1. WORKSHOP ON COMPANIES ACT 2013 08 August 2015 Anagha Anasingaraju PARTNER, KANJMAG & CO COMPANY SECRETARIES

2. BOARD & COMMITTEE MEETINGS (WITH SECRETARIAL STANDARDS)

3. Frequency of board meetings: a.1 st meeting within 30 days of incorporation b.At least 4 meetings in a year c.Maximum gap between two meetings – 120 days d.For OPC and small companies – at least 2 meetings in a year – minimum gap of 90 days between two meetings

4. Notice of board meetings: a.At least 7 days’ notice b.Proof of service of notice and delivery to be preserved c.Notice to contain serial number, day, date, time, full address of venue of meeting d.Meeting / adjourned meeting cannot be held on national holiday

5. Agenda: a.To be circulated at least 7 days before in same manner as notice b.Proof of service of agenda and delivery to be preserved c.Matters of UPSI may be given at shorter period with majority consent

6. Agenda contd: d. Each item requiring approval to have note with details e. Draft resolution to be circulated / placed at the meeting f. Each agenda item to be serially numbered g. Matters outside agenda only with permission of the Chairman and consent of majority directors present

7. Quorum: a.1/3 or 2 whichever is higher b.Quorum should be present throughout the meeting c.Interested directors not counted as quorum* d.Directors participating through electronic mode form quorum except certain transactions e.For committee meetings – all members unless provided by the Act / articles / other law

8. Quorum contd: Where number of directors falls below 2 / quorum, continuing director / s to act only for the purposes of increasing the number to 2 / quorum or for calling general meeting [Section 174 (2)]

9. Attendance: a.Separate attendance register to be maintained for board and committee meetings b.Pages of register to be serially numbered c.If in loose leaf form, to be bound periodically. d.Contents – serial number, date of meeting, place, time, names, signature of director, invitees, CS

10. Attendance Register: a.To be maintained at registered office b.It is open for inspection only by directors and auditor c.Entries to be authenticated by CS / Chairman d.To be preserved for 8 years e.Leave of absence granted only when specifically requested for

11. Video conferencing -Proceedings to be recorded – audio and video -To be preserved till completion of audit -Detailed procedure given in the Rules about conduct of meeting through electronic means -Meeting for accounts approval, approval of directors’ report, approval of prospectus, approval of corporate restructuring not through video conferencing

12. CIRCULAR RESOLUTIONS (WITH SECRETARIAL STANDARDS)

13. a.To be circulated to all directors with supporting papers b.Each resolution to carry serial number c.By hand, post, courier, email, fax d.Proof of sending and delivery to be maintained e.Resolution deemed to be passed when approved by majority f.Directors to respond within 7 days

14. a.Effective date of resolution – last day of assent / dissent, day on which 2/3 have assented / date specified b.Directors to write date of signing c.Where 1/3 directors wish the matter to be decided at next BM, they need to communicate as such before last date and then matter only in next BM d.Resolutions to be noted at next BM, text to be included in minutes with dissent or abstention.

15. Matters which cannot be passed in VC meeting: a.Accounts approval b.Approval of directors’ report c.Prospectus d.Amalgamation, merger, demerger, acquisition, takeover

16. Matters which cannot be passed by circular resolution: a.Accounts approval b.Approval of directors’ report c.Prospectus d.Amalgamation, merger, demerger, acquisition, takeover e.Borrowing f.Investing funds g.Granting loans, giving guarantee, providing security

17. Contd… a.Making political contributions b.Calls on shares c.Approving remuneration of MD, WTD, Manager d.Appointment / removal of KMP e.Appointment of a person as MD / Manager in more than one company f.Sanction to RPT

18. Contd… a.Purchase / sale of subsidiaries / assets not in ordinary course of business b.Approve payment to director for loss of office c.Buy back d.Issue of securities including debentures e.Specific matters in listed companies

19. GENERAL MEETINGS WITH SECRETARIAL STANDARD

20. Annual General Meetings: -First AGM within 9 months from date of closing first financial year -AGM to be held within 9.00 a.m. to 6.00 p.m. only -AGM not to be held on National Holiday -AGM CANNOT be held outside India -Consent for shorter notice by at least 95% of members entitled to vote at the meeting

21. Annual General Meetings contd: -AGM notice to be given to each director, auditor, secretarial auditor, debenture trustee -Auditor to attend AGM unless specifically exempt by the company -Explanatory statement to contain details so as to enable members to make informed decision -Quorum now dependent on total number of members

22. Annual General Meetings contd: -Financials may be circulated at shorter notice along with AGM notice -If foreign subsidiary is not required to get accounts audited as per local laws, Indian holding company to place such unaudited financials on website and file them with ROC; format may be different

23. MINUTES OF MEETINGS WITH SECRETARIAL STANDARD

24. -Separate minutes book for each type of meeting -Can be maintained in electronic form -Should include time of commencement and conclusion of meeting -Draft minutes of board meeting to be circulated within 15 days for comments – proof to be maintained -Directors to comment within 7 days of circulation -Alteration only by express approval at next board meeting

25. POWERS OF THE BOARD

26. Powers of the Board -List of matters to be transacted only by way of a resolution passed at the board meeting given in section 179 and Rules -Restrictions on powers of the board in section 180 – not applicable to private companies w.e.f. 05 June 2015 -Contribution to bona fide charitable funds – prior special resolution where amount exceeds 5% average NP of 3 years

27. Powers of the board contd…. Contributions to political party / purpose: -Restriction on Govt companies and companies in existence for less than 3 years -Max. amount of contribution – 7.5% of average net profits of last three years -Prior board resolution required -Amount and name of party to be disclosed in P & L account

28. Powers of the board contd…. Contributions to National Defence Fund: -No restriction on amount to be contributed -Amount to be disclosed in P & L account

29. List of events for which Form MGT-14 to be filed by private companies -Special resolutions -Board resolution for appointment / reappointment / variation in terms of appointment of MD -Resolution for voluntary winding up

30. List of events for which Form MGT-14 to be filed -Calls on shares -Buy back of shares -Borrowing monies -Investment of funds -Grants loans, give guarantee, provide security -Approve financial statements -Approve directors’ report

31. List of events for which Form MGT-14 to be filed -Diversification of business -Amalgamation, reconstruction, merger -Takeover -Acquisition of substantial stake in another company -Political contributions -Appointment / removal of KMP -Appointment of secretarial / internal auditor

32. DISCLOSURE OF INTEREST BY DIRECTORS

33. When to disclose interest: -First meeting in which he participates as a director -First meeting in every financial year -Whenever there is a change in disclosure made, first board meeting held after such change -At the meeting in which contract or arrangement is discussed -Whenever he becomes concerned or interested in the contract or arrangement after it is entered into or 1 st BM thereafter

34. Manner of disclosure: -Disclosure to be made in Form MBP-1 – extent of interest and date of change in interest -Concept of annual notice done away with -Applicable to all directors including independent directors -Interested director not to participate in discussion on the contract / arrangement -Disclosure should be noted in board minutes by way of a resolution

35. Exemption? -Applicable to all companies -Not applicable to contracts / arrangements between 2 companies where one director of a company or two put together hold upto 2% of paid up capital of other company

36. Contents of Form MBP-1 -Names of relatives -Names of private companies in which director -Names of private companies in which member -Names of public companies in which director -Names of public companies in which member, by himself or with relatives -Names of body corporates which are accustomed to act as per his directions

37. Contents of Form MBP-1 -Names of BC at general meeting of which he can exercise 25% or more voting power, individually or with other directors -Names of persons on whose instructions he is accustomed to act -Name of BC of which he is promoter / manager / CEO -Names of AOP / firms in which he is a partner

38. Relative under Companies Act 2013 -Spouse -Father, Mother (including step father, mother) -Son (including step son) and his wife -Daughter and her husband -Brother (including step brother) -Sister (including step sister)

39. LOANS TO DIRECTORS – SECTION 185

40. Complete prohibition on companies to advance any loan – including loan represented by a book debt / give any guarantee / provide any security in connection with loan to – either directly or indirectly: -Directors -Any other person in whom director is interested -GOVERNMENT APPROVAL DONE AWAY WITH

41. Person in whom director is interested: -Director of lending company -Director of a company which is holding company of the lending company -Any partner of such director -Any relative of such director -Any firm in which director is partner -Any firm in which relative is partner

42. Person in whom director is interested contd: -Any private company of which such director is a director -Any private company of which such director is a member -Any body corporate of which 25% of voting power may be exercised or controlled by director, alone or with other director -Any bode corporate whose BOD / MD / Manager is accustomed to act in accordance with instructions of the director / BOD of lending company

43. Exceptions: -Giving of loan to MD / WD (a) as a part of conditions of service extended to all employees (b) pursuant to a scheme approved by members by special resolution - Company engaged in giving loans etc in ordinary course of business and interest rate is not less than bank rate of RBI

44. Exceptions contd…: -Loan made / guarantee given / security provided by holding company to WOS -Guarantee given or security provided by holding company in respect of loan made by bank / FI to subsidiary -Provided loans are utilized by subsidiary for its principal business activities

45. Exceptions contd…: -Private company a.Which has no body corporate as shareholders b.Borrowing from banks / FI / body corporate < 2 times its paid up capital or Rs. 50 crores, whichever is lower c.Has no default in repayment of such borrowings at the time of making transaction under Section 185

46. LOANS AND INVESTMENT BY COMPANY

47. Similar to old Section 372A -Applicable to private companies also -Upto limits, unanimous board resolution -Beyond limits, prior special resolution -Disclose full particulars of loans etc in financial statements -Prior sanction of financial institution necessary in case where loans etc beyond limits and there is default in repayment of loan or interest thereon

48. -Interest rate to be at least equal to prevailing yield of 1 / 3 / 5 / 10 year government security closest to the tenor of the loan -Cannot give loan etc in case default in repayment of deposits / interest under old or new Act -Employee loans exempted from this section by way of circular dated 10 th March 2015 if given under a Scheme

49. Exceptions: -Loan / guarantee / security by banking / insurance / housing finance company in ordinary course of business -Loan / guarantee / security by company engaged in business of financing companies -Loan / guarantee / security by company engaged in providing infrastructural facilities

50. Exceptions contd: -Acquisition: (a)By NBFC in respect of its investment and lending activities (b)By company whose principal business is acquisition of securities (c)Of shares under rights issue

51. RELATED PARTY TRANSACTIONS

52. Who is a related party: -A director -Relative of director -KMP -Relative of KMP -Firm in which director is a partner -Firm in which manager is a partner -Firm in which relative is a partner

53. Who is a related party contd: -Private company in which director is a member -Private company in which director is a director -Private company in which manager is a member -Private company in which manager is a director -Private company in which relative is a member -Private company in which relative is a director

54. Who is a related party contd: -Public company in which director is a director and holds more than 2% of paid up capital, along with relatives -Public company in which manager is a director and holds more than 2% of paid up capital, along with relatives -Body corporate whose BOD / MD / Manager accustomed to act in accordance with instructions of director / manager

55. Who is a related party contd: -Person on whose advise director or manager is accustomed to act -A holding company -A subsidiary company -An associate company -A fellow subsidiary -Director or KMP of holding company

56. Which are related party transactions: -Sale, purchase, supply of goods or materials -Sell or otherwise dispose of, buy, property of any kind -Lease property of any kind -Avail or render any service

57. Which are related party transactions contd….: -Appointment of agent for purchase or sale of goods /materials / services / property -Related party’s appointment to office or place of profit in the company / its subsidiary / its associate company -Underwriting subscription of any securities or derivatives of the company

58. Difference in section 297 and section 188: -Not limited only to common directors – definition of related party widened -Equally applicable to all types of companies -Transactions related to immovable property also included -No relation to paid up capital -Government approval done away with

59. How it works: -Agenda / explanatory statement should contain all details -Prior Board approval required for entering into any such transaction by the company with a related party -Prior shareholders’ resolution in specified cases as per Rules -Member who is a related party not to vote on resolution in general meeting for approving the transaction

60. How it works: -Transaction already entered into may be ratified within 3 months by board / shareholders -Director not to remain present during discussion on transaction in board meeting

61. Limits for special resolution: -Sale, purchase, supply of goods or materials – 10% of turnover or Rs. 100 crores, whichever is lower -Sell or otherwise dispose of, buy, property of any kind – 10% of networth or Rs. 100 crores, whichever is lower -Lease property of any kind – 10% of net worth or Rs. 100 crores, whichever is lower -Avail or render any service – 10% of turnover or Rs. 50 crores, whichever is lower

62. Limits for special resolution contd…..: -Related party’s appointment to office or place of profit in the company / its subsidiary / its associate company – monthly remuneration exceeding Rs. 250,000 -Underwriting subscription of any securities or derivatives of the company – 1% of the net worth

63. Exceptions: Section 188 is completely not applicable to: -Transactions which are in the ordinary course of business -AND -Transactions which are at arm’s length -Shareholders’ resolution not required for transaction between holding and WOS whose accounts are consolidated and placed at AGM

64. Exceptions contd…: Section 188 is completely not applicable to: -Transactions arising out of compromises, arrangements and amalgamations -Contracts entered into before 01 April 2014 and still valid

65. What is ordinary course of business: -Whether activity is frequent, regular -Financial scale of activity vis a vis business operations -Revenue generated by the activity -Resources committed to the activity

66. What may not be ordinary course of business: -Mere inclusion of activity in objects clause -Sale made for business but no reasonable connection with business -Disposal of old machinery

67. NOT related party transactions? -Acceptance of ICD in two companies -Payment of / increase in sitting fees to directors -Leave and license agreement -Reimbursement of expenses to director for attending BM

68. APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL

69. Section 196 -Cannot have MD and Manager at the same time -Maximum term of appointment / re-appointment of MD, WTD, Manager is five years -Reappointment not before one year of expiry of term -Minimum age 21 years and maximum age 70 years -Beyond 70, pass special resolution for appointment / reappointment

70. Other disqualifications for MD / WTD / Manager: -Undischarged insolvent / adjudged insolvent -Suspended payment to creditors or made composition with them -Convicted by court of offence and sentenced for more than 6 months

71. Appointment of MD / WTD / Manager in public companies: -Comply with provisions of Section 196, 197, Schedule V -Appointment by board, subject to approval by members -If terms of appointment in variance with Schedule V, Central Government approval -Form MR-1 to be filed within 60 days

72. Comparison of Schedule XIII with Schedule V: 1.Part I – Appointments – almost similar – addition of Prevention of money laundering Act 2.Minimum age 21 against 25 earlier 3.Part II – Section I – Remuneration by companies having profits 4.Part II – Section II – Remuneration by companies having inadequate or no profits

73. Comparison of Schedule XIII with Schedule V: 1.Part II – Section III – Remuneration by companies having inadequate or no profits in special circumstances 2.Part II – Section IV – Perquisites not included in remuneration 3.Part II – Section V – Remuneration payable to managerial personnel in two companies 4.Part III – Provisions applicable to Part I and II

74. Conditions of appointment in Schedule V – Part I: -Not sentenced to imprisonment / fine exceeding Rs. 1,000 under listed statutes -Not been detained under COFEPOSA -Completed 21 years and not attained 70 years -Managerial person in more than 1 company and draws remuneration from 1 or more companies within ceiling of Part II -Is resident of India

75. Limits of remuneration – Section 197 A. In case of profits: -Overall – not to exceed 11% of net profits as per section 198 -Central Govt approval to exceed 11% s.t. Schedule V Part II Section 1 -To 1 MD or WTD or manager – 5% of NP -More than 1 – 10% of NP -Other directors – 1% if MD / WTD / Manager -3% in other cases

76. Limits of remuneration – Section 197 contd… B. In case of inadequacy of profits: -Remuneration as per Schedule V – Part II Section II -If not, previous Central Govt approval -Remuneration can be doubled if special resolution passed

77. Limits of remuneration – Section 197 contd… B. In case of inadequacy of profits: -In special cases, Schedule V – Part II Section III a.Remuneration paid by another company b. Newly incorporated company – upto 7 years c.Sick company d.Remuneration fixed by BIFR / CLB / NCLT e.Company in SEZ s.t conditions

78. -Remuneration to directors may be paid as monthly payment or percentage of net profits or partly in both ways -Remuneration to independent director – sitting fees, reimbursement of expenses for attending meeting, profit related commission approved by members BUT NOT stock options

79. -MD / WTD who receives commission from the company can receive remuneration or commission from holding company or subsidiary company, subject to disclosure in directors’ report [section 197 (14)] -Premium for director liability insurance not treated as part of remuneration, unless person is proved guilty

80. QUERIES?

81. THANK YOU! anagha.anasingaraju@kanjcs.com