Update The wait is over: MCA notifies most of the sections of the Companies Act, 2014 w.e.f

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1 The wait is over: MCA notifies most the sections the Act, 2014 w.e.f Team Vinod Kothari & Company 26/03/2014 Check at: for more write ups. Copyright: This write up is the property Vinod Kothari & Company and no part it can be copied, reproduced or distributed in any manner. Disclaimer: This write up is intended to initiate academic debate on a pertinent question. It is not intended to be a pressional advice and should not be relied upon for real life facts.

2 MCA notifies most the sections the Act, 2014 w.e.f Brief on ns enforced and their Impact on Commencement 2(2) 211(3-C) Accounting Standards Standards accounting for companies or class companies This section may not pose problems as now. However, we will have to wait for the final accounting standard to be prescribed by NFRA. 2(7) -- Auditing Standards Standards auditing for companies or class companies 2(13) 209(1) Books Accounts Records maintained in respect income, expenditure, assets, liabilities etc. Presently the auditing standards are not mandatory. It is to be seen if the present auditing standards are adopted as is. Definition same as before 2(31) 58-A, Explanation Definition Deposit Sum money to be classified as deposit Definition same as before 2(41) 2(17) Definition Financial Year 2(42) 591(1) Definition Foreign Company Financial year to be compulsorily between April 1 March 31 Company incorporated outside India and having an This section poses a major shift specially for subsidiaries foreign companies. Proviso course allows to continue with the present financial year subject to consent NCLT. Definition majorly similar

3 MCA notifies most the sections the Act, 2014 w.e.f (47) -- Definition Independent Director 2(48) -- Definition Indian Depository Receipt 2(62) -- Definition One Person Company 2(83) -- Definition Serious Fraud Investigation Officer 2(85) -- Definition Small Company Explan ation (d) 2(87) 2(47), 4 Meaning the word layer fice or place prit in India Criteria independence as in Sec. 149(5) Instrument created by a domestic depository against underlying securities foreign company Company which has only one person as member Officer who will investigate matters involving serious fraud Company which is small on the basis prescribed paid up capital and turnover In relation to holding company means subsidiaries For the first time,act defines the who shall be the independent director and also lays down the qualifying criteria. For the first time definition has been incorporated in the Act. Another noble feature in the Act. Same as above Same as above This can be a real poser for companies. Although, the limit is yet to be prescribed. It remains to be seen that once the number layers are prescribed, read with section 186, what impact will the same have

4 MCA notifies most the sections the Act, 2014 w.e.f Formation a Company Provisions pertaining to incorporation companies including that an OPC Although, the provisions in relation to other companies remain the same, provisions relating to incorporation OPC have been added 4 13, 14 20, 37(1) Memorandum Association the Company Requirements with respect to Memorandum a company All 5 clauses have been retained excepting that newly incorporated companies need not have other objects clause 5 26, 27, 28, 29 Articles Association the Company Contents and models Articles Association One section which needs to be paid a lot attention. With retrenchment provisions being also allowed, companies may have to immediately amend their AoAs. 6 9 Act to override memorandum, articles Act shall have overriding effect on MoA and AoA Same as before 7 except subsection (7) 15(c ), 33, 34(1) Incorporation a Company Procedure incorporation Certain provisions have been retained. However, additions include declarations from a practitioner, affidavit subscribers to MoA, address for correspondence till registered fice is established.

5 MCA notifies most the sections the Act, 2014 w.e.f Formation Central Government Except with to register an sub- charitable object association as limited section company having (9) charitable objects 9 34(2) Effect registration From the date incorporation, subscribers become members the Company Lots new provisions have been prescribed. n now also talks about amalgamation or winding up such companies. Same as before Effect memorandum and articles Commencement business etc. MoA and AoA to be binding on the company and members to the extent signed by them respectively Declaration to be filed with the Registrar before commencement business Same as before. A major change is doing away with the requirement containing Certificate Commencement Business for public companies 12 17A, 146, 147 Registered fice company Company to have a registered fice capable receiving and acknowledging all communications Same as before. However, timelines have been amended , 17, 18, 19, 21, 23, 37, 31 Alteration memorandum Company may alter the MoA with appropriate permission from members Same as before. However, section 13(8) needs to be given special attention.

6 MCA notifies most the sections the Act, 2014 w.e.f [exc ept second provis o sub section (1) and susection (2)] 31 Alteration articles Company may alter the AoA with appropriate permission from members Alteration memorandum and articles to be noted in every copy Every alteration to be noted in every copy MoA and AoA We will have to wait for the two sub-sections to be enforced. n 14(3) seems inconsequential without this. Same as before Rectification name company Copies memorandum, articles etc. to be given to members Conversion companies already registered Rectification name the Company, if the same is identical to the name an existing company Every company shall on receiving request send a copy MoA, AoA, resolutions etc on payment sspecified fees A company may convert itself into other class companies n is largely same as before. Timelines have been amended. Same as before. Same as before. In the absence rules prescribing anything on these lines, private companies may convert into small companies or OPCs under

7 MCA notifies most the sections the Act, 2014 w.e.f this section , 52, 53 Service documents Modes serving documents on members and Registrar Same as before. Serving documents on Registrar by electronic mode has been specifically included. 23(1) Clause (b) and (2) -- Public fer and private placement Private companies may issue securities by way rights/ bonus/ private placement This is to be read with section 42 Act, 2013 since sweeping amendments have been done. 25(3) 64(3) Document containing fer securities for sale to be deemed prospectus Document by which fer is made to public for securities shall be treated as prospectus Same as before , 56, 57, 58, 60, Sch.II Information to be added in the prospectus with regard to issue size, capital structure,terms etc. Matters to be stated in prospectus Elaborate list information to be disclosed has been set out Variations in terms contract or objects in prospectus Offer sale shares to certain members the company A company shall not vary the terms an fer in prospectus without issuing a notice in prescribed format Members the company may in consultation with the n now specifically required special resolution to eb passed apart from newspaper advertisements. This section is on the lines a public fer by certain members

8 MCA notifies most the sections the Act, 2014 w.e.f Board fer a part their holding to public 33(3) 56(3) inclusive provisos Issue application forms for securities Every application form should be accompanied by an abridged prospectus Same as before. 35(1)( e ) 62 Civil liability for misstatements in prospectus Any person who subscribes to any securities on the basis the prospectus and suffers any loss or damage shall be compensated Refers to civil liability an expert who is not in any way interested in the promotion or management the company. 39(4) 69, 75 Allotment securities by Company 40(6) 73, 76 Securities to be dealt with in stock exchange Global Depository Receipt Prohibition on allotment where minimum subscription amount has not been received Prospectus has to mention the name the stock exchange where the securities are to be dealt with Company may issue GDRs to be dealt with in a depository mode in any foreign company Same as before. However, a major part the section is by way rules which is yet to be finalised Same as before. Interestingly, the draft rules have not prescribed any percentage as yet. Novel provision added.

9 MCA notifies most the sections the Act, 2014 w.e.f Offer or invitation for subscription securities on a private placement basis A company may make an fer or invitation securities by way private placement Sweeping changes made. Not only have the provisions rules pertaining to preferential allotment by unlisted companies been incorporated, the section is also applicable to private companies presently, which will now have to comply with the elaborate provisions. 43 2(46A), 85, 86 Kinds share Capital Equity shares and preference shares Same as before Certificate shares Certificate issued by company shall be prima facie evidence title the shares Voting Rights Every equity shareholder shall have a right to vote on resolutions Same as before largely. Issue shares in demat form also included. Same as before Application premiums received on issue shares Prohibition on issue shares at discount Transfer and usage premium on shares issued cannot issue shares at discount except by sweat equity Same as before. However, applicability section 52(3) is for such companies as prescribe din draft rules. Major change A Issue Sweat equity Company may issue Provisions largely

10 MCA notifies most the sections the Act, 2014 w.e.f (Excep t subsection 3) shares sweat equity on certain specified conditions 80 Issue and No company limited Redemption by shares shall, after Preference Shares. the commencement this Act, issue any preference shares which are irredeemable. Transfer and A company shall not Transmission register transfer securities. securities the company, or the interest the member in the company having no share capital unless a proper instrument transfer is executed ,109,110, [exc ept provis o to clause (b) subsection (1)] 94 Power limited Company to alter its share capital A limited company having a share capital may, if so authorised by the articles, alter its memorandum in its general meeting to increase the authorised share capital, consolidate and divide all or any its share capital, convert all or any its fully paid-up shares into stock, cancel shares which shall not be deemed encapsulated in draft rules. n also states the possibility inability redeem the preference shares. The provisions have been substantially amended. Timelines for issue certificates have also been amended. Same as before. Prior approval required if consolidation and division results in change in voting percentage.

11 MCA notifies most the sections the Act, 2014 w.e.f to be a reduction in capital. 62[exc 81, 94-A(I) Further issue Company can ept subsection s (4) to (6)] share capital. increase its subscribed share capital, by sending the letter fer to the holders equity shares in proportion to the paid up share capital, to employees subject to special resolution, to any persons,if authorised by special resolution and share price is determined by the valuation report registered valuer subject to the prescribed conditions Issue Bonus shares A company may issue fully paid up bonus shares out free reserves, securities premium account, CRR. No company shall capitalize its prits or reserves for the above purpose except so authorised A(3),95.97 Notice to be given to Registrar for alteration share capital Company shall file a notice in the prescribed form with the Registrar within a Number amendments made. Notably, valuation by registered valuer has been prescribed in case issue is done to other than existing members Specific provisions unlike before have been prescribed. Previously, SEBI ICDR regulations were referred to. Same as before.

12 MCA notifies most the sections the Act, 2014 w.e.f Restriction on purchase by company or giving loans by it for purchase its shares A Power company to purchase its own securities 70(2) 77-B Prohibition on buyback in certain circumstances 71(exc ept subsection 9 to 11) 117-A,B,C, 118, 119, 122 Debentures period thirty days any alteration or increase in share capital or redemption shares. No company limited by shares or by guarantee and having a share capital shall buy its own shares unless there is a consequent reduction in the share capital. Buy back shares and securities subject to such conditions as specified. No company,directly or indirectly, purchase its own shares or specified securities in case such company has not compiles with the provisions section 92,123,127,129. A company may issue debenture with an option to convert such debentures into shares, either wholly or partly at the time redemption. Debentures shall not carry any voting Same as before. Board disclosures have been prescribed. Same as before. The loose drafting regarding the limit and amount buy back has been retained. Same as before. Sweeping changes made. Security cover, requirement debentures trustees have been prescribed. Further, going by the way draft rules have been prescribed, NBFCs may face a bumpy road ahead with respect to securing debentures.

13 MCA notifies most the sections the Act, 2014 w.e.f rights. Secured debentures may be issued, subject to such terms & conditions A Power to nominate Every holder securities can nominate a person to whom his securities shall vest in the event his death A Prohibition on No company shall acceptance invite, accept or deposits from public. renew deposits from the public except in the manner so provided. 74(1) -- Repayment n relates to deposits accepted deposits, etc., before the accepted enforcement Act, 2013 before commencement Same as before. This section pertains to acceptance deposits by private companies and public companies. This is one bomb a section. So, for companies which have already issued deposits, they need to pay extra attention lest they incur the violations prescribed this Act Acceptance deposits from public by certain companies. a public company, having such net worth or turnover as may be prescribed, may accept deposits from persons other than its members This section is applicable only to public companies.

14 MCA notifies most the sections the Act, 2014 w.e.f , 132 Duty to register charges, etc Application for registration charge. subject to compliance with the requirements provided in subsection (2) section 73 and subject to such rules as the Central Government may, in consultation with the Reserve Bank India, prescribe. It shall be the duty every company creating a charge within or outside India to register the particulars the charge signed by the company and the charge-holder together with the instruments, if any, creating such charge in such form, on payment such fees and in such manner as may be prescribed, with the Registrar within thirty days its creation In failure a company to register its charges within the specified period, the person in whose The additional time for filing charged has been increased to 270 days. Further, what constitutes a charge has also been left open in section 2 to actually also include a pledge. Unlike the previous act, this section allows charge to be also filed by the person in whose favour charge has been created.

15 MCA notifies most the sections the Act, 2014 w.e.f & 135 n 77 to apply in certain matters Date notice charge. favour the charge is created may apply to the Registrar for registration the charge along with the instrument created for the charge, within such time and in such form and manner as may be prescribed. Apply to a company acquiring any property subject to a charge within the meaning that section or any modification in the terms or conditions or the extent or operation any charge registered under that section. Where any charge on any property or assets a company or any its undertakings is registered, any person acquiring such property, assets, undertakings or part there or any share or interest therein shall be deemed to have notice the charge from the date Same as before. Same as before.

16 MCA notifies most the sections the Act, 2014 w.e.f Register charges to be kept by Registrar Company to report satisfaction charge Power Registrar to make entries satisfaction and release in absence Intimation from company. such registration. The Registrar shall, in respect every company, keep a register containing particulars the charges registered in such form and in such manner as may be prescribed and shall be open to inspection by any person on payment such fees as may be prescribed for each inspection. A company shall give intimation to the Registrar in the prescribed form, the payment or satisfaction in full any charge registered and within a period thirty days from the date such payment or satisfaction. The Registrar may, on evidence being given to his satisfaction with respect to any registered charge enter in the register charges a memorandum Same as before. Substantial part this section shall come by way rules. Same as before. Same as before.

17 MCA notifies most the sections the Act, 2014 w.e.f Intimation appointment receiver or manager satisfaction in whole or in part, or the fact that part the property or undertaking has been released from the charge or has ceased to form part the company s property or undertaking, as the case may be, notwithstanding the fact that no intimation has been received by him from the company. If any person obtains an order for the appointment a receiver, or a person to manage, the property, subject to a charge, a company or if any person appoints such receiver or person under any power contained in any instrument, he shall, within a period thirty days from the date the passing the order or the making the appointment, give notice such Same as before. n 137(3) which prescribed punishment for non compliance has been removed however.

18 MCA notifies most the sections the Act, 2014 w.e.f , 143, 144 Company s charges register Punishment for contravention Rectification by Central Government in register charges , 151, A, 157, 158 Register members, etc C Declaration in respect beneficial appointment to the company. Every company shall keep at its registered fice a register charges which shall include therein all charges and floating charges affecting any property or assets the company or any its undertakings, indicating in each case such particulars as may be prescribed Imprisonment or fine for persons contravening Chapter VI relating to charges This section pertains to delay in intimating the Registrar regarding creation, modification or satisfaction charge. Every company shall keep and maintain register members, register debenture-holders and register any other security holders with index. Person who does not hold beneficial Same as before. Manner inspection charge register to be prescribed by rules. Like many other sections, amount fine has been increased. Same as before. Major part the section has been prescribed by way draft rules. Also, Same as before.

19 MCA notifies most the sections the Act, 2014 w.e.f interest in any share D Investigation beneficial ownership shares in certain cases , 160, , Sch. V Annual returns to be submitted by companies Return to be filed by listed companies for change in shareholding pattern promoters and top 10 shareholdes Place keeping and inspection registers, interest holders but enters his name ion the register shall make a declaration within such time and in such form as may be prescribed to the company specifying the name and other particulars the person who holds the beneficial interest in such shares. Central Government may appoint one or more competent persons to investigate and report as to beneficial ownership with regard to any share or class shares The section now requires an extract annual return to be also filed. This requirement is only for listed companies The section is similar to section 163 except that that registers may be kept Same as before. In what means duplication work, the section requires serving information as on the end financial year This is only an additional burden for listed companies which also have to devise a system to ensure timely dissemination Unlike previous section, companies will have to ensure that registers are kept only where 1/10 th

20 MCA notifies most the sections the Act, 2014 w.e.f returns, etc anywhere else subject to special resolution and presence 1/10 th the total number members at that place Registers, The registers, their etc., to be indices and copies evidence annual returns maintained under sections 88 and 94 shall be prima facie evidence any matter directed or authorised to be inserted therein by or under this Act Annual General Some major changes Meeting have been done like convening AGM on all days excepting national holidays and has also prescribed 100(6) 169 Calling extraordinary general meeting ,172 Notice Meeting business hours Reimbursement expenses to members in calling EGM Relates to serving notices AGM and also calling AGM on shorter notice members reside. This section however, does not seem to take note that by way transfers, the place where 1/10 th reside may change Same as before will have to take special care at the upcoming AGM Same as before Same as before Quorum limits that the Novel provision

21 MCA notifies most the sections the Act, 2014 w.e.f rd and 4 th provis o to subsection (1) and (7) Voting through electronic means , 180, 184, (1) (b) number members that a proxy can act on behalf shall not exceed 50 This was allowed as a green initiative measure and now has been made a part substantive part the Act. Demand for poll This section has revised the threshold for making such demands 187 Representation corporations at meeting companies and creditors (1) Resolutions requiring special notice Resolutions and agreements to be filed , 194, 195, 197 Minutes proceedings general Representation body corporate which is a creditor n lays down the threshold limit for serving a special notice n lays down a list resolutions which have to be filed with the Registrar Notably even proceeding postal ballot have to be We have seen that companies opted for e voting in case postal ballot only. It remains to be seen if even in GMs this shall be followed -- Same as before Prescribing the threshold limit may keep out errant shareholders Although the section is the same as before however, now resolutions u/s 179 will also have to be filed This may not mean additional compliance for many companies as listed

22 MCA notifies most the sections the Act, 2014 w.e.f meeting, meeting Board Directors and other meeting and resolutions passed by postal ballot Inspection minute-books general meeting Maintenance and inspection documents in electronic form Report on annual general meeting minuted companies have had the practice to minute postal ballot proceedings also Analogous to existing provisions except that postal ballot resolution now specifically included. Penal provisions stricter. This is a new provision and will provide an ease now maintaining documents in electronic form. The same is also been done currently, however, now is it provided by law. However, manner inspection in electronic form to be prescribed by way rules. The format report to be prescribed. Moreover, since the section requires compliances with the provisions Act as well as the Rules, hence, relevant rules also to be notified. This may be applicable for AGM 2014 itself. Since companies will have almost 300 days to file, it will be a breather to understand the format and

23 MCA notifies most the sections the Act, 2014 w.e.f Applicability this Chapter to One Person Company , 205- Declaration A(3), 206 dividend A Right to dividend, rights shares and bonus shares to be Dividend shall be out the prits the company for that year arrived at after providing for depreciation and out money provided by the Central Government or a State Government for the payment dividend by the company in pursuance a guarantee given by that Government. Board Directors a company may declare interim dividend during any financial year out the surplus in the prit and loss account and out prits the financial year in which such interim dividend is sought to be declared. For shares pending register, the company shall transfer the make compliance. These provisions are applicable for OPCs specifically. A major part this section is to be enforced by way rules. Same as before.

24 MCA notifies most the sections the Act, 2014 w.e.f held in abeyance pending registration transfer shares Books accounts to be kept by company dividend in relation to such shares to the Unpaid Dividend Account and keep in abeyance in relation to such shares, any fer rights shares. Every company y shall prepare a books accounts at registered fice and branches Financial statements Financial statements shall give a true and fair view , 216, 217 n 136 n 137 s to section 219 n 220 Financial statement, Board s report, etc. Methods preparing and signing A major part this section is to be enforced by way rules This section most importantly requires all companies having subsidiaries or associates to compulsorily consolidate. This is one section which companies need to pay special attention to. It lays down the contents the board s report. n almost analogous to earlier provisions. Second proviso to sub-section (1) to be notified. Further, provisions for providing separate audited accounts subsidiaries on websites also become applicable. Analogous provisions. However, provision in relation to OPC have also been enforced. Further, time limit gets extended to 300 days as section 403 also gets

25 MCA notifies most the sections the Act, 2014 w.e.f Sec 138 notified. Further, in case adjourned meetings filing will have to be done both before adjournment (in case due date is crossed) and also after the adjourned meeting. Penal provisions become stricter. -- Since it refers to internal audit, Rules will have to be enforced for the class companies , 619 It seems that appointment auditors will therefore have to be given effect to from AGM in 2014 itself. All the qualification and certificate requirements will have to be acted upon immediately. However, class companies under sub-sec (2) to be notified by way Rules. However form for appointment also to be notified Form for resignation to be notified. Further, procedure for the removal auditors is slightly modified from the earlier provisions Eligibility, qualifications and is qualifications auditors only a chartered accountant or in case firm and LLP the partners who are chartered accountants shall be

26 MCA notifies most the sections the Act, 2014 w.e.f (8) Remuneration auditors , 228, 619 Powers and duties auditors and auditing standards Auditor not to render certain services , 230 Auditor to sign audit reports, etc. authorised to act and sign on behalf the firm shall be fixed in its general meeting or in such manner as may be determined therein right access at all times to the books account and vouchers the company shall make a report to the members the company on the accounts examined by him and on every financial statements which are required by or under this Act to be laid before the company in general meeting shall provide to the company only such other services as are approved by the Board Directors or the audit committee excluding such services mentioned in the section shall sign the auditor s report or sign or certify any other document

27 MCA notifies most the sections the Act, 2014 w.e.f Auditors to attend general meeting , 233 Punishment for contravention. the and the qualifications, observations or comments on financial transactions or matters, which have any adverse effect on the functioning the company mentioned in the auditor s report shall be read before the company in general meeting and shall be open to inspection by any member the company. All notices, and other communications relating to, any general meeting shall be forwarded to the auditor the company and the auditor shall, attend either by himself or through his authorised representative. In contravention sections 139 to 146 (both inclusive) the company shall be punishable with fine

28 MCA notifies most the sections the Act, 2014 w.e.f which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every ficer the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees, or with both B Central Government to specify If an auditor a company contravenes any the provisions section 139, section 143, section 144 or section 145, the auditor shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees. the Central Government may, by order, in respect

29 MCA notifies most the sections the Act, 2014 w.e.f audit items cost in respect certain companies , 253 Company to have Board Directors Manner selection independent directors and maintenance databank independent directors. such class companies engaged in the production such goods or providing such services direct that particulars relating to the utilisation material or labour or to other items cost as may be prescribed shall also be included in the books account kept by that class companies Minimum 3 directors in case public companies, two directors in case Private companies and maximum 15 directors May be selected from a data bank containing names, addresses and qualifications persons who are eligible and willing to act as independent directors. The appointment independent director shall be approved by

30 MCA notifies most the sections the Act, 2014 w.e.f Appointment director elected by small shareholders , 255, 256, 264 Appointment directors A Application for allotment Director Identification the company in general meeting A listed company may have one director elected by such small shareholders in such manner and with such terms and conditions as may be prescribed the subscribers to the memorandum who are individuals shall be deemed to be the first directors the company until the directors are duly appointed where no provision in the article for appointment first directors. In case OPC an individual being member shall be deemed to be its first director until the director or directors are duly appointed by the member. Every individual intending to be appointed as director a company shall

31 MCA notifies most the sections the Act, 2014 w.e.f Number B Allotment Director Identification Number C Prohibition to obtain more than one Director Identification Number D Director to intimate Director Identification Number. make an application for allotment Director Identification Number to the Central Government The Central Government shall, within one month from the receipt the application under section 153, allot a Director Identification Number to an applicant No individual, who has already been allotted a Director Identification Number under section 154, shall apply for, obtain or possess another Director Identification umber Every existing director shall, within one month the receipt Director Identification number from the Central Government, intimate his Director Identification Number to the

32 MCA notifies most the sections the Act, 2014 w.e.f E Company to inform Director Identification Number to Registrar F Obligation to indicate Director Identification Number Right persons other than retiring directors to company or all companies wherein he is a director Every company shall, within fifteen days the receipt intimation under section 156, furnish the Director Identification number all its directors to the Registrar or any other ficer or authority as may be specified by the Central Government Every person or company, while furnishing any return shall mention the Director Identification Number in such return, information or particulars in case such return, information or particulars relate to the director or contain any reference any director A person who is not a retiring director be eligible for appointment to the

33 MCA notifies most the sections the Act, 2014 w.e.f (2) 260, 262, , 274, 283(2) stand for directorship. Appointment additional director, alternate director and nominee director. Disqualifications for fice a director at any general meeting, if he, or some member intending to propose him as a director, has, not less than fourteen days before the meeting left at the registered fice the company, a notice in writing under his hand signifying his candidature as a director The Board Directors a company may, if so authorised by its articles or by a resolution passed by the company in general meeting, appoint a person, not being a person holding any alternate directorship for any other director in the company, to act as an alternate director for a director during his absence for a period not less than three months from India A person shall not be eligible for

34 MCA notifies most the sections the Act, 2014 w.e.f , 276, 278, 279 appointment director Number directorships Duties directors. appointment as a director a company is unsound mind and stands so declared, an un discharged insolvent has applied to be adjudicated as an insolvent and his application is pending etc No person, after the commencement this Act, shall hold fice as a director, including any alternate directorship, in more than twenty companies at the same time subject to maximum 10 public companies Shall act in good faith, exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment, shall not involve in a situation in which he may have a direct or indirect interest that conflicts, shall not achieve or

35 MCA notifies most the sections the Act, 2014 w.e.f Vacation fice director Resignation director 169 except sub section Removal directors , 307 Register directors and key attempt to achieve any undue gain or advantage either to himself or to his relatives etc The fice a director shall become vacant in such cases as mentioned under the section A director may resign from his fice by giving a notice in writing to the company and the Board shall on receipt such notice take note the same and the company shall intimate the Registrar A company may, by ordinary resolution, remove a director, not being a director appointed by the Tribunal before the expiry the period his fice after giving him a reasonable opportunity being heard Every company shall keep a register containing such

36 MCA notifies most the sections the Act, 2014 w.e.f managerial personnel and their shareholding. particulars its directors and key managerial personnel with the details securities held by each them Members right to inspect. A return containing such particulars and documents the directors and the key managerial personnel shall be filed with the Registrar within thirty days from the appointment every director and key managerial personnel, The register kept shall be open for inspection during business hours and the members shall have a right to take extracts there from and copies there, and also be kept open for inspection at every annual general meeting Punishment. company contravenes any the provisions this Chapter and for which no specific

37 MCA notifies most the sections the Act, 2014 w.e.f , 286 Meetings Board. punishment is provided therein the company and every ficer the company who is in default shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees First Board meeting within 30days incorporation and thereafter 4 meetings in a year with maximum gap 120 days. Participation can be in person or through video conferencing , 288 Quorum for meetings Board Passing resolution by circulation Atleast minimum seven days notice required Qurum shall be 1 / 3 rd total strength or 2 directors, higher one The resolution shall be circulated in draft to all directors or members the committee

38 MCA notifies most the sections the Act, 2014 w.e.f A Audit Committee Nomination and Remuneration Committee and Stakeholders Relationship Committee , 292 Powers Board. The resolution shall be noted at a subsequent meeting The Board Directors every listed company and such other class or classes companies, as may be prescribed, shall constitute an Audit Committee The Board Directors every listed company and such other class or classes companies, as may be prescribed shall constitute the Nomination and Remuneration Committee consisting three or more nonexecutive directors out which not less than one-half shall be independent directors The Board Directors a company shall be entitled to exercise all such powers, and to do all such acts and things,

39 MCA notifies most the sections the Act, 2014 w.e.f B Disclosure interest by director B Disclosure interest by director. as the company is authorised to exercise and Every director shall at the first meeting the Board in which he participates as a director and thereafter at the first meeting the Board in every financial year or whenever there is any change in the disclosures already made, then at the first Board meeting held after such change, disclose his concern or interest in any company or companies or bodies corporate, firms, or other association individuals which shall include the shareholding Every director shall at the first meeting the Board in which he participates as a director and thereafter at the first meeting the Board in every financial year or whenever

40 MCA notifies most the sections the Act, 2014 w.e.f A Loan and investment by company Investments company to be held in its own name , 294-A, 297, 314 Related party transactions there is any change in the disclosures already made, then at the first Board meeting held after such change, disclose his concern or interest in any company or companies or bodies corporate, firms, or other association individuals which shall include the shareholding a company shall unless otherwise prescribed, make investment through not more than two layers investment companies All investments made or held by a company in any property, security or other asset shall be made and held by it in its own name No company shall enter into any contract or arrangement with a related party xcept with the consent the Board

41 MCA notifies most the sections the Act, 2014 w.e.f Register contracts or arrangements in which directors are interested Contract employment with managing or whole-time directors , 319, 320, 321(4) Payment to director for loss fice, etc., in connection with transfer undertaking, property or shares Contract by One Person Company Directors given by a resolution Every company shall keep one or more registers giving separately the particulars all contracts or arrangements to which sub-section (2) section 184 or section 188 applies, Every company shall keep at its registered fice a contract appointment MD/ WTD No director a company shall, in connection with transfer undertaking or property etc receive any payment by way compensation for loss fice or as consideration for retirement from fice Where One Person Company limited by shares or by guarantee enters into a contract with the sole

42 MCA notifies most the sections the Act, 2014 w.e.f member company shall, unless the contract is in writing, ensure that the terms the contract or fer are contained in a memorandum or are recorded in the minutes the first meeting the Board Directors the company held next after entering into contract Appointment MD, WTD, manager The company shall inform the Registrar about every contract entered into by the company and recorded in the minutes the meeting its Board Directors Procedure to be followed The provisions section 196 are similar to section 269. Certification requirements under Part III Schedule V will further be required as the said Schedule is also notified. This was not required earlier. The same is also required to be disclosed in Annual Return as section

43 MCA notifies most the sections the Act, 2014 w.e.f , 201, 309, 310, 387 Overall maximum managerial remuneration and managerial remuneration in absence prits Managerial remuneration to be paid under various circumstances Calculation prits Manner calculation prits company Recovery remuneration in certain cases Power CG to accord approval in relation to any matter 92 is also enforced. However, form annual return yet to be enforced. Not much a difference from the earlier provisions and will not have much impact. However, Rules when enforced will mean that sitting fees to be paid now will increase to Rs. 1 lakh. Further, section 134 pertaining to financial statements and board s report has been enforced, therefore, once the rules gets notified, disclosure by listed companies in terms remuneration to kmp, directors, percentage increase for remuneration, parameters for variables etc. will also have to be disclosed most likely in financial statement Not much a difference from the earlier provisions and will not have much impact except disclosure in board report as referred above. This is a new provision and requires the company to recover from CEO, MD, WTD, manager, any excess remuneration including stock option, if the company

44 MCA notifies most the sections the Act, 2014 w.e.f AA Central Government or company to fix limit with regard to remuneration B Forms and procedure in relation to certain applications Compensation for loss fice managing or whole-time director or , 316, 386 manager Appointment KMP Power CG to fix limit remuneration Forms and procedure in relation to certain applications made to CG Payment can be paid to manager/ MD/ WTD, by way compensation for loss fice. Prescribed companies to appoint KMPs re-states its financial statements due to fraud or non-compliance with any requirement under this Act and the rules made thereunder; Similar to old provision and will not have much impact. Though the section has been enforced, forms are yet to be enforced. In case application to CG for sections enforced, how will the companies submit forms? Hence, most likely related rules and forms will also be notified shortly. This is a very big change and the companies will have to immediately take care the same including redesignations ceo/cfo. However, the class companies are prescribed under the rules which have not been notified yet. Likewise, disclosures in board report and annual

45 MCA notifies most the sections the Act, 2014 w.e.f return will now become applicable. Further, provision articles will need to be amended for appointment chairperson. Therefore, AoA needs immediate change Secretarial audit for Certain companies to This will be a sea change as bigger companies annex a secretarial now lot responsibilities audit report by a CS will be cast upon the in practice pressionals. However, once again the rules and the forms will have to be notified for the class companies and the applicable format. Though there are lot difficulties in the format itself Functions Functions to be This is a new requirement Company Secretary performed by CS in and enforcement this employment section is once again a very big challenge to the CS pressionals as one the requirements is to comply with all laws Power to call for Empower RoC to This is same as before. information, inspect conduct inquiries However, the impact the books accounts same like freeze assets and conduct under inspection may be one inquiries the consequences once section 221 is enforced A Conduct inspection Procedure to be The provisions are similar to and inquiries adopted by RoC or those earlier except for Inspector penal provisions which become stricter A Report on inspection RoC shall submit a The provisions are similar to

46 MCA notifies most the sections the Act, 2014 w.e.f made report to CG those earlier except for penal provisions which become stricter A Search and seizure Search and seizure The provisions are similar to documents by those earlier except for Registrar penal provisions which become stricter. Special Court order will be required under the section, which has not been yet constituted. Thus, the enforcement section is a way is no sense until such formulation. Moreover, code criminal procedure provisions will now also become applicable. Hence, penal consequences Investigation into affairs company Establishment Serious Fraud Investigation Office(SFIO) Power CG to order investigation into affairs company CG shall constitute Serious Fraud Investigation Office become much more severe. Almost similar as before. However, sub-sec (2) in relation to orders Tribunal will have no sense unless the Tribunal is constituted. Surely the constitution is not happening in near future as can be seen, therefore, the enforcement this section also may not have much meaning now. This section may have serious impact now. Though the SFIO under the section is yet not constituted but as per proviso to sub-sec (1), proceedings may be

47 MCA notifies most the sections the Act, 2014 w.e.f Investigation into affairs Company by SFIO Security for payment cost and expenses investigation Firm, body corporate or association not to be appointed as inspector Investigation ownership company Powers SFIO to investigate into the affairs a company Applicant or Company shall have to give security No Firm, body corporate or association to be appointed as inspector Empower CG to appoint inspector Procedure, powers Duty ficers and inspectors employees with regard to inspection Power inspector to Power inspector to conduct investigation conduct investigation into affairs related into affairs related companies companies A Seizure documents Seizure documents by inspector by inspector on reasonable grounds , 246 Inspector s Report An inspector appointed under Chapter XIV shall submit interim and final report to the instituted into various affairs as mentioned under sub-sec 2. Sec 208 read with this section, being enforced, may have serious implications. n will not be applicable in so far as sec 213 is concerned. The security amount is raised. However, the section will not be much use as such. Provisions almost similar as before. Not much an impact. Provisions almost similar as before. Not much an impact. However, Tribunal is yet to be constituted. Provisions almost similar as before. Not much an impact. Provisions almost similar as before. Not much an impact. Provisions almost similar as before. Not much an impact. Provisions under were more elaborate

48 MCA notifies most the sections the Act, 2014 w.e.f , 243, Actions to be [excep 244 taken in t subsection pursuance (2) inspector s report and (5)] Expenses investigation Investigation, etc., foreign companies Penalty for furnishing false statement, mutilation, destruction documents capable being registered Certificate registration existing companies Central Government Various penalties and actions that can be taken on the basis the Inspector s report Details the persons liable to reimburse the expenses investigation incurred by the Central Government Chapter XIV shall also apply to foreign companies Actions during the course investigation and inspection that shall attract penalty Describes various types companies that can be registered On compliance with the requirements Chapter XXI, the Registrar shall issue Certificate Registration Same as before Same as before Same as before Such violation will attract the provision section 447 Same as before Same as before Vesting All the property Same as before

49 MCA notifies most the sections the Act, 2014 w.e.f property on registration Saving existing liabilities. 370 (excep 577 Continuation pending t the legal provis proceedings o) Effect registration under this Part Obligations companies registering under this Part , 593 Documents, etc., to be delivered to Registrar by foreign companies Accounts foreign company the existing company shall vest and pass to the company registered under this Act Registration under this Act existing companies shall not affect the obligations the company All the legal proceedings the existing companies registered under this Act shall continue Various provisions that shall apply to the existing companies upon registration under this Act. Procedure to be followed by companies seeking registration under Chapter XXI Various documents that a foreign company shall deliver to the Registrar upon the establishment place business in India. Provisions regarding the financial statements a Same as before Same as before Same as before A novel provision which lays down obligations on companies registered under this Act. Same as before Same as before