Presentation on theme: "ADVOCATES AND CORPORATE LAW ADVISORS"— Presentation transcript:
1 ADVOCATES AND CORPORATE LAW ADVISORS fuCORPORATE JURISCS HIMANSHU HARBOLAAdvocate and Company SecretaryACS, B.A. LL.B (Hons.), PGDIPR, PGDDLTA-Mobile:VAIBHAV AGARWALMT – Legal & Secretarial-Mobile:754, 2nd Floor, Sukhdev Nagar, Near New Public School, Kotla- Mubarak Pur, Opp. Defence Colony, New Delhi- 03
4 Dr. J. J. Irani Committee Report Journey so farDr. J. J. Irani Committee Report2005Laying down of Companies Bill 2011 in Lok SabhaReferred to Standing Committee for examination20092010201220092011Introduction of Companies Bill 2009 in Lok SabhaReceipt of Standing Committee ReportReferred to Standing Committee for re-examination
5 Notification of Sections Receipt of Standing Committee ReportIntroduction and passage of Bill by Rajya Sabha2012201320122013Introduction and passage of Bill by Lok SabhaReceipt of President assent
6 Implementation in Steps Section 1 of CA, 2013 empowers Central Government to commence the different provisions of Companies Act 2013 on different dates.MARCH 27-28, 2014MARCH 26, 2014FEBRUARY 27, 2014SEPTEMBER 12, 2013AUGUST 30, 2013Companies Act, 2013 NotifiedSection 1 came into effect immediately98 Sections NotifiedSections for which rules were not requiredCSR NotifiedSection 135 read with Companies (Corporate Social Responsibility Policy) Rules, 2014Some more Sections NotifiedIncorporation of CompaniesProspectus & Allotment of SecuritiesDividendsMeetings & DirectorsAccounts and AuditsSome Rules NotifiedCompanies (Incorporation) Rules, 2014Companies (Prospectus & Allotment of Securities) Rules, 2014Companies (Management & Administration) Rules, 2014Companies (Accounts) Rules, 2014Companies (Declaration & Payment of Dividend) Rules, 2014
7 SOME CONCEPTS CONCERNING PROFESSION OF CHARTERED ACCOUNTANTS Accounts & AuditsCorporate Social ResponsibilityNational Financial Reporting AuthorityDividendDepreciation
8 ACCOUNTS AND AUDITSCHAPTER IX AND X OF COMPANIES ACT, 2013
9 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 MarchCA, 1956: Company's /body corporate's election to choose FY.Restatement of Financial Statements (Section 130) – Yet to be notifiedCA, 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 tribunalCA, 1956: Not allowed
10 Audit & Auditors TERM OF APPOINTMENT ROTATION OF AUDITORS NON-AUDIT SERVICESIndividual 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.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 yearsIndividual 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 keepingInternal AuditInvestment advisory servicesInvestment banking servicesManagement services
11 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 BoardLISTED COMPANYUNLISTED PUBLIC COMPANYPRIVATE COMPANYEvery listed 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.
12 CORPOARTE SOCIAL RESPONSIBILITY SECTION 135 OF COMPANIES ACT, 2013 READ WITH COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY) RULES, 2014 NOTIFIED ON FEBRUARY 27, 2014
13 Concept & BenefitsCommunities provide licence to operate“Attracting and retaining employeesBusiness take inputs from nature and society and thus owe responsibility of taking care of them.Communities as suppliers”Enhancing corporate reputationReduced regulatory oversight
14 CSR as per Law (Not Exhaustive) Projects or programs relating to activities specified in Schedule VII to the ActProjects 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.
15 Applicability Net Worth – Rs. 500 Crore or more Every Company meeting any of the following criteria in any financial yearNet Worth – Rs. 500 Crore or moreTurnover – Rs Crore or moreNet Profit – Rs. 5 Crore or more
16 NATIONAL FINANCIAL REPORTING AUTHORITY & NATIONAL FINANCIAL REPORTING APPELLATE AUTHORITY YET TO BE NOTIFIED (SECTION 132)
17 Constitution, Functions & Powers Section 133 of Companies Act, 2013 empowers Central Government to constitute NFRA and NFRAA to perform following functions:Make recommendations to Central Government on formulation of accounting and auditing standards.Monitor and enforce compliance with accounting and auditing standards.Oversee the quality of service of the professions associated with ensuring compliance with such standards.Investigate into matters of professional or other misconduct committed by any member or firm of Chartered Accountants.Impose penalty and debar such firm or Chartered Accountants from practice, in case where professional or other misconduct is proved.
18 DECLARATION AND PAYMENT OF DIVIDEND CHAPTER VIII OF COMPANIES ACT, 2013
19 A Comparison… Basis Companies Act, 2013 Companies Act, 1956 Whether dividend declaration/payment barred if company defaulted in repayment of deposits?YesNo such barWhether 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 yearsShares 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.
20 Impact on various Stakeholders Board of DirectorsAudit CommitteeCXO and KMPsAccountability to stakeholders beyond only shareholdersReporting beyond SOXLiability on Class Action SuitsSignificant penalties on Insider Trading and restatementsSocietal scrutiny on CSRAdditional rigor on financial ReportingMandatory internal auditReporting beyond SOXSignificant penalties on Insider Trading and restatementsCompliance on Related Party TransactionsEase of restructuringReporting beyond SOXWider definition of Related Party TransactionsNew depreciation rules may affect profitabilityLiable for Class Action SuitsIndependent DirectorsPromotersMNCsOversee implementation of best corporate governance practices.Safeguard interests of all stakeholdersEnsure adequate and functional vigil mechanism.Determine appropriate levels of remuneration for Directors and KMP.Multi-layered structures to be collapsedCross-border transactions allowedMandatory CSR contribution will affect cash flowsWider definition of Related Party TransactionsLower thresholds for financial consolidationMandatory contribution to local CSRWider definition of Related Party TransactionsEase in cross-border restructuringFacility of minority buy-out
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