advocates and corporate law advisors f u cs himanshu harbola advocate and company secretary acs,...
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ADVOCATES AND CORPORATE LAW
ADVISORS
f
u
CS HIMANSHU HARBOLAAdvocate and Company SecretaryACS, B.A. LL.B (Hons.), PGDIPR, PGDDLTAEmail - [email protected]: 9818-993-836
754, 2nd Floor, Sukhdev Nagar, Near New Public School, Kotla- Mubarak Pur, Opp. Defence Colony, New Delhi- 03
VAIBHAV AGARWALMT – Legal & SecretarialEmail - [email protected]: 9013-140-137
CORPORATE JURIS
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COMPANIES ACT, 2013AN OVERVIEW
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An Introduction
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Journey so far
Introduction of Companies Bill 2009 in Lok Sabha
Referred to Standing Committee for examination
Dr. J. J. Irani
Committee
Report2005
2009 20
09 Receipt of Standing Committee Report
2010
Laying down of Companies Bill 2011 in Lok Sabha
2011 Referred to Standing
Committee for re-examination
2012
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Receipt of Standing Committee Report
Notification of
Sections2013-
2014
201220
122013
Introduction and passage of Bill by Lok Sabha
Introduction and passage of Bill by Rajya Sabha
2013
Receipt of President assent
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Implementation in Steps
Section 1 of CA, 2013 empowers Central Government to commence the different provisions of Companies Act 2013 on different dates.
98 Sections NotifiedSections for which rules were not required
CSR NotifiedSection 135 read with Companies (Corporate Social Responsibility Policy) Rules, 2014
Some more Sections Notified
• Incorporation of Companies
• Prospectus & Allotment of Securities
• Dividends• Meetings & Directors• Accounts and Audits
Some Rules Notified• Companies (Incorporation) Rules,
2014• Companies (Prospectus & Allotment
of Securities) Rules, 2014• Companies (Management &
Administration) Rules, 2014• Companies (Accounts) Rules, 2014• Companies (Declaration & Payment
of Dividend) Rules, 2014
SEPTEMBER 12, 2013
FEBRUARY 27, 2014
MARCH 26, 2014
MARCH 27-28, 2014
Companies Act, 2013 NotifiedSection 1 came into effect immediately
AUGUST 30, 2013
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SOME CONCEPTS CONCERNING
PROFESSION OF CHARTERED
ACCOUNTANTS
Accounts & Audits
Corporate Social
Responsibility
National Financial Reporting Authority
Dividend Depreciation
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ACCOUNTS AND AUDITS
CHAPTER IX AND X OF COMPANIES ACT, 2013
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AccountsThe 2013 Act contains a number of provisions which have implications on accounts. Some of these provisions are analysed below.
Consolidated Financial Statements (Section 129)
• CA, 2013: Mandates
preparation of CFS by all
companies having one or
more subsidiaries
(including associates and
joint ventures).
• CA, 1956: No such
requirement.
Financial Year (Section 2(41))
• CA, 2013: FY for all
companies and body
corporates to end on
31st March
• CA, 1956:
Company's /body
corporate's election to
choose FY.
Restatement of Financial Statements (Section 130) – Yet to be notified
• CA, 2013: Mandatory
restatement, in case of fraud
and when a Court/ the
Tribunal passes an order for
restatement; Voluntary
restatement to comply with
accounting standards with
the approval of the tribunal
• CA, 1956: Not allowed
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Individual or firm to be appointed for five years, subject to ratification by members in every AGM.
Change of auditors before the five year term would require special resolution after obtaining the previous approval of the Central Government.
TERM OF APPOINTMENT
ROTATION OF AUDITORS
Listed Companies and such class of companies as may be prescribed cannot appoint or reappoint – Audit Firm for more than 2
consecutive terms of 5 years Individual for one term of
5years.
Cooling Period of 5 years.
Prohibition on auditor rendering non-audit services to auditee company/ its subsidiary/ holding company.
Some of such services are as follows: Accounting and book keeping Internal Audit Investment advisory services Investment banking services Management services
Audit & Auditors
NON-AUDIT SERVICES
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LISTED COMPANY
Every listed company.
UNLISTED PUBLIC COMPANY
Paid-up Share Capital – Rs. 50 Crore or more during preceding FY.
Turnover – Rs. 200 Crore or more during preceding FY.
Outstanding loans from Banks/PFIs – Rs. 100 Crore or more at any point of time during preceding FY.
Outstanding deposits – Rs. 25 Crore or more during preceding FY.
PRIVATE COMPANY
Turnover – Rs. 200 Crore or more during preceding FY.
Outstanding loans from Banks/PFIs – Rs. 100 Crore or more at any point of time during preceding FY.
Mandatory Internal Audit (Section 138)
Following class of companies shall appoint either Chartered Accountants or Cost Accountants or other professional as may be decided by the Board
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CORPOARTE SOCIAL RESPONSIBILITY
SECTION 135 OF COMPANIES ACT, 2013 READ WITH COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY) RULES, 2014 NOTIFIED ON FEBRUARY 27, 2014
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Concept & BenefitsCommunities provide licence to operate
Attracting and retaining employees
Communities as suppliers
Enhancing corporate reputation
Reduced regulatory oversight
Business take inputs from nature and society and thus owe responsibility of taking care of them.
“
”
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CSR as per Law (Not Exhaustive)
1.Projects or programs relating to activities specified in Schedule VII to the Act
2.Projects or programs relating to activities undertaken by the board of directors of a company (Board)
in pursuance of recommendations of the CSR Committee of the Board as per declared CSR Policy of
the company subject to the condition that such policy will cover subjects enumerated in Schedule VII
of the Act.
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Net Worth – Rs. 500 Crore or more
Turnover – Rs. 1000 Crore or more
Net Profit – Rs. 5 Crore or more
ApplicabilityEvery Company meeting any of the following criteria in any financial year
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NATIONAL FINANCIAL REPORTING AUTHORITY & NATIONAL FINANCIAL REPORTING APPELLATE AUTHORITY YET TO BE NOTIFIED (SECTION 132)
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1.Make recommendations to Central Government on formulation of accounting and auditing standards.
2.Monitor and enforce compliance with accounting and auditing standards.
3.Oversee the quality of service of the professions associated with ensuring compliance with such standards.
4.Investigate into matters of professional or other misconduct committed by any member or firm of Chartered Accountants.
5.Impose penalty and debar such firm or Chartered Accountants from practice, in case where professional or other misconduct is proved.
Section 133 of Companies Act, 2013 empowers Central Government to constitute NFRA and NFRAA to perform following functions:
Constitution, Functions & Powers
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DECLARATION AND PAYMENT OF DIVIDENDCHAPTER VIII OF COMPANIES ACT, 2013
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A Comparison…Basis Companies Act, 2013 Companies Act, 1956
Whether dividend declaration/payment barred if company
defaulted in repayment of deposits?
Yes No such bar
Whether transfer to reserves compulsory?
No. Discretion of company. Mandatory in accordance with Companies (Transfer of Profit to
Reserves) Rules, 1975.
Transfer of Shares to IEPF after expiry of
seven years
Shares in respect of which unclaimed or unpaid dividend transferred to
IEPF shall also be transferred in the name of IEPF.
No such requirement was there.
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Board of Directors
• Accountability to stakeholders beyond only shareholders
• Reporting beyond SOX• Liability on Class Action Suits• Significant penalties on Insider
Trading and restatements• Societal scrutiny on CSR
• Ease of restructuring• Reporting beyond SOX• Wider definition of Related Party
Transactions• New depreciation rules may
affect profitability• Liable for Class Action Suits
• Additional rigor on financial Reporting• Mandatory internal audit• Reporting beyond SOX• Significant penalties on Insider
Trading and restatements• Compliance on Related Party
Transactions
• Oversee implementation of best corporate governance practices.
• Safeguard interests of all stakeholders
• Ensure adequate and functional vigil mechanism.
• Determine appropriate levels of remuneration for Directors and KMP.
• Multi-layered structures to be collapsed
• Cross-border transactions allowed
• Mandatory CSR contribution will affect cash flows
• Wider definition of Related Party Transactions
• Lower thresholds for financial consolidation
• Mandatory contribution to local CSR
• Wider definition of Related Party Transactions
• Ease in cross-border restructuring
• Facility of minority buy-out
Impact on various Stakeholders
Audit Committee
MNCsPromoters
CXO and KMPs
Independent Directors
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For any further queries, contact us as below
981-899-3836, 901-314-0137 [email protected]
CS HIMANSHU HARBOLA, [email protected]/
You can also find us at:
* Let’s talk
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DISCUSSION