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How new company law can be a boon to the CEO and Company?. By CA Santhanakrishnan. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA ICAI Bhawan, Indraprastha Marg, New Delhi – 110 002. That ’ s not how we think, right?. We all know change is the only permanent thing So why keep cribbing?

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how new company law can be a boon to the ceo and company

How new company law can be a boon to the CEO and Company?

By

CA Santhanakrishnan

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

ICAI Bhawan, Indraprastha Marg, New Delhi – 110 002

that s not how we think right
That’s not how we think, right?
  • We all know change is the only permanent thing
  • So why keep cribbing?
  • Why not act?
  • Now that we do have the Company law, how can that be used to maximum advantage?
csr the great goodwill creator
CSR –the great goodwill creator
  • We should thank MCA for giving us a great tool to increase goodwill, create brand awareness, get the friendship of the local areas we operate from and generally be part of Nation building
  • Who are we talking about in the local area
    • Many contractors and their families
    • Own employees and their families
    • Many suppliers/ sub suppliers and their families
    • Many people whose livelihood depends on your office or factory
improve the livelihood of the neighborhood
Improve the livelihood of the neighborhood
  • What ever you do for local community will come back to benefit you
  • Look what one Jamshedpur has done to Tatas and how much Tatas have done for Jamshedpur –it’s mutual
  • My take is that
    • If all industries had spent 2% of project cost on CSR they would have never faced any trouble from locals
use csr for maximum benefit
Use CSR for maximum benefit
  • Use your funds judiciously
  • Use it to improve overall carbon footprint
  • Use it to improve hygiene, health, education in the area surrounding
    • You will end up with more customers!
  • Make all group companies join together to arrive at a sizeable amount which can make real change
  • Connect with employees who already have good projects or are thinking of one and make them the champions
    • Your employee morale will also go up
use technology for csr
Use technology for CSR
  • Use latest technology to do revolutionary changes in the lives of people around you
    • Just take one technology- 3D Printing or 3D Layering
  • You make 3D printers available locally so almost all needs can be met locally
  • As we speak , 3D printers that make Pizza are being made
  • You have the chance to really eradicate hunger –literally!
woman director
Woman Director
  • Great women, unfortunately, have come to surface only when their father or husband had expired or gone out of action
  • Think of Anu Aga and how many AnuAgas are hidden from public eye
  • Indian women are now in great positions
  • AartiPrabhakar heads Military technology in DARPA for the US army
  • Indira Nooyi became the most powerful woman on earth
go get the best woman on your board
Go get the best woman on your board
  • As a co director of great women like Irina Vittal, MallikaSrinivasan I know the contribution women can make in the Board room
  • This is the single best thing to happen to India Inc. in a very long time
  • Get the smart , intelligent, participative woman director you deserve and
  • see how they change/transform your business for the better
deposits
Deposits
  • Worried you can’t accept deposits?
  • Good for you
  • Who wants to deal with fickle minded unprofessional jittery retail investors?
  • Ask anyone who has faced the wrath of unpaid deposit holders
  • Your banker will understand what downturn and CDR mean; your average depositor will arrange a run on your company.
  • Good riddance
related party transactions
Related party transactions
  • If you want to purchase good exceeding 25% of your Turnover and they are not at arm’s length!
  • It is but fair that you explain to your minority shareholders why you think it is fair!
  • I do not know why some people crib about this also!
isn t it great you don t have to deal with babus
Isn’t it great you don’t have to deal with babus
  • India Inc has to raise as one man and salute MCA for removing (their own powers) all those Central Government approvals which took ages and which were a pain and lot of expenditure
  • It should be a great feeling that you will be dealing with your co-shareholders and not some Babus in Delhi to explain your business and why the approval is necessary
think of all the vanishing cos
Think of all the vanishing Cos
  • Yes, many of us are honest
  • But how do we deal with those black sheep that get away, which bleed all stakeholders dry?
  • Was it fair that Satyam shareholders in USA got compensated but Indian shareholders were left high and dry?
  • Some deterrent was needed to rein in people who thought they could away with murder.
yes we need to work hard
Yes we need to work hard
  • This is not to say there are no pin pricks
  • But pinpricks will be there in whatever we do
  • MCA has proved that they can and will listen –as proved by so many amendments –some even beyond law!
  • If you have a problem take it to them
  • It will get a fair hearing.
relatives
Relatives
  • Category of relatives come down from 24 to 11
  • 16 categories of relatives dropped
  • New Relatives added - Step Father, Step Brother, Step Sister
    • Previously step daughter was a relative but not step father who is now a relative. Shows times have changed
  • Even in new Rule 4 in Chapter 1 under S 2(77) of the new act, would be better that only dependents are included under relatives. Though it will be a sweeping change, that would ensure to make this improvement to include only dependent Brother and sister
related parties
Related Parties
  • Not complicated, contrary to general belief
  • Major changes:
    • Various clauses in various sections for different regulatory purposes – consolidated into one place for all transactions – “Related Party” is referred only in 4 sections
    • Disclosure requirements have gone up substantially
  • Compliance with Related Party requirements significantly reduced by
    • Excluding companies with Paid up share capital less than Rs. 10 crores
    • For companies above this limit – substantially higher transaction limit prescribed in rules, considering Materiality.
key managerial personnel
Key Managerial Personnel
  • Clubbed positions of CEO /MD / WTD Manager / CEO and CS as under the old Act and added CFO and treated them as KMP
  • No new additional responsibilities
  • No qualification requirements for CEO/ CFO
  • Could become an overload in small Private companies
    • To explore possibility of CG prescribing any one person as KMP
  • Theme is to fix responsibility in the event of any issue – otherwise, these positions are just similar to directors and there is no new material impact arising from this
special resolutions
Special Resolutions
  • Definition same as 1956 Act
    • Except that In Related Party transaction, related parties cannot vote
  • 75% voting from non related parties for Related party transactions
    • Majority approval from minority through special resolutions - Operational difficulty, possible loss of objectivity
  • Member approval instead of CG approvals
issues concerning the profession
Issues concerning the profession
  • NFRA
  • Penal Provisions on the Auditors
  • Rotation of Audits
  • Limit on number of audits
  • Fraud reporting
  • Related Parties (for the purpose of audits)