co act 2013 good presentation.pptx

8/10/2019 Co Act 2013 Good Presentation.pptx

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SEMINARON COMPANY LAW

ORGANISED BY

DTPA STUDY CIRCLE, ICAI

22/04/14


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COMPANIES ACT, 2013SOME SELECTED TOPICS

CA NITESH MORE


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Companies Act, 1956 Companies Act, 2013

It has 658 Sections,

Rules & 15 Schedules

It was introduced on 1stApril, 1956

It extends to the whole ofIndia (except Sikkim- ithas its own CompaniesAct)

The Act has 470 Sections

(309 pages), 29 chapters,7 Schedules & 29 rules(338 pages)

98 Sections has been

notified w.e.f. 12thSeptember, 2013 & 282sec. has been notifiedw.e.f. 1stApril, 2014.

It applies to the whole ofIndia


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Relevant provisions

SEC 185

SEC 186

CHAPTER V & ITS RULES:SEC 73 TO SEC 76 &


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Sec 185: An Anti-business sec

NO LOAN / SECURITY / GUARANTEE TO DIRECTORS

other PERSONS IN WHOM DIRECTOR IS INTERESTED

No company can directly or indirectly advance

loan to its directors or to other persons in

whom directors are interested.

No company can give any guarantee or

provide any security in connection with any loan

taken by him or such other person.

Company cant give loan represented by a book

debtto above mentioned person.


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Meaning of the word Indirect

The word indirect used means that the co does

not give a loan to director through the agency

of one or more intermediaries. The word

indirect cannot be read as converting what is

not a loan into a loan. [Dr. Fredie Ardeshir

Mehta V Union of India (1991) 70 Comp Cas

210]


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Planning

1) ConvertLender co & borrower co toLLPor

2) Convert other co (to whom loan is given) topublic Ltd to enjoy 25% limit or

3) Rearrange shareholding pattern & directorshippattern:

a)Appointnew directors in lender Co, whopersonally neither hold any share in other conor are directors in other co. If their relativesholds shares or are directors than there is noproblem or

b) Gift of shares


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MEANING OF TO ANY OTHER PERSON IN

WHOM DIRECTOR IS INTERESTED

(a) INDIVIDUAL:Director of lending co.,or holding co. or any partner or relative of any

such director;

(b)FIRM:in which any such directoror relative is a

partner;

(c) PVT LTD CO:of which such directoris a director

or member;

[Note- Relative of Director are not covered under

this sub clause]


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MEANING OF TO ANY OTHER PERSON IN

WHOM DIRECTOR IS INTERESTED

(d) BODY CORPORATEat a general meeting of

which at least25 %of voting power may be

exercised or controlledby such director, or by

two or more such directors, together; or

[Note- Relative of Director also not coveredunder this sub-clause]

(e)BODY CORPORATEBoard, MD or manager,

whereof is accustomed to actin accordance withdirections or instructions of Board, or of any

director or directors, of lending company.


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Planning

1) ConvertLender co toLLPor

2) Convert other co (to whom loan is given) topublic Ltd to enjoy 25% limit or

3) Rearrange shareholding pattern & directorshippattern:

a)Appointnew directors in lender Co, whopersonally neither hold any share in other conor are directors in other co. If their relativesholds shares or are directors than there is noproblem or

b) Gift of shares


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How to rearrange shareholding &

Directorship pattern?

Suppose A,B,C,D are 4 members in a family.

They have 2 Cos: A Pvt Ltd & C Pvt Ltd.

i) We can appoint A& B as directors of A Pvt

Ltd. & gift all shares in name of C & D in A

Pvt Ltd to A & B.

ii) We can appoint C& D as directors of C Pvt Ltd

& gift all shares in name of A & B in C Pvt Ltd

to C & D.


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MEANING OF CONTROL [SEC. 2 G)]

"Control" has been defined as to include the right to

appoint majority of the directors or to control the

management or policy decisionsexercisable by a person or

persons acting individually or in concert, directly orindirectly, including by virtue of their shareholding or

management rights or shareholding or management rights

or shareholders agreements or voting agreements or in any

other manner.


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EXCEPTIONS

a) MD/WTD - The giving of any loan to a Managing or

Whole-time director-

(i) as a part of the conditions of service extended by the

company to all its employees; or

(ii) Pursuant to any schemeapproved by the members by aspecial resolution;

b) ORDINARY COURSE- A company which in the ordinary

course of its business provides loans or gives

guarantees or securities for the due repayment of any

loan and in respect of such loans an interest is charged

at a rate not less than the bank ratedeclared by RBI.


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Ordinary Course of Lending:

TWO TEST(MY VIEW) :

If the company is engaged in lendingactivities regularity &

Lend not only to directors/directors entitiesbut also toarms length parties/unrelatedparties

Question: All NBFCengaged in lendingactivities in ORDINARY COURSE?

Ans: May not be


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Loan has not been defined under Co Act.

Any transaction of giving money to be returned inmoney with or without interest can be treated as

loan. Group companies usually give guarantee or

provide securities for loan taken by other group

company. Q: Should we stop doing this also?

Ans: Depend on shareholding & directorshippattern.

DEFINITION OF LOAN


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ADVANCE NOT COVERED BY SEC 185

Normally an advance is not repayable as an

advance

It usually conveys an idea of a prepayment,

that is, paying something in advance before it

is actually due.


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IMPRISONMENT FINE UPTO 25 LAKHS

Lender CompanyFine Rs. 5 lakhs to Rs. 25 lakhs

&

Receiver: Director or other person to whom any

loan is advanced or guarantee or security is given

-Imprisonmentupto 6 months or fine Rs. 5 lakhs

to Rs. 25 Lakhs, or both.


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Guarantee covered, not

letter of comfort

In case of Guarantee, guarantor undertakes

the liability of principal debtor, whereas

In case of letter of Comfort, intention is to

give introduction of debtor, without

undertaking the liability of principal debtor


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LOAN existing on 12 sep: Repayon due dates

Existing loan/guarantee/security provided before

12th Sep, 2013 is not affected by above

provisions.However, it should not be renewed &

should be repaid on due date.

Loanrepayable on demandshouldbe repaid on

demand.

Loan repayable after fixed period should be

repaid on expiry of Fixed period.


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LOAN given to group companies

A family has two Pvt Ltd Companies.

One Co has surplus fund , which they

require in other. Can they transfer surplus fund to other

as loan?

Ans: Depend on shareholding &

directorship patter


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LOAN/security/guarantee given by holding

to subsidiary co. vice versa

MAY NOT COVERED IN

Clause (a)(as applicable for individual) or

Clause (b)(as applicable for Firm),

Clause (c)(for Pvt Ltdco.,only if directoris a director or member),

Clause (d)(only if the director either by himself or two or more

such directors hold 25% or more of total voting power in theborrowing company,

Clause (e)(only if borrowing company /its Board/Directors areaccustomed to act as per the Directors of the board/Directors of thelending company

To attract Sec. 185, any interest of director (or other person) inhis personal capacity(not holding as nominee of company) isrelevant. Interest of holding co. in subsidiary is not relevant.

Cont..


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Rule 10 of chapter XII: Whether Valid?

(1) Any loan made by a holding co to its

wholly owned subsidiary coor any

guarantee given or security provided by a

holding co in respect of any loan made to

its wholly owned subsidiary co is

exemptedfrom the requirements underthis section; and


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Example

If H ltd gives loan to its 100%

subsidiary S Ltd, it is exempted

from application of sec 185

provided fund is used for

principal business purpose.


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Rule 10 of chapter XII: Whether Valid?

(2) Any guarantee given or security provided by

a holding company in respect of loan made by

any bank or financial institution to its

subsidiary company is exempted from therequirements under this section:

Provided that such loans made under sub-rule

(1) and (2) are utilised by the subsidiarycompany for its principle business activities.


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PRIVATE LTD COMPANIES HAVING TURNOVER UPTO

60 LAKHS SHOULD BE CONVERTED TO LLP

1) LLP is not a company, hence limit of audit of 20company will not be applicable.

2) As Companies Act will not be applicable, you can

transfer fundfrom one LLP to another group LLP.

3) Many of exemption which Pvt Ltd company enjoy

under old Companies Act has been withdrawn,

which are not applicable to LLP.

4) Compliances under new companies Act for Pvt LtdCompanies has been substantially increased, which

are not applicable for LLPs.

Cont


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PRIVATE LTD COMPANIES HAVING TURNOVER UPTO

60 LAKHS SHOULD BE CONVERTED TO LLP

5) There is heavy penalty for non compliances under NewCompany Act. Penalty of Rs 50,000 is a small amount

for a single violation.

6) Cost benefit analysis suggests that these should be

converted into LLP.

7) However, as per Sec 47(xiiib) of Income tax Act,for tax

neutrality of such conversion , turnover of Pvt Ltd

company in any of last 3 years must not exceeds 60lakhs. So, if turnover exceeds 60 lakhs than such

conversion will be subject to income tax.

SHOULD PRIVATE LTD COMPANIES BE


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SHOULD PRIVATE LTD COMPANIES BE

CONVERTED INTO PUBLIC LTD COMPANIES ??

1) Clause (d) is not applicable to a companyat a generalmeeting of which less than 25% of the total votingpower of Body corporate may be exercised orcontrolled by any such director, or by two or more

such directors, together

2) We can plan accordingly and take benefit.

3) So, we can convert our existing Pvt Ltd companies topublic Ltd companies and take benefits.


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LOAN AND INVESTMENT BY A COMPANY(sec 186)

According to section 186 without prejudice of the

provisions contained in this Act, a company shall unlessotherwise prescribed, make investment through not more

than two layers of investment companies;

Provided that provisions of this sub-section shall not affect:

a) A company from acquiring any other company incorporated

in a country outside India if such other company has

investment subsidiaries beyond two layers as per the laws

of such country;

b) A subsidiary company from having any investment

subsidiary for the purposes of meeting the requirements

under any law or under any rule or regulation framed

under any law for the time being in force.


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No companyshall directly or indirectly-a) give any loan to any person or other body

corporate;

b) give any guarantee or provide security inconnection with a loan to any other body corporate

or person; and

c) acquire by way of subscription, purchase or

otherwise, the securities of any other body

corporate,


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exceeding 60% of its paid-up share capital, freereserve and securities premium account or 100% of

its free reserves and securities premium account,

whichever is more.

Where the giving of any loan or guarantee or

providing any security or the acquisition under sub-

section (2) exceeds the limits specified in that sub-section, prior approval by means of a special

resolutionpassed at a GM shall be necessary.


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DEFINITION OF DEPOSIT

[Sec. 2(31)] UNDER CO Act, 2013

Deposit includes: any receipt of money by way of deposit or

loan or in any other form by a company,

but does not include:

such categories of amount as may be

prescribed in consultation with the Reserve

Bank of India


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UNDER deposit Rules, 2014

deposit includes any receipt of money byway of deposit or loan or in any other form,

by a company, but does not include

any amount received by a company from anyother company

any amount received from a person who, at

the time of the receipt of the amount, was a

directorof the company


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UNDER CO Act, 1956[Expl. to Sec. 58A]

Deposit" means any deposit of moneywith, and includes

any amount borrowed by, a company but

shall not include such categories of amountas may be prescribed in consultation with

the Reserve Bank of India.


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UNDER Companies (Acceptance of Deposits) Rules,

1975

"deposit" means any deposit of moneywith, and includes any amount borrowed

by, a company, but does not include-

any amount received by a Company fromany other Company.

any amount received by a private company

from a person who, at the time of the

receipt of the amount, was a director,

relative of director or member


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SEC 73:Prohibition on acceptance of deposits from public

(Similar to Section 58A of The Companies Act, 1956)

1) Co., except Banks, NBFC and other specifiedcompanies(Public co:100/500cr), shall not invite,accept or renew deposits from public.2) Co. may, by resolution in GM and subject toprescribed rules & conditions accept depositsfrom members.

3) If co. does not secure deposits then, the

deposits shall be termed as unsecureddeposits and shall be quoted all documentrelated to invitation or acceptance of deposits.


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SEC 73:Prohibition on acceptance of deposits from public

(Similar to Section 58A of The Companies Act, 1956)

4) Deposits accepted shall be repaid with

interest.

5) If co. fails to repay, depositor may apply to

Tribunal for an order directing co. to pay sum

due or loss incurred.

6) The deposit repayment reserve a/cshall

only be used for repayment of deposits


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SEC 74: Repayment of deposits, etc. accepted before

commencement of this Act (New Provision)

1) If deposit or any interest remains unpaid oncommencement of this Act, co. shall file,within 3 months, with ROCa

statement(Form DPT-4)of all depositsaccepted & sums remaining unpaid andrepay the dues within 1 year or due date,whichever is earlier.

2) Tribunalmay, on application made by co.,allow further time to repay the deposit.


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SEC 74: Repayment of deposits, etc. accepted before

commencement of this Act (New Provision)

Penalty

A) Companyshall pay deposit and interest

along with fine Rs. 1 crore to Rs. 10 crores &

B) Officer in default -Imprisonment upto 7

years or fine Rs. 25 Lakhs to Rs. 2 Crores, or

both


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SEC 76: Acceptance of deposits from public by certain

Companies

This new clause provides that a

public company having specified net

worth or turnover may acceptdeposits from persons other than its

members subject to compliance with

Sec 73(2), rules and credit rating.


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Definition of Eligible co : Chapter V Rule

eligible company means a public company as referred toin sub-section (1) of section 76, having a net worthof notless than 100 crore rupees or a turnoverof not less than500 crorerupees and which has obtained the priorconsent of the company in general meeting by means of a

special resolution and also filed the said resolution withthe Registrar of Companies before making any invitationto the Public for acceptance of deposits:

Provided that an eligible company, which is acceptingdeposits within the limits specified under clause (c) of

sub-section (1) of section 180, may accept deposits bymeans of an ordinary resolution;


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Deposit Rules, 2014

No company referred to in sub-section

(2) of section 73 and no eligible company

shall accept or renew any deposit, which

is repayable on demand or upon

receiving a notice within a period of less

than six months or more thanthirty-six

monthsfrom the date of acceptance or

renewal of such deposit


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REPORTING OF FRAUD TO CG [Sec. 143 (12)]

If an auditor of a company, in the course of the performance of his duties as

auditor,

has reason to believe that an offenceinvolving fraud is being or has been

committed against the company

by officers or employees of the company, he shallreport the matter to the CG

Immediately or within prescribed time & manner.


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NO DUTY OF CONFIDENTIALITY UNDER THE CA ACT.

[SEC. 143(13)]

No duty to which an auditor of a company may

be subject to (e.g. duty of confidentiality under

the CA Act, 1949) shall be regarded as having

been contravened by reason of his reporting thematter as above if it is done in good faith.


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APPLICABLE TO COST SECRETARIAL AUDITORS

(SEC. 143(14)

Section 143(14) extends obligation cast by

section 143 mutatis mutandis to:

Cost Auditors appointed u/s 148 &

Secretarial Auditors appointed u/s 204.


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PENALTY FOR NOT-REPORTING OF FRAUD

Fine Rs. 1,00,000/- to Rs.25,00,000/-

[Sec. 143 (15)].


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REPORTING OF MATERIAL FRAUD

[DRAFT RULES 10.10(1)]

For the purpose of Sec.143(12), in case: the auditor has sufficient reason and

information to believe that an offence

involving fraud, is being or has beencommitted against the company by officers or

employees of the company, such fraud is

likely to materially affect the company, heshall report the matter to CG within 30 days.


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REPORT TO AUDIT COMMITTEE/ BOARD ALSO IN

PRESCRIBED FORM [DRAFT RULES 10.10(1)]

Report shall be in the form of a statement as

given in Form No. 10.3:

Report to be sent immediately but not later

than 30 daysof his knowledge or information,

with a copy,

to the audit committeeor

in case the company has not constituted an

audit committee, to theBoard.


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MEANING OF MATERIALITY

[DRAFT RULES 10.10(2)]

A. Fraud(s) that is or are happening frequently;

or

B. Fraud(s) where the amount involved or likely

to be involved is not less than:

5% of net profit or

2 % of turnover of the company for thepreceding FY.


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REPORTING OF NON-MATERIAL FRAUD [DRAFT

RULES 10.10(3)]

Auditors shall send a report in writing

to the audit committee and

Where the co. has not constituted an audit committee, to

Board.

The audit committee or the Board, as the case may be, shall

replyto the auditors in writing as to stepstakenby the audit

committee or the Board in addressing the issues of fraud,

including systemic issues.

In case the audit committee or the Board, as the case may be, is

not taking action orthe auditor is not satisfiedwith the action

taken, he may report to the CGeven if the fraud is not material

in nature.


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PENALTY FOR FRAUD (Sec. 447)

Any person guilty of fraud

Imprisonment: 6 months to 10 years; and

Fine:Atleast amount involved in fraud, but mayextend to 3 times the amount involved in fraud.

Where the fraud involves public interest,

imprisonment shall not be less than 3 years.


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DEFINITION OF FRAUD (Sec. 447)

Fraud includes any act, omission, concealmentof any fact or abuse of position committed by any

person or any other person with the connivance in

any manner, with intent to deceive, to gain undueadvantage from, or to injure the interests of, the

company or its shareholders or its creditors or any

other person, whether or not there is anywrongful gain or wrongful loss.

Example:Undisclosed sale


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SOME ISSUES

RELATING TO

ACCOUNTS


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MEANING OF FINANCIAL STATEMENT

[Sec. 2(40)]

It includes:a) Balance Sheet

b) Profit & Loss statement

c) Cash Flow statement(not mandatory for smallcompanies, OPCs & Dormant companies)

d) Statement of Changes in equity, if applicable

e)Explanatory statement Note annexed to &

forming part of Financial statements


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MEANING OF FINANCIAL STATEMENT

[Sec. 2(41)]

It means the period ending on 31st March

every year and where a company has been

incorporated on or after the 1stday of January

of a year, the period ending on 31stMarch ofthe following year.

The Companies Act, 2013 does not provide for

extension of FY.


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Requirements of Financial Statement

(Sec. 129)

The FS shall give a true and fair view and complywith the AS & shall be in the form as provided in

Schedule III.

The FS shall be laid in the AGMof that FY.

The holding companyshall in addition, prepare

a CFS of the Company, all subsidiaries,

associates & joint ventures and lay before theAGM.


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Re-opening OF ACCOUNTS ON COURTS OR

TRIbUNALS orders (Sec. 130)

This new Section provides for provisions relating

to re-opening or re-casting of the books of

accounts of Company pursuant to order of Court

or Tribunal on application made by CG, anyStatutory Authority or any person concerned if it

was found that earlieraccounts were prepared in

fraudulent manner or financial statements are notreliable due to mismanagement of affairs of the

company. The accounts so revised or re-cast shall

be final.

Voluntary revision of FS OR bOARDS report


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(Sec. 131)

The directorsto prepare revised financial statement or

a revised Boards report of any of the 3 preceding

financial years only once in a FY, if it appears to them

that they did not comply with the requirement of

Section129 or Section134 after obtaining approval ofthe Tribunal.

Tribunal shall take into account the representations if

any, of theCG and of the IT Department.

Such revised financial statement or report shall be

subject to rules prepared by CG.

Constitution of National Financial


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Reporting Authority (Sec. 132)

This Section provides that the CG may by

notification constitute the NFRA

toadviceon Accounting Standards (AS) & Auditing

Standards(SA),to monitor, enforce, compliance and overseeing

the quality of service of associated professionals.

to investigate matters of misconduct committedby any member of ICAI or any other prescribed

profession and pass order which may be appealed

to Appellate Authority to be constituted by CG.


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CG to prescribe AS (Sec. 133)

This Section provides that the CG may, after

consultation with NFRA, prescribe the Accounting

Standards as recommended by the ICAI for

adoption by companies.


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CLASS OF COS WHICH nfra will investigate

a) CompaniesListed in or outside India;

b) Unlistedcompanies with

net worth >= Rs. 500 crores orpaid up capital >= Rs. 500 crores or

annual turnover >= Rs. 1,000 crores

as on 31st March of immediately preceding FY.


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Class of ca firm Which nfra will investigate

a) audit of 200 companies or more in a year; or

b) audit of 20 or more listed companies; or

c) company(including listed company), havingnet worth >= Rs.500 crores or

paid up capital >= Rs.500 crores or

annual turnover >= Rs.1,000 croresas on 31st March of immediately preceding FY; or

d) company having securities listed outside India


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Reference to nfra

Reference by CG or any authority:If any referenceis made by CG or any regulator in public interest,

no restriction of turnover or paid up capital etc.

will be applicable.

Reference by CG/RD/ROC:Where any of them

have any information in respect of any auditor or

audit firm which is not complying with provisions

of sec. 132 or rules made thereunder, he shall

refer the matter to NFRA.

Copy of FS to be filed with Registrar


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(Sec. 137)

This Section provides that a copy of FS, auditorsreport

etc shall be filled with the Registrar within 30 days.

In case a company does not holdan AGM or the AGM

has been adjourned in any year, astatement of facts and

reasons along with FS and attachment has to be filedwith the Registrar.

In case the accounts are not adopted at AGM or

adjourned meeting, the unadopted accounts shall be

filed with ROC who shall take them in his records asprovisionaltill final accounts are filed.

One Person Co. (OPC)is required to file the FS with the

Registrar within180 days from the date of meeting.


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Internal Audit (Sec. 138)

This new Section provides for conduct of internal

audit of prescribed class or classes of companies

(Listed co, Public co: Paid up Capital > 10 crores or

Loan > 25 crores). Manner of conducting internal

audit shall be prescribed by the CG.


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SCHEDULE II (See section 123)


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SCHEDULE II (See section 123)

USEFUL LIVES TO COMPUTE DEPRECIATION

PART A

1. Depreciation is the systematic allocation of the

depreciable amount of an asset over its useful life. The

depreciable amount of an asset is the cost of an asset orother amount substituted for cost, less its residual value.

Theuseful life of an asset is the period over which an

asset is expected to be available for use by an entity, or

the number of production or similar units expected tobe obtained from the asset by the entity.

USEFUL LIVES TO COMPUTE DEPRECIATION (Contd )


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USEFUL LIVES TO COMPUTE DEPRECIATION (Contd.)

2. For the purpose of this Schedule, the term depreciation

includes amortisation.

3. Without prejudice to foregoing provisions of paragraph

1,

(i) In case of such class of companies, as may be prescribed and

whose financial statements comply with the accounting

standards prescribed for such class of companies under

section 133 the useful life of an asset shall not normally be

different from the useful life and the residual value shall not

be different from that as indicated in Part C, provided that if

such a company uses a useful life or residual value which is

different from the useful life or residual value indicated

therein, it shall disclosethejustification for the same.



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(ii) In respect of other companies the useful life of anasset shall not be longer than the useful life and the

residual value shall not be higher than that

prescribed in Part C.

(iii) For intangible assets, the provisions of the

Accounting Standards mentioned under sub-para (i)

or (ii), as applicable, shall apply.



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PART B4. The useful life or residual value of any specific

asset, as notified for accounting purposes by a

Regulatory Authority constituted under an Act of

Parliament or by the Central Government shall be

applied in calculating the depreciation to be

provided for such asset irrespective of the

requirements of this Schedule.



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PART C

5. Subject to Parts A and B above, the following are the useful lives of various

tangible assets:

Nature of assets Useful Life

I. Buildings [NESD]

(a) Buildings (other than factory buildings)

RCC Frame Structure 60 Years

(b) Buildings (other than factory buildings)

other than RCC Frame Structure 30 Years

(c) Factory buildings -do-

(d) Fences, wells, tube wells 5 Years(e) Others (including temporary structure, etc.) 3 Years



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II. Bridges, culverts, bunders, etc. [NESD] 30 Years

III. Roads [NESD]

(a) Carpeted roads

(i) Carpeted Roads-RCC 10 Years

(ii) Carpeted Roads-other than RCC 5 Years

(b) Non-carpeted roads 3 Years

IV. Plant and Machinery

(i) General rate applicable to plant and machinery not covered under

special plant and machinery

(a) Plant and Machinery other than continuousprocess plant not covered under specific industries 15 Years

(b) continuous process plant for which no special

rate has been prescribed under (ii) below [NESD] 8 Years



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(ii) Special Plant and Machinery

(a) Plant and Machinery related to production and exhibition of

Motion Picture Films

1. Cinematograph filmsMachinery used in the

production and exhibition of cinematograph films,

recording and reproducing equipments, developing

machines, printing machines, editing machines,

synchronizers and studio lights except bulbs 13 Years

2. Projecting equipment for exhibition of films -do-

(b) Plant and Machinery used in glass manufacturing1. Plant and Machinery except direct fire glass melting.

furnaces Recuperative and regenerative glass

melting furnaces 13 Years



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2. Plant and Machinery except direct fire glass

melting furnaces Moulds [NESD] 8 Years

3. Float Glass Melting Furnaces [NESD] 10 Years

(c) Plant and Machinery used in mines and quarries

Portable underground machinery and earth movingmachinery used in open cast mining [NESD] 8 Years

(d) Plant and Machinery used in Telecommunications [NESD]

1. Towers 18 Years

2. Telecom transceivers, switching centres,

transmission and other network equipment 13Years

3. TelecomDucts, Cables and optical fibre 18 Years

4. Satellites -do-



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(e) Plant and Machinery used in exploration,production and refining oil and gas [NESD]

1. Refineries 25 Years

2. Oil and gas assets (including wells),

processing plant and facilities -do-

3. Petrochemical Plant -do-

4. Storage tanks and related equipment -do-

5. Pipelines 30 Years

6. Drilling Rig -do-

7. Field operations (above ground) Portable boilers,drilling tools, well-head tanks, etc. 8 Years

8. Loggers -do



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(f ) Plant and Machinery used in generation,

transmission and distribution of power [NESD]

1. Thermal/ Gas/ Combined Cycle

Power Generation Plant 40

Years

2. Hydro Power Generation Plant -do-

3. Nuclear Power Generation Plant -do-

4. Transmission lines, cables and other network assets -do-

5. Wind Power Generation Plant 22 Years

6. Electric Distribution Plant 35 Years

7. Gas Storage and Distribution Plant 30 Years

8. Water Distribution Plant including pipelines -do-



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(g) Plant and Machinery used in manufacture of steel1. Sinter Plant 20 Years

2. Blast Furnace -do-

3. Coke ovens -do-

4. Rolling mill in steel plant -do-

5. Basic oxygen Furnace Converter 25 Years

(h) Plant and Machinery used in manufacture of non-ferrous metals

1. Metal pot line [NESD] 40 Years

2. Bauxite crushing and grinding section [NESD] -do-

3. Digester Section [NESD] -do-4. Turbine [NESD] -do-

5. Equipments for Calcination [NESD] -do-

6. Copper Smelter [NESD] -do-



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7. Roll Grinder 40 Years

8. Soaking Pit 30 Years

9. Annealing Furnace -do-

10. Rolling Mills -do-

11. Equipments for Scalping, Slitting , etc. [NESD] -do-

12. Surface Miner, Ripper Dozer, etc., used in mines 25 Years13. Copper refining plant [NESD] -do-

(i) Plant and Machinery used in medical and surgical

operations [NESD]

1. Electrical Machinery, X-ray and electrotherapeutic

apparatus and accessories thereto, medical, diagnostic

equipments, namely, Cat-scan, Ultrasound Machines,

ECG Monitors, etc. 13 Years



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Nature of assets Useful Life2. Other Equipments. 15

Years

(j) Plant and Machinery used in manufacture of

pharmaceuticals and chemicals [NESD]

1. Reactors 20 Years

2. Distillation Columns -do-

3. Drying equipments/Centrifuges and Decanters -do-

4. Vessel/storage tanks -do-



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(k) Plant and Machinery used in civil construction

1. Concreting, Crushing, Piling Equipments

and Road Making Equipments 12 Years

2. Heavy Lift Equipments

Cranes with capacity of more than 100 tons 20 Years

Cranes with capacity of less than 100 tons 15 Years

3. Transmission line, Tunneling Equipments [NESD] 10 Years

4. Earth-moving equipments 9 Years

5. Others including Material Handling /Pipeline/Welding

Equipments [NESD] 12 Years(l) Plant and Machinery used in salt works [NESD] 15 Years



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V. Furniture and fittings [NESD](i) General furniture and fittings 10Years

(ii) Furniture and fittings used in hotels, restaurants

and boarding houses, schools, colleges and other

educational institutions, libraries; welfare centres;

meeting halls, cinema houses; theatres and circuses; and

furniture and fittings let out on hire for use on the

occasion of marriages and similar functions. 8 Years

VI . Motor Vehicles [NESD]

1. Motor cycles, scooters and other mopeds 10 Years

2. Motor buses, motor lorries, motor cars and motor

taxies used in a business of running them on hire 6 Years



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Nature of assets Useful Life3. Motor buses, motor lorries and motor cars

other than those used in a business of running

them on hire 8 Years

4. Motor tractors, harvesting combines and heavy vehicles -do-

5. Electrically operated vehicles including battery

powered or fuel cell powered vehicles 8 Years

VII. Ships [NESD]

1. Ocean-going ships

(i) Bulk Carriers and liner vessels 25Years

(ii) Crude tankers, product carriers and easy

chemical carriers with or without conventionaltank coatings. 20 Years



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( )


(iii) Chemicals and Acid Carriers:

(a) With Stainless steel tanks 25 Years

(b) With other tanks 20 Years

(iv) Liquified gas carriers 30

Years

(v) Conventional large passenger vessels

which are used for cruise purpose also -do-

(vi) Coastal service ships of all categories -do-

(vii) Offshore supply and support vessels 20 Years

(viii) Catamarans and other high speed

passenger for ships or boats do-



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( )


(ix) Drill ships 25 Years

(x) Hovercrafts 15 Years

(xi) Fishing vessels with wooden hull 10 Years

(xii) Dredgers, tugs, barges, survey launches

and other similar ships used mainly for dredging purposes 14 Years

2. Vessels ordinarily operating on inland waters(i) Speed boats 13 Years

(ii) Other vessels 28 Years

VIII. Aircrafts or Helicopters [NESD] 20 Years

IX. Railways sidings, locomotives, rolling stocks,

tramways and railways used by concerns, excluding

railway concerns [NESD] 15 Years



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( )


X. Ropeway structures [NESD] 15 Years

XI. Office equipment [NESD] 5 Years

XII. Computers and data processing units [NESD]

(i) Servers and networks 6 Years

(ii) End user devices, such as, desktops, laptops, etc. 3 Years

XIII. Laboratory equipment [NESD]

(i) General laboratory equipment 10 Years

(ii) Laboratory equipments used in educational institutions 5 Years

XIV. Electrical Installations and Equipment [NESD] 10 years

XV. Hydraulic works, pipelines and sluices [NESD] 15 Years



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( )

Notes

1. "Factory buildings" does not include offices, godowns, staff quarters.

2. Where, during any financial year, any addition has been made to any asset, or whereany asset has been sold,discarded, demolished or destroyed, the depreciation on

such assets shall be calculated on apro rata basis from the date of such addition or,

as the case may be, up to the date on which such asset has been sold, discarded,

demolished or destroyed.

3. The following information shall also be disclosed in the accounts, namely:

(i) depreciation methods used; and

(ii) the useful lives of the assets for computing depreciation, if they are different from

the life specified in the Schedule.

4. Useful life specified in Part C of the Schedule is for whole of the asset. Where cost of a

part of the asset is significant to total cost of the asset and useful life of that part is

different from the useful life of the remaining asset, useful life of that significant partshall be determined separately.



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( )

Notes (contd.)5. Depreciable amount is the cost of an asset, or other amount substituted for cost, less its

residual value. Ordinarily, the residual value of an asset is often insignificant but it

should generally be not more than 5% of the original cost of the asset.

6. The useful lives of assets working on shift basis have been specified in the Schedule based

on their single shift working. Except for assets in respect of which no extra shiftdepreciation is permitted (indicated by NESD in Part C above), if an asset is used for any

time during the year for double shift, the depreciation will increase by 50% for that

period and in case of the triple shiftthe depreciation shall be calculated on the basis of

100%for that period.



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( )

Notes (contd.)

7. From the date this Schedule comes into effect, the carrying amount

of the asset as on that date

(a) shall be depreciated over the remaining useful life of the asset as

per this Schedule;

(b) after retaining the residual value, shall be recognised in the

opening balance of retained earnings where the remaining useful

life of an asset is nil.

8. Continuous process plant means a plant which is required and

designed to operate for twenty-four hours a day.


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SOME ISSUES

RELATING TOAUDIT & AUDITORS

Audit Auditors: Some Amendments


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Individual/ Audit Firm shall be appointed for a block

of 5 years. For Listed Co & prescribed class of companies

(under consideration) Compulsory rotation in 5

years (individual)/ 10 years (firm) In addition to accounting standards, auditing

standardsalso being made compulsory

Casual vacancy caused due to resignation- to befilled in 3 months by general body

Errant auditor-removed and may not be allowed to

become auditor of other Companiesalso for 5 years.

APPOINTMENT OF FIRST AUDITORS IN CASE OF


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COMPANIES OTHER THAN GOVT. CO. [SEC 139(6)]

Appointment by Board: within 1 month of the dateof registration.

Appointment in EGM within 90 days: On failure of

Board, Co. shall inform the members, who shall

appoint at EGM.

Tenure of office: Till the conclusion of the first AGM.

No notice of appointment to ROC

APPOINTMENT OF subsequent AUDITORS [SEC


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Appointment at 1st AGM: Every company shall, at

the first AGM, appoint an individual or a firm as an

auditor.

Tenure of office: Till the conclusion of 6thAGM and

thereafter till the conclusion of every 6thmeeting.

Ratification: The Company shall place the matterrelating to such appointment of ratification by

member at every Annual General Meeting.

139(1)]

APPOINTMENT OF subs. AUDITORS [SEC 139(1)]


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Written consent: Before such appointment is made, the

written consent of the auditor to such appointment shallbe obtained from the auditor.

Certificate: A certificate from him or it that the

appointment, if made, shall be in accordance with the

conditionsas may be prescribed, shall be obtained from

the auditor. The certificate shall also indicate whether

the auditor satisfies the criteria provided in section 141.

Notice of appointment: The Company shall inform theauditor concerned of his or its appointment, and also file

a notice of such appointment with the Registrar within

15 days of the meeting in which the auditor is appointed.

CONDITIONS FOR APPOINTMENT(rule 10.2)


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Rule 10.2:For the purposes of the second proviso to

sub-section (1) of section 139, the proposed

appointee shall submit acertificatethat

(1) He or it is eligible for appointment and is not

disqualified for appointment under the Act, theChartered Accountants Act, 1949 and Rules and

Regulations made therein

(2) The proposed appointment is within the termallowed under the Act

(3) The proposed appointment is within the limit laid

down in the Act

INTIMATION OF APPOINTMENT to roc


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COMPANIES ACT, 1956

Within 7 days ofappointment by the

company to the auditor

The auditor shall within 30

days of the receipt of

appointment letter, inform

the ROC in Form 23B:

a. whether he has

accepted

or

b. whether he has refused

COMPANIES ACT, 2013

Within 15 days ofappointment by the

companyto the auditor

The company shall within

15 days of appointment,

inform the ROC:

a. his acceptance(not mentioning rejection

here because the consent

letter is taken before)

ROTATION OF AUDITORS IN LISTED AND SPECIFIED


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CLASS OF COMPANIES [SEC 139(2)]

STATUS PERIOD

Individual 1 term of 5 consecutive years

Audit Firm 2 terms of 5 consecutive years

Cooling period of 5 years before next appointment

FIRM HAVING COMMON PARTNER INELIGIBLE FOR


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APPOINTMENT FOR NEXT FIVE YEARS

[PROVISO TO SEC. 139(2)]

As on the date of appointment, no audit firm

having a common partner or partners to the other

audit firm, whose tenure has expired in acompany immediately preceding financial year,

shall be appointed as auditor of the same

company for a period of5 years.

TRANSITION PROVISIONS


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[PROVISO TO SEC. 139(2)]

Every company, existing on or before the

commencement of this Act which is required to

comply with provisions of this sub-section,company shall comply with the requirements of

this sub-section within 3 years from the date of

commencement of this Act.

ROTATION OF auditor, AUDITING PARTNER HIS


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TEAM

TheCGmay, by rules, prescribe the manner in which

the companies shall rotate their auditors in

pursuance of sub-section (2) {Sec 139(4)}.

Membersof a company may resolveto provide that -

(a) in the audit firm appointed by it, the auditing

partner and his team shall be rotated at such

intervals as may be resolved by members; or(b) the audit shall be conducted by more than one

auditor.{Sec 139(3)}

CASUAL VACANCY


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Any casual vacancy in the office of an auditor

shall be filled by the Boardof Directors within 30days.

If it is because of RESIGNATION:

a. At a general meeting

b. Convened within 3 months of the

recommendation of the BOD

c. The Auditor to hold the office till the conclusion

of the next annual general meeting

Reappointment of retiring auditor at AGM


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[Sec 139(9)]

A retiring auditor may be re-appointed at an AGM, if he is not disqualified for re-appointment;

he has not given the company a notice in writing of his

unwillingness to be re-appointed; and

aSpecial Resolution has not been passed at that meeting

appointing some other auditor or providing expressly

that he shall not be re-appointed.

However, the above provision is subject to Sec 139(1)and the rules made thereunder. Where at any AGM, no

auditor is appointed or re-appointed, the existing auditor

shall continue to be the auditor of the company [Sec

139(10)].

Removal, RESIGNATION SPECIAL NOTICE of


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Auditor: (Sec 140)

REMOVAL:The auditor may be removed by special

resolution after obtaining the previous approval of

CG and after giving an opportunity of being heard.

RESIGNATION: When Auditor resigns, a statementin

prescribed form is to be filled with the Company

and the Registrarwithin 30 days.

Special notice shall be required for appointing a

person as auditor other than a retiring auditor.

The Tribunal is empowered to change auditor of a

Co. in case of any fraudulent activities by auditor.

INTIMATION OF RESIGNATION


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The auditor shall file within a period of 30 days

from the date of resignation, a statement in theprescribed form with (Form no.10.2):

a. the Company and

b. the Registrar andc. the CAG (where applicable)

indicating the reasons and other facts (for

resignation) Non-compliance of it by the auditor:

PenaltyFine Rs.50,000 to Rs.5 lakhs

Eligibility, Qualifications of Auditors


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(Sec 141)

A CA within the meaning of the CA Act, 1949 maybe appointed as an auditor. Only a CA holding a CP

can be appointed as an auditor.

Afirmwhereof all the partners practicing in Indiaare qualified for appointment may be appointed

by its firm name to be the auditor of a company.

Where a firm including a LLP is appointed as anauditor of a company, only the partners who are

CA shall be authorised to act and sign on behalf of

firm.

DISQUALIFICATIONS OF AUDITORS (SEC 141)


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A body corporate other than a LLP:

An officer or employee of the company.

A person who is a partner, or who is in the employment,

of an officer or employee of the company

A person who, or his relative or partner is holding any securityof or interest (beneficial owner)

in the company or its subsidiary, or of its holding or

associate co. or a subsidiary of such holding co.However, the relativemay hold security or interest in

the company of face value not exceeding Rs. 1,000 or

such sum as may be prescribed (1 Lakh);



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is indebtedto the co., or its subsidiary, or its holding or

associate co. or a subsidiary of such holding co., in

excess of such amount as may be prescribed (1 Lakh);

or

has given a guarantee or provided any security in

connection with the indebtedness of any third personto the co., or its subsidiary, or its holding or associate

co. or a subsidiary of such holding co., for such amount

as may be prescribed (1 Lakh);

a person or a firm who, whether directly or indirectly,

has business relationship with co., or its subsidiary, or

its holding or associate co. or subsidiary of such

holding co. or associate co. of prescribed nature;



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a person whose relative is a director or is in employment

of the co. as a director or KMP; a person who is in full time employment elsewhere or a

person or a partner of a firm holding appointment as its

auditor, if such person or partner is at the date of such

appointment or reappointment holding appointment asauditor ofmore than 20 companies (Exclusions expected:

Paid up Capital less than 25 crores ;

a person who has been convicted by a court of an offence

involving fraud and a period of 10 years has not elapsed

from the date of such conviction;

any person whose subsidiary or associate co. or any other

form of entity, is engaged as on the date of appointment

Remuneration of Auditors (Sec 142)


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This Section provides for remuneration of auditors

of the company. It further defines the term

remuneration. The remuneration is to be fixed

generally in the general meeting.

MEANING OF REMUNERATION [SEC 142 2)]


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The remuneration under sub-section (1) shall, in

addition to the fee payable to an auditor, include

the expenses, if any, incurred by the auditor in

connection with the audit of the company and anyfacility extended to him but does not include any

remuneration paid to him for any other service

rendered by him at the request of the company.


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SOME ISSUES

RELATING TO

PRIVATE PLACEMENT

REASON FOR SUCH STRINGENT PROVISION:

SAHARA INDIA


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1. Recent case of Sahara India Real Estate Corp.

Ltd vs. SEBI (Civil Appeal No. 9813 of 2011)

provides basis of this section.

2. Section 42 of the Companies Act, 2013 has

introduced a new provision regarding private

placement of securities.

3. The Companies Act, 1956 is silent on this issue

Private placement [Sec 42]


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Applicability- This sec. is also applicable for Private Ltd.

Co. also.

Offer Letter- Co. may make private placement through

issue of a private placement offer letter.

No. of persons- Offer of securities can be made to

maximum of 50 persons or higher no. as may be

prescribed(200)in a FY.

Exclusions- It excludes QIB and employees under a

scheme of ESOP.



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Deemed Public Offer

1)If offer is made to more than prescribed limits, thenoffer shall be deemed to be public offer.

2) Any offer not in compliance with provision of this sec.

shall be treated as public offer.

No fresh offer- No fresh offercan be made unlessallotment of earlier offer either completed or withdrawn.

Cash Not Allowed- All monies for subscription shall be

paid throughbanking channelsbut not by cash.

Separate Bank A/c- Application money shall be kept in a

separate bank a/c in a scheduled bank



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Utilisation of Application Money- Money shall not be

utilised for any purpose other than for adjustmentagainst allotmentof securities;or for therepayment of

monies where the company is unable to allot securities.

Allotment Period- Allotment shall be made within 60

days.

Consequences of Failure - If co. do not allot within 60

days, it shallrepaythe application money within 15days. If co. fails to repay, co. shall pay interest @12%

p.a. from the expiry of 60 days.



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Intimation of offer to ROC- Complete information

about offer shall be filed with ROC within 30 daysof circulation of offer letter.

Return of allotment - Return of allotment shall befiled withROC in prescribed manner

PenaltyCo., Promoters & directors - amountinvolved in offer or Rs.2 crore, whichever is higher.

Co. shall refund all monies to subscribers within

30 days of order imposing penalty


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THANK YOU

CA. NITESH MORE

co act 2013 good presentation.pptx

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