ARTICLE : COMPANY CLASSIFICATIONS UNDER THE COMPANIES ACT, 2013
S.K.Batra, B.A. LL.B., FCS

The Companies Act, 2013 (hereinafter called the Act) has created various kinds of companies such as Small companies, dormat companies, one person companies, private companies and public companies. Further all these companies have been divided these into various categories of companies for compliances. These categories are based on number of shareholders, economic participation (net worth, paid up share capital, turnover), listing on stock exchange, liability of members (share capital, share capital and / or guarantee), inter-se company relation such as holding and subsidiary, object clause (commercial or for charitable objects etc.) and public borrowings. The compliances have got split into more than 30 categories since the legislatures have not divided the company into four or five broad categories.

This has made the Act quite complicated from compliance point of view. This paper aims to discuss these classifications broadly for the benefit of the professionals. This paper is based on sections that are in force as on. I have divided my paper into the following sequence which are discussed later from compliance point of view.

A: COMMON COMPLIANCES FOR ALL TYPES OF COMPANIES:

1. Definitions;
These are covered under Section 2 of the Act. For further explanations and coverage of definitions, please refer to Companies (Specification of definitions details) Rules, 2014. It is interesting to note that all the rules that have come into force have further definitions mentioned in Rule 2. There are already 95 definitions in the Act and the definitions mentioned in the rules make it multiplied by 2. A CS must keep in mind the definitions so that there is no mis-interpretations of the Act, Rules or notifications thereof.

2. Incorporation of Companies;
Chapter II of the Act deals with the incorporation of Companies. One has to refer to the Companies (Incorporation) Rules, 2014 for compliance purposes. Different forms have been provided for incorporation different types of Companies but by and large documents to be attached are similar in nature.

1. Alteration to the Memorandum of Association;
Chapter II of the Act deals with alteration to the MoA. One has to refer to the Companies (Incorporation) Rules, 2014 for compliance purposes.

I take this opportunity to compliment the Chairmen of various committees for showing sheer dedication and request them to maintain the same energy for better results.

2. Alteration to the Articles of Association;
Chapter II of the Act deals with alteration to the AoA. One has to refer to the Companies (Incorporation) Rules, 2014 for compliance purposes.

3. Conversion of company from one class to the other;
Section 18 in Chapter II of the Act deals with conversion of company from one class to the other. One has to refer to the Companies (Incorporation) Rules, 2014 for compliance purposes. Company can be converted from OPC to Private/Public Ltd. or a Private Ltd. can convert itself into Public Company vise-versa.

4. Inter-corporate investments and loans:
Section 186(1) relating to inter-corporate investments and loans provides that without prejudice to the provisions contained in this Act, a company shall unless otherwise prescribed, make investment through not more than two layers of investment companies: However section 186(11) provides that nothing contained in this section, except sub-section (1), shall apply to a loan made, guarantee given or security provided by a banking company or an insurance company or a housing finance company in the ordinary course of its business or a company engaged in the business of financing of companies or of providing infrastructural facilities;
Section 186 is applicable from 1.4.2014. All transactions entered into upto 31.3.2014 will be covered by corresponding Section 372A of Companies Act 1956.

5. To have a common seal:
Section 22 provides that a company may, by writing under its common seal, authorise any person, either generally or in respect of any specified matters, as its attorney to execute other deeds on its behalf on any place either in India or Abroad. Article 79 of Table F in schedule 1 of the Act states that the board shall provide for the safe custody of the seal.

6. To disclose CIN etc.:
Under section 12(3), every company shall paint or affix its name, and the address of its registered office outside of ever office or place where business is carried on in a local language and have its name engraved in the common seal and also get its name, address of the registered office and CIN with telephone number, fax number, if any, email and website addresses, if any printed on all its notices and other official publications.

7. Obligation to indicate DIN:
Under Section 158 every person or company, while furnishing any return, information or particulars as are required to be furnished under this Act, shall mention Director Identification Number in such return, information or particulars in case such return, information or particulars relate to the director or contain any reference of any director. Under proviso to Rule 7 of companies (Registration Offices and Fees) Rules,2014 it is obligatory that the correspondence shall contain name, designation, address, membership number or DIN as the case may be of the person signing documents.

8. Filing of Annual Return:
Section 92 provides that every company shall prepare a return (hereinafter referred to as the annual return) in the prescribed form containing the particulars as they stood on the close of the financial year. For the year ending 31st March, 2014 the return will be prepared in the new format and the same is very lengthy and cumbersome.
A company has to file within 60 days of AGM and in case if no AGM is held within 60 days from which the AGM was suppose to be held with the reasons when AGM could not be held.

9. Filing of Annual Accounts:
Section 137 provides that a copy of the financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the annual general meeting of the company, shall be filed with the Registrar within thirty days of the date of annual general meeting. For the year ending 31st March, 2014 the accounts can be prepared in the old format.
A company has to file within 30 days of AGM and in case if AGM is adjourned than within 30 days from the date of such adjournment.

10. Punishment where no specific penalty or punishment is provided
Section 450 provides that if a company or any officer of a company or any other person contravenes any of the provisions of this Act or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this Act, 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.

11. Punishment in case of repeated default.
Section 451 provides that if a company or an officer of a company commits an offence punishable either with fine or with imprisonment and where the same offence is committed for the second or subsequent occasions within a period of three years, then, that company and every officer thereof who is in default shall be punishable with twice the amount of fine for such offence in addition to any imprisonment provided for that offence.

12. Punishment for wrongful withholding of property.
      Section 452 provides that –
(1) If any officer or employee of a company —
(a) wrongfully obtains possession of any property, including cash of the company; or
(b) having any such property including cash in his possession, wrongfully withholds it or knowingly applies it for the purposes other than those expressed or directed in the articles and authorised by this Act, he shall, on the complaint of the company or of any member or creditor or contributory thereof, be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

(2) The Court trying an offence under sub-section (1) may also order such officer or employee to deliver up or refund, within a time to be fixed by it, any such property or cash wrongfully obtained or wrongfully withheld or knowingly misapplied, the benefits that have been derived from such property or cash or in default, to undergo imprisonment for a term which may extend to two years.

13. Punishment for improper use of "Limited" or "Private Limited".
Section 453 provides that if any person or persons trade or carry on business under any name or title, of which the word "Limited" or the words "Private Limited" or any contraction or imitation thereof is or are the last word or words, that person or each of those persons shall, unless duly incorporated with limited liability, or unless duly incorporated as a private company with limited liability, as the case may be, punishable with fine which shall not be less than five hundred rupees but may extend to two thousand rupees for every day for which that name or title has been used.

B: COMMON COMPLIANCES BY ALL PUBLIC COMPANIES:

Public offer of Securities:
Section 23 in Chapter III of the Act deals with the public offer of securities by public companies. The applicable rules are contained in Companies (Prospectus and Allotment of Securities) Rules, 2014.

Quorum
Section 103(1)(a)(i) provides that unless the articles of the company provide for a larger number, a public company shall have five members personally present if the number of members as on the date of meeting is not more than one thousand

Section 103(1)(a)(ii) provides that unless the articles of the company provide for a larger number, a public company shall have fifteen members personally present if the number of members as on the date of meeting is more than one thousand

Section 103(1)(a)(iii) provides that unless the articles of the company provide for a larger number, a public company shall have thirty members personally present if the number of members as on the date of the meeting exceeds five thousand.

C: CATEGORISATION BASED ON NUMBER OF PERSONS INVOLVED.

1. Minimum and Maximum Number of members restricted to 1.
One Person Company – popularly known as OPC. Section 2(62) defines OPC means a Company which has only one person as a member. OPC has a restriction on its share capital and turnover. Section (3) read with Rule 6(1) of the Companies (Incorporation) Rules, 2014 provides - Where the paid up share capital of One Person Company exceeds Rs.50 lakh rupees or its average annual turnover during the relevant period exceed Rs.2.00 crores, it shall cease to be entitled to continue as a One Person Company. OPC can get itself converted into a private or public company after increasing the minimum number of members and directors.

Some other features incidental to OPC.

a) Filing of cash flow statement Section 2(40) provides that an OPC is not required to give cash Flow Statement

b) Signing of annual return: Proviso to Section 92(1) provides that in relation to One Person Company and small company, the annual return shall be signed by the company secretary, or where there is no company secretary, by the director of the company.

c) Non applicability of certain sections of the Act. Section 122 provides that the provisions of section 98 (meeting by tribunal) and sections 100 to 111 (both inclusive) shall not apply to a One Person Company.

d) Exemption from holding meetings of board in certain cases: Section 122(4) provides that notwithstanding anything in this Act, where there is only one director on the Board of Director of a One Person Company, any business which is required to be transacted at the meeting of the Board of Directors of a company, it shall be sufficient if, in case of such One Person Company, the resolution by such director is entered in the minutes book required to be maintained under section 118 and signed and dated by such director and such date shall be deemed to be the date of the meeting of the Board of Directors for all the purposes under this Act.

e) Special condition with regard to filing of annual accounts: Section 137 provides that a One Person Company shall file a copy of the financial statements duly adopted by its member, along with all the documents which are required to be attached to such financial statements, within one hundred eighty days from the closure of the financial

f) Exemption from interval between two meetings: Section 173(5) provides that a One Person Company shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days

2. Number of members restricted between 2 to 200.
Private Company; Section 3(1)(b) requires minimum two persons to incorporate a private company and the maximum number of members is restricted to 200.

Quorum
Section 103(1)(b) provides that a private company, two members personally present, shall be the quorum for a meeting of the company.

3. Minimum number of members restricted to 7.
Public Company; Section 3(1)(a) requires minimum seven persons to incorporate a public company. There is no limit on the maximum number of members.

4. All public companies having more than 1000 shareholders.
Under Section 178(1) of the Act, the Board of Directors of every listed company and such other class or classes of companies, as may be prescribed shall constitute the Nomination and Remuneration Committee consisting of three or more non-executive directors out of which not less than one half shall be independent directors:

Section 178(5) of the Act further provides that the Board of Directors of a company which consists of more than one thousand shareholders, debenture-holders, deposit-holders and any other security holders at any time during a financial year shall constitute a Stakeholders Relationship Committee consisting of a chairperson who shall be a non-executive director and such other members as may be decided by the Board. There is a small confusion for which clarification is required. The sub-section by a logical interpretation means a listed company having more than 1000 members but the wording used is ‘every company’.

Under Section 120 read with Rule 27 of the Companies (Management and Administration) Rules, 2014 every company having not less than one thousand shareholders, debenture holders and other security holders, shall maintain its records, as required to be maintained under the Act or rules made there under, in electronic form.

Explanation.- For the purposes of this sub-rule, it is hereby clarified that in case of existing companies, data shall be converted from physical mode to electronic mode within six months from the date of notification of provisions of section 120 of the Act.

Section 108 read with Rule 20 of Companies (Management & Administration) Rules, 2014 provides that every company having not less than one thousand shareholders shall provide to its members facility to exercise their right to vote at general meetings by electronic means.

1. Company Limited by shares; [Section 3(2)(a)]
2. Company Limited by guarantee; [Section 3(2)(b)]
3. Company unlimited; [Section 3(2)(c)] To the best of our knowledge there is not even a single Company with unlimited liability incorporated in India even since British period. It is not understood why such companies find place in the Act. A single section could have been put that ventures with unlimited liability will be treated as association of person.

1. Companies with charitable objects, etc. Section 8 permits incorporation of such companies popularly known as non-profit making companies engaged in promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any other such object. The companies under this category have to apply all their income in promotion of the object and prohibits the payment of dividend to members.

1. Holding companies.
2. Subsidiary companies.
3. Associate companies

A: All Listed Companies

1. Definition Listed companies. Section 2(52) of the Act defines “Listed company” means a company which has any of its securities listed on any recognised stock exchange;

2. Signing of Annual Return: Section 92 read with Rule 11(2) Companies (Management & Administration) Rules, 2014 provides that annual return of listed company is required to be certified by a company secretary in practice.

3. Disclosure with regard to manner of evaluation of performance manner: Section 134 read with Rule 8(4) of Companies (Accounts) Rule, 2014 provides that every listed company and every other public company having a paid up share capital of twenty five crore rupees or more calculated at the end of the preceding financial year shall include, in the report by its Board of directors, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors.

4. Right of members to vote at general meetings by electronic means: Section 108 read with Rule 20 of Companies (Management & Administration) Rules, 2014 provides that every listed company shall provide to its members facility to exercise their right to vote at general meetings by electronic means.

5. Provision with regard to Independent Directors: Section 149(4) provides that every listed public company shall have at least one-third of the total number of directors as independent directors. I do not know why the word public is appearing in the section when there can’t be any class of company to go for listing.

6. Provision with regard to Woman Director: Section 149 (1) read with Rule 3 of Companies (Appointment & Qualification of Directors) Rule, 2014 provides that every listed Company shall appoint atleast one Woman director on the Board.

7. Compliance with regard to change in shareholding by 2% of Promoters and top ten shareholders. Section 93 read with Rule 13 of Companies (Management and Administration Rules), 2014, provides that every listed company shall file with the Registrar, a return in Form No. MGT.10 along with the fee with respect to changes relating to either increase or decrease of two percent, or more in the shareholding position of promoters and top ten shareholders of the company in each case, either value or volume of the shares, within fifteen days of such change.
Explanation.- For the purpose of this sub-rule, the “change” means increase or decrease by two percent or more in the shareholding of each of the promoters and each of the top ten shareholders of the company.

8. Report on compliance relating to Annual General Meeting. Section 121 read with rule 31 of the Companies (Management and Administration) rules, 2014 every listed public company shall prepare in the prescribed manner a report on each annual general meeting including the confirmation to the effect that the meeting was convened, held and conducted as per the provisions of this Act and the rules made there under and the company shall file with the Registrar in form no. MGT-15 within thirty days of the conclusion of the annual general meeting

9. Appointment of Independent Auditors Section 138 read with Rule 13 of the Companies (Accounts) Rule, 2014 every listed company shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company.

10. Filing of Secretarial Audit Report Section 204 read with Rule9 of the Companies (Appointment and Remuneration Personnel) Rules, 2014 every listed company shall annex with its Board's report made in terms of sub-section (3) of section 134, a secretarial audit report, given by a company secretary in practice, in form MR3.

11. Establishment of vigil mechanism Section 177(10) read with Rule 7 of Companies (Meetings of Board and its powers) Rules, 2014 every listed company shall establish a vigil mechanism for their directors and employees to report their genuine concerns or grievances-

12. Constitution of Audit Committee Section 177 read with Rule 6 of Companies (Meetings of Board and its powers) the Board of directors of every listed companies shall constitute an Audit Committee.

13. Constitution of Nomination and Remuneration Committee Section 178 (1) provides that the Board of directors of every listed companies shall constitute an a Nomination and Remuneration Committee of the Board.

B: Listed Companies with a paid-up capital of Rs.5.00 crore or more Appointment of CS as KMP
In a clarification to Section 203 read with Rule 8 of the Companies (Appointment and Remuneration Personnel) Rules, 2014 every listed company having a paid up share capital of Rs.5.00 crores or more shall appoint CS as whole-time key managerial personnel.

C: Listed Companies with a paid-up capital of Rs.10.00 crore or more Appointment of KMP
Section 203 read with Rule 8 of the Companies (Appointment and Remuneration Personnel) Rules, 2014 every listed company having a paid up share capital of Rs.10.00 crores or more shall have whole-time key managerial personnel other than CS for which the limit is paid-up capital of Rs.5.00 crore

H: COMPANIES BASED ON THEIR ECONOMIC PARTICIPATION:

A. NET WORTH CRITERIA
All companies having net worth of Rs.500.00 crores. Section 135 read with Rule Companies (Corporate Social Responsibility Policy) Rules, 2014 every company having net worth of rupees five hundred crores or more, shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director

B. PAID-UP CAPITAL CRITERIA.

1. Companies having paid up share capital of 50.00 lacs or less Small companies
Section 2(85) provides that a small companies are those having paid up share capital not exceeding Rs.50.00 lacs or a higher amount as prescribed by Central Government

2. Public company having paid up share capital of Rs.10.00 crores or more.
Signing of Annual Return:

Section 92 read with Rule 11(2) Companies (Management & Administration) Rules, 2014, annual return of a company having paid up share capital of Rs.10 crores or more is required to be certified by a company secretary in practice.

Section 149 read with Rule 4 of Companies (Appointment & Qualification of Directors) Rule, 2014 provides that Public Companies having paid up share capital of ten crore rupees or more shall have at least two directors as independent directors

Section 203 read with Rule 8 of the Companies (Appointment and Remuneration Personnel) Rules, 2014 every listed company having a paid up share capital of Rs.10.00 crores or more shall have whole-time key managerial personnel

Section 178 (1) read with Rule 6 of Companies (Meeting of Board and its Powers) Rule, 2014 provides that the Board of directors of all public companies with a paid up capital of ten crore rupees or more shall constitute a Nomination and Remuneration Committee of the Board.

3. All Public companies having net paid up share capital of Rs.50.00 crores or more

Section 138 read with Rule 13 of the Companies (Accounts) Rule, 2014 every public company having a paid up share capital of Rs.50.00 crores or more shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company.
Section 204 read with Rule9 of the Companies (Appointment and Remuneration Personnel) Rules, 2014 every public company having paid up share capital of Rs.50.00 crores or more shall annex with its Board's report made in terms of sub-section (3) of section 134, a secretarial audit report, given by a company secretary in practice, in form MR-3.

4. All companies having paid up share capital of Rs.100.00 crores or more.

5. Private companies having paid up capital of Rs.20.00 crore or more.

6. Public companies having a paid up capital of Rs.25.00 crore or more.

Section 134 read with Rule 8(4) of Companies (Accounts) Rule, 2014 provides that every public company having a paid up share capital of twenty five crore rupees or more calculated at the end of the preceding financial year shall include, in the report by its Board of directors, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors.

C. TURNOVER CRITERIA

1. Company having no turnover

a. Section 455(1) provide that a Company having future projects, assets, intellectual property but doesn’t have any significant accounting transactions can obtain a status of Dormant company by an application to ROC.
b. Section 173(5) provides that a Dormant Company shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days:

2. Public company having turnover upto Rs.2.00 crores.
Section 2(85)(ii) defines that small companies are those having turnover not exceeding of Rs.2.00 crores or a higher amount not exceeding Rs.20.00 crore as prescribed by Central Government. The CG has not increased the amount from Rs.2.00 crore so far.

3. Public company having turnover of Rs.50.00 crores or more.
Signing of Annual Return: Section 92 read with Rule 11(2) Companies (Management & Administration) Rules, 2014, annual return of a Company having turnover of RS.50 crores or more is required to be certified by a company secretary in practice.

4. Public company having turnover of Rs.100.00 crores or more.
Section 149 read with Rule 4 of Companies (Appointment & Qualification of Directors) Rule, 2014 provides that Public Companies having turnover of one hundred crore rupees or more shall have at least two directors as independent directors.
Section 149 (1) read with Rule 3 of Companies (Appointment & Qualification of Directors) Rule, 2014 provides that every Public Company having paid up share capital of Rs.100.00 crore or more shall appoint atleast one Woman director on the Board.
Section 178 (1) read with Rule 6 of Companies (Meeting of Board and its Powers) Rule, 2014 provides that the Board of directors of all public companies having turnover of one hundred crore rupees or more; shall constitute a Nomination and Remuneration Committee of the Board

5. All companies having a turnover of Rs.1000.00 crores.
Section 135 read with Rule Companies (Corporate Social Responsibility Policy) Rules, 2014 every company having turnover of rupees one thousand crores or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.

6. Public companies having a turnover of Rs.300.00 crores or more
Section 149 (1) read with Rule 3 of Companies (Appointment & Qualification of Directors) Rule, 2014 provides that every Public Company having turnover of Rs.300.00 crore or more shall appoint atleast one Woman director on the Board.

7. Public companies having a turnover of Rs.200.00 crores.
Section 138 read with Rule 13 of the Companies (Accounts) Rule, 2014 every Public company having a turnover of Rs.200.00 crores or more shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company.
Section 204 read with Rule 9 of the Companies (Appointment and Remuneration Personnel) Rules, 2014 every public company having turnover of 200.00 crores or more shall annex with its Board's report made in terms of sub-section (3) of section 134, a secretarial audit report, given by a company secretary in practice, in form MR-3.

8. Private companies having a turnover of Rs.200.00 crores.
Section 138 read with Rule 13 of the Companies (Accounts) Rule, 2014 every Private companies having a turnover of Rs.200.00 crores or more shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company

9. All companies having a turnover of Rs.250.00 crores.

D. NET PROFIT CRITERIA

All companies having a net profit of Rs.5.00 crores. Section 135 read with Rule Companies (Corporate Social Responsibility Policy) Rules, 2014 every company having a net profit of rupees five crores or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director

E. BORROWING / DEPOSIT CRITERIA

1. Public company having, in aggregate outstanding loans, debentures and deposits exceeding Rs.50.00 crores or more.

Section 149 read with Rule 4 of Companies (Appointment & Qualification of Directors) Rule, 2014 provides that Public Companies which have in aggregate, outstanding loans, debentures and deposits, exceeding fifty crore rupees shall have at least two directors as independent directors.

Section 177(10) read with Rule 7 of Companies (Meetings of Board and its powers) Rules, 2014 every company having, in aggregate outstanding loans, debentures and deposits exceeding Rs.50.00 crores or more shall establish a vigil mechanism for their directors and employees to report their genuine concerns or grievances

Section 178 (1) read with Rule 6 of Companies (Meeting of Board and its Powers) Rule, 2014 provides that the Board of directors of all all public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding fifty crore rupees or more; shall constitute a Nomination and Remuneration Committee of the Board

2. All companies which accept Deposits.
Section 177(10) read with Rule 7 of Companies (Meetings of Board and its powers) Rules, 2014 every company which accept Deposits shall establish a vigil mechanism for their directors and employees to report their genuine concerns or grievances

3. Appointment of Internal Auditor
Section 138 read with Rule 13 of the Companies (Accounts) Rule, 2014 every Private company having, in aggregate outstanding loans, debentures and deposits exceeding Rs.100.00 crores or more shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company

4. Public company having deposits of Rs.25.00. crores or more
Section 138 read with Rule 13 of the Companies (Accounts) Rule, 2014 every Public company having deposits of Rs.25.00. crores or more shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company.

5. Public company having, loans and borrowing from banks of Rs.100.00 crores or more.
Section 138 read with Rule 13 of the Companies (Accounts) Rule, 2014 every Public company having a loans and borrowing from banks of Rs.100.00 crores or more shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company.

It is hoped that over a period during full implementation of the Act, the number of categories will get merged and compliances made easy by the companies

ARTICLE : COMPANY LAW SETTLEMENT SCHEME, 2014 -
Rajendra Kewliya, Company Secretary, Sonic Biochem Extractions Limited, Indore (MP)

Introduction:
The Companies Act requires companies to file annual documents (Annual Return and Financial Statements) on the Registrar of Companies within prescribed time limits.

These annual documents are considered very important to the Registrar of Companies, (MCA21 electronic registry), it is observed that a large percentage of companies have not filed their statutory documents making them liable for penalties and prosecution for such non-compliance.

The Companies Act, 2013 lays down a stricter regime for the defaulting companies with higher additional fees. The quantum of punishment has been enhanced under the above mentioned provisions of the Act vis-a-vis the earlier Act i.e. Companies Act, 1956.

A specific provision for enhanced fine in case of repeated default has also been included in the form of section 451 of the Act. Additionally, the provisions of section 164(2} of the Act, inter alia, providing for disqualification of directors in case a company has not filed financial statements or annual returns for any continuous period of three financial years has been extended to all companies.

Comparative provisions of the Companies Act, 2013, as well as the Companies Act, 1956 tabulated below for filing of Annual documents;

Other important stringent provisions of the Companies Act, 2013 with reference to above.

According to clause (f) of sub section (5) of section 134 of the Companies Act, 2013 the Directors’ Responsibility Statement shall state that the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

It means it is the duty of the director to devise proper system for compliance of the law and it will be reported in Director’s Report.

According to provisions of section 164 (2) of the Companies Act, 2013, No person who is or has been a director of a company which (a) has not filed financial statements or annual returns for any continuous period of three financial years;

It means director will become disqualify to act as director if the company has not filed annual document to the ROC for continuous period of three financial years. Now, this provision is applicable to every company.

In addition, the auditors (Statutory auditor and Secretarial auditors) shall also report for non compliance of provision of 164 (2) of the Companies Act, 2013 in their report.

According to section 451 of the Companies Act,2013 If a company or an officer of a company commits an offence punishable either with fine or with imprisonment and where the same offence is committed for the second or subsequent occasions within a period of three years, then, that company and every officer thereof who is in default shall be punishable with twice the amount of fine for such offence in addition to any imprisonment provided for that offence. It means a company or officer has committed any default for the second or subsequent occasion within a period of three years, it will be punishable with twice of fine amount as well as imprisonment. Looking to above provisions, now it become necessary for a company to file annual documents to the Registrar of Companies under provisions of the Act within the prescribed time otherwise provisions are stricter than previous Act.

1) Representations from stakeholders:

The Ministry has received representations from various stakeholders requesting for grant of transitional period/one-time opportunity to enable them to file their pending annual documents to avoid attraction of higher fees/fine and other penal action, especially disqualification of their Directors prescribed under the new provisions of the Act.

The Company Law Settlement Scheme, 2014

2) The Ministry of Corporate Affairs, in order to give an opportunity to companies who have failed to file annual statutory documents (Annual Return and Financial Statements), has launched Company Law Settlement Scheme, 2014 (CLSS-2014), vide General Circular no. 34/2014 dated 12.08.2014.

3) The Central Government has exercised its under section 403 and 460 of the Companies Act, 2013 to introduce the Scheme namely 'Company Law Settlement Scheme 2014".

4) The scheme provides condoning the delay in filing the above mentioned documents with the Registrar, granting immunity for prosecution and charging a reduced additional fee of 25% of the actual additional fees payable as per section 403 read with Companies (Registration Offices and Fee) Rules, 2014 for filing those belated documents under the Companies Act, 1956/2013 and the Rules made thereunder.

5) Dormant Company: The scheme gives an opportunity to Inactive companies to get their companies declared as 'dormant company' under section 455 of the Act (Chapter XXIX) by filing a simple application at reduced fees. The said provision enables Inactive companies to remain on the Register of Companies with minimal compliance requirements.

6) Validity of the Scheme: The scheme shall come into force on the 15th August 2014 and shall remain in force up to 15th October, 2014.

7) Definitions - In this Scheme, unless the context otherwise requires, -

• (a) "Act" means the Companies Act, 2013 and Companies Act, 1956 (where ever applicable);
• (b) "Company" means a company as defined in clause of 20 of section 2 of the Companies Act, 2013 ;
• (c) "Defaulting company" means a company defined under the Companies Act, 2013, and which has made a default in filing of annual statutory documents.
• (d) "Designated authority" means the Registrar of Companies having jurisdiction over the registered office of the company.
• (e) “Immunity certificate” means the certificate as referred in the scheme.
• (f) "Inactive Company' means as defined In Explanation (i) to sub-section (1) of section 455(1) of Companies Act, 2013.

8) Applicability: - Any "defaulting company" is permitted to file belated documents which were due for filing till 30th June 2014 in accordance with the provisions of this Scheme:

9) Manner of payment of fees and additional fee on filing belated document for seeking Immunity under the Scheme - The defaulting company shall pay statutory filing fees as prescribed under the Companies (Registration Offices and fee) Rules, 2014 along with additional fees of 25% of the actual additional fee payable on the date of filing of each belated document.

10) Withdrawal of appeal against prosecution launched for the offences: If the defaulting company has filed any appeal against any notice issued or complaint filed before the competent court for violation of the provisions under the Companies Act, 1956 and/or Companies Act, 2013 in respect of which application is made under this scheme, the applicant shall before filing an application for issue of Immunity certificate, withdraw the appeal and furnish proof of such withdrawal along with the application.

11) Application for issue of Immunity in respect of document(s) filed under the Scheme - The application for seeking immunity in respect of belated documents filed under the Scheme may be made electronically in the e-Form CLSS-2014, after the document(s) are taken on file, or on record or approved by the Registrar of Companies as the case may be. The e-Form for filing application to obtain such a certificate will be available on the MCA21 portal from 1st September, 2014 and may be filed thereafter but not later than three months from the date of closure of the Scheme. There shall not be any fee payable on this Form.

Provided that this immunity shall not be applicable in the matter of any appeal pending before the court of law and in case of management disputes of the company pending before the court of law or tribunal.

Before the filing the application under this scheme, a person (Director/ Managing Director / Secretary/ Manager/ CEO/CFO) should be authorized by the Board Resolution to sign and submit this application under the scheme. It is to be mentioned in the application.

12) Order by designated authority granting immunity from penalty and prosecution - The designated authority shall consider the application and upon being satisfied shall grant the immunity certificate in respect of documents filed under this Scheme

13 : Scheme not to apply in certain cases ÷ (a) This scheme shall not apply to the filing of belated documents other than the following:

a. Form 20B — Form for filing annual return by a company having sham capital.

b. Form 21A — Particulars of Annual return for the company not having share capital.

c. Form 23AC, 23ACA, 23AC-xbrl. and 23ACA-XBRI. — Forms for filing Balance Sheet and Profit & Loss account.

d. Form 66 — Form for submission of Compliance Certificate with the Registrar.

e. Form 23B— Form for intimation for Appointment of Auditors.

14) This Scheme shall not apply

a) To companies against which action for striking off the name under sub-section (5) of section 560 of Companies Act, 1956 has already been initiated by the Registrar of Companies or

b) Where any application has already been filed by the companies for action of striking off name from the Register of Companies or

c) Where applications have been filed for obtaining Dormant Status under section 455 of the Companies Act, 2013;

d) to vanishing companies

15) Withdrawal of pending prosecutions: After granting the immunity, the Registrar concerned shall withdraw the prosecution(s) pending if any before the concerned Court(s);

16) Scheme for Inactive Companies: The defaulting inactive companies, while filing due documents under CLSS-2014 can, simultaneously, either

a, apply to get themselves declared as Dormant Company under section 455 of the Companies Act, 2013 by filing e-form MSC-1 at 25% of the fee for the said form; OR

b. apply for striking off the name of the company by filing e- Form FTE at 25% of the fee payable on form FTE.

17) Applicability of clause (a) sub-section (2) of 164 of the Companies Act, 2013 in case of companies availing the Scheme:- In case of defaulting companies which avail of this Scheme and file all belated documents, the provisions of clause (a) of sub¬section (2) of section 164 of the Companies Act, 2013 shall apply only for the prospective defaults, if any, by such companies

18) Action against the Company: At the conclusion of the Scheme, the Registrar shall take necessary action under the Companies Act, 1956/ 2013 against the companies who have not availed this Scheme and are in default in filing these documents in a timely manner.

Summary:

Corporate can avail the following benefits: a. Immunity from prosecution for delayed filing b. A reduced additional fee of 25% of the actual additional fees payable c. Escape for directors disqualified under section 164(2) of Companies Act, 2013

WIRC Advt & Announcement : CCEC 2014 Anouncement

Attention: Students

CORPORATE COMPLIANCE EXECUTIVE CERTIFICATE FOR STUDENTS

The Institute launched the ‘Corporate Compliance Executive Certificate’ in terms of Chapter IVA (Regulation 28A & 28B) of the Company Secretaries Regulations, 1982 on 4th October, 2013.

ELIGIBILITY FOR AWARD OF CORPORATE COMPLIANCE EXECUTIVE CERTIFICATE

A person who –
• is currently registered as a student of the Company Secretaryship course of the Institute;
• has completed at least one group of the Intermediate/Executive Programme Examination of the Company Secretaryship Course, and
• has completed a training of Six months under Regulation 28A of the Company Secretaries Regulations, 1982, which may include skill oriented practical /class room training for two weeks.

PROCEDURE

An eligible student may apply for award of Corporate Compliance Executive Certificate by submitting an application in specified format (available on the website of the Institute www.icsi.edu ), after making payment of a fee of ₹ 2000 (two thousand only), either in cash (at counters of the Institute across the county) or by way of Demand Draft in favour of ‘The Institute of Company Secretaries of India’ payable at New Delhi.

STATUS OF HOLDER OF CORPORATE COMPLIANCE EXECUTIVE CERTIFICATE

• The student who is awarded Corporate Compliance Executive Certificate of the Institute shall be entitled to use the descriptive letters "Corporate Compliance Executive".

• The grant of Certificate of Corporate Compliance Executive Certificate shall not confer on the Corporate Compliance Executive the rights of a member, nor entitle him to claim membership of the Institute.

VALIDITY OF CERTIFICATE

• The Corporate Compliance Executive certificate is valid for a period of three years (financial years) and is renewable on completion of four Programme Credit Hours (PCH) and payment of requisite fee as the Council may determine from time to time.

OTHER DETAILS

• The student shall have to complete the course of Corporate Compliance Executive Certificate including the training requirements within the registration period.

• The student having awarded the Corporate Compliance Executive Certificate may continue to pursue the regular Company Secretaryship course if he so desires.

• Except to the extent provided in this Chapter IVA (Regulations 28A & 28B) of the Company Secretaries Regulations, 1982 or as decided by the Council from time to time, regulations in Chapter IV and VI relating to `Registered Students’ and `Examinations’ shall mutatis-mutandis apply to the ‘Corporate Compliance Executive Certificate Course’.

• A student after having awarded the Corporate Compliance Executive Certificate shall secure four Programme Credit Hours (PCH) for renewal of Corporate Compliance Executive Certificate.

• There shall be no exemption from training.

Brochure and application form are available at CCEC section on website of the Institute www.icsi.edu For queries please write at ccec@icsi.edu or contact on phone number 011-45341049.

WIRC Advertisement

Case Law at Glance

A BIRD’S EYE VIEW: RECENT JUDGEMENTS ON COMPANY LAW -
              Ajay Kumar, B.COM(H), L.L.B., F.C.S., ACIS (UK), Practicing Company Secretary

Where the petitioner’s resignation, from directorship was in fact accepted and was acted upon, he ceased to be director of the company from the date he resigned from the Board of directors – Section 614 – KAMAL KUMAR GUPTA V. INDUS MARINE (P.) LTD. [2014] 121 CLA 96 (CLB).

The power of Company Law Board in dealing with the petition under section 397/398 and section 402 is statutory, and such power also includes passing of the order for winding up, which cannot be exercised by the arbitrator – Section 397/398 and section 402 read with section 8 Arbitration and Conciliation Act, 1996 – TRIUMPHANT INSTITUTE OF MANAGEMENT EDUCATION (P.) LTD. V. INSPIRE EDUCATIONAL SERVICES (P.)LTD. [2014] 121 CLA 38 (AP)

Deposits not to be invited without issuing an advertisement. Petitioner company accepted public deposits. Initially it returned same properly. Subsequently, it incurred losses and faced liquidity problems. Petitioner company was unable to repay its deposits and, hence, approached their Bankers for CDR. Petitioner company proposed a scheme for repayment of deposits with a prayer to allow initial moratorium and liberal terms. Since petitioner company had all intentions to profitably and effectively run business and to pay its depositors, scheme of repayment was to be sanctioned and repayment was to be made as per terms scheduled by CLB. – JINDAL COTEX LTD., [2014] 125 SCL 312/44 (CLB-NEW DELHI)

Appeal to High Court against order of Company Law Board under section 10F is maintainable even when it is Board ‘s administrative decision because the language of section 10F is wide enough to cover the same – Section 10F – R P KHOSLA V. CONNAUGHT PLAZA RESTAURANT (P.) LTD. And Ors [2014] 121 CLA 12 (DEL.)

Once prima facie case is made out for relief under section 167 of Companies Act, 1956, the Company Law Board would issue directions for convening and holding annual general meeting even with one shareholder attending – Section 167 [prior to substitution] – CDS PROJECTS SRI VIA DELL V. CDS SOLES (P.) LTD. [2014] 120 CLA 73 (CLB)

Civil court and not the Company Law Board is the correct forum to seek relief by litigants where the petitioner company alleges fraud, forgery or non–receipt of sale consideration of the shares – Section 111A - INTERNATIONAL COMMENTER LTD. V. COLUMBIA TRADING CO. LTD. [2014] 121 CLA 81 (CLB)

Smile Please

Office Mahabharata (Part - I) :

1) Dronacharya –
The Mentor. The employee who doesn’t like working himself but is always ready to guide and train new joiners.

2) Bhishma –
The Loyal. The employee in a relatively senior position who happily assists the boss in spite of knowing his incompetence (because of some strange oath maybe)

3) Dhritarashtra –
The blind boss. He knows that everything is wrong with his project but will still let it function, without making any changes to the current processes

4) Gandhari –
The Yesmen/Women. Boss’s immediate juniors who know that they are a part of an evil plan but will stay blindfolded and pretend as if nothing is happening

5) Yuddhisthira –
The ethical guy. Poor chap would never fudge timesheets and call in sick only when he is dying

6) Bheema –
The angry resource. Always ready to pick up a fight with his peers, subordinates or even the bosses

7) Arjuna –
The cool dude. The star performer who also knows how to sell his skills. A natural charmer.

How many Mahabharata characters like these have you seen in your office?

........To be continued.......

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WIRC Report June

WIRC Report July

WIRC Report September

Chapter News

Photo Gallery

Editorial Policy

A : “FOCUS” published monthly as a magazine aims to be a forum for members of the Western India Regional Council of the Institute of Company Secretaries of India ( WIRC of ICSI) for;

a. DISSEMINATING information,
b. COMMUNICATING developments affecting the Institute and its members in particular and the
     CS profession in general,
c. ARTICULATING issues of contemporary concern to the members of the profession.
d. CEMENTING and DEVELOPING relationships across membership by promoting discussion and
     dialogue on professional issues.
e. DISCUSSING and DEBATING issues particularly of public interest, which could be served by
      the CS profession.
f. FACILITATING Members of the profession to share their views on matters of professional
     interest by way of articles and write-ups.

B : The WIRC of ICSI recognizes the fact that;

a. There is a growing emphasis on the globalization of the CS profession;
b. There is an imminent need to position the profession in a business context which transcends the
    traditional and specific CS applications.
c. The Institute members increasingly will work across the globle and in global context.

C : Given this background the WIRC of ICSI strongly encourage contributions from the following
groups of professionals;

a. Members of other Professional bodies across the globe
b. Regulators and Government officials
c. Professionals from allied professions
d. Academia
e. Professionals from other disciplines whose views are of interest to the CS profession
f. Business leaders

D : The magazine also seeks to keep members updated on the activities of the Institute including events on the various practice areas and the various professional development programs on the anvil.

E : The WIRC of ICSI while encouraging stakeholders as in Section C to Contribute to the Magazine , it makes it clear that responsibility for authenticity of the contents or opinions expressed in any material published in the Magazine is solely of its author and the WIRC of ICSI, council members, any of its editors or members of Editorial Team & Advisory Board, the staff working on it or “FOCUS” is in no way holds responsibility there for. In respect of the advertisements, the advertisers are solely responsible for contents of such advertisements and implications of the same.

F : Finally and most importantly WIRC of ICSI strongly believes that the magazine must play its part in motivating students to grow fast as Members of tomorrow to be capable of serving the Legal & Compliance area within ever demanding customer expectations.

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