Compliance under The Companies Act, 2013 (SS1 & SS2)

1. J J Gandhi & Co. Compliance underThe Companies Act, 2013(SS1 & SS2) J.J. Gandhi Practising Company Secretary 231, Phoenix Complex, Sayajigunj, Vadodara jjgandhics@gmail.com 1

2. Event based complianceTo be complied when event occurs/ decision taken

3. Appointment of Auditor • Auditor can not be appointed for less than 5 years. Section 139 uses the word “shall” • Audit Committee to recommend Appt. of Auditor • Auditor has to provide certificate mentioning; (Rule 3) • Consent to act as Auditor • Eligible for appt. and not disqualified • Appt. is as per the term provided in the Act • Appt. is within the limit • First Auditor Appt.- by Board within 30 days of incorporation. If Board failed then Appt. by EOGM within 90 days of incorporation. J J Gandhi & Co.

4. Appointment of Auditor …. • Govt. Co. - First Auditor Appt. by CAG within 60 days. If CAG fails to Appt. Board can Appt. within next 30 days. If Board fails Appt. at EOGM within next 60 days. • Co. to intimate Appt. to Auditor • Now, liability is with Co. to file Form ADT 1 by using DSC of Director • To be filed within 15 days of appt. i.e. dt. of AGM • ADT 1 filed after 15th Oct. is late filing and attracts additional filing fees. J J Gandhi & Co.

5. Rotation of Auditor • Applicable to • All listed Co. • Public Co. having Paid up cap. 10 Cr. & more • Pvt. Co. having Paid up cap. 20 Cr. & more • Any Co. with public borrowings from FI/ Banks/ public deposits 50 Cr. & more • Individual Auditor cannot be appointed for more than one term of 5 yrs • Firm cannot be appointed for more than two consecutive terms of 5 yrs • Co. to appoint Jt. Auditors in such manner that they do not complete their term in same year. J J Gandhi & Co.

6. Resignation of Auditor • No provisions contained under old Act • ADT 3 required to be filed within 30 days with the Co. & MCA & CAG, if applies. • Filed with the DSC of Auditor • Attachment - Resignation letter must mention date of resignation, reasons of resignation and other facts, if any. • Non compliance – Mini. Fine Rs. 50,000 extended upto Rs. 5 lacs. J J Gandhi & Co.

7. Resignation of Auditor … • Casual vacancy occurred due to resignation to be filled by Board within 30 days and also required to be approved by shareholders within 3 months. • Auditor can be removed before expiry of term • By serving special notice to Auditor • by passing Special resolution and • By obtaining previous approval of the CG J J Gandhi & Co.

8. Appointment of Director • For appointment, cessation and for change in designation of Director and KMP - DIR12 required to be filed • Required to mention other Directorship • Appointee can not use his DSC • Exiting Director can not use his DSC • For CEO/ CFO/ CS PAN is mandatory J J Gandhi & Co.

9. Attachments of DIR 12 Attachment for appointment • Board Resolution/ shareholders resolution of appointment • Consent to act as Director in DIR 2 • Not attached to disqualification - DIR 8 • Appointment letter if appointed as Independent Director J J Gandhi & Co.

10. Resignation of Director Sec. 168 • No provision in the Companies Act, 1956 • Should be in writing – mentioning date and reasons • Take effect when received by the Co. or date mentioned in it – Whichever is later. Sec. 168(2) • Resignation to be acknowledged by Co. • Acceptance by the Board is not necessary. Board has to take note of resignation. (Sec. 168(1)) • Co. within 30 days intimate the ROC in Form DIR 12 and post the information on its website, if any. J J Gandhi & Co.

11. Resignation of Director … • Resignation to be mentioned in next Board Report • Attachment to DIR12 is resignation acknowledged by co. • Within 30 days from the date of resignation, resigning Director will upload DIR 11 attaching his resignation with reasons along with the fee. DSC of resigning Director is required • If the Company has minimum Directors, MCA system will not allow to upload resignation, unless Director is appointed to satisfy minimum requirement. J J Gandhi & Co.

12. Vacation of office by Director Sec. 167 • If Director fails to attend all Board meetings held during last 12 months - even if leave of absence is granted by the Board. • If fails to disclose interest in Related Party Transactions u/s 184 • Function as Director after vacation of office - imprisonment upto 1 year or fine of Rs. 1 lac to 5 lacs or with both J J Gandhi & Co.

13. Borrowings by Company

14. Public Company • A Companycan accept money under following heads. This provision also apply to unsecured loans or Deposits or book entry. Account title is not relevant. • Public Co. can accept unsecured loan only from Directors. Even closely held public Co. can not accept from its shareholders or from relatives of Directors. • Director has to give declaration that the Loan given to the Company is not out of borrowed fund. J J Gandhi & Co.

15. Private Company • Pvt. Co. can accept unsecured loan from Directors and also form relatives of Directors. • Director or Relative has to give declaration that the Loan given to the Company is not out of borrowed fund. • Pvt. Co. can accept Deposits from shareholders but not exceeding the amount of paid-up share capital and free-reserves of Pvt. Co. (Notification dt. 05/06/2015) J J Gandhi & Co.

16. Prohibition to give loans Sec. 185 • A company shall not give loan (directly or indirectly) to following; • Director of a Company or his relatives • Director of a Holding Company or his relatives • Firm in which above Director or relative is partner • Any partner of above firm • Private company where there is common Director or Director is Shareholder • Body corporate whose 25% or more equity capital is controlled by Director or Directors. J J Gandhi & Co.

17. Sec. 185 modified for Pvt. Co. • As per Notification dt. 05/06/2015- a private Co. which satisfy following all conditions can give loans, deposits or guarantee to parties covered in section 185 • Which does not have a company Shareholder • Which does not borrow money from Bank/ FI / Body Corporate exceeding Rs. 50 crores or does not have borrowing exceeding twice the paid up capital – WL • Which does not have default in repayment of such borrowings subsisting at time of giving loan. J J Gandhi & Co.

18. From Promoters and Relatives • Promoter and Relatives can give unsecured loan to the Company if stipulated by Banks/ FI as per the terms of sanction. But such loan can continue with the Company till the loan is repaid to the Bank. • Customer Advance:It is requiredto be adjusted within 365 days. J J Gandhi & Co.

19. Registration of Charge J J Gandhi & Co.

20. Registration of Charge • Charge created on movable or immovable assets/ properties of the Company requires to be registered. i.e. Hypothecation of Stock, Book debts, movable machineries, mortgage of fixed assets of the Company. But charge created on personal properties of Director does not require registration with MCA portal. • Registration of charge or modification of charge is filed/ uploaded through Form CHG 1. It is required to be registered within 30 days by the Company. J J Gandhi & Co.

21. Registration of Charge …. • On Registration of charge a Certificate of Registration will be issued by the ROC. • If the Company fails to Register within 30 days then after 30 days charge holder i.e. Bank can apply for charge Registration with additional filing fees. Here, digital signature of Director of a Company is not required. Registrar will inform the Company and Register the charge. Here, as per Section 78 Bank is entitled to recover fees and additional fees from the Company. J J Gandhi & Co.

22. Registration of Charge …. • If charge is not registered within 300 days of its creation or modification then as per Rule 12 application for condonation of delay (for permitting delayed filing) will be made to the RD. • The order of RD will be filed with Form INC 28. • If Company acquires any property which is subject to charge then also charge required to be registered. e.g. Merger, conversion of Partnership firm into company etc. J J Gandhi & Co.

23. Registration of Charge …. Registration and Modification of charge • Can be filed by charge holder or Co. • Attachment instrument creating charge – stamp duty amount should be visible • For joint charge holder list to be attached • DSC of Director, Banker and certifying professional are required • In case of Public Co. for borrowing Board resolution must have been filed J J Gandhi & Co.

24. Satisfaction of Charge • A Company shall give intimation to the Registrar in Form CHG 4 for satisfaction of charge within 30 days along with No Due Letter (NOC) of Bank. • The ROC will serve notice on the Charge holder, if he has objection against satisfaction of charge. • On Registration of Satisfaction of Charge a Certificate of Satisfaction of charge will be issued by the ROC. J J Gandhi & Co.

25. Satisfaction of charge … • To be filed within 30 days of repayment in full • After 30 days Petition to be made to RD • Can not be regularized filing by paying additional filing fees. Order of RD is required. • The order of Regional Director will be filed with Form INC 28. • NOC of Bank should mention date on which loan is repaid in full. • Signed by Director, Bank and Certifying professional • Satisfaction is not possible in part J J Gandhi & Co.

26. Loans & Investments J J Gandhi & Co.

27. Loans & Investments Sec. 186 • If loans are given to 100% wholly owned subsidiary Co. it should be used only for its principal busi. activities • Consent of all Directors present at the Board meeting is required for giving loans or making investments Sec. 186(5) • If any Term Loan is subsisting – prior approval of public FI is required. However, approval is not required if loans and investments are within the following limits and default has not been made in repayment of principal or interest. J J Gandhi & Co.

28. Loans & Investments …. Total of Loans and Investments (along with existing) shall not exceed • 60% of its paid up capital, free reserves and premium account or • 100% of its free reserves and premium account - whichever is more. • If Loans and Investments exceed above limits prior approval of Shareholders by special resolution is required. Resolution should mention amount of loans or investments. J J Gandhi & Co.

29. Loans & Investments …. • The limit (i.e. 60% or 100%) does not apply if loans given to or investments made in 100% subsidiary Company. • Loan shall not be given at a rate of interest lower than the yield rate of Govt. Security. • Disclosure is required in financial statement mentioning proposed utilization by the recipient company. J J Gandhi & Co.

30. Increase in Autho. capital Sec. 61 • Increase in Authorized share capital attracts Registration fee and stamp duty • Attachments - Special Resolution & Expl. St. and MOA with modified capital clause • Proof of earlier payment of stamp duty • Certifying professional certifies payment of stamp duty • Registration fee and stamp duty challan attracts 2.5% p.m. and 3% p.m. late fee, if filed late. J J Gandhi & Co.

31. Increase in Paid up capital • File MGT 14 for filing Special Resolution with Explanatory Statement • File GNL 2 for filing PAS 4 (Letter of Offer contains all details) attachment Board Resolution and Special Resolution • File PAS 3 for filing List of Allottees attachments - Board Resolution for Allotment • Filing GNL 2for filingPAS 5 (i.e. record name, address, from which Account money has come etc.) • File MGT 14 for filing Board Resolutionof Allotment J J Gandhi & Co.

32. Change of Regd. office Address • Whether premises owned by Director or others • Whether taken on Lease • Attachment – Sale deed, lease deed, rent agreement, latest rent receipt, NOC of owner, Latest proof like electricity bill/ phone bill (not older than 2 months) • List of all companies having same registered office address, if any. • Professional certify that he has personally visited the registered office and verified that it is functioning for the business purpose of Co. J J Gandhi & Co.

33. Annual compliance Mandatory for every Company Even if there is no activity J J Gandhi & Co.

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45. Key Highlights Companies Amendment Bill, 2016 J J Gandhi & Co.

46. Universal object companies will be permitted. Allow unrestricted object clause in the Memorandum of Association dispensing with detailed listing of objects • The company is free to give negative list of businesses that it may not want to do. • Big heap of unwarranted “objects” which the company may not even want to engage in in foreseeable future J J Gandhi & Co.

47. Approval of reservation of name of a proposed company will expire within 20 days from the date of approval (presently it expires after 60 days) • In the process of incorporation presently many notorised affidavits are required to be given by subscribers/ first Directors – this is replaced by declarations. J J Gandhi & Co.

48. Co. can pay remuneration in excess of limit prescribed in Schedule V, after seeking approval of shareholders by special resolution. • However, if appointee do not satisfy the eligibility condition then Govt. approval is required. • Prior approval of Bank/ FI or non-convertible debenture holder or secured creditor is required, before taking approval from shareholders. J J Gandhi & Co.

49. A company may give loans to entities in which directors are interested after passing special resolution and adhering to disclosure requirement; • CEO who is not Director can sign Financial Statement. J J Gandhi & Co.

50. removal of requirement for annual ratification of appointment or continuance of auditor • It is to become optional to file DIR11 by the resigning Director J J Gandhi & Co.