMAN DIRECTOR & SMALL SHAREHOLDER DIRECTOR At least 1 woman director • As per the Draft Rules: Listed Companies, and for prescribed class or every other public company with paid up capital classes of companies. 2 nd > Rs 100 cr; or turnover > Rs 300 cr. proviso to Section 149(1) Companies with prescribed number of small • As per Draft Rules: A listed company may suo shareholders or paid up moto or upon the notice of > 500 or 1/10 th of the capital and listed total number of small shareholders, whichever is Companies to have 1 lower, elect a small shareholders’ director from director elected by Small amongst the small shareholders) Shareholders Section - 151 16/11/2013 24
DIRECTORS – OTHER REQUIREMENTS Amount to be deposited along with notice • (As per Draft Rules: Rules of nomination of any person to the office prescribe for manner of notice of of director has been increased from Rs candidature of a person for 500 to Rs 100000 or such higher amount directorship) as may be prescribed RESIDENT DIRECTOR (Section 149 (2) At least 1 director to be a person who has stayed in India for atleast 182 days in the previous calendar year 16/11/2013 25
NUMBER OF DIRECTORS 16/11/2013 26
NUMBER OF DIRECTORS – (SECTION 149) Board of Directors consisting individuals as directors. Private Company : 2 Directors Public Company : 3 Directors One Person Company : 1 Director Maximum number :15 (earlier 12) 16/11/2013 27
NUMBER OF DIRECTORSHIPS 16/11/2013 28
NUMBER OF DIRECTORSHIPS (SECTION 165) Director in maximum 20 companies Directorship to include alternate directorship Of these 20 companies, cannot be a Director in more than 10 public companies (including private companies which are holding or subsidiary companies of public companies) No. of members specify lesser number by passing special resolution Penalty for contravention: Minimum Rs. 5,000, and Maximum Rs. 25,000 for every day during which the default continues 16/11/2013 29
APPOINTMENT & REMOVAL OF DIRECTORS 16/11/2013 30
APPOINTMENT OF DIRECTOR (SECTION 152) Appointment of Managing Director, Whole Time Director or Manager to be approved by special resolution in a General Meeting Appointment to be Voted individually… (Notified). Section 162 Consent for appointment to be filed by directors of private company to the ROC When appointment not in accordance with Schedule V, approval of Central Government also required Independent directors not to be included in the total number of directors while calculating retiring directors i.e. 2/3 rd of the total number of directors 16/11/2013 31
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