1. COMPANIES ACT, 2013 Important sections applicable w.e.f. 12.09.2013 CA. Arun Saxena Saxena & Saxena Chartered Accountants 811, Ansal Bhawan 16, Kasturba Gandhi Marg, New Delhi – 110 001. Mob.: 9810037364 E-mail : arunsaxena@saxenaandsaxena.com

2. Associate Company [Section 2(6)] Associate Company means the company in which other company has significant influence: which is not a subsidiary company but includes joint venture companies. Significant influence means control of atleast 20% of total capital or of business decision under the agreement. 2 SAXENA & SAXENA

3. Experts [Section 2(38)] Experts includes engineers, valuers, chartered accountants, company secretary, cost accountants Or Any other person who has the power or authority to issue the certificate under any law. 3 SAXENA & SAXENA

4. Interested Directors [Section 2(49)] Interested directors means the director who is in any way whether by himself or through any of his relative, or body corporate, other association of individual in which he or his relative are partners, director or the member interested in any contract or arrangement or proposed contract or arrangement entered into or be entered into by or on behalf of the company. 4 SAXENA & SAXENA

5. Key Managerial Persons KMP means:  CEO  MD  CS  whole time Director  Chief Financial Officer or  any other officer as may be prescribed. 5 SAXENA & SAXENA

6. Networth [Section 2(57)] Networth means the aggregate value of the  Paid up capital and  All reserves created out of profit and  Security Premium account  Reduced by aggregate value of the accumulated loss, deferred expenditure, miscellaneous expenditure not written off excluding reserve created out of revaluation associate or write back of depreciation. 6 SAXENA & SAXENA

7. Officer [Section 2(59)] Officer means any director, manager, KMP or any other person in accordance with whose direction or introduction, the Board of Directors are accustomed to act. 7 SAXENA & SAXENA

8. Officer In Default [Section 2(60)] Officer in default:  whole time director  key managerial person  where no KMP then director as specified by the board and who has given his consent in writing to the board to such specification. 8 SAXENA & SAXENA

9. Officer In Default [Section 2(60)]  All director if no director is so specified.  Any person who, under the immediate authority of the Board or any KMP is charged with any responsibility including maintaining filing or department of accounts, records etc.  Any person in accordance with whose advice or direction or instructions the Board of Directors are accustomed to act. However, the advice to board in professional capacity shall not cover under this provision. 9 SAXENA & SAXENA

10. Officer In Default [Section 2(60)]  Every director, in respect of the contravention of provision of act who is aware of such contravention by virtue of receipt by him by any proceeding of board or participation in such proceedings without objecting the same.  Where contravention has taken place with his consent or connivance. 10 SAXENA & SAXENA

11. Private Limited Company (Section 2(68)) Private company means a company having a minimum paid up share capital of Rs.1,00,000/- or such higher paid up share capital as may be prescribed, and which by its articles: i. Restricts the right to transfer its shares; ii) Except in case of one person company, limits the number of its members to 200. iii) Prohibits any invitation to the public to subscribe for any securities. 11 SAXENA & SAXENA

12. Promoter Section 2(69) Promoter means a person –  who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or  who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or  in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act. 12 SAXENA & SAXENA

13. Related Party [2(76)] Related party with reference to company means:  Director or his relative  KMP or his relative  Firm in which director, manager or his relative are partners  Private company in which director, manager is member or director  Public company in which director, manager are director or holds alongwith relative more than 2% of paid up capital. 13

14. Related Party [2(76)]  Body corporate, whose Board of Director accustomed to act with the advice of directions of such director  Any person on whose advice the director or manager is accustomed to act, except direction are in his professional capacity.  Any company which is:  Holding, subsidiary or an associate company of such company. Or,  A subsidiary or holding company to which it is also a subsidiary company  Such other party as may be prescribed. 14

15. Relative [Section 2(77)]  Members of HUF  Husband & wife  Related in manner as may be prescribed Rule 1.4: 15 SAXENA & SAXENA 1Spouse2Father (including step father) 3Father’s father4Father’s mother 5Mother (including step mother)6Mother’s mother 7Mother’s father8Son (including step son) 9Son’s wife10Son’s son 11Son’s daughter12Daughter (including step daughter) 13Daughter’s husband14Brother (including step brother) 15Sister (including step sister)

16. Turnover [2(91)]  Aggregate value of the realization of amount made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year 16

17. Subsidiary Company not to hold shares in its holding company (Section 19)  No company shall hold any shares in its holding company and no holding company shall allot or transfer its shares to any of its subsidiary companies.  Such allotment or transfer of shares shall be void.  Exception – Shares held as trustee or legal representative 17

18.  Where the prospectus issued, circulated or distributed includes any statement which is untrue or mis-leading and  Where any inclusion or omission of any matter is likely to mislead,  every person, who authorises the issue of such prospectus, shall be liable under Section 447. 18 Criminal Liability for misstatements in Prospectus (Section 34)

19. Civil Liability for misstatements in Prospectus (Section 35) Where a person has subscribed for security of a company acting on any statement included in any manner in the prospectus which is mis-leading and such person has sustained any loss or damage. Company and or any person who is director, authorize himself to be named in the prospectus as the Director, as the Promoter, as an expert, to be liable for compensation to every such person who sustain such loss. However, no person shall be liable if he satisfied that he has withdrawn his consent before the issue of prospects and prospects is issued without his consent. 19

20.  Any person who, either knowingly or recklessly makes any  statement,  promise or  forecast which is false, deceptive or misleading, or deliberately conceals any material facts, to induce another person to enter into (a) any agreement for acquiring, disposing of, subscribing for, or underwriting securities; or (b) any agreement with object to secure any profit from the yield of securities or fluctuations in the value of securities; or (c) any agreement for, or with a view to obtaining credit facilities from any bank or financial institution, shall be liable for action u/s 447 20 Punishment for Fraudently inducing persons to Invest Money (Section 36)

21.  Scope is widened for all types of securities.  No allotment to the public shall be made unless minimum subscription has been received.  Amount on application shall not be less than 5 % of nominal amount.  The amount of minimum subscription shall be received in 30 days (against 120 days as per companies act, 1956).  If not received, all money has to be refunded within such time and manner prescribed. 21 Allotment of Securities by Company (Minimum Subscription (Section 39)

22.  If any person deceitfully personates as an owner of any security,  imprisonment for 1 to three yrsand  with fine 1 to 5 lakh. 22 Punishment for Personation of Shareholder (Section 57)

23.  Company to register the transfer or transmission within 30 days give notice for refusal.  The appeal to Tribunal within 30 days from the receipt of notice or in case no notice is received then 60 days from the date on which documents were submitted to company.  In case of limited companies, appeal to tribunal within 90 days when there is no notice. 23 Refusal of Registration and appeal against refusal (Section 58)

24. Section covers all securities.  Application to tribunal.  For rectification of register of foreign members or debenture holders, appeal can be made by aggrieved party to the competent court outside India, as approved by Central Government.  Rectification within 10 days from order of tribunal.  Voting rights shall continue unless specified by Tribunal.  Penalty  Co. – Rs. 1 Lakh to 5 Lakh  Officer – Imp upto 1 year  Fine Rs. 1 Lakh to 3 Lakh 24 Rectification of Register of Members (Section 59)

25.  Now a Company can buyback even if it had any time defaulted in repayment of deposit or interest payable, provided that the default must have been remedied and a period of 3 year s must have been lapsed. 25 Prohibition for Buy Back in certain circumstances (Section 70)

26. Punishment for Contravention ( Registraton of Charges) (Section 86)  If any Company contravenes any provision relating to Registration of Charges, punishment has been increased.  Co. Rs. 1lakh to 10 lakh  Officer Imp. Upto 6 months Fine. Rs. 25000 to Rs 100 000 26

27.  The explanatory statement should specify the nature of concern or interest in respect of  Every director or manager  Every other Key Managerial Personnel, and  Relatives of persons mentioned above 27 Statement to be annexed with Notice (Section 102)

28. Quorum for Meeting (Section 103)  In case of Public Company :  No. of members not more than 1000: 5  No. of members 1000 to 5000: 15  No. of members more than 5000: 30  In case of Private Company :  2 members personally present 28

29. Proxies (Section 105)  One person cannot represent as proxy for more than 50 members or more than 1/10 of voting power.  Proxy in section 8 companies.  The Central Government is now vested with the powers to prescribe a class or classes of companies whose members shall not be entitled to appoint another person as proxy.  Now a member of private company can appoint more than one proxy to attend on the same occasion. 29

30. Appointment of Additional Director, Alternate Director and Nominee Director (Section 161)  Section clearly states that Additional Director shall hold office up to Annual General Meeting or the last due date of Annual General Meeting.  Nominee Director 30

31. Loan to Directors (Section 185) No company shall directly or indirectly provide any loan (including in nature of book debts) or give guarantee for providing security in connection with any loan to  Any Director or  Any other person in which Director is interested. 31

32. Loan to Directors (Section 185) To any other person means:  Any director of lending company or  Director of holding company or  any partner or relative of such director.  Any firm in which he or she or his/ her relative is partner.  Any private company in which such director is Director/Member  Anybody corporate in which not < 25% of voting power is exercising by such director or by two or more such director  Any body corporate, Board of Directors are accustomed to act with the director on such direction. 32

33. Loan to Directors (Section 185) EXCEPTIONS: Company can provide the same to MD OR WTD, if it is a part of condition of service extended by company to its employees. Or Pursuant to any scheme approved by Special Resolution. 33

34. Loan to Directors (Section 185)  2. In case of finance companies:  Loans can be provided not lesser than bank rate.  PANALTIES:  Company:Rs. 5 lakh to Rs.25 lakh  Director or any other person to whom loan given or security provided :Imprisonment upto 6 months 34

35. Prohibition on forwarding dealing in security by Director or Key Managerial Person (Section 194)  No Director or KMP shall buy in company holding, subsidiary or associate company  A right to call for delivery or right to make delivery at specified price or time of specified number of shares or amount of debentures, OR  a right, he may elect, to call for delivery or to make of delivery at specified price, time and number of shares or amount of debentures. 35

36. Prohibition on forwarding dealing in security by Director or Key Managerial Person (Section 194)  Penalty: imprisonment upto 2 years and fine from Rs.1,00,000/- to Rs.5,00,000/- or both. And  If Director or KMP acquires any securities then they shall be liable to surrender to the company. And  Such transfers shall not be registered in the name of transferees and will remain in the name of transferors. 36

37. FRAUD (SECTION 447) Explanation to Section 447 defines fraud which means:  Any act or omission,  Concealment of fact or  Abuse of position of any person (by him or herself or by any other person in connivance in any manner).  With the intent to deceive  to gain undue advantage to injure the interest of company, or its shareholders or creditors or any other person (whether or not there is any wrongful gain or loss). 37 SAXENA & SAXENA

38. FRAUD (SECTION 447)  Fraud which materially affect the company  Fraud which are happening frequently  Amount of fraud not < 5% of net profit or < 2% of turnover.  Section 143(12) : Auditor has to report above fraud to the C.G. (within 30 days).  In other cases fraud will be reported to Audit Committee or Board. Punishment for not reporting fraud:  Fine Rs. 1lakh to Rs 25 lakh. 38

39. Punishment for False Statement ( Section 448)  Person is liable u/s 447 Punishment for False Evidence( Section 449)  Imprisonment for term 3 years to 7 years and fine which may extend to Rs. 10 Lacs. 39

40.  Punishment has been increased.  The company and every officer of the company who is in default or such other person shall be punishable with fine which may extend to ten thousand rupees, and where the contravention is continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the contravention continues. 40 Punishment where no specific punishment is provided (section 450)

41.  Punishable with fine or imprisonment  Repeated within 3 years  Double Penalty 41 Punishment in case of repeated Default (Section 451)

42. Punishment for wrongful withholding of property (Section 452)  Section specifically provides that property includes cash.  Punishment has been increased - 1 Lac which may further extend to Rs. 5 Lacs. Punishment for improper use of “Limited” or “Private Limited”. (Section 453)  Punishment has been increased and now defaulter shall be punishable with fine which shall be not less than Rs. 500 but may extend to Rs. 2000 for every day. 42

43. Power of Central Government to make Rules (Section 469)  The Central Government may, by notification, make rules for carrying out the provisions of this Act.  Penalty which CG may provide for contravention of rules has been increased. Power to remove difficulties (Section 470)  If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order published in the Official Gazette, make such provisions, not inconsistent with the provisions of this Act, as appear to it to be necessary or expedient for removing the difficulty 43

44. THANK YOU 44 SAXENA & SAXENA