Transcript CRUCIAL ISSUES RELATING TO NEW COMPANY BILL 2011

COMPANIES ACT, 2013
Important sections applicable
w.e.f. 12.09.2013
CA. Arun Saxena
Saxena & Saxena
Chartered Accountants
811, Ansal Bhawan
16, Kasturba Gandhi Marg,
New Delhi – 110 001.
Mob.: 9810037364
E-mail : [email protected]
Associate Company [Section 2(6)]
2
Associate Company means the company in which other
company has significant influence:
which is not a subsidiary company but includes joint venture
companies.
Significant influence means control of atleast 20% of total
capital or of business decision under the agreement.
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Experts [Section 2(38)]
3
Experts includes engineers, valuers, chartered accountants,
company secretary, cost accountants
Or
Any other person who has the power or authority to issue the
certificate under any law.
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Interested Directors [Section 2(49)]
4
Interested directors means the director who is in
any way whether by himself or through any of his
relative, or body corporate, other association of
individual in which he or his relative are partners,
director or the member interested in any contract
or arrangement or proposed contract or
arrangement entered into or be entered into by or
on behalf of the company.
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Key Managerial Persons
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KMP means:
 CEO
 MD
 CS
 whole time Director
 Chief Financial Officer or
 any other officer as may be prescribed.
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Networth [Section 2(57)]
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Networth means the aggregate value of the
 Paid up capital and
 All reserves created out of profit and
 Security Premium account
 Reduced by aggregate value of the accumulated
loss,
deferred
expenditure,
miscellaneous
expenditure not written off excluding reserve
created out of revaluation associate or write back
of depreciation.
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Officer [Section 2(59)]
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Officer means any director, manager, KMP or any
other person in accordance with whose direction
or introduction, the Board of Directors are
accustomed to act.
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Officer In Default [Section 2(60)]
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Officer in default:
 whole time director
 key managerial person
 where no KMP then director as specified by the board and
who has given his consent in writing to the board to such
specification.
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Officer In Default [Section 2(60)]
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


All director if no director is so specified.
Any person who , under the immediate authority of
the Board or any KMP is charged with any
responsibility including maintaining filing or
department of accounts, records etc.
Any person in accordance with whose advice or
direction or instructions the Board of Directors are
accustomed to act. However, the advice to board
in professional capacity shall not cover under this
provision.
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Officer In Default [Section 2(60)]
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

Every director, in respect of the contravention of
provision of act who is aware of such
contravention by virtue of receipt by him by any
proceeding of board or participation in such
proceedings without objecting the same.
Where contravention has taken place with his
consent or connivance.
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Private Limited Company (Section 2(68))
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Private company means a company having a minimum paid
up share capital of Rs.1,00,000/- or such higher paid up
share capital as may be prescribed, and which by its articles:
i.
Restricts the right to transfer its shares;
ii)
Except in case of one person company, limits the number
of its members to 200.
iii)
Prohibits any invitation to the public to subscribe for any
securities.
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Promoter Section 2(69)
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Promoter means a person –
 who has been named as such in a prospectus or is
identified by the company in the annual return referred to in
section 92; or
 who has control over the affairs of the company, directly or
indirectly whether as a shareholder, director or otherwise;
or
 in accordance with whose advice, directions or instructions
the Board of Directors of the company is accustomed to
act.
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Related Party [2(76)]
13
Related party with reference to company means:

Director or his relative

KMP or his relative

Firm in which director, manager or his relative
are partners

Private company in which director, manager is
member or director

Public company in which director, manager are
director or holds alongwith relative more than
2% of paid up capital.
Related Party [2(76)]
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



Body corporate, whose Board of Director accustomed
to act with the advice of directions of such director
Any person on whose advice the director or manager is
accustomed to act,
except direction are in his
professional capacity.
Any company which is:
 Holding, subsidiary or an associate company of such
company. Or,
 A subsidiary or holding company to which it is also a
subsidiary company
Such other party as may be prescribed.
Relative [Section 2(77)]
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


Members of HUF
Husband & wife
Related in manner as may be prescribed
Rule 1.4:
1
Spouse
2
Father (including step father)
3
Father’s father
4
Father’s mother
5
Mother (including step mother)
6
Mother’s mother
7
Mother’s father
8
Son (including step son)
9
Son’s wife
10
Son’s son
11 Son’s daughter
12
Daughter (including step daughter)
13 Daughter’s husband
14
Brother (including step brother)
15 Sister (including step sister)
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Turnover [2(91)]
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
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 a financial year
Subsidiary Company not to hold shares in its holding
company (Section 19)
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


No company shall hold any shares in its
holding company and no holding company
shall allot or transfer its shares to any of its
subsidiary companies.
Such allotment or transfer of shares shall be
void.
Exception – Shares held as trustee or legal
representative
Criminal
Liability
for
Prospectus (Section 34)
misstatements
in
18
Where the prospectus issued, circulated or
distributed includes any statement which is untrue
or mis-leading
and
Where any inclusion or omission of any matter is
likely to mislead,
every person, who authorises the issue of such
prospectus, shall be liable under Section 447.

Civil Liability for misstatements in Prospectus (Section 35)
19
Where a person has subscribed for security of a company acting
on any statement included in any manner in the prospectus
which is mis-leading and such person has sustained any loss or
damage.
Company and or any person who is director, authorize himself to
be named in the prospectus as the Director, as the Promoter, as
an expert, to be liable for compensation to every such person
who sustain such loss.
However, no person shall be liable if he satisfied that he has
withdrawn his consent before the issue of prospects and
prospects is issued without his consent.
Punishment for Fraudently inducing persons
to Invest Money (Section 36)
20
Any person who, either knowingly or recklessly makes any

statement,

promise or

forecast
which is false, deceptive or misleading, or deliberately conceals
any material facts, to induce another person to enter into
(a) any agreement for acquiring, disposing of, subscribing for, or
underwriting securities; or
(b) any agreement with object to secure any profit from the yield of
securities or fluctuations in the value of securities; or
(c) any agreement for, or with a view to obtaining credit facilities
from any bank or financial institution,
shall be liable for action u/s 447

Allotment of Securities by Company (Minimum
Subscription (Section 39)
21





Scope is widened for all types of securities.
No allotment to the public shall be made unless
minimum subscription has been received.
Amount on application shall not be less than 5 % of
nominal amount.
The amount of minimum subscription shall be
received in 30 days (against 120 days as per
companies act, 1956).
If not received, all money has to be refunded within
such time and manner prescribed.
Punishment for Personation of Shareholder
(Section 57)
22

If any person deceitfully personates as an owner
of any security,

imprisonment for 1 to three yrs and

with fine 1 to 5 lakh.
Refusal of Registration and appeal against
refusal (Section 58)
23



Company to register the transfer or transmission
within 30 days give notice for refusal.
The appeal to Tribunal within 30 days from the
receipt of notice or in case no notice is received
then 60 days from the date on which documents
were submitted to company.
In case of limited companies, appeal to tribunal
within 90 days when there is no notice.
Rectification of Register of Members
(Section 59)
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




Section covers all securities.
Application to tribunal.
For rectification of register of foreign members or debenture
holders, appeal can be made by aggrieved party to the
competent court outside India, as approved by Central
Government.
Rectification within 10 days from order of tribunal.
Voting rights shall continue unless specified by Tribunal.
Penalty
 Co.
– Rs. 1 Lakh to 5 Lakh
 Officer – Imp upto 1 year
Fine Rs. 1 Lakh to 3 Lakh
Prohibition for Buy Back in certain circumstances
(Section 70)
25

Now a Company can buyback even if it had
any time defaulted in repayment of deposit or
interest payable, provided that the default
must have been remedied and a period of 3
year s must have been lapsed.
Punishment for Contravention ( Registraton of
Charges) (Section 86)
26

If any Company contravenes any provision relating to
Registration of Charges, punishment has been increased.

Co.
Rs. 1lakh to 10 lakh

Officer
Imp. Upto 6 months
Fine. Rs. 25000 to Rs 100 000
Statement to be annexed with Notice (Section
102)
27




The explanatory statement should specify the
nature of concern or interest in respect of
Every director or manager
Every other Key Managerial Personnel, and
Relatives of persons mentioned above
Quorum for Meeting (Section 103)
28

In case of Public Company :
 No.
of members not more than 1000
 No. of members 1000 to 5000
 No. of members more than 5000

In case of Private Company :
2
members personally present
: 5
: 15
: 30
Proxies (Section 105)
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



One person cannot represent as proxy for more than
50 members or more than 1/10 of voting power.
Proxy in section 8 companies.
The Central Government is now vested with the
powers to prescribe a class or classes of companies
whose members shall not be entitled to appoint
another person as proxy.
Now a member of private company can appoint more
than one proxy to attend on the same occasion.
Appointment of Additional Director, Alternate
Director and Nominee Director (Section 161)
30


Section clearly states that Additional Director
shall hold office up to
Annual General
Meeting or the last due date of Annual
General Meeting.
Nominee Director
Loan to Directors (Section 185)
31
No company shall directly or indirectly provide any loan
(including in nature of book debts) or give guarantee for
providing security in connection with any loan to
Any Director or
 Any other person in which Director is interested.

Loan to Directors (Section 185)
32
To any other person means:
 Any director of lending company or
 Director of holding company or
 any partner or relative of such director.
 Any firm in which he or she or his/ her relative is
partner.
 Any private company in which such director is
Director/Member
 Anybody corporate in which not < 25% of voting power
is exercising by such director or by two or more such
director
 Any
body corporate, Board of Directors are
accustomed to act with the director on such direction.
Loan to Directors (Section 185)
33
EXCEPTIONS:
Company can provide the same to MD OR WTD, if it is a
part of condition of service extended by company to its
employees.
Or
Pursuant to any scheme approved by Special Resolution.
Loan to Directors (Section 185)
34

2.
In case of finance companies:
 Loans

can be provided not lesser than bank rate.
PANALTIES:
 Company
 Director or any other
person to whom loan
given or security
provided
: Rs. 5 lakh to Rs.25 lakh
: Imprisonment upto 6
months
Prohibition on forwarding dealing in security by Director or
Key Managerial Person (Section 194)
35



No Director or KMP shall buy in company
holding, subsidiary or associate company
A right to call for delivery or right to make delivery
at specified price or time of specified number of
shares or amount of debentures, OR
a right, he may elect, to call for delivery or to
make of delivery at specified price, time and
number of shares or amount of debentures.
Prohibition on forwarding dealing in security by Director or
Key Managerial Person (Section 194)
36



Penalty:
imprisonment upto 2 years and fine
from Rs.1,00,000/- to Rs.5,00,000/- or both. And
If Director or KMP acquires any securities then
they shall be liable to surrender to the company.
And
Such transfers shall not be registered in the
name of transferees and will remain in the name
of transferors.
FRAUD (SECTION 447)
37
Explanation to Section 447 defines fraud which means:
 Any act or omission,
 Concealment of fact or
 Abuse of position of any person (by him or herself or by
any other person in connivance in any manner).
 With the intent to deceive
 to gain undue advantage to injure the interest of
company, or its shareholders or creditors or any other
person (whether or not there is any wrongful gain or
loss).
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FRAUD (SECTION 447)
38

Fraud which materially affect the company


Fraud which are happening frequently
Amount of fraud not < 5% of net profit or < 2% of turnover.
Section 143(12) :
Auditor has to report above fraud to the C.G. (within 30
days).
In other cases fraud will be reported to Audit Committee or
Board.


Punishment for not reporting fraud:
 Fine Rs. 1lakh to Rs 25 lakh.
Punishment for False Statement ( Section 448)
39

Person is liable u/s 447
Punishment for False Evidence( Section 449)

Imprisonment for term 3 years to 7 years and fine
which may extend to Rs. 10 Lacs.
Punishment where no
provided (section 450)
specific
punishment
is
40
Punishment has been increased.


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 ten thousand rupees, and where the
contravention is continuing one, with a further fine which
may extend to one thousand rupees for every day after the
first during which the contravention continues.
Punishment in case of repeated Default
(Section 451)
41

Punishable with fine or imprisonment

Repeated within 3 years

Double Penalty
Punishment for wrongful withholding of property
(Section 452)
42

Section specifically provides that property includes cash.
Punishment has been increased - 1 Lac which
further extend to Rs. 5 Lacs .

may
Punishment for improper use of “Limited” or
“Private Limited”. (Section 453)
Punishment has been increased and now defaulter shall be
punishable with fine which shall be not less than Rs. 500
but may extend to Rs. 2000 for every day.

43
Power of Central Government to make Rules
(Section 469)


The Central Government may, by notification, make rules
for carrying out the provisions of this Act.
Penalty which CG may provide for contravention of rules has
been increased .
Power to remove difficulties (Section 470)

If any difficulty arises in giving effect to the provisions of this
Act, the Central Government may, by order published in the
Official
Gazette,
make
such
provisions,
not
inconsistent with the provisions of this Act, as appear to it to
be necessary or expedient for removing the difficulty
THANK YOU
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SAXENA & SAXENA