Transcript Slide 1

Companies Act, 2013
By CS Mamta Binani
Past Chairperson (Year 2010), EIRC of ICSI
Practising Company Secretary
At ACAE
For Chartered Accountants
[email protected]
dated : 16.11.2013
Room No.6, 4th Floor, Commerce House
2A, Ganesh Chandra Avenue, Kolkata 700013
Connect me @ : (033) 3028 8955-57; (033) 3002 5630-33; 98310 99551
[email protected]
Visit me @ : www.mamtabinani.com
UNDER THE COMPANIES ACT, 2013
(Sections 134, 143, 204)
Room No.6, 4th Floor, Commerce House
2A, Ganesh Chandra Avenue, Kolkata 700013
Connect me @ : (033) 3028 8955-57; (033) 3002 5630-33; 98310 99551
[email protected]
Visit me @ : www.mamtabinani.com
• 134(1):
Section 134
Every financial statement, including
consolidated financial statement, if any, shall be
approved by the Board of Directors before they are
signed on behalf of the Board, as laid in the
section and then submitted to the auditor for his
report thereon.
• 134(2): The auditors’ report shall be attached to
every financial statement.
• 134(3): There shall be attached to statements laid
before a company in general meeting, a report by
its Board of Directors, which shall include :
Secretarial Audit
Inter-alia:
• Explanations or comments by the Board on
every qualification, reservation or adverse
remark or disclaimer made—
(i) by the auditor in his report; and
(ii) by the company secretary in practice in
his/her secretarial audit report
Comments: Quite a lot of emphasis is laid by
the Government
Powers & Duties of Auditors
• Section
143(14): Mentions that the
provisions of section 143 will apply mutatismutandis to:
1. the cost accountant in practice conducting
cost audit under section 148 or
2.the company secretary in practice
conducting secretarial audit under section
204
Very Critical Provision
• Section
143(12): Notwithstanding anything
contained in this section, if an auditor of a
company, 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 company
• he shall immediately report the matter to the
Central Government within such time and in such
manner as may be prescribed
Look at the Penal Provisions
• Section 143(15): If any auditor, cost accountant
or company secretary in practice do not comply
with the provisions of sub-section (12)
• he shall be punishable with fine which shall not
be less than Rs.1.00 lakh but which may extend
to Rs.25.00 lakhs
• Section 143(13): No duty to which an auditor of
a company may be subject to shall be regarded
as having been contravened by reason of his
reporting the matter referred to in sub-section
(12), if it is done in good faith
What are the Powers & Duties
• 143(1):
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Right of access at all times to the books of
account whether kept at registered office or elsewhere
Require information from the officers of the company,
as may be necessary for the performance of his duty as
an auditor
143(2): The auditor to make a report to the members
about the true and fair view of the financial statements
143(3): The information that the auditor’s report has to
also state etc.
Enabling Provision-Section 204
• Section 204(1): Every listed company and a company
•
•
belonging to other class of companies shall annex with
its Board’s report made in terms of section 134(3), a
secretarial audit report, given by a company secretary
in practice, in such form as may be prescribed
Section 204(2): It shall be the duty of the company to
give all assistance and facilities to the company
secretary in practice, for auditing the secretarial and
related records of the company
Section 204(3): BOD to explain in their report-any
qualification or observation or other remarks made by
the CS in Practice
Penalty Provision
• Section 204(4): If a company or any officer of the
company or the company secretary in practice,
contravenes the provisions of this section
• the company, every officer of the company or the
company secretary in practice, who is in default
• shall be punishable with fine which shall not be
less than Rs.1.00 lakh but which may extend to
Rs.5.00 lakhs
As per Draft Rules Prescribed in
Chapter XIII
• SECRETARIAL AUDIT
Rule 13.7 (1): For the purposes of section 204(1), the
other class of companies shall be as under:
(a) Every public company having a paid-up share
capital of Rs.100.00 crores or more.
• The format of the Secretarial Audit Report shall be
in Form No.13.3
Specimen of draft Form no.13.3
• To The Board of Directors/Members
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•
______________(Name and Address of the Company)
I have examined the registers, records and documents of
_____________ (“the Company”) for the financial year
ended on March ___________ according to the provisions
of –
(i) the Companies Act, 2013 and the Rules made under that
Act;
(ii) the Memorandum and Articles of Association of the
Company;
(iii) the Securities and Exchange Board of India Act, 1992
and the rules/regulations made under that Act; (where
applicable)
• (iv)
•
•
•
•
Contd…
Bank of India
the Reserve
Act, 1934 and the
rules/regulations/directions made under that Act;
(where applicable)
(v) the Securities Contracts (Regulation) Act, 1956 and
the Rules made under that Act; (where applicable)
(vi) the Depositories Act, 1996 and the Regulations
and Bye-laws framed under that Act; (where
applicable)
(vii) the Foreign Exchange Management Act, 1999 and
the Rules and Regulations made under that Act;
(where applicable)
(viii) the Competition Act, 2002 and the rules and
regulations made under that Act;(where applicable)
• 2.
•
•
Contd…
Based on my examination and verification of the
registers, records and documents produced to me and
according to the information and explanations given to
me by the Company, I report that the Company has, in
my opinion, complied with the provisions of the
Companies Act, 2013 (“the Act”) and the Rules made
under the Act and the Memorandum and Articles of
Association of the Company, with regard to:
(a) maintenance of various statutory registers and
documents and making necessary entries therein;
(b) closure of the Register of Members / Debenture
holders/other security holders;
• (c)
•
•
•
Contd….
forms, returns, documents and resolutions
required to be filed with the Registrar of Companies
and the Central Government;
(d) service of documents by the Company on its
Members, Debenture holders, Other security holders,
Debenture Trustees, Auditors, Cost auditors (where
applicable), Secretarial auditor (where applicable), the
Registrar of Companies and the Stock exchange
(where applicable);
(e) contents and service of notice of Board meetings
and Committee meetings of Directors;
(f) convening and holding the meetings of Directors
and Committees of Directors including passing of
resolutions by circulation;
Contd….
• (g)the Annual General Meeting/Extraordinary General
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meetings of the company;
(h) minutes of proceedings of General Meetings and of
the Board and its Committee meetings;
(i) approvals of the Members including through postal
ballot (wherever required), the Board of Directors, the
Committees of Directors and the government
authorities, wherever required;
(j)constitution of the BOD/ Committee(s) of
Directors, appointment, retirement and reappointment of Directors including the Managing
Director and Whole-time Directors, and Key
managerial personnel;
Contd….
• (k)
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payment of remuneration to Directors including
the Managing Director and Whole-time Directors and
key managerial personnel;
(l) appointment and remuneration of Auditors,
secretarial auditor (where applicable); and Cost
Auditors (where applicable);
(m) transfers and transmissions of the Company’s
shares and debentures, issue and dispatch of duplicate
certificates and requirements with regard to
dematerialization and re-materialization of securities;
(n) redemption of preference shares (where
applicable);
Contd….
• (o) payment of interest on debentures and redemption
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of debentures; (where applicable)
(p) declaration and payment of dividends;
(q) acceptance of deposits from members or public,
where applicable;
(r) transfer of certain amounts/securities as required
under the Act to the Investor Education and
Protection Fund, uploading of details of unpaid and
unclaimed dividends on the relevant websites;
(s) borrowings and registration, modification and
satisfaction of charges wherever applicable;
Contd….
• (t) investment of the Company’s funds including inter
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corporate loans and investments and loans to others
(where applicable);
(u) giving guarantees in connection with loans taken
by subsidiaries and associate companies (where
applicable);
(v) form of financial statement as prescribed under
Schedule III of the Act;
(w) allotment of securities of the Company pursuant
to
Employees
Stock
Option
Scheme(where
applicable);
Contd….
• (x) buy-back of equity shares of the Company (where
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•
applicable);
(y) issue of sweat equity shares, (where applicable);
(z) Directors’ report;
(za) contracts, agreements, common seal, registered
office and publication of name of the Company;
(zb) secretarial standards,
(zc) generally, all other applicable provisions of the Act
and the Rules made under the Act.
Contd….
• 3. I further report that:
• (a) the Directors/Key
managerial personnel have
complied with the requirements as to disclosure of
interests and concerns in contracts and arrangements,
shareholdings / debenture holdings and directorships
in other companies and interests in other entities;
• (b)
the Directors have complied with the disclosure
requirements in respect of their eligibility of
appointment,
their being
independent and
compliance with the provisions of the Companies Act
and, where applicable, Listing Agreement;
Contd….
• 3. I further report that:
• (c) the Company has obtained all necessary approvals
under the various provisions of the Act; and
• (d) there was no prosecution initiated and no fines or
penalties were imposed during the year under review
under the Act, SEBI Act, RBI Act, SCRA, Depositories
Act, Listing Agreement and Rules, Regulations and
Guidelines framed under these Acts against/ on the
Company, its Directors and Officers.
Contd….
• 4.
I further report that the Company has complied
with the requirements under Acts, rules and
regulations mentioned in para 1 above.
• 5.
I further report that based on the information
received and records maintained, there are adequate
systems and processes in the Company commensurate
with the size and operations of the Company to
monitor and ensure compliance with applicable laws,
rules, regulations and guidelines.
Contd….
• Place :
• Signature:
• Date : Name of Company Secretary in practice / Firm:
• ACS/FCS No.
• C P No.:
• Note:
Para wise details of the Audit finding, if
necessary, may be placed as annexure to the report
ICSI made representations
• The
Institute of Company Secretaries of India
made representations to the Ministry of Corporate
Affairs expressing its concerns over some of the
provisions relating to Secretarial Audit
• For
quick reference, the representation is being
produced herewith, in the next few slides
ICSI representation on Secretarial Audit
• MCA: 2013
October 21, 2013
Shri Naved Masood, IAS
Secretary to Government of India
Ministry of Corporate Affairs
Shastri Bhawan
New Delhi
Dear Sir,
Sub: Draft rules with respect to Secretarial Audit under
the Companies Act, 2013
ICSI repn. on Secretarial Audit…Contd
• Section 204(1) of the Companies Act, 2013 provides
•
that every listed company and a company belonging to
other class of companies as may be prescribed shall
annex with its Board’s report made in terms of subsection (3) of section 134, a secretarial audit report,
given by a company secretary in practice, in such
form as may be prescribed. The draft Rule 13.7. (1),
however provides that the other class of companies
shall be as under:
(a) Every public company having a paid-up
share capital of one hundred crore rupees or more.”
ICSI repn. on Secretarial Audit…Contd
• 2. We submit the following in this regard:
• a. Section 204 focuses on governance
•
as also
compliance with applicable laws, as evident from draft
format issued along with draft rules. This can’t be
overlooked for companies which have a paid up capital
of less than Rs.100 crore.
b. The requirement proposed in draft rules would keep
99% of the companies out of purview of section 204 of
the Act.
ICSI repn. on Secretarial Audit…Contd
• 2. We submit the following in this regard:
• c. Generally, in large corporates the level of governance is
expected to be higher compared to smaller companies. In
this context, it is all the more necessary to ensure
governance in those companies where the public interest
would be substantially high. In this context, “public
interest” would constitute:
• Amount of paid-up capital;
• Total net-worth;
• Turnover;
• Borrowings including fixed deposits;
• Number of stakeholders.
ICSI repn. on Secretarial Audit…Contd
• 3. Secretarial Audit comprises of verification of
compliance of provisions of various laws and
rules/procedure, by an independent professional to
ensure that the company has complied with the legal
and procedural requirements and also followed due
processes. This can’t be overlooked for a public
company having a bank borrowing of Rs. 200 crore but
with paid-up share capital of Rs. 10 crore only. Also this
can’t be overlooked for a private company.
ICSI repn. on Secretarial Audit…Contd
• 4. The Companies Act, 2013 for the first time defines
the term ‘fraud’. Severe punishment for fraud has been
provided at several places throughout the entire Act.
Under the Act, the duty has been cast on practicing
company secretary who is conducting secretarial audit
to report fraud to the Central Government.
• In
the interest of governance, transparency and
compliance, the rules may provide that “For the
purposes of sub-section (1) of section 204, the other
class of companies may be as under:
ICSI repn. on Secretarial Audit…Contd
• (a) every company having a paid-up share capital of
Rs.10 crore or more or annual turnover of Rs. 25 crore
or more as per its last audited financial statement;
Or
• (b) every company having outstanding loan or
borrowing from Bank or Financial Institution or
accepted public deposits exceeding Rs. 25 crore or
more at any point of time in last financial year.
Thanking you
Yours faithfully
(M S Sahoo), Secretary
For info - Secretarial Audit
• The
Ministry had in its Corporate Governance
Voluntary Guidelines, 2009 released during the India
Corporate Week (Dec 14-21, 2009) mentioned about
Voluntary Secretarial audit on page 20 of the said
document in Para V.
• For quick reference, the link enabling access to the
said document is provided hereunder:
www.mca.gov.in/Ministry/latestnews/CG_Voluntary
_Guidelines_2009_24dec2009.pdf
What was there in Voluntary Guidelines
• V. SECRETARIAL AUDIT
Since the Board has the overarching responsibility of
ensuring transparent, ethical and responsible
governance of the company, it is important that the
Board processes and compliance mechanisms of the
company are robust. To ensure this, the companies
may get the Secretarial Audit conducted by a
competent professional. The Board should give its
comments on the Secretarial Audit in its report to the
shareholders.
For info - Secretarial Standards
• 118(1):
Every company shall cause minutes of the
proceedings of every meeting prepared and signed
in such manner as may be prescribed and kept
within 30 days of the conclusion of every such
meeting concerned in books kept for that purpose
with their pages consecutively numbered.
• 118(10):
Every company shall observe secretarial
standards with respect to general and Board
meetings specified by the Institute of Company
Secretaries of India and approved as such by the
Central Government.
For sake of clarity
This PPT covers the actual provisions envisaged in
the new law. As, it is quite important to first know
the letter of law.