PROVISIONS OF COMPANIES ACT REGARDING SMALL COMPANY, PRODUCER COMPANY, RATING AGENCIES, INSIDER

TRADING & SMALL SHAREHOLDER'S DIRECTOR

Section 2(85) defines a Small company as

‘‘small company’’ means a company, other than a public

company,—

(i) paid-up share capital of which does not exceed fifty lakh

rupees or such higher amount as may be prescribed which

shall not be more than five crore rupees; or

(ii) turnover of which as per its last profit and loss account

does not exceed two crore rupees or such higher amount as

may be prescribed which shall not be more than twenty crore

rupees:

Provided that nothing in this clause shall apply to—

(A) a holding company or a subsidiary company;

(B) a company registered under section 8; or

(C) a company or body corporate governed by any special

Act;

Formation of Small

Companies Application For DIN & DSC

Search for the company name availability

Application for the name availability

Drafting of MOA & AOA

Filing of e-form with RoC

Payment of ROC Fees & Stamp Duty

Verification of Documents by RoC

Issue of Certificate of Incorporation by RoC

Incorporate a Company

Exemptions & BenefitsO Signatures in the Annual returns

O Board meetings

O Financial statement

O Auditor regulations

O Merger Process

O Consolidated financial statements

A Producer Company is a group of people engaged in the

production of primary produce or having one or more objectives relating to the primary produce.

Section 465(1)

Primary Produce includes: Produce of farmers,

arising from agriculture (including animal husbandry, horticulture, floriculture etc.)

Any activity which is intended to increase the production of anything referred to above or to improve the quality thereof

“Indian Organic Farmers Producer Company Limited” is the first Farmers’ Producer Company incorporated in the year 2004.

Producer company

Small Farmers Agribusiness Consortium

(SFAC)

non Government Organizations• Indian Farmers Movement (In farm)

• Professional Assistance for Development

Action (PRADAN)

Salient features of Producer Companies

• only equity share capital

• minimum paid-up capital = ₹ 5,00,000

• no restriction on the maximum number of members

• Minimum five directors are required

• The First annual general meeting of the Producer Company should be held within ninety days from the date of its registration

• The Producer Company can under no circumstances become a deemed public company

• A Producer Company is required to appoint a whole-time secretary if its average annual turnover exceeds Rupees Five Crores in each of the three consecutive financial years

better bargaining position in the market

Elimination of intermediaries

Reduced Cost due to Bulk purchases

Acquisition of better technology resulting in enhanced quality and productivity

Timely and easy availability of inputs

Every Member shall, on the share capital contributed, receive only a limited return

The surplus if any, remaining after making provision for payment of limited return and reserves referred to in section 581ZI, may be disbursed as patronage bonus, amongst the Members, in proportion to their participation in the business of the Producer Company, either in cash or by way of allotment of equity shares, or both, as may be decided by the Members at the general meeting.

Any ten or more individuals, each of them being a producer or any two or more Producer institutions, or a combination of ten or more individuals and Producer institutions may form an incorporated Company as a Producer Company under this Act.

If the Registrar is satisfied that all the requirements of this Act have been complied with in respect of registration he shall, within thirty days of the receipt of the documents required issue a certificate of incorporation.

A Producer Company so formed shall have the liability of its Members limited and be termed a company limited by shares.

Company may reimburse to its promoters all other direct costs associated with the promotion and registration of the company.

On registration under 581C(1) the Producer Company shall become a body corporate as if it is a private limited company to which the provisions contained in this Part apply, without, however, any limit to the number of Members. Producer Company shall not, under any circumstance, become or be deemed to become a public limited company.

Rating Agencies

Rating agencies, or credit rating agencies, evaluate the

creditworthiness of organizations that issue debt in public markets.

Application for grant of certificate Promoter of credit rating agency Eligibility criteria Application to conform to the requirements Furnishing of information, clarification and personal representation Grant of Certificate

Code of Conduct Agreement with the client Monitoring of ratings Procedure for review of rating Internal procedures to be framed Disclosure of Rating Definitions and Rationale Submission of information to the Board Rating process

An act of subscribing, buying, selling, dealing or agreeing to subscribe, buy, sell or deal in any securities by any director or key managerial personnel or any other officer of a company either as principal or agent if such director or key managerial personnel or any other officer of the company is reasonably expected to have access to any non-public price sensitive information in respect of securities of company; or

An act of counseling about procuring or communicating directly or indirectly any non-public price-sensitive information to any person;

If any person contravenes the provisions of this section, he

shall be punishable with imprisonment for a term which may

extend to five years or with fine which shall not be less than

five lakh rupees but which may extend to twenty-five crore

rupees or three times the amount of profits made out of insider

trading, whichever is higher, or with both.

The Act definesSmall shareholder – Shareholders with shares worth less than Rs 20,000Company – A paid-up capital of more than 5 crore and more than 1,000 shareholders Shareholder’s have to give a notice of intention at least 14 days before the annual general meeting (AGM) with signatures of at least 100 small shareholders

Election will be done through postal ballot If you are elected, you become a director for a maximum

of three years or until you remain a small shareholder The director so appointed shall be treated at par with

other directors, except for appointment as whole-time director or managing director

Even after the shareholders have approved the

nominee, the final say remains with the company

Logistical issues of getting the shareholders

together is an important issue

Getting majority votes is a tricky matter

The nominated person may not have the

wherewithal of taking decisions on behalf of the

small investors

Navin Pandya wanted to join the Mahindra & Mahindra (M&M) board as a representative of minority shareholders and had even sent letters to the company stating the provision for this under the Companies Act, 1956. Since his demand was rejected by the board, Pandya, a former junior officer in the company, raised the issue in the annual general meeting held last week.

The resolution was put to vote – and predictably, Pandya lost. It’s not known how much backing Pandya had from M&M’s small shareholders, but the provision he referred to in his letters to the M&M management was Section 252 of the Act, which says a group of 1,000 or more small shareholders can appoint their nominee on the company board. That nominee can be anyone who is a small shareholder.