ANNUAL RETURN As per Rules: Certification by PCS for Listed Company or a company with: Paid up capital Rs.10 Crore or more or Turnover of Rs.50Crore or more
DISCLOSURES IN ANNUAL RETURN – SECTION 92 Matters relating to Certification of Compliance Registered office, principal business activities Meeting of board and committees Members and debenture holders shares held by or on behalf of the FII’s Securities and shareholding pattern Remuneration of directors and KMP Promoters, directors, key managerial personnel other matters as may be prescribed. Indebtedness Penalty or punishment & details of compounding Meetings of members
CLARIFICATION FOR ANNUAL RETURN[Circular 22/2014 dated 25.06.2014] • Clarification with regard to format of annual return applicable for Financial Year 2013-14 and fees to be charged by companies for allowing inspection of records. • Form MGT-7 shall not apply to annual returns in respect of companies whose financial year ended on or before 1st April, 2014 and for annual returns pertaining to earlier years. These companies may file their returns in the relevant Form applicable under the Companies Act, 1956. • Companies have also sought clarity about permitting free of cost inspection of records under rule 14(2) and rule 16 of the rules cited above and till a fee is prescribed for the purpose in the Articles. It is clarified that until the requisite fee is specified by companies, inspections could be allowed without levy of fee
ANNUAL RETURN-COMPLIANCES PENALTY: Non compliance may lead to penalty of 50K exceeding up to 5 lacs and office in default –Imprisonment of Six months or fine of Rs.50K -5 Lacs
RETURN TO BE FILED WITH REGISTRAR IN CASE PROMOTERS STAKE CHANGES [ S.93] PENALTY: Company/Officer in Default-Fine up to Rs. 10 ,000 Continuing Offence: Rs.1,000 /day
REPORT ON ANNUAL GENERAL MEETING [S.121] • Report in addition to the minutes of the general meeting by Listed Public Company; • To be signed and dated by the Chairman of the meeting or in case of his inability to sign, by any two directors of the company, one of whom shall be the Managing director, if there is one and company secretary of the company; • the Report shall contain fair and correct summary of the proceedings of the meeting. Penalty: Non Compliance-Fine-1 Lac to 5 Lac & Officer in Default-Rs.25 K to 1 Lac
EXTRA ORDINARY GENERAL MEETING [Sec 100] • Every general meeting (i.e. meeting of members of the company) other than annual general meeting or any adjournment thereof, is an extraordinary general meeting. • Board of director may convene EGM in regard to any matter whenever they deem fir- Section 100(1) [Ram prasadSomani v. Bank of Rajasthan Ltd. (2001) 34 SCL 750 (Raj HC) • All business at EOGM shall be special business i.e Explanatory statement will have to be given in respect of each proposed resolution- Sec 102(2) (b) of 2013 Act.[ Section effective from 12.09.2013 vide MCA circular No 15/2013 dated 13.09.2013] • If notice of EOGM is invalid all business transacted thereof shall stand invalid [J C Aigustine v. Remanika Silks (2001) 30 SCL 71 (CLB)
EGM-MEETING BY REQUISITION • Members may ask to hold a EOGM –Sec 100(2) in following case: • Clash upon different group of shareholders on account of control • Suspection of irregularities in company • Oppression of Minority group of shareholder is alleged • Board must hold meeting if requisition submitted • Requisition meeting dissolves if no quorum • Explanatory statement not necessary for requesitionist • Provisions not practical for companies with large number of members
ESSENTIALS OF VALID REQUISITION • The requisition must state the objects of the meetings & be signed by the requisitioning members. • The requisition must be deposited at the company’s registered office. • The Directors should within 21 days, move to call a meeting and the meeting should be actually be held within 45 days from the date of the lodgment of the requisition. • The meeting may be called by requesitionist themselves within a period of 3 months from date of Requisition. Company with Paid up Capital 1/10 th of Paid up Capital Strength for requisition of Members Company without Paid Up capital 1/10 th of Voting Power
NOTICE & EXPLANATORY STATEMENT– SEC 101 • 21 clear days notice in writing /electronic[ Section 171(1)] • General meeting with short notice if 95% of members give their consent in writing/electronic mode- Section 101(1) • Notice shall be served to : • Every member of the Company/legal representative of deceased member/assignee of insolvent member • The auditor/auditor firm • Every director of the company • Special Notice:- By members holding not less than one percent of total voting power or holding shares on which an aggregate sum of not less than five lakh rupees has been paid up on the date of the notice on account of: • Removal of Director before expiry period • To appoint an auditor other than a retiring auditor
NOTICE & EXPLANATORY STATEMENT– SEC 102 Liability in case of non-disclosure or insufficient disclosure in Explanatory Statement Explanatory Statement in case of special business to specify Non-disclosure /insufficient disclosure Nature of interest/ concern Financial Interest Other Interest Benefit Profit Director and Manager Relatives Promoter Director and Manager KMP KMP Explanatory statement to specify shareholding % of Promoters/directors/manager/KMP whose shareholding is not less than 2% of paid up capital Liable to compensate to Company to the extent of such profit/benefit
PENAL PROVISION U/S 102 PENALTY: • WHO ARE RESPONSIBLE: • Promoter, • Director, • Manager or • Key managerial personnel who is in default Fine up to Rs.50,000 Or 5 times the amount of benefit accruing to the promoter, director, manager or other key managerial personnel or any of his relatives, WHICHEVER IS MORE.
QUORUM FOR MEETING[ S.103] Public Company ≤ 1000 members 5 members personally present > 1000 members but ≤ 5000 members 15 members personally present 30 members personally present > 5000 members 2 members personally present Private Company
PROVISION FOR COUNTING QUORUM • Proxy cannot be counted • All joint holders are members and can be counted for quorum[ One vote & joint holders shall be counted as one] • Person present in different capacities can be counted separately[ only if they are members- Auditors ,PCS etc. cannot be counted for quorum unless they are shareholders] • Power of Attorney holder is “ member personally present. PREFERENCE SHARES CANNOT BE COUNTED FOR QUORUM ?? They can only be counted for quorum in respect of resolution affecting their rights [Matter remains contradictory as Preference shareholder is also a member –the member entitled to attend and vote are not used in section 103(1) of the 2013 Act
RESOLUTIONS[Sec.114-117] • Resolution is passed at an adjourned meeting —the resolution shall, be treated as having been passed on the date on which it was in fact passed, and on any earlier date. • A copy of every resolution or any agreement, in respect of matters specified in sub-section (3) together with the explanatory statement under section 102, if any, annexed to the notice calling the meeting in which the resolution is proposed, shall be filed with the Registrar within thirty days PENALTY: Company/Officer in Default- including liquidator of the company, - one lakh rupees to five lakh rupees. Company : five lakh rupees up to twenty-five lakh
MATTERS TO BE REGISTERED WITH REGISTRAR THE FOLLOWING SHALL BE FILED WITH REGISTRAR IN 30 DAYS IN MGT-14
KEY HIGHLIGHTS • Make Effective Presentations • Using Awesome Backgrounds • Engage your Audience • Capture Audience Attention
WHEN AN ID IS MUST? Public Companies HAVING: • Paid up Share Capital of Rs. 10 Cr or more OR • Turnover of Rs.100 cr. Or more • Outstanding Loans; or • Borrowings; or • Debenture; or 50 cr or more. • Deposits
WHO CANNOT BE APPOINTED AS ID? • One who together with his/her relatives holds 2 % or more of the total voting powers of the company • Past and current employees • Partners of a firm of auditors, • Company secretaries, • Cost Accountants, • Lawyers or consultants • That has or had any transaction with the company, its holding, subsidiary or associate company ,if that firm earned 10 per cent or more of its gross turnover in the preceding three financial years from that company.
CLARIFICATION REGARDING INDEPENDENT DIRECTOR[MCA CIRCULAR 14/2014 DATED 09.06.2014] • In preview of Section 188 which take away transactions in the ordinary course of business at arm’s length price from the preview of related party transaction an ID will not said to have “pecuniary relation” • Any tenure of an ID on the date of commencement of the Act shall not be counted for his appointment/holding office of director under the Act. In view of the transitional period of 1 year, it would be necessary that if it is intended to appoint existing ID under new act, such appointment shall be made u/s 149(10)(11) within 1 year from 1st April ,2014 • Term of appointment of ID may be less than 5 years-no person can old office for more than 2 consecutive terms even if total no. of years is less than 10 years
CLARIFICATION FOR RESIDENT DIRECTOR[ General Circular 25/2014 dated 25 June 2014] • The period from 1st April 2014 till 31 December 2014 (Calendar Year 2014) will be period taken into consideration for ensuring compliance with previous calendar year. • Accordingly, the number of days for which the director(s) need to be a resident in India, during the above mentioned period shall be computed proportionately (instead of 182 days) and in all cases shall exceed 136 days. • Companies incorporated between 1 April 2014 to 30 September 2014 should have a resident director either at the incorporation stage itself or within six months of their incorporation. • Further, Companies incorporated after 30 September 2014 needs to have the resident director from the date of incorporation itself.
DIRECTOR ELECTED BY SMALL SHAREHOLDERS [Sec 151] • A listed company may have one director elected by such small shareholders on notice of not less than 1000 small shareholders or 1/10 of the total no. of such shareholder whichever is lower. • Notice of intention to propose the name of director shall be given to company 14 days before. • The director as proposed shall be considered as an independent director subject to his capability u/s 149(6) and on his giving of declaration of his independence u/s 149(7) • Appointments constraints to the following: • No retirement by rotation • Tenure- 3 Consecutive years • Not eligible for reappointment • No person shall hold position of Small shareholder director in more than 2 companies at same time –the business of both companies shall not be conflicting. • Vacation of office if: disqualification u/s 164/ vacancy arises u/s 167 /ceases to meet criteria of section 149(6) • Small Shareholder means a shareholder holding shares of nominal value of not more than twenty thousand rupees
ALTERNATE DIRECTOR [Sec 161(2)] • Alternate director shall vacate office when original director returns India[ Sec 161(2) ] [If original director comes to India for any reason & not attending Board Meeting ,the appointment of Alternate director terminates-Dept letter No. 6/16/(313) 68 PR dated 05.12.1963] • Company should not refuse to appoint alternate director without reasons [D Ross Porter v. Pioneer Seed Co. Ltd.(1989) 66 Comp Cas 363 (Del)-Co cannot refuse to appoint alternate director for malafide reason. Decision must be considered fairly and in the interest of the company & shareholders] • Legal Position -Alternate director not Proxy of Original Director-Position of Alternate director Co-extensive with Original Director • Appointment of Alternate director is adequate leave of Absence for original director • No person shall be appointed as an alternate director for an Independent director unless he is qualified to be appointed as an independent director under the Act.
DISQUALIFICATION OF DIRECTOR • No disqualification if offence compounded • Statutory Auditor to state in his report if any director is disqualified • Private company can prescribe additional disqualifications but public company cannot do so. • Director not disqualified if appeal is filed • DISQUALIFICATION FOR LIFE IF DIRECTOR DISOBEYS DIRECTIONS OF • REGISTRAR OR INSPECTOR AT TIME OF INSPECTION[ SEC 207(4)]
VACATION OF OFFICE BY DIRECTOR • If all directors vacate by virtue of disqualification- • Promoter shall be appointed as director or • In absence of Promoter CG shall appoint required no. of directors • Private Company may by its articles insert other grounds for vacation of office PENALTY U/s 167(2) Imprisonment –1 year Fine- 1 lac to 5 Lac OR BOTH
REMOVAL/RESIGNATION OF DIRECTOR[Sec. 168] • A director on giving notice in writing to company may resign. • Convening of General Meeting – Members may remove the director by passing ordinary resolution. • Special notice to Company-Only shareholder/s holding not less than 1% of total voting power or holding shares on which an aggregate sum of not less than Rs. 5,00,000 has been paid up as on the date of notice, can send special notice to the Company for removal of director. • Intimation by Company to all shareholders -Special notice shall be sent not earlier than three months but at least 14 clear days before the date of the meeting, at which the resolution is to be moved. • Intimation to Director- The Company shall forthwith send a copy of the notice to the concerned director. • Reasonable Opportunity of being heard must be given to director
PERSONAL LIABILITY OF DIRECTOR • Director to be held liable under the following: • Civil Liability for misstatement in Prospectus • Contravening Section 185 of 2013 Act regarding loan from Company • Failure to disclose interest in Contract or arrangement • Director liable in winding up proceedings in case of Fraud • No personal Liability for payment of Taxes unless statute provides • Vicious liability of Directors of a private company to pay Income Tax of the Company, If company not competent to pay off. • Director may be held liable even not personally involved in Fraud & negligent [Official Liquidator ,Supreme Bank Ltd. V. P A Tendolkar AIR 1973 SC 1104] • No personal Liability unless malafide proved
LIABILITY OF DIRECTOR • All directors should not be arrayed in Prosecution [MCA Circular No.1/2001 dated 29.07.2011] • Criminal liability of an ordinary director would arise in respect of company which has no MD/WTD & when no other person or director are specified [Smt G Vijayalakshmi v. SEBI (2000) 25 SCL 183] • A director is not liable in respect of illegalities committed by company after he has resigned [M.A.A Annamalai v. State of Karnataka (2010) • Once director resigns by sending Letter, he is not liable even if Form 32 not filed with ROC [SaumilDilip Mehta V. State of Maharastra (2002) 5 CLJ 183 • Ordinary Director cannot be said officer in default if Co. has MD/WTD/Manager [KalpeshDagli v. State of Gujarat (2013) 117 SCL 498 • Director liable for contempt of Court by Company
BOARD MEETINGS [SEC. 173] • First board Meeting within 30 days from incorporation & minimum 4 meet a year with not more than gap of 120 days • Participation of directors in meeting of Board either in person or VC or other audio visual means • Notice of Meeting of Board shall be called by giving not less than 7 days by post/ electronic mode • Meeting of Board may be called at shorter notice to transact urgent business and one independent director ,if any ,must be present. • OPC/Small company/Dormant Company- deemed to comply with this section if one meeting in each half of calander year is conducted and gap between two meetings is not less than 90 days. Penalty- Rs.25,000- if fails to comply with proviso of this section
QUORUM FOR MEETING OF BOARD[SEC.174] • 1/3 of total strength or two director ,whichever is higher • Participation by Video Conferencing shall be counted for purpose of Quorum • Where at any time the number of interested directors exceeds or is equal to two thirds of the total strength of the Board of Directors, the number of directors who are not interested directors and present at the meeting, being not less than two, shall be the quorum during such time. • Adjourned meeting shall be at same day/time & place in next week –unless otherwise articles provide
MATTERS NOT TO BE DEALT WITH IN A MEETING THROUGH VIDEO CONFERENCING The following matters shall not be dealt with in any meeting held through video conferencing or other audio visual means.- (i) the approval of the annual financial statements; (ii) the approval of the Board’s report; (iii) the approval of the prospectus; (iv) the Audit Committee Meetings for consideration of accounts; and (v) the approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.