February 27

Corporate Social Responsbility Provisions to come into effect from April 1st, 2014.

According to the Section 135 read with Schedule VII of the companies act which will come into force on 1st April, 2014, all companies with turnover of `1,000 crore and more or a net worth of `500 crore and more or net profit of `5 crore and more -will have to spend at least two per cent of their three-year average profit every year on CSR activity.

The notification is available at http://www.mca.gov.in/Ministry/pdf/CompaniesActNotification1_2014.pdf

The following important new activities have been included in Schedule VII:

(a) Promoting preventive health care and sanitation and making available safe drinking water;

(b) Setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups;

(c) Ensuring ecological balance, protection of flora and fauna, animal welfare, agro-forestry, conservation of natural resources and maintaining quality of soil, air and water;

(d) Livelihood enhancement projects;

(e) Protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts;

(f) Measures for the benefit of armed forces veterans, war widows and their dependents;

(g) Training to promote rural sports, nationally recognised sports, paralympic sports and Olympic sports;

(h) Contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government;

(i) Rural development projec

From April 1, all 16,245 registered companies have to nominate three members for their CSR committee from their board..

To understand the various provisions and concepts regarding CSR please go to to http://ssglawfirm.in/corporate-social-responsibility-not-an-option-anymore/

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October 24

Directors Declaration under the old companies act and the Companies Act, 2013

The changes with respect to directors declaration under the new Companies Act are as follows :

Section 274 (1) (g): declaration of director now not restricted to a public company:

Under the previous act the director had to give a declaration that he is he is not the director of a public company which has not filed annual return for 3 continuous financial years and has not failed to repay the deposits but under the new companies act, 2013 the director has to give the same declaration with respect to any company. The words public company has been replaced by company

Status: New section 164(2), not notified

Section 299: The following are the changes :

1) Time for making disclosure: Under the new companies act the disclosure regarding interest in contracts and arrangement has to be made by any director at first meeting of board when he becomes director and 1st meeting of the board in every financial year or where there is a change in disclosure. Earlier the disclosure was made at the board meeting when the contract or arrangement was considered or in other cases at first meeting of the board after the directors becomes interested in any contract or arrangement

2) Penalty: The penalty earlier for not complying with the provision earlier fine upto 50 thousand now the penalty is imprisonment for 1 years or fine which may extend from 50 thousand to one year.

3) Format of Form 24AA has changes. Now the form is Form 12.1

4) The notices given by directors have to be preserved for a period of 8 years from the financial year in which they are given at the registered office address of the company in the safe custody of the secretary of the company or any person so appointed by the board (New Requirement Chapter XII, Rule 12.7)

Status : New Section 184, not notified

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October 16

APPOINTMENT OF DIRECTOR, RESIGNATION OF DIRECTOR, INDEPENDENT DIRECTOR, CONDUCT OF BOARD MEETING AND COMPOSITION OF BOARD UNDER COMPANIES ACT,2013

A. Steps for appointment of director: The steps for appointment of director of a private limited company are as follows :

Note: Only provision regarding appointment of an additional director has been notified.

Step 1: Section 152[1]: Ensure that the director has been allotted a director identification number.

Step 2: Section 149[2]: Ensure that the number of director for a private company is a minimum of two in number.

Step 3: Section 149[3]: Ensure that the company has atleast one director who has stayed in India for a total period of not less than 180 days in the previous calendar year. This provision is applicable for all companies and all the companies existing on and before the commencement of this act have to comply with this requirement within one year from date of notification of the rules in this regard or from the commencement of the act[4].

Step 4: Section 161[5]: In case of appointment of additional director : Ensure that the director to be appointed by board of directors exercising the power so conferred in them by the Articles of the company is not such a person who has failed to get appointed as a director in a general meeting. The additional director has to be appointed till date of next AGM or last date on which AGM should have been held , whichever is earlier

Step 5: Section 161(2)[6]: In case of appointment of an alternate director: Ensure that such director is appointed as a director in place of a director during his absence from India for a period not less than three months. Also ensure that such person is appointed by the board on being so authorized by the AOA or resolution passed in general meeting. Such director shall not be appointed as an alternate director unless he is qualified to be an independent director under the companies act.

Step 4: Section 160[7]: In case of a person notifying his candidature: Notice must be given to the Company regarding proposal for appointment of a person as a director not less than 14 days before the General Meeting. Such notice should be given by deposit of Rs, 1 Lakh or any higher amount which may be prescribed

Step 5: Section 152(5)[8]: In case the person has not himself notified his candidature: Obtain consent from the person who is to be appointed as Director. The consent should be in form 11.2 (Chapter XI, Draft rules[9]). The format has changed with respect to the old act.

Step 6: Hold and convene a board meeting and pass resolution to the effect

Step 7: The consent for appointment should be filed by the company with the Registrar in Form No. 11.8 along with the fee as provided in Annexure ‘B’. (Chapter XI, Draft rule 11.6[10])

Step 8: Section 170[11]– Make necessary entries in the Register of Director

Changes vis-à-vis Companies Act, 1956:

1) In case of a person notifying his candidate the person had to deposit Rs. 500 but according to the companies act, 1956 the person has to deposit Rs. 1 Lakh or higher amount so prescribed.

2) Format for written consent has changed (The format can be found at Form 11.2)

3) Provision regarding a resident director has been introduced.

4) Changes have been introduced with respect to additional director.

B. Steps for resignation of a director: The steps for resignation of director of a private limited company according to companies Act, 2013 are as follows:

Note: None of the provisions have been notified.

Step 1: Notice to be given by the director resigning to the company (Section 168[12])

Step 2: After the receipt of notice the company should within thirty days from the date of receipt of notice from a director, intimate the Registrar in Form No. 11.8 and post the information on its website, if any. (Chapter XI, Rule 11.12[13]).

Step 3: Place the fact of such resignation in the report of directors laid in the immediately following general meeting by the company (Section 168[14]).

Step 4: The director may within thirty days from the date of resignation, forward to the Registrar a copy of his resignation along with reasons for the resignation in Form No. 11.7 along with the fee as provided in Annexure ‘B’. (Chapter XI, Rule 11.13[15])

C. Steps for conducting a board meeting : The procedure for conducting a board meeting according to the provisions of the Companies Act, 2013 is as below:

Note: None of these provisions have been notified

Step 1: Section 173[16]: Check that four meetings of board of directors are being conducted every year and the time period between two consecutive board meetings is not more than 121 days.

Step 2: Section 173[17]: Check that a notice of not less than 7 days has been sent by hand or post or electronic means to all the directors .

Step 3: Section 174[18]: The quorum for meeting has to be seen. The quorum for the meeting should be 1/3 of its total strength or two directors whichever is higher. The participation of directors by video conferring and other audio visual means shall be also counted for the purpose of quorum

Step 4: If the meeting is being conducted through audio visual means check that requirements of Chapter XI [19]are met.

Step 5: Section 118[20]: Ensure that the minutes of the meeting are prepared and signed within 30 days of the conclusion of the meeting.

D. Independent Director: The provisions regarding Independent director according to Companies Act, 2013 are as follows:

Note: None of these provisions have been notified

An independent director shall be appointed for the following companies:

§ Section 149 (4) : Every listed public company shall have at least one-third of the total number of directors as independent directors and the Central Government may prescribe the minimum number of independent directors in case of any class or classes of public companies.

The classes of such public companies are mentioned in Chapter XI Rule 11.2. They are:

§ Public Companies having paid up share capital of one hundred crore rupees or more; or

§ Public Companies having turnover of three hundred crore rupees or more;

§ Public Companies which have, in aggregate, outstanding loans or borrowings or debentures or deposits, exceeding two hundred crore rupees. (Chapter XI, Rule 11.2[21])

§ Applicable to all companies be it public or private, provision ambiguous in nature : Section 135[22] : Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore 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 (This provision requires clarification and clarification would be soon given as stated my Mr. Sachin Pilot. )

The definition and requirements of an independent director is stated in Section 149 (6)[23]. The steps for appointment of independent Director are as follows:

Step 1: Ensure that the independent director meets the requirements stated in Section 149 r/w Schedule VI [24]

Step 2: Ensure that explanatory statement attached to the notice of the meeting for approving the appointment of independent director includes a statement that in the opinion of the Board, the independent director proposed to be appointed fulfils the conditions specified in the Act and the rules made there under and that the proposed director is independent of the management (Schedule VI of companies Act, 2013[25])

Step 3: Getting the appointment of independent director(s) approved at the meeting of the shareholders. (Schedule VI[26])

Step 4: Issuing a letter of appointment to the independent director enlisting the term of appointment, the expectations, the fiduciary duties, code of ethics, terms and conditions , remuneration etc (Schedule VI[27])

E. Composition of board ; The following is the composition of Board in a private Limited company as per the Companies Act, 2013

Note : Only provision regarding additional and nominee director has been notified.

I. Minimum and maximum no of directors: Section 149[28]: Every company shall have board of directors constituting of individuals as directors and shall have minimum of two directors in case of private limited company and a maximum of 15 directors. A Company may appoint more than 15 directors after passing a special resolution.

II. Resident Director Section 149 (3)[29]: Applicable to private company: Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar year.

Compliance time: Section 149(5)[30]: Every company existing on or before the date of commencement of this Act shall, within one year from such commencement or from the date of notification of the rules in this regard as may be applicable, comply with the requirements of the provisions of resident director[31].

III. Additional director: Section 161 (1)[32]: Applicable to private company:The Additional director can be to be appointed by board of directors exercising the power so conferred in them by the Articles of the company till date of next AGM or last date on which AGM should have been held , whichever is earlier but such a person should not has failed to get appointed as a director in a general meeting.

IV. Alternate Director: Section 161(2)[33]: Applicable to private company:Such director is appointed as a director in place of a director during his absence from India for a period not less than three months. An Alternate Director is appointed by the board on being so authorized by the AOA or resolution passed in general meeting. A Person qualified to become an independent director can only be appointed as an alternate director [34]

V. Nominee Director: Section 161(3) [35]: Applicable to private company:Board may appoint any person as a director nominated by any institution in pursuance of the provisions of any law for the time being in force or of any agreement or by the Central Government or the State Government by virtue of its shareholding in a Government company.

VI. Key managerial personnel: Section 203[36] : applicable to listed company as well as private company with paid up share capital of five crores or more[37]:Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,—

(i) managing director, or Chief Executive Officer or manager and in their absence,

a whole-time director;

(ii) company secretary; and

(iii) Chief Financial Office

Points to be taken into consideration:

a) Section 203 (2)[38]: Every whole-time key managerial personnel of a company shall be appointed by means of a resolution of the Board containing the terms and conditions of the appointment including the remuneration.

b) Section 203 (3)[39]: A Whole-time key managerial personnel shall not hold office in more than one company except in its subsidiary company at the same time.

Provided that nothing contained in this sub-section shall disentitle a keymanagerial personnel from being a director of any company with the permission of the Board:

Provided further that The whole-time key managerial personnel holding office in more thanone company at the same time on the date of commencement of this Act, shall, within a period of six months from such commencement, choose one company, in which he wishes to continue to hold the office of key managerial personnel

Provided also that a company may appoint or employ a person as its managing director, if he is the managing director or manager of one, and of not more than one, other company and such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice has been given to all the directors then in India.

c) In case of vacation :Section 203(4)[40] : If the office of any whole-time key managerial personnel is vacated, the resultingvacancy shall be filled-up by the Board at a meeting of the Board within a period of six months from the date of such vacancy.

Penalty for contravention (Non appointment of KMP) : Section 203 (5)[41] : In case of contravention of the provisions of the section 203 , the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every director and key managerial personnel of the company who is in default shall be punishable with fine which may extend to fifty thousand rupees and where the contravention is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the contravention continues.

VII. Independent Director : Not applicable to Private companies but section 135 of the act which is related to corporate social responsibility states that Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore 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 .

VIII. Women directors (Not applicable to private companies) : Proviso to section 149 : The prescribed class or classes of companies as may be shall have at least one woman director. The prescribed companies[42]are :

(i) every listed company – within one year from the commencement of second proviso to sub-section (1) of section 149;

(ii) every other public company having –

(a) paid–up share capital of one hundred crore rupees or more; or (b) turnover of three hundred crore rupees or more within three years from the commencement of second proviso to sub-section (1) of section 149

[1] Not in force

[2] Not in force

[3] Not in force

[4] Section 149(5), not in force.

[5] In force , notification dated 14.09.2013.

[6] Not in force

[7] Not in force

[8] Not in force

[9] Not in force

[10] Not in force

[11] Not in force

[12] Not in force

[13] Not in force

[14] Not in force

[15] Not in force

[16] Not in force

[17] Not in force

[18] Not in force

[19] Not in force

[20] Not in force

[21] Not in force

[22] Not in force

[23] Not in force

[24] Not in force

[25] Not in force

[26] Not in force

[27] Not in force

[28] Not in force

[29] Not in force

[30] Not in force

[32] In force

[33] Not in force

[34] Provio to section 161, not in force.

[35] In force

[36] Not in force

[37] Rule 13.6, Chapter XIII, not in force

[38] Not in force

[39] Not in force

[40] Not in force

[41] Not in force

[42] Rule 11.2, Draft Rules Chapter XI, Not in force

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October 16

Steps for Holding an EGM under Companies Act, 2013

Note: The following sections are notified:

Section 100- General Provision for holding EGM – no change

Section 102- Statement to annexed to notice – change w.r.t Companies Act, 1956

Section 103- Quorum for meetings – change w.r.t Companies Act, 1956

Section 104- appointment of chairman- no change

Section 105 – Appointment of proxies change w.r.t Companies Act, 1956 but changes not notified

Section 107- Voting by show of Hands-no change

Section 108- Demand for Poll- no change

General provision: An Extra Ordinary General Meeting can be conducted in the following three ways: (No change with respect to the old companies act)

Meeting by Board: Section 100(1)[1]: The Board may, whenever it deems fit, call an extraordinary general meeting of the company.

Meeting by Board on requisition: Section 100(2)[2] : The board can also call an EGM at the requisition of members.

a) in the case of a company having a share capital, such number of members who hold, on the date of the receipt of the requisition, not less than one-tenth of such of the paid-up share capital of the company as on that date carries the right of voting;

(b) in the case of a company not having a share capital, such number of members who have, on the date of receipt of the requisition, not less than one-tenth of the total voting power of all the members having on the said date a right to vote, call an extraordinary general meeting of the company within the period specified in subsection

Meeting by requisitonits: Section 100(3)[3]: If the Board does not, within twenty-one days from the date of receipt of a valid requisition in regard to any matter, proceed to call a meeting for the consideration of that matter on a day not later than forty-five days from the date of receipt of such requisition, the meeting may be called and held by the requisitonists themselves within a period of three months from the date of the requisition.

The following are the steps for holding an EGM under the Companies Act, 2013 by the board:

Step 1: Convene Board Meeting after giving notice to all the directors to discuss besides others the following matters.

· To propose resolutions to be passed at the Extraordinary General Meeting of shareholders

· To fix the date, time and place for convening the Extraordinary General Meeting of shareholders.

Step 2: Section 101[4], Notice: Issue and dispatch notices in writing or through electronic mode giving atleast 21 clear days in such a manner as may be prescribed. Chapter VII, Rule 7.16 lays down in details the procedure to be followed while sending a notice through electronic means. The notice shall specify the place, date, day and hour of the meeting and shall contain a statement of business to be transacted at such meeting[5]. The notice of meeting shall be given to:

(a) every member of the company, legal representative of any deceased member
or the assignee of an insolvent member;
(b) the auditor or auditors of the company; and
(c) every director of the company

Step 3: Section 101(1) Provio[6]: The meeting can be held at a shorter notice if the consent is given in writing or electronically by not less than 95 percent of members entitled to vote at such meeting.

New: Step 4: Attach statement to the notice[7]: According to Section 102[8]: the statement annexed to the notice shall contain

(a) the nature of concern or interest, financial or otherwise, if any, in respect of each items of—

(i) every director and the manager, if any;

(ii) every other key managerial personnel; and

(iii) relatives of the persons mentioned in sub-clauses (i) and (ii);

(b) any other information and facts that may enable members to understand the meaning, scope and implications of the items of business and to take decision thereon

Step 5:Quorum: section 103[9]: Ensure that the quorum required for private companies that is 2 members is present. If the quorum is not present within half-an-hour from the time appointed for holding a meeting of the company—

(a) the meeting shall stand adjourned to the same day in the next week at the same time and place, or to such other date and such other time and place as the Board may determine; or

(b) the meeting, if called by requisitionists under section 100, shall stand cancelled:

New: Provided that in case of an adjourned meeting or of a change of day, time or place of meeting under clause (a), the company shall give not less than three days notice to the members either individually or by publishing an advertisement in the newspapers (one in English and one in vernacular language) which is in circulation at the place where the registered office of the company is situated.

Step 6:Chairman: Section 104[10]: The members personally present at the meeting shall elect one of themselves to be chairman on show of hands. If a poll is demanded on the election of the Chairman, it shall be taken forthwith in accordance with the provisions of this Act and the Chairman elected on a show of hands shall continue to be the Chairman of the meeting until some other person is elected as Chairman as a result of the poll, and such other person shall be the Chairman for the rest of the meeting

Step 7:Appointment of Proxies: Section 105[11]: Provision exactly same as old act except the following:

New :Section 105 (1)Proviso 3[12]: Provided also that the Central Government may prescribe a class or classes of companies whose members shall not be entitled to appoint another person as a proxy:

Section 105 (1) Proviso 4[13]: Provided also that a person appointed as proxy shall act on behalf of such member or number of members not exceeding fifty and such number of shares as may be prescribed

Step 8:Voting: Section 107[14]states that voting can be done by show of hands unless a poll is demanded.

Demand for Poll: Section 108[15]states that before or on declaration of result of voting on any resolution by show of hands a poll may be ordered by the chairman on an demand made by:

(a) in the case a company having a share capital, by the members present in person or by proxy, where allowed, and having not less than one-tenth of the total voting power or holding shares on which an aggregate sum of not less than five lakh rupees or such higher amount as may be prescribed has been paid-up; and

(b) in the case of any other company, by any member or members present in person or by proxy, where allowed, and having not less than one-tenth of the total voting power.

New: Section108[16]: Voting can also be done through electronic means for the class or classes of companies so prescribed by the central government. Chapter VII Rule 7.18 states that the following companies can conduct voting through electronic means:

a) Every listed company

b) a company having five hundreds or more shareholders may provide to its members facility to exercise their right to vote at general meetings by electronic means.

The procedure for electronic voting and requirements are further stated in proviso to Rule 7.18 , Chapter VII Draft Rules

Step 9: After the voting is done and resolutions are passed ensure that the minutesof the meeting are prepared and signed within 30 days of the conclusion of the meeting. (Section 118[17])

Step 10:Section 117[18]: File the appropriate form with ROC within 30 days of passing of the resolution.

[1] In force

[2] In force

[3] In force

[4] Not in force

[5] Section 101(2), not in force

[6] Not in force

[7] Section 102, in force

[8] In force

[9] In force

[10] In force

[11] In force

[12] Not in force

[13] Not in force

[14] In force

[15] Not in force

[16] Not in force

[17] Not in force

[18] Not in force

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