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INCORPORATION OF A COMPANY AND RELATED MATTERS COMPANIES BILL 2012

CA Rajeev Sogani. INCORPORATION OF A COMPANY AND RELATED MATTERS COMPANIES BILL 2012 . ICAI. ICAI Study Circle Meeting 02/02/2013. Chapter II of Bill v/s Existing Section(s). Continued.

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INCORPORATION OF A COMPANY AND RELATED MATTERS COMPANIES BILL 2012

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  1. CA Rajeev Sogani INCORPORATION OF A COMPANYAND RELATED MATTERSCOMPANIES BILL 2012 ICAI ICAI Study Circle Meeting 02/02/2013

  2. Chapter II of Bill v/s Existing Section(s) Continued.. Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  3. Chapter II of Bill v/s Existing Section(s) Continued.. Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  4. The Changed Ones!!!!! Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  5. The Changed Ones!!!!! Continued.. Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  6. ONE PERSON COMPANY Clause 3 (1) (c) Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  7. One Person Company(OPC) Clause 3(1)(c) “A Company may be formed for any lawful purpose by one person, where the company to be formed is to be One Person Company that is to say, a Private Company,” Features • One member and one shareholder. • Financial liability is limited - Alternative to risky proprietorship business. • Legal entity – a form of Private Company • Function on the same principles as a Company, • Minimum one director Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  8. Process of INCORPORATION of an OPC • One person to • Subscribe his name to memorandum and • Comply with other requirements of registration of this Act. • Memorandum of OPC shall indicate • the name of Nominee whose prior written consent has been taken The written consent of such Nominee shall also be filed with ROC Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  9. Status Of NOMINEE? On the death of the sole member, The nominee shall become the member. At any other time The nominee can withdraw his consent. The member may change the name of such Nominee. Duty of theCompany to intimate ROC about any such change. Change of name of nominee shall not be deemed to be alteration in articles Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  10. Relaxations to an OPC Exempted from holding AGM (Clause 96 (1)). No need of Cash-Flow Statement in F.S. (Clause 2(40)). Minimum number of directors– One (Clause 149(1)(a) ). One director can sign the audited financial statements (Clause 134) Minimum number of Board Meetings- 2 instead of 4 for others (Clause 173) Continued.. Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  11. Relaxations to an OPC Continued.. Specific provisions (Clauses 100 to 111) related to general meetings and extraordinary general meetings would not apply (Clause 122(1)). For transacting a business at General Meeting, resolutions entered in the minutes book would be sufficient (Clause 122 (3)). Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  12. Other Provisions for OPC The words, ‘One Person Company’ shall be mentioned in brackets below the name of such company (Clause 12 (3)(d)). Board Meeting to be conducted in each half of a calendar year - gap between the two meetings should be > 90 days (Clause 173(5)). Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  13. Board Meetings of OPC If only one director If more than one director Study Circle Meeting 02/02/2013 CA Rajeev Sogani No Board Meeting required. Shall be sufficient if resolution is entered in the minutes book, signed and dated by such Director. Said date shall be deemed to be the day of the meeting (BM) Board meeting required and other provisions to be followed.

  14. RATIONALE BEHIND INTRODUCTION OF “The OPC Concept” Bring unorganized sector of proprietorship to organized version of Pvt. Ltd. Co. Adding family members for compliance of regulations – No longer required. Efficient Business Management - Sole decision making . Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  15. CHALLENGES AHEAD?? • Whether OPC would be really preferred over proprietorship?? • MAT, DDT and other taxes - applicable. • Compliance cost being a Company will increase. • Lenders such as banks may not prefer the concept. • Whether the legal successor would not enjoy any benefits of the OPC? Supreme Court judgement : Ram ChanderTalwar & another Vs. Devendra Kumar Talwar & others ( Civil Apppeal No. 1684 of 2004) Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  16. Objects of the Company Clause 4 (1) (c) Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  17. Clause 4 (1) (c) – Objects of the Co. “The memorandum of a Company shall state the objects for which the Company is proposed to be incorporated and any matter considered necessary in furtherance thereof” Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  18. Before 1965 After the Companies (Amendment ) Act, 1965 • Section 13 (1) (d) The MOA shall contain • Main objects Objects incidental or ancillary to the attainment of the main objects; • Other objects of the Company not included in the sub-clause i) above Companies were not required to bifurcate objects in MOA. Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  19. Articles Clause 5 (3) Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  20. Articles- Entrenchment provisions The Articles of the Company can contain entrenchment provisions, which may be more restrictive than passing a Special Resolution for altering certain provisions. Q . : What does entrenchment mean? Ans. : Dictionary Meaning - Entrenchments are a series of long deep holes called trenches which are dug for defense by soldiers in war. Q. : Effect of Entrenchment provision? Ans. : For altering a clause in articles of a Company, a Company can have harsher provision than special resolution as required in existing law. Q. : Is it a new concept? Ans. : May be not. Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  21. Incorporation of a Company Clauses 7 (1) , (4), (5), (6), (7) Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  22. Clause 7 (1) (b)- Declaration Declaration by Professional engaged in incorporation and First Director both, that all the requirements of the act have been complied. Existing Law - Any one of the above was required to certify the same in Form 1. Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  23. Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  24. Clause 7 (1) (c) - Affidavit Affidavits by all the persons named as the First Directors and subscribers, that he is not convicted of any offence in connection with the promotion, formation or management of the Company, or that he has not been guilty of any fraud or misfeasance or of any breach of duty to any Company under this act or any previous Company Law during the last 5 years. Existing Law- Only one of the Director signing the Form 1 was required to certify the all the subscribers had given such declaration and a similar certification was required for the Directors in Form 32. - No separate affidavit was required. Q : Whether as per Clause 7 (1) (c) a convicted person barred from being subscriber of a Company? Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  25. Clause 7 (1) (d) – Correspondence Address • Correspondence address needs to be filed till the registered office is established. One month time given to file the details of verification of Registered Office and obtain Certificate Commencement. Existing Law- The day Company begins to carry on or within 30 days of incorporation whichever is earlier, the details of Registered Office was to be filed. (Section 146) But, however Form 18 and 32 were mandatory to be correspondingly filed with Form 1 and therefore from the day of incorporation the Company was entitled to commence the business. Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  26. Clause 7 (1) (e) (f) (g) (e) Proof of identity of subscribers and directors to be filed, Existing Law – DIN (based on identity proof) was used as the proof of identity and a proof of identity was not separately required. (f) Interest of first directors in other firms also to be filed, Existing Law - Directors interest in existing Company(s) was only required to be submitted in Form 1. (g) First directors consent to act as director mandatory to be filed. Existing Law - The detail was optional to be filed as an attachment in Form 32. Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  27. Clause 7 (4)- Preservation of Original Docs. • Maintain and preserve at its registered office copies of all documents and information as originally filed under sub-section (1) of Clause 7 till its dissolution under this Act. Existing Law - No such requirement Q : Whether existing companies will also need to preserve and maintain the original documents? Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  28. Incorrect information submitted for Registration Clause 7 (5) In relation to Registration of Company, if any person furnishes any false or incorrect particulars or suppresses any material information, of which he is aware in any documents filed with ROC Liable under Section 447 Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  29. Clause 7 (6) After incorporation, it is proved that the Company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact First directors of the Company and the Professional engaged in incorporation. Liable for action under Section 447 Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  30. Clause 7 (7) – Further powers of Tribunal Powers of Tribunal on a application made to it and on being satisfied that the situation so warrants:- Pass such orders, as it may think fit, for regulation of the management of the company including changes, if any, in its memorandum and articles, in public interest or in the interest of the company and its members and creditors; or Direct that liability of the members shall be unlimited; or Direct removal of the name of the company from the register of companies; or Pass an order for the winding up of the company; or Pass such other orders as it may deem fit: Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  31. Clause 447 of Bill - Punishment for Fraud • Imprisonment for a term which shall not be less than six months but which may extend to ten years and • Fine which shall not be less than the amount involved in the fraud, but which may extend to three times. Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  32. Companies with Charitable Objects Clause 8 (1)(a) Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  33. Companies with Charitable Objects Section 25 specifies charitable object as “promotion of commerce, art, science, religion, charity or any other useful object”. Clause 8 has replaced the words “or any other useful object” with “sports, education, research, social welfare and environment protection or any such other object.” Such Company can also be formed by a single person. Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  34. Commencement of Business Clause 11 (1) Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  35. Commencement of Business • Certificate of commencement required for all companies having share capital. As per Companies Act , 1956 – Private Limited Companies were not required to obtain COC. • Preconditions to be satisfied • Declaration by Director that every subscriber has paid the agreed value of shares and paid up share capital of Company is not less than specified limit. • Form filed in respect of verification of Registered Office as per Clause 12 (2). Continued.. Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  36. Commencement of Business Continued.. If default made in above procedure- Penalty on Company and every officer in default. If declaration not filed within 180 days of incorporation then ROC has reasonable cause to believe that the Company is not carrying on any business or operations and he may initiate action for removal of the name of the Company from the Register of Companies. Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  37. Registered office of company Clause 12 (1) Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  38. Registered Office • Company to furnish verification of its registered office within 30 days of incorporation. Verification to be done by the professional engaged in company incorporation. • Verification also required for obtaining Certificate of Commencement. Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  39. Changes made in present Form 18 vide Notification dated 24/12/2012 Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  40. Alteration of Memorandum Clauses 13 (4), (8) Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  41. Clause (13) (4) • The alteration relating to the place of the registered office from one State to another shall not have any effect unless it is approved by the Central Government on an application in such form and manner as may be prescribed. • The following portion of Section 17 (1) of the Existing Act has been omitted “so far as may be required to enable it — (a) to carry on its business more economically or more efficiently; or (b) to attain its main purpose by new or improved means; or (c) to enlarge or change the local area of its operations; or (d) to carry on some business which under existing circumstances may conveniently or advantageously be combined with the business of the company; or (e) to restrict or abandon any of the objects specified in the memorandum; or  (f) to sell or dispose of the whole or any part of the undertaking, or of any of the undertakings, of the company; or  (g) to amalgamate with any other company or body of persons.” Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  42. Clause 13 (8) Alteration of Object Clause In case money raised from public and that money still unutilized A Special Resolution Publish notice of such resolution in newspapers and also on website of the Company (if any) The dissenting shareholders shall be given an opportunity to exit Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  43. Service of Documents Clause 20 Study Circle Meeting 02/02/2013 CA Rajeev Sogani

  44. Service of Documents A document may be served on a company or an officer thereof by sending it to the company or the officer at the registered office of the company by registered post or by speed post or by courier service or by leaving it at its registered office or by means of such electronic or other mode as may be prescribed: Study Circle Meeting 02/02/2013 CA Rajeev Sogani

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