Transcript Companies Act, 2013 - Top Company Secretary Firms in North India

COMPANIES ACT, 2013
Presented by
CS Vijay Kumar Sharma
OVERVIEW
Presented By
CS Vijay Kumar Sharma
Introduction
INDIA has seen many regulatory changes in the past. The
recently enacted Companies Act, 2013 ('the Act') is a
landmark legislation with far-reaching consequences on all
companies incorporated in India. With the revised and
complex Companies Act 2013, plethora of changes and
Amendments has bought vast impact on corporate legal
framework of the Country. According to the new regulatory
framework, Companies need to rework their norms.
Presented By
CS Vijay Kumar Sharma
OLD
vs
NEW
COMPANIES ACT, 1956
COMPANIES ACT, 2013
13 Parts
29 Chapters
658 Sections
470 Sections
15 Schedules
7 Schedules
Presented By
CS Vijay Kumar Sharma
Introduction of New Concepts
One
Person
Company
CEO, CFO,
KMP
Small
Company
NEW
CONCEPTS
Corporate
Social
Responsi
bility
NCLT
Class
Action
Suit
COB
becomes
Mandato
ry
Presented By
CS Vijay Kumar Sharma
Presented By
CS Vijay Kumar Sharma
Milestones
 02/12/2004
Constitution of an expert committee under the
chairmanship of Dr. J.J. Irani to advice on company
law.
 31/05/2005
Submission of report to the government by expert
committee.
 23/10/2008
Introduction of Companies Bill, 2008 in Lok Sabha
to replace existing Companies Act, 1956.
Dissolution of 14th Lok Sabha leads to lapse in
Companies Bill, 2008 lapsed.
 03/08/2009
Introduction of Companies Bill 2009 in Lok Sabha
by Ministry of Corporate Affairs.
 09/09/2009
Bill referred to Parliament’s standing committee on
finance (SCF) for examination.
Presented By
CS Vijay Kumar Sharma
 31/08/2010
Introduction of report on Companies Bill in Lok Sabha by
SCF.
 14/12/2011
Introduction of fresh Companies Bill, 2011 in Parliament.
 05/01/2012
Bill referred to Parliament’s standing committee on finance
(SCF) after an objection being raised against it in
Parliament.
Based on SCF’s recommendations, Bill was amended and introduced as Companies Bill
2012
 18/12/2012
Approval of Companies Bill, 2012 in Lok Sabha however it
could not be placed in that session in Rajya Sabha.
 08/08/2013
Finally, much awaited & needed landmark legislation
passed by Rajya Sabha in the form on COMPANIES ACT,
2013. A modern & contemporary company law replacing
the old & outdated provisions of Companies Act,1956.
Bill was immediately sent for consent from the President.
Presented By
CS Vijay Kumar Sharma
 29/08/2013
Consent on the bill received by the President.
 12/09/2013
MCA notified 98 Sections with effect from 12th
September, 2013.
 01/04/2014
MCA notified 183 Sections with effect from
01st April, 2014.
WITH THIS NOTIFICATION MOST OF ACT BECAME APPLICABLE
EXCEPT FOR SOME SECTIONS RELATED TO NCLT, NFRA, AND
MERGERS & ACQUISITIONS
Presented By
CS Vijay Kumar Sharma
IMPORTANT DEFINITIONS
Associate Company
A company in which another company has a significant
influence, but which is not a subsidiary company of the
company having such influence and includes a joint venture
company.
Significant influence means Control of:At least 20% of total share capital; or
Business decisions under an agreement;
Presented By
CS Vijay Kumar Sharma
Books of Accounts
“Books of account” includes records maintained in respect of:
• All sums of money received & expended and matters in relation to
such transactions;
• •All sales & purchases of goods & services;
• •The assets & liabilities of the company;
• •Costing records as prescribed.
Presented By
CS Vijay Kumar Sharma
Deposit
“Deposit” includes any receipt of money by way of deposit or
loan or in any other form by a Company, but does not include
such categories of amount as may be prescribed in
consultation with the RBI.
Presented By
CS Vijay Kumar Sharma
Financial Statement
FINANCIAL STATEMENT includes :
 BALANCE SHEET as at the end of Financial Year;
 PROFIT & LOSS ACCOUNT for the Financial Year;
(in case of Non Profit Company; INCOME & EXPENDITURE
ACCOUNT for the Financial Year)
 CASH FLOW STATEMENT for the Financial Year;
(Cash flow not mandatory for One person, Dormant and Small Companies)
 STATEMENT of change in Equity, if applicable
 Any EXPLANATORY NOTE forming part of any of the items mentioned above.
Presented By
CS Vijay Kumar Sharma
Key Managerial Personnel
“Key Managerial Personnel” includes –
• The Chief Executive Officer or the managing director or manager;
• The Company secretary;
• The Whole time director;
• The Chief Financial Officer;
• such other officer as may be prescribed.
Presented By
CS Vijay Kumar Sharma
Relative
Relative means anyone who is related to another, if –
•
•They are members of HUF
• •Spouse
• •Father/ Step-father
• •Mother/ Step-mother
• •Son/Step-son
• •Son’s wife
• •Daughter
• •Daughter’s Husband
• •Brother/ Step-brother
• •Sister/ Step-sister
Presented By
CS Vijay Kumar Sharma
Small Company
Private company having:
• •Paid up share capital upto Rs.50 Lacs; or
• •Turnover upto Rs. 2 Crores;
•However small company excludes any holding/ subsidiary
company or any company registered under section 8.
Presented By
CS Vijay Kumar Sharma
Subsidiary Company
Subsidiary company means –
• •A company in which the holding company :
(a) Controls the composition of the board of directors; or
(b) Exercises or controls more than one half of the total share
capital (Equity + convertible preference) either at its own
or together with one or more of its subsidiary companies.
• •Companies shall not have layers of subsidiaries beyond two levels.
Presented By
CS Vijay Kumar Sharma
Turnover
Turnover means the aggregate value of the realization of
amount made from the sale, supply, or distribution of goods
or on account of services rendered, or both, by the company
during the financial year.
Presented By
CS Vijay Kumar Sharma
IMMEDIATE COMPLIANCES
Company’s Stationery
As per companies Act 2013, companies are required to get its
name, address of its registered office and the Corporate Identity
Number along with telephone number, fax number (if any) e-mail
and website addresses(if any) printed in all its business letters,
billheads, letter papers and in all its notices and other official
publications from 01/04/2014.
Presented By
CS Vijay Kumar Sharma
Director’s
• Every Company is required to have minimum one resident director.
Resident means “director who stayed in India for 182 days or more in
previous calendar year”
• For existing companies, company should fulfill the requirement of the
resident director within one year.
Presented By
CS Vijay Kumar Sharma
• A person is allowed to hold directorship in 20 co. only, out of which not
more than 10 could be public companies including private ltd companies.
if the person is the director in more than the above mentioned limit
then he has to resign from the other companies in the excess of above
limit within one year from the commencement of the act.
Presented By
CS Vijay Kumar Sharma
• Director’s of the company has to mention their name, address & DIN
(Director Identification Number) with their signature on all the
documents certified by them.
Presented By
CS Vijay Kumar Sharma
Treatment of Application Money
• Companies are time bound to allot the shares within a period of sixty (60)
days from the date of receiving application.
If they fail to allot the shares within prescribed duration then the
entire amount should be repaid by companies within 15 days to the
respective applicants.
In the light of above provisions our view are if
there are p[ending application money in the company as on 31/03/2014,
than company should allot the shares before 30/06/2014 or repay that
application money before 15/07/20104
Presented By
CS Vijay Kumar Sharma
Pending Deposit
• All the companies who had taken Deposit, shall file the return
to ROC with 3 months.
• Repayment of loan to its shareholders, within one year from
the date of commencement of this act.
In respect to the above provision amount taken by
the company from all individual (Except Director) including its
shareholder will also cover in the definition of deposit
Presented By
CS Vijay Kumar Sharma
Publication of Capital
If company specifies its authorised capital at the time of issue
of Notice, Advertisement or other official publication like
Business letter, Billhead or Letter paper of a company, so it
shall also mention its subscribed capital and paid-up capital in
the same manner as the authorised capital.
Presented By
CS Vijay Kumar Sharma
Disclosure of Director’s Interest
• Mandatory in first meeting in which the participating as
director.
• There after every first meeting of board in every financial
year.
• If there are any change in disclosure first meeting of board
after such change.
• In the meeting in which contract or arrangement discussing
director will disclose his interest and will not participates in
the meeting.
• If director interested after the contract will disclose first board
meeting after he become interested.
Presented By
CS Vijay Kumar Sharma
COMPANY FORMATION
Presented By
CS Vijay Kumar Sharma
Types of Companies
Private Company
Public Company
One Person Company
Presented By
CS Vijay Kumar Sharma
Key Features
• Maximum number of members in a private companies can be 200, except for
OPC.
• Object clause of memorandum are classified as:
Main object
Matter considered necessary in furtherance thereof(Ancillary Objects)
“Concept of other objects has been removed”
• Reservation of proposed name for the company is valid for 60 days from date
of application.
EARLIER
“it was 60 days from date of approval”
Presented By
CS Vijay Kumar Sharma
• Penalty will be imposed if wrong information is provided to
obtain name for the company.
• Proof of relation is required, If the name applied contains
name of some other person with whom promoter has a
close blood relation.
• NOC is required, If the name applied contains name of some
other person with whom promoter has no blood relation.
Presented By
CS Vijay Kumar Sharma
• Every subscriber of MOA and person named as
first director shall provide an affidavit in Form
INC-9 in respect to following points:
 That he is not convicted of any offence in promotion, formation or
management of the company.
 That he is not found guilty of any fraud in last 5 years.
 That all the documents filed for registration of company are
correct and complete to the best of his knowledge and belief.
Presented By
CS Vijay Kumar Sharma
• Signature of every subscriber of MOA shall be
witnessed.
• Duly filled FORM NO. INC-10 along with photograph
attested by Banker/Notary.
• It is mandatory to furnish the address & ID proof of the
person who has witnessed the signature.
Presented By
CS Vijay Kumar Sharma
•
Documents required by each subscriber of MOA of the company
Address proof- (Any One)
Bank Statement\Electricity Bill\Telephone Bill\Mobile Bill
(Proof should not be more than 2 months old)
Identity proof
Pan card (Mandatory); AND
any one of the following
Voter-ID\Passport\Driving License\UIN(Adhaar Card)
*For NRI & Foreign nationals, only passport is required & mandatory as well.
Presented By
CS Vijay Kumar Sharma
ONE PERSON COMPANY
Presented By
CS Vijay Kumar Sharma
•OPC shall be incorporated & operated by only one person who is resident
of India.
•OPC should have a nominee whose name shall be mentioned in
memorandum.
•One person cannot be a member or nominee of more than one OPC.
•No Minor shall become a member or nominee or hold shares in OPC.
•OPC shall not carry out any non-banking financial investment activities.
Presented By
CS Vijay Kumar Sharma
•OPC shall not be incorporated or converted into section 8 companies
•Wherever the name OPC is printed, affixed or engraved, the word
"One Person Company" shall be mentioned in the brackets, just below
the name.
•Member of OPC shall be considered as the first director of the
company.
•Company shall obtain consent from nominee in Form INC-3 and shall
file the same with ROC in relevant forms.
• OPC shall hold minimum two board meetings in every calendar year
Presented By
CS Vijay Kumar Sharma
• A private limited company can also be converted into OPC.
• OPC should be converted into a private or public company with-in
six months in case its
Paid-up share capital exceeds fifty lakh rupees
or
Average annual turnover exceeds two crore rupees
(In any other case it cannot be converted into private or public company
before completion of 2 years of its incorporation)
Presented By
CS Vijay Kumar Sharma
DORMANT COMPANY
Presented By
CS Vijay Kumar Sharma
Any company formed or registered to hold assets and intellectual
properties and there are no other transaction other than
“Significant Accounting Transaction” during
The last two (2) Financial year
Or
Since Incorporation
May make an Application to ROC in Form MSC-1 for obtaining the
status of Dormant Company
Presented By
CS Vijay Kumar Sharma
=============================================
“ Significant accounting transactions” means any
transaction as mentioned below
====================================================
•Payment of fees by a company to the Registrar.
•Payments made by company to fulfill
requirements of this act or any other law.
the
•Allotment of shares to fulfill the requirements of this
act.
•Payments for maintenance of company’s office and
records.
Presented By
CS Vijay Kumar Sharma
•
Company can make application in form no.Misc-1
•
Roc can suo moto also convert the company as dormant if
company has not filed the annual account since 2 or more
years.
•
Dormant company shall file required documents with the ROC
and pay prescribed annual fees.
•
If company not fulfill the conditions of this section registrar
will strike off the company
Presented By
CS Vijay Kumar Sharma
Documentation/ Procedure
CONVENE BOARD MEETING
Issue notice to call shareholder’s meeting for passing “Special Resolution” to apply
for the status of Dormant Company
CONVENE SHAREHOLDERS’S MEETING
Pass Necessary resolution
File Form MGT-14 with ROC
FILE FORM MSC-1 ALONG WITH THE GIVEN DOCUMENTS
Special Resolution
Passed by company
Statement of affairs
certified by Auditor of
the Company
Certificate from Auditor
of the company
List of shareholders &
directors of the
company
Presented By
CS Vijay Kumar Sharma
Provision related to Registered Office
•At the time of incorporation only address
correspondence till its registered office established.
of
•Company should have its registered office on or before
15th day of its incorporation.
•If not furnish verification of registered office or change
of its registered office Rs. 1000/- per day penalty
maximum upto 1 lacs.
Presented By
CS Vijay Kumar Sharma
PUBLIC
Conversion
PRIVATE
Presented By
CS Vijay Kumar Sharma
New Provision
EARLIER
Approval of Tribunal is required
Power was with Central government
Presented By
CS Vijay Kumar Sharma
FUND RAIS BY CO.
Presented By
CS Vijay Kumar Sharma
Sources
• Share Capital
– Equity share capital
– Preference share capital
• Debentures
• Borrowings
• Deposits
Provision related to share capital
• Complete prohibition on issuing of shares on discount.
• Application money can be receive only through banking
channel. Hence complete prohibition on receive of application
money through cash.
• In Private Placement Application size should not be less Rs.
20000 of face value.
• Provision of right issue are now applicable on private limited
company also
Presented By
CS Vijay Kumar Sharma
Provision related to share capital
• Separate bank account shall be maintained for receiving
application money.
• Application money received by the company for allotment of
shares cannot be utilized for before that allotment.
• Companies are bound to allot the shares within a period of 60
days from the date of application money received.
• If company fails to allot shares within prescribed time it
should be repaid within 15 days to the applicant.
• Non repayment within prescribed time & from the 76th day
whole application money will be treated as deposit
Presented By
CS Vijay Kumar Sharma
Return of allotment
• Return of allotment shall be filed with ROC within 30 days.
• List of allottee shall only be signed by the person who has
signed the form & not by any other person.
• Shares issued for consideration other than cash should be
executed as an agreement which is duly stamped.
Presented By
CS Vijay Kumar Sharma
TRANSFER OF SECURITIES
Presented By
CS Vijay Kumar Sharma
Provisions
• Instrument Of Transfer Of Securities Shall be in the Form No.
SH-4.
• Documents Related To Transfer Should Be Submitted to the
Company Within 60 Days From The Date Of Execution.
Presented By
CS Vijay Kumar Sharma
ACCEPTANCE OF DEPOSITS
BY
COMPANIES
Presented By
CS Vijay Kumar Sharma
Prohibition
• Complete prohibition on acceptance of deposits from public
by private limited companies.
• NBFC is not covered by the provisions relating to acceptance
of deposit.
• Company can accept deposit from its members but after
fulfilling certain criteria and taking shareholder’s approval.
Presented By
CS Vijay Kumar Sharma
Amount not treated as deposit
• Amount received from
– Any other Company
– Director
– Security form its employee (Maxi one year salary)
– Advance form its customer (up to 365 Days)
– Advance against property under an agreement
– Security deposit for performance of contract
Presented By
CS Vijay Kumar Sharma
Repayment of deposit
• All the companies who has pending deposit shall file the
return to ROC within 3 months.
• Repay the same within one year from the date of
commencement of this act.
Presented By
CS Vijay Kumar Sharma
Presented By
CS Vijay Kumar Sharma
Provisions
•
First AGM in 9 months from the end of financial year.
•
Business hours specified 9 am to 6 pm.
•
AGM cannot be held on national holiday.
•
Notice through electronic mode permitted.
•
Shorter notice required 95% shareholders consent.
Presented By
CS Vijay Kumar Sharma
Quorum of AGM
Private Company
2 (two) members
Public Company
5, if 1000 members
15, if 1000-5000
members
30, if members are
more than 5000
Presented By
CS Vijay Kumar Sharma
Restriction on Appointment of Proxy
• A person cannot be the proxy of more than 50 members.
• holding in the aggregate not more than ten percent of the
total share capital of the company carrying voting rights.
• Certain companies cannot appoint proxies.
Presented By
CS Vijay Kumar Sharma
ANNUAL RETURN
Presented By
CS Vijay Kumar Sharma
Provisions
• Annual return should be prepared up to the date of financial
year.
• Annual return should be certified by practicing company
secretary in specified companies.
• Extract of annual return shall be part of board report.
• All the business activities which contribute 10% or more of
the total turnover shall be stated in annual return.
• If wrong certification by company secretary, he/she WILL be
liable to the fine of Rs. 50000/- to Rs.500000/-
Presented By
CS Vijay Kumar Sharma
COMPANY’S
MANAGEMENT
DIRECTORS
Directorship
A person is allowed to HOLD
directorship in 20 companies
Out of which not more than 10 could be
public companies included in private
companies.
Presented By
CS Vijay Kumar Sharma
Provisions
• Minimum number of Directors:
Public company – 3
Private Company – 2
One person company – 1
• A Company can have maximum 15 Directors.
• There shall be minimum one Woman Director in every listed
company and public company with minimum paid-up capital of
Rs.100 crores or minimum turnover of Rs.300 crores.
Presented By
CS Vijay Kumar Sharma
• Every company shall have at least one director who stayed in
India for 182 days or more in previous calendar year.
• Consent mandatory for every Director before appointment in
Form DIR-2;
• Form DIR-12 to be filed within 30 days for appointment of
Directors.
• Independent director & non-executive directors are liable for
those acts which have occurred in their knowledge.
Presented By
CS Vijay Kumar Sharma
Appointment of director other than
retiring director
• Provision is applicable on all companies.
• The person who is proposing the candidate for director
post shall deposit amount of rupees one lakh with the
company.
• Amount deposited is refundable if candidate gets more
than 25% of total casted votes.
Presented By
CS Vijay Kumar Sharma
Disqualifications of Directors
• Convicted of any offence & sentenced to imprisonment for 7
years or more.
• Convicted of any offence dealing with related party
transactions during last 5 years.
• If the person is already a director of defaulting companies
(including private company).
• Has Not Obtained Din No.
Presented By
CS Vijay Kumar Sharma
Appointment of Alternate director
• Appointment of alternate director can be held in place of
director who is out of country for more than 3 months.
• If alternate director is appointed in place of independent
director then proposed alternate director shall also qualify to
be appointed as an independent director.
Presented By
CS Vijay Kumar Sharma
Independent Director
• Concept
Of
Independent
Director
Has
Been
introduced
First Time In Company Law.
• All Listed Companies Shall Have At least One-Third Of The
Board As Independent Director.
• They Shall Not Be Entitled To Any Remuneration Other Than
Sitting Fees.
• They shall not be entitled to any stock option.
Presented By
CS Vijay Kumar Sharma
VACATION OF THE OFFICE
Presented By
CS Vijay Kumar Sharma
Vacation of the Office of
Director
Automatic
Vacation
Resignation
By Director
Presented By
CS Vijay Kumar Sharma
Automatic Vacation
• If the Director has not ATTENDED any meeting in last 12 months.
• Enter in contract in which he is directly or indirectly INTERESTED .
• Failed to DISCLOSE HIS INTEREST in contract.
• If all director vacate their office, promoter shall appoint the
Directors or in absence of Promoter central govt. Shall appoint
required number or director’s.
Presented By
CS Vijay Kumar Sharma
Resignation
• Director will submit WRITTEN RESIGNATION to the company
and to the board.
• Will take effect on the date given in resignation, if date not
given from the date on which resign given by director.
• Company will also laid the resignation in next general meeting
with reason.
Presented By
CS Vijay Kumar Sharma
• Director also sent a copy to the roc within 30 days with
reason.
• If all director vacate their office, promoter shall appoint the
Directors or in absence of Promoter central govt. Shall appoint
required number or director’s.
Presented By
CS Vijay Kumar Sharma
REPORTS
Board
OF
Director’s
Presented By
CS Vijay Kumar Sharma
Board Report
Board report shall include the following details:
– Extract of annual return.
– Number of meetings of board in the year.
– Company policy on appointment of director in his secretarial audit
report.
– Comment on adverse remark by company secretary Particulars of loan,
guarantees or investments.
– Particulars of contract or arrangements with related parties.
Presented By
CS Vijay Kumar Sharma
Notice of Board Meeting
• At least 7 days prior notice shall be given.
• Notice shall be given at the address of the director registered
with the company.
• Notice can be given through electronic means.
• If shorter notice is to be given, then presence of one
independent director is must.
Presented By
CS Vijay Kumar Sharma
Frequency Of Board Meeting
OPC WITH ONE
DIRECTOR
OPC/SMALL
COMPANIES/DORMANT
COMPANIES
OTHER
COMPANIES
MAX. 120 DAYS
BETWEEN 2
CONSEQUTIVE
MEETINGS
NOT APPLICABLE
EACH HALF OF A CALENDAR YEAR
AND
GAP BETWEEN TWO MEETING SHOULD NOT BE
LESS THAN 90 DAYS.
Presented By
CS Vijay Kumar Sharma
Disclosure of Director’s Interest
• Mandatory in first meeting in which the participating as
director.
• There after every first meeting of board in every financial
year.
• If there are any change in disclosure first meeting of board
after such change.
• In the meeting in which contract or arrangement discussing
director will disclose his interest and will not participates in
the meeting.
• If director interested after the contract will disclose first board
meeting after he become interested.
Presented By
CS Vijay Kumar Sharma
LOAN TO DIRECTORS
•
Total prohibition on making loan to directors.
•
Also prohibit to loan to other person to whom director are
interested.
•
Loan represented by Book debts will also treated as loan.
Presented By
CS Vijay Kumar Sharma
•
Can give loan to managing director and whole time director
 But as part of condition of service to all its employees.
 Pursuant to any scheme approved by the member by a
special resolution
Presented By
CS Vijay Kumar Sharma
OTHER AMENDMENTS
Presented By
CS Vijay Kumar Sharma
• Digital signature Certificate (DSC) is now mandatory for all the
persons applying for DIN.
• Books and accounts may be kept in electronic form.
• All documents or CONTRACT can only be signed by KMP or by
the person authorized by the Board on their behalf.
• Contract or arrangement in respect to transfer of securities
shall be enforceable as a valid contract.
• Foreign members can file an appeal.
• If number of director in a company become less that the
minimum quorum required remaining director can do work
for appointment of director
AUDITOR
Presented By
CS Vijay Kumar Sharma
Eligibility
• Person shall be a Chartered Accountant
• In case of Firm or LLP if, majority of partners practicing in
India are Qualified i.e. CA
• Only CA can sign on behalf of firm or LLP
Presented By
CS Vijay Kumar Sharma
Non eligibility
• Body Corporate other than LLP
• An officer or employee of the company
• Partner or employee of an officer or employee of the Co
• A person or his relative or partner:  Holding security or interest in Co, Holding, Subsidiary or associate Co
 Relative can hold upto 1 Lacs (Corrective steps within 60 days)
Presented By
CS Vijay Kumar Sharma
 Indebted more than 5 Lacs
 Given guarantee or provided security more than 1 Lacs
• Who whether directly or indirectly has business relationship
Except:  In the nature of professional services
 In Ordinary course of business as arms length price in the
industries of telecommunication , airlines , hospitals ,hotels ,
and same kind of industries.
Presented By
CS Vijay Kumar Sharma
• Whose relative is director or is KMP in the company
• A person who is in full time employment
• Holding appointment as auditor of more than 20 Companies
• Convicted by Court and 10 years have not elapsed.
• Where incurs any disqualifications shall vacate office and will
be casual vacancy
Presented By
CS Vijay Kumar Sharma
Appointment
• First Auditor
Board of Director shall appoint 1st Auditor within 30 days, if failed do
so then in EGM within 90 days to hold office till the conclusion
of 1st AGM
Every Co to appoint auditor to hold office from conclusion of AGM to
conclusion of 6th AGM
Ratification in every AGM.
Such appointment needs to be made within 30th September, 2014
Presented By
CS Vijay Kumar Sharma
• Written consent of Auditor & a certificate that he is eligible to
act as Auditor is required.
•
Company shall inform auditor about his appointment within
15 Days and file notice of appointment to ROC (form ADT-1)Not required for First Auditor
Presented By
CS Vijay Kumar Sharma
Certificate by Auditor
Certificate is to be given by Auditor that he:
 Is not disqualified for appointment
 Is as per terms provided in the Act
 Is within the limits laid down
 List of proceedings against the auditor pending in respect of
professional misconduct as disclosed is true and correct.
Presented By
CS Vijay Kumar Sharma
Rotation
• No listed Company or such class or classes of companies as
prescribed shall appoint or re-appoint:  An Individual for one term of 5 consecutive years
 An Audit Firm for more than 2 terms of 5 consecutive years.
• Auditor who has completed his term cannot be re-appointed for 5
years.
Presented By
CS Vijay Kumar Sharma
• Audit firm having common partner cannot be appointed after
tenure of other firm has expired
• The company existing on 31st March 2014 have to comply the
requirement of rotation within 3 years from 1st April 2014
• That audit to be conducted by more than one auditor.
Presented By
CS Vijay Kumar Sharma
Applicability of Rotation
• All listed Companies
• Class of Companies
 All unlisted public companies having paid up share capital10 Crore or
more
 All Pvt Ltd Companies having paid up share capital 20 Crore or more
 All companies having paid up share capital below above but having
public borrowings from FI (S. 2(39)), Banks, or public deposits 50 Crore
or more
Presented By
CS Vijay Kumar Sharma
Non Applicability of Rotation
• One person company
• Small companies
Other than Public Co
Paid up Capital 50 Lacs or more OR
Turnover as per last P&L a/c does not exceed 2 Crore
Not to apply to holding or subsidiary Co
Sec 8 Company or under Special Act
Presented By
CS Vijay Kumar Sharma
Appointment in Govt. Co.
• First Auditor to be appointed by CAG within 60 days of
incorporation.
• In case of failure by CAG, by BOD in next 30 days
• In case of failure of BOD, in EGM within 60 days.
• Other than 1st Auditor, by CAG within 180 days of from
beginning of every Financial Year
Presented By
CS Vijay Kumar Sharma
Casual Vacancy
• Other Than Govt. Co, if casual vacancy arise not by reason of
Resignation, then appointment by BOD within 30 Days
• In case of Resignation- appointment of BOD shall be approved
by shareholders in the GM within 3 months of the BOD
meeting
• In Govt. Co, by CAG within 30 days. In case of failure by CAG,
by BOD within next 30 days.
Presented By
CS Vijay Kumar Sharma
Audit Committee
Where Audit Committee is required to be constituted the
appointment or re-appointment will be made taking into
account the recommendation of the Committee.
Presented By
CS Vijay Kumar Sharma
Removal of Auditor
• By a Special Resolution after obtaining previous approval of the CG
in the manner prescribed
“Auditor to be given reasonable opportunity of being heard”
• Form ADT-2 to be filed with CG within 30 days of BOD meeting
• Meeting of shareholders to be conducted within 60 days of receipt
of CG approval
Presented By
CS Vijay Kumar Sharma
Removal at AGM
• Except for the change of auditors due to the mandatory
rotation, any other change at the AGM requires special notice
for the resolution
• Special notice copy shall be send to the retiring auditor
• The retiring auditor can make a written representation to be
circulated & read in AGM
Presented By
CS Vijay Kumar Sharma
Resignation by Auditor
• Auditor to file statement (ADT-3) with Company and ROC and
CAG (if applicable), within 30 days of resignation indicating
reasons and relevant facts to resignation.
• Non compliance may be punishable with the fine of not less
than 50 Thousands and may extend to 5 Lacs
Presented By
CS Vijay Kumar Sharma
Remuneration
• For first Auditor, remuneration is to be fixed by BOD
• For Subsequent Auditor, to be fixed in the GM or in such
manner as may be determined therein
Presented By
CS Vijay Kumar Sharma
Power and Duties
Addition in Report: Whether the Co has adequate internal financial controls systems
in place and operating effectiveness of such controls
 Observations of Auditor on financial transactions having adverse
effect on functioning of Company
 No requirement to use thick type or italics for adverse
comments
Presented By
CS Vijay Kumar Sharma
Other Matters in Report
To include views & comments on
 whether Co has disclosed the impact, of pending litigations on
its financial position in Financial Statement
 whether Co has made provision, as required under any law or
Accounting Standard, for material foreseeable losses, if any, on
long term contracts including derivative contracts;
 Any delay in transferring amounts to the Investor Education and
Protection Fund.
Presented By
CS Vijay Kumar Sharma
Reporting of Fraud
• If an auditor 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 Co, he shall immediately report
the matter to the CG within 60 days.
Presented By
CS Vijay Kumar Sharma
Procedure
• Report on letter head in ADT-4 to secretary MOC in sealed cover by
Regd AD
• Report to CG immediately but not later than 60 days of his
knowledge
• Report to BOD or AC for their reply within 45 days
• On Receipt of reply forward to CG within 15 days of receipts his
report + reply + his comments on reply
Presented By
CS Vijay Kumar Sharma
Auditor prohibited to render services
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accounting & book keeping services;
internal audit;
design & implementation of any financial information system;
actuarial services;
investment advisory services;
investment banking services;
rendering of outsourced financial services;
management services; and
any other kind of services as may be prescribed:
Presented By
CS Vijay Kumar Sharma
Auditor & AGM
• Adverse comments of report to be read before shareholders
in the meeting
• Auditor shall unless otherwise exempted by the Co attend
AGM himself or through authorised representative (who shall
be qualified to be an auditor)
• Shall have right to be heard on business which concerns him
as auditor
Presented By
CS Vijay Kumar Sharma
Contraventions
• On the part of Company- Not less than 25000/- extend to 5
lacs, imprisonment of year or both
• On the part of Auditor- Not less than 25000/- extend to 5 lacs
• If Auditor has contravened knowingly or willfully with the
intention to deceive Co, shareholders, Creditors or tax
authorities- Imprisonment of 0ne year with fine of 1 Lac to 25
Lacs
Presented By
CS Vijay Kumar Sharma
Presented By
CS Vijay Kumar Sharma
Provisions
•Every company having net worth of rupees 500 crore or more,
or turnover o f rupees 1000 crore or more or a net profit of
rupees 5 crore or more during any financial year shall
constitute a CSR committee.
•Board consisting of three or more directors, out of which at
least one director shall be an independent director.
•The board of every company shall ensure that in every financial
year company spends at least 2% of the average net profits made
during the three immediately preceding financial years in pursuance
of its CSR policy.
Presented By
CS Vijay Kumar Sharma
For more detail
Please contact:CS Vijay KUMAR SHARMA
COMPANY SECRETARY
Mobile no- +919910792221
Email id – [email protected]
[email protected]