Companies Act, 2013 vis – a –vis Financial Statements and Audit Report CS DHARMENDRA GANATRA PRACTISING COMPANY SECRETARY Saturday

CS DHARMENDRA GANATRA

SectionDetails 2(40) Financial Statement includes Balance Sheet, Profit and Loss account, Cash flow statement, changes in equity and explanatory notes. Cash flow not mandatory for One Person Companies, Small Companies and Dormant Companies 2(62) One Person Company – One person as a member 2(85) Small Company: Paid up capital not exceeding Rs Lakh AND Turnover not exceeding Rs Crore Exclusion: A Company which is -Public Company - Section 8/25 Companies -Holding Company - Subsidiary Company -Governed under special Acts 2(91) Turnover: Aggregate value of the realization made towards sale supply of goods or services

CS DHARMENDRA GANATRA SectionDetails 129(1) Financial Statement to give true and fair view, to comply Accounting Standards and in a form set out in Schedule III 129(3) & Explanation there of Consolidated Financial Statement of: 1.Holding company and Subsidiary Company 2.Company and its Associate Company 3.Company and its Joint Venture (For the purpose of this section the word ‘subsidiary’ shall include Associate companies and Joint Venture companies) 129(4) Also attach Form AOC – 1 (Salient features of subsidiary and subsidiaries) to Consolidated financial statements signed in the same manner as financial statements

CS DHARMENDRA GANATRA SectionDetails 2(6) Associate Company: If another company has significant influence. Significant influence means control of at least 20% of total share capital (equity and convertible preference shares) Rule 6 of Accounts Rules - Manner of CFS: As per accounting standards or Companies Act - Exemption: As per MCA notification dated 27/07/2016, intermediate subsidiary subject to conditions prescribed there in (no exemption for associate companies)

CS DHARMENDRA GANATRA

 Details of share holders holding more than 5% shares  Share holding of Holding company and ultimate holding company  Issue of shares for consideration other than cash or bonus issued during last 5 years  Terms attached to class of shares  Prior period adjustments to be made in P&L under the head RSP. CS DHARMENDRA GANATRA

 Secured borrowing – disclosures about security and whether guaranteed by directors or others – also terms of repayment  Current maturities to be shown under the other current liabilities  Application money due for refund – other current liabilities  Loans & advances due by directors or related firms or Pvt. Co. to be shown separately.  Bank deposits (even more than 12 months maturity) to be shown under the head cash or cash equivalents. CS DHARMENDRA GANATRA

 General Circular No 05/2015 Dated : Disclosure of deposits accepted by private company from its directors or their relatives or members before 1 st April, 2014 the amount and head under which shown in Financial Statement.  Section 129(5) – Non Compliance of any AS - The deviations from Accounting Standard - Reasons - Financial Impact  Section 182(3) – Political Contribution - Amount of Consideration - Name of the political party CS DHARMENDRA GANATRA

 Section 186(4) – Full particulars of below listed matters: - Loans given - Investment made - Guarantee given - Security provided - The purpose for which the loan, guarantee or security is provided to be utilized by its recipient.

CS DHARMENDRA GANATRA Disclosures as per Schedule III - Bifurcation of payments made to auditor - In case of company covered u/s 135, amount of expenses incurred for CSR - Quantitative details - Method of depreciation and useful life of assets - Expenses incurred on each of the following - Consumption of stores and spares - Power and fuel - Rent - Repairs to building - Repairs to machinery - Insurance - Rates and taxes (excluding Income Tax)  Details about the foreign currency earning and out go as per the broad head given under schedule III.  AS 4 : Contingencies and events occurring after Balance Sheet date

CS DHARMENDRA GANATRA Section / Rules Details Section 143(3) Contents of Audit Report Section 143(3)(g) Comment on disqualification of director u/s 164(2) Rule 11(c) of Companies (Audit and Auditors), has disclosed impact of pending litigation on financial position. -made provision for material foreseeable loss on long term and derivative contract -Delay in transferring to Investor Education and Protection Fund.

CS DHARMENDRA GANATRA  Applicability ‘Small company’ vs. ‘Private Company’:  Clause 3(iii): Loan to companies, firm, LLP or other parties covered in the Registers maintained u/s 189 Registers U/s 189 : MBP 4 Related Party Transaction [Section 188 & 184(2)] Related Parties [Section 184(1) & MBP 1]

CS Dharmendra Ganatra  Compliance of Section 185 & 186 in respect of Loan, guarantee, security or investment  Section 185: - Prohibition on giving of loan guarantee or security to following: 1. Director or his relative or partner 2. Firm in which Director/Relative is partner 3. Private company in which Director is Director or member 4. Body Corporate in which 25% of voting powers in general meeting are held by a director or two or more directors. Notes: 1. LLP is not covered under prohibited category 2. W.e.f. 05/06/2015, exemptions to Private company subject to 3 conditions

CS Dharmendra Ganatra  Section 186 : Loan/ Guarantee / Security / Investment: - Boards Power = 60% of aggregate of Paid up Share capital, Free Reserve and Securities Premium Account OR 100% of aggregate of Free Reserve and Securities Premium account - General Meeting approval i.e Special Resolution required beyond above limit - Board Resolution for each transactions - For loan minimum ROI: Prevailing yield of 1, 3, 5, or 10 years of Government Securities (closest to tenor) - Register of Loan/ Guarantee / Security / Investment Note: Section 186 also applies to Private Company

CS DHARMENDRA GANATRA  Exempted Deposits : Rule 2(1)(c) of Deposit Rules, Government local or other statutory authority. - Foreign source including NRI subject to compliance of FEMA - Bank loan - Loan from Public Financial Institution - Commercial Paper - Inter Corporate Loan - Share application money subject to allotment within 60 days - Directors - Relatives of Directors (only private companies) - Secured / convertible bonds or debentures - Security deposits from employees - Received / held in trust - Ordinary course of Business - Unsecured Loans from promoters – subject to conditions

CS DHARMENDRA GANATRA  Deposits from members: Section 73 - Members’ deposits not exempted deposits - Public company upto 25% of aggregate of Paid up share capital, free reserve and securities premium. - Private company upto 100% of paid up share capital, free reserve and securities premium - Tenure 6 – 36 months - Return on investment not to exceed 12% per annum - Fixed deposit receipt & maintaining register of the same - Deposit repayment reserve - Others

CS DHARMENDRA GANATRA  Deposits from others: Section 76 - Only eligible companies (NW Rs. 100 Cr. or more or Turnover Rs. 500 Cr. or more) 1. From Members upto 10% of aggregate of paid up share capital, free reserves and securities premium. 2. From Public upto 25% of aggregate of paid up share capital, free reserves and securities premium.

CS DHARMENDRA GANATRA  Rule 5 of Cost records and Audit Rules, 2014: Class of companies engaged in the production of the goods or providing services, specified in below table, having an overall turnover from all its products and services – Rs. 35 Cr. or more during immediately preceding F.Y.  Regulated Sectors: - Telecommunication - Electricity - Petroleum Products - Drugs and Pharmaceuticals - Fertilizers - Sugar and Ind. alcohol

CS DHARMENDRA GANATRA  Non Regulated Sectors: - Steel- Hospital and health services - Infrastructure projects- Education - Rubber- Milk Powder - Tea & Coffee- Insecticide - Cement- Plastic and polymer - Ores and Mineral Product- Paper - Mineral fuels and mineral oils- Textiles - Base metal- Glass - Chemicals- Machineries - Edible Oil- Specified medical devices - Construction

CS DHARMENDRA GANATRA  Not applicable to private companies  Limits u/s 197  Also refer Schedule V – Depending on effective capital different slabs prescribed Managerial Remuneration M. D., WTD or Manager (Managerial Personnel) Other than M. D., WTD or Manager If 1 then 5% of Net profit If more than 1 M.P. than 10% of Net profit If company has M.P. than 1 % of Net profit If company does not have any person as M.P. than 3% of Net profit

CS DHARMENDRA GANATRA Related Party : Section 2(76) 1. Directors and Relatives5. Public company in which Director / manager is director and holds 2% or more paid up capital individually or with relatives 2. Key Managerial Personal and Relatives 6. Any company which is: -Holding company, subsidiary company and associate company -A subsidiary of companies holding company. 3. Firm in which Director / manager / relative is partner 7. Directors (other than Independent Director) and KMP of holding company, subsidiary company and associate company or relatives thereto 4. Private company in which Director / Manager /relative is member or director

CS DHARMENDRA GANATRA  Related Party Transactions : Section 188(1): - Sale/ Purchase of goods or materials - Buying / selling of property - Leasing of property - Availing / rendering of services - Appointment of agent for sale/purchase of goods/service/property - Office or place of profit - Underwriting services Note: Auditors comments is for compliance of Section 177/188 and all RPT disclosed in the Financial Statements in accordance with Accounting Standard

CS DHARMENDRA GANATRA - Board meeting approval - Special Resolution in general meeting - Letter of offer (Form PAS – 4) - Maintenance of records of the persons to whom offer letter is sent (Form PAS – 5) - Filing of Form PAS – 4, PAS – 5, & MGT – 14 with Registrar of Companies. - Receipt of share application money by cheque / D.D. or other normal banking channel (not by cash or other adjustment) - Share application money kept in a separate bank account not utilized until allotment - Allotment within 60 days or refund within next 15 days or otherwise it shall be treated as deposits - Filing of form PAS – 3 with ROC

CS DHARMENDRA GANATRA  Buying or selling of assets to/from directors and persons connected with him for consideration other than case then ordinary resolution to be passed in general meeting. More than 50% of the financial assets AND More than 50% of the gross income from financial assets

CS DHARMENDRA GANATRA

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