Transcript New Concepts, Initiatives and Opportunities in the

Presentation
By
CA Anil Sharma
CA, 2013 vs. CA, 1956
– 29 chapters against 13 in CA,1956
– 470 sections against 658 sections in CA,1956
– 7 schedules against 15 in CA, 1956
Friday, July 17, 2015
CA, 2013 vs. CA, 1956
– Substantial part of law shall be in the form of rules
to be prescribed. More than 400 Rules are likely.
– Applicability to the entire nation, no regional
exemptions.
– Very few exemptions to private limited companies
as compared to under CA,1956.
– Few transition provisions.
– Very steep penalties and very harsh prosecution
provisions.
– Very strict regime for company auditors.
Friday, July 17, 2015
Accounts
• Chapter IX
• Sections 128 to 138
Friday, July 17, 2015
Section 128- Books of Accounts to be
kept by the company
• Prepare and keep at its registered office:
–
–
–
–
–
Books of accounts,
Other relevant books and papers and
Financial statement
For every financial year
To be kept on accrual basis and according to the
Double Entry system of accounting
– Which give a true and fair view of the state of affairs
of the company including its branch office(s)
– May keep in electronic mode in such manner as may
be prescribed.
Friday, July 17, 2015
Books of Accounts
• Section 2(13) Books of accounts include
records maintained in respect of:
– All money received and expended
– All sales and purchases of goods and services
– The assets and liabilities and
– The items of cost as may be prescribed under
section 148.
Friday, July 17, 2015
Book and Paper
• Section 2(12) - Book and Paper include books
of accounts, deeds, vouchers, writings,
documents, minutes and registers maintained
on paper or in electronics mode.
Friday, July 17, 2015
Financial Statement
• Section 2(40) defines ‘Financial statement’ to include:
–
–
–
–
–
Balance sheet
Profit and loss Account
Cash Flow Statement
Statement of Changes in Equity , if applicable
Explanatory Notes
• Cash flow statement not applicable to :
– OPC,
– small company and
– dormant company.
Friday, July 17, 2015
Financial Year
• Section 2(41) – means the period ending on the
31st March every year
–Exception could be made by a Tribunal if a company
being holding or subsidiary of a company
incorporated abroad and is required to maintain
accounts for a different financial year outside India
• In the first year of incorporation:
–If incorporated before 1st Jan, then period ending 31st
March of the same financial year
–otherwise, period ending 31st March of the next
financial year.
• Existing companies to align within two years.
Friday, July 17, 2015
Draft Rules(9.1)- Electronic mode of
maintaining books of account
Conditions:
• To remain accessible in India so as to be usable for
subsequent reference.
• To be retained in the same format in which originally
generated.
• To remain complete and unaltered.
• To be capable of being displayed in a legible form.
• To have proper system for storage, retrieval, display or
printout of electronic records.
• Not to dispose off or rendered unusable, unless
permitted by law.
Friday, July 17, 2015
Sec 129- financial Statement
• It shall give true and fair view of the state of affairs of
the company,
• Shall comply with the accounting standards notified
under section 133 and
• Shall be in the form in Schedule III.
• At every AGM of a company, the BOD shall lay before
such meeting Financial statements for the financial
year.
• Where a company has one or more subsidiaries, it
shall, in addition to stand alone financial statement
shall also prepare a CFS of the co and all its subsidiaries
in the same form and manner as that of its own.
Friday, July 17, 2015
CFS
• Sub-section (3) of section 129 provides for
preparation of CFS by a company having one
or more subsidiaries and lying the same in
AGM
• ‘Subsidiary’ for the purpose of this clause
includes ‘ associates’ and ‘joint venture’.
Friday, July 17, 2015
Subsidiary company
Sec 2 (87) “subsidiary company” in relation to any other company means a company in
which the holding company—
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total share capital
either at its own or together with one or more of its subsidiary companies.
Provided that such class or classes of holding companies as may be prescribed shall not
have layers of subsidiaries beyond such numbers as may be prescribed.
Explanation.—For the purposes of this clause,—
• (a) a company shall be deemed to be a subsidiary company of the holding company
even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary
company of the holding company;
• (b) the composition of a company’s Board of Directors shall be deemed to be
controlled by another company if that other company by exercise of some power
exercisable by it at its discretion can appoint or remove all or a majority of the
directors;
• (c) the expression “company” includes any body corporate;
• (d) “layer” in relation to a holding company means its subsidiary or subsidiaries
Friday, July 17, 2015
Associate company
• Sec 2(6) “associate company”, in relation to
another company, means a company in which
that other company has a significant influence,
but which is not a subsidiary company of the
company having such influence and includes a
joint venture company.
• Explanation.—For the purposes of this clause,
“significant influence” means control of
– at least twenty per cent. of total share capital, or
– business decisions under an agreement;
Friday, July 17, 2015
CFS
• Rules to be provided for consolidation.
• Draft Rule (9.4): CFS shall be made in
accordance with the accounting standards and
in the manner and format as specified under
Schedule III to the Act).
Friday, July 17, 2015
CFS
• CFS in addition to stand alone financial
statement.
• Preparation and adoption of financial
statements of a holding co shall apply mutatis
mutandis to CFS.
• First proviso to Section 129(3)– A statement containing the salient features of the
financial statement of subsidiaries to be attached
to the financial statement of the holding company.
(Draft form 9.1 as per Draft Rules 9.3)
Friday, July 17, 2015
Revision of accounts
• Distinction between reopen and recast and
revision
• Section 130- reopen and recast ( on judicial
directions)– can be done only with approval of Tribunal and no
objections from the Central Government, Income Tax
Authorities, SEBI or any other regulator/authority
– Allowed only if it is established that earlier accounts
were prepared fraudulently or the affairs were
mismanaged during the period casting doubt on the
reliability of financial statement.
Friday, July 17, 2015
Revision of accounts
•
Section 131- revision ( voluntarily by the company with the
approval of the Tribunal)
–
–
•
For the three preceding financial years
If the Board feels that financial statements are not prepared
according to Section 129 ( accounting standards, format)
Procedure (Draft Rules 9.8)
–
–
–
–
–
–
While granting approval , Tribunal to issue notice and hear the
auditor of the original financial statement, if the present auditor is
different.
After approval a GM may be called . Notice to include reasons for
change, copy of approval and to accompany revised statement of
directors and auditors.
Notice to be publish in newspaper
Auditor to ensure every shareholder is informed and
After adoption to be filed with Registrar by the company.
To revise all subsequent accounts, if relevant period is in between.
Friday, July 17, 2015
National Financial Reporting Authority (NFRA)
•Section 132- Body with advisory role having
quasi-judicial powers for ensuring compliance
•make recommendations to the Central
Government on formulation and laying down
of accounting and auditing policies and
standards for adoption by companies and
their auditors and
•monitor and enforce the compliance with
accounting standards and auditing standards
by companies and their auditors.
Friday, July 17, 2015
Sec 134(3)- Board Report
Report to include:
• Extract of the annual return
• Number of Board meetings
• Directors Responsibility Statement
• Statement of Declaration by Independent directors
• Explanations or comments on every qualification, adverse remarks or disclaimer by
the auditor
• Particulars of loans, guarantees or investment under section 186
• Particulars of related party transactions u/s 188
• State of company’s affair
• Proposed dividend and transfer to reserves
• Material changes and commitments affecting the financial position of the
company
• CSR Policy, Risk Management Policy
• Details on conservation of energy, technology absorption, forex earning and outgo
• Such other matters as may be prescribed: ( Draft Rules 9.10)
–
–
–
–
–
Changes in the nature of business
Details of directs ,KMPs appointed or resigned
Changes in subsidiaries, associates or JVs
Details of deposits
Significant orders passed by the regulator impacting going concern status
Friday, July 17, 2015
CSR
• Section135 read with Schedule VII
– applicable to a co with capital of Rs. 500 Crores or more
or
– Turnover of Rs. 1000 Crores or more or
– Net profit of Rs. 5 Crores or more during any financial year
• To spend in every financial year at least 2% of the
average net profits of the co during the three
immediately preceding financial years
• Local area to be given preference, activities as
mentioned in Schedule VII
• To constitute a CSR Committee to formulate policy and
monitor its implementation.
Friday, July 17, 2015
CSR
• 27th Feb,2014- Section 135 made applicable w.e.f.
1.4.2014.
• 27th Feb, 2014- Companies ( Corporate Social
Responsibility Policy) Rules, 2014 notified.
• 27th Feb,2014- Schedule VII modified.
Friday, July 17, 2015
CSR Policy Rules, 2014
• To be applicable from 1.4.2014.
• Guiding Principle: Use CSR to integrate economic, environmental
and social objectives with the company’s operations and growth.
• CSR is not charity or mere donations. CSR activities to be generally
conducted as projects or programme.
• Net Profit not to include profits arising from branched outside India
and dividend from other companies to which section 135 apply.
• Company may set up an organisation of its own or may
conduct/implement through organisations not owned by it.
• Surplus arising out of CSR activities not to be part of business
profits
• Format for annual reporting prescribed.
Friday, July 17, 2015
Schedule- VII
• Eight projects/programs to be considered as
CSR activities.
• Can also make contributions to:
– Prime minister Relief fund
– Technology Incubators at academic institutions
Friday, July 17, 2015
Sec 136- Copies of FS to members
• FS including CFS, if any, auditors report and other
documents required to be part of the Financial
statements.
• Draft Rules 9.13: In case of listed companies or
such public company having net worth of more
than one Crore Rupees or turnover of more than
10 Crores Rupees, the financial statement may be
sent by:
– Electronic mode to those who agreed to received
– To others physical copies by any recognised mode of
delivery
Friday, July 17, 2015
Internal Audit
• Sec 138-Such class of companies as may be
prescribed shall be required to appoint an
internal auditor to conduct internal audit of
the functions and activities of the company.
• The Central Govt. to prescribe by Rules, the
manner and intervals in which the internal
audit shall be conducted and reported to the
Board.
Friday, July 17, 2015
Internal Audit
• Such class or classes of companies as may be prescribed:
Draft Rule [9.15 (1)]:
• (a) every listed company
• (b) every public company having paid up share capital of Rs. 10
Crores or more;
• (c) every other public company which has any outstanding
loans or borrowings from banks or public financial institutions
exceeding Rs. 25 Crore or which has accepted deposits of Rs.
25 Crores rupees or more at any point of time during the last
financial year.
• No mandatory internal audit for Private Companies
• No criteria on the basis of turnover
Workshop on Companies Act, 2013
27
Internal Audit Plan
• The Central Government may, by rules, prescribe the
manner and the intervals in which the internal audit shall be
conducted and reported to the Board:
• Draft Rule 9.15 (2):
The Audit Committee of the company or the Board shall, in
consultation with the Internal Auditor, formulate the:
- scope,
- functioning,
- periodicity and
- methodology for conducting the internal audit.
Workshop on Companies Act, 2013
28
THANK YOU
Contact me at:
9811320203
[email protected]
Friday, July 17, 2015