Financial Transactions Under the Companies Act, 2013

Slides:



Advertisements
Similar presentations
OVERVIEW OF C OMPANIES ACT,2013 CA. Arun Saxena Saxena & Saxena Chartered Accountants 811, Ansal Bhawan 16, Kasturba Gandhi Marg, New Delhi –
Advertisements

Acceptance Of Deposits.  “Deposit” includes any receipt of money: a) by way of deposit or a) loan or a) in any other form.
Share Capital and Debentures
Corporate Compliance Audit
Specific Issues under Companies Act, 2013
Abdul Aziz Tayabani Advocate High Court Noorani & Company.
AUDIT & AUDITORS (Section 139 – 148)
Ashish Sharma B.Com, CS Final.  Meaning  A non-banking financial company (NBFC) is a company registered under the Companies Act, 1956 and is engaged.
Provision Relating to Loan & Advances/Investment In Companies Act 2013.
Room No.6, 4 th Floor, Commerce House 2A, Ganesh Chandra Avenue, Kolkata Connect : (033) ; (033) ;
Related Party Transactions as per
COMPANIES ACT 2013 – Urgent & Important actions before March 15
Officers & Key Managerial Person  The definition of “Officer” in the new Act has been extended to include Key Managerial Personnel (KMP).  Key Managerial.
Presentation On Related Party Transactions as applicable to Private Companies and Unlisted Public Companies March 13, 2015 Lalit Kumar Partner J. Sagar.
BUSINESS BASICS. Types of Business BUSINESS MAY BE UNDERTAKEN BY DIFFERENT TYPES OF ORGANISATION WHICH IS BRIEFLY DESCRIBED BELOW SOLE PROPRIETORSHIP.
POWER AND DUTIES OF DIRECTORS
COMPANIES ACT 2013 – Impact on Private Limited Companies - By CS Makarand Joshi -
Anand Banka Partner, Talati & Talati Changes Specifically affecting Private Limited Companies.
RELATED Party TRANSACTIONS (section 188). Related Party Means 1. Director 2. Director’s Relative 3. KMP 4. KMP’ s Relative Private Company Where Director/
M.V. Damania & Co. Chartered Accountants Nilay Shah || Arpita Gadodia.
RELATED PARTY TRANSACTION
Impact of Recent Exemptions to Private Companies BY P.K.MITTAL B. Com, LLB, FCS ADVOCATE DELHI HIGH COURT PAST CENTRAL COUNCIL MEMBER – THE INSTITUTE OF.
Room No.6, 4 th Floor, Commerce House 2A, Ganesh Chandra Avenue, Kolkata Connect : (033) ; (033) ;
The Game Changer! Companies Act, Anand Bathiya B.Com., A.C.A., LL.B., D.I.S.A. CMII - ICAI – 27 th April, 2014.
AUDIT & AUDITORS Government Companies :-
Companies Amendment Act Notification dated 5th June 2015
ICAI - DELHI CA BHAVESH VORA.  Reserve Bank of India has published the draft guidelines for NBFCs which are extensive in Nature mainly focusing on following.
[Section188 and Rule 15 of Companies (Meeting of Boards and its Powers) Rules, 2014] Applicable to both Private as well as Public Companies Venky Rathi.
STUDY CIRCLE MEETING BY SINHAGAD ROAD ZONE OF PUNE CHAPTER OF ICSI Related Party Transactions.
Project Special Purpose Vehicle Company (SPV) - An Option
Banking Legislation In India BANKING REGULATION ACT 1949 The Banking Regulation Act 1949 as amended up to date contains the following five parts :- Part.
Need of AS on Related Party Transactions  There is general presumption that transaction reflected in the financial statements are executed on arm’s-length.
SIDDHARTHA MURARKA FCS, LL.B, B.COM(H) Ghosh & Murarka Legal, Solicitors & Advocates 12 Waterloo Street, Kolkata Mobile:
Companies Act 2013 CA K Raghu The Institute of Chartered Accountants of India.
BANKING REGULATION ACT,1949 & THE BANKING OMBUDSMAN SCHEME,1995.
Annual Return Certification under Companies Act, 2013
CH- VII: MANAGEMENT AND ADMINISTRATION UNDER COMPANIES ACT, 2013 CA Mohit Bhuteria.
Provisions applicable to private limited company under this act
1.  Primary Function  Major Source of Income  Major funds used for this purpose 2.
COMPANIES ACT, 2013 Deepak Sharma FCS, LL.B, M.com Ph. No
Notification dated 5 th June 2015 in C OMPANIES ACT,2013 Adv. Arun Saxena Saxena & Saxena Law Chambers Advocates & Attorneys , New Delhi House 27,
COMPANIES ACT, 2013 ORDINARY AND SPECIAL RESOLUTION
C OMPANIES (Amendment) ACT, 2015 (effective from 29 th May 2015) Advocate Arun Saxena Saxena & Saxena Law Chambers Advocates & Attorneys , New Delhi.
OVERVIEW OF C OMPANIES ACT,2013 CA. Arun Saxena Saxena & Saxena Chartered Accountants 811, Ansal Bhawan 16, Kasturba Gandhi Marg, New Delhi –
BATLIBOI & PUROHIT Chartered Accountants. Companies Act 2013 Topics: KMP & Directors ( Incl. Independent Directors), Appointment & Remuneration of Managerial.
Loans & advances Under companies act, 2013 To director or company in which director is interested Sec 185 To any other Companies Sec 186.
Speaker- Ajay Garg Former Director, Corporation Bank.
1 Board Process 7 th February, 2015 © Savithri Parekh.
By C. S. Kelkar Partner C. S. Kelkar & Associates, Company Secretaries.
OVERVIEW OF C OMPANIES ACT,2013 CA. Arun Saxena Saxena & Saxena Chartered Accountants 811, Ansal Bhawan 16, Kasturba Gandhi Marg, New Delhi –
OVERVIEW OF C OMPANIES ACT,2013 Adv. Arun Saxena Saxena & Saxena Law Chambers Chartered Accountants , New Delhi House 27, Barakhamba Road, New Delhi.
PRESENTATION BY CA. (DR.) DEBASHIS MITRA M.COM, LL.B, F.C.A., A.C.M.A., A.C.S., DISA(ICA), PhD. DEBASHIS MITRA & ASSOCIATES Chartered Accountants.
Section 134 of COMPANIES ACT, 2013 Team Globalca
Annual Return (Section 92 of Companies act 2013) Team Globalca
COMPANIES ACT, 2013 SECTION 406 AND NIDHI RULES, 2014
Companies Act, 2013 vis – a –vis Financial Statements and Audit Report CS DHARMENDRA GANATRA PRACTISING COMPANY SECRETARY Saturday
RELATED PARTY TRANSACTIONS AND DEPOSITS
COMPANIES ACT 2013: BEGINNING OF A NEW ERA
DEPOSIT CS Ashok Tyagi E-130, Greater Kailash, New Delhi – Mobile:
LOANS TO DIRECTORS Section 185 of the Companies Act 2013 and Amendments proposed vide Companies Bill 2013.
COMPANIES ACT, 2013 ANNUAL RETURN (MGT 7)
SCOPE OF DISCUSSION 1. ANNUAL COMPLIANCES:
Related Party Transactions under the Companies Act, 2013
By CMA R GOPAL MFM M. Phil., FCMA Practicing Cost Accountant
Recent Amendments in Companies Act, 2013
Companies Act 2013 S. Y. B. Com Prof. Arjun B. Bhagwat
DEPOSITS PRESENTED BY:-AMIT BACHHAWAT TRAINING FORUM.
Prof Sabbah Iqbal Department of Commerce Govt. Degree College Kulgam
Related Party Transactions
Loan to directors, etc. -by Dibisha Mishra
Presentation transcript:

Financial Transactions Under the Companies Act, 2013

Financial Transactions Under the Companies Act, 2013 Capital Nature Transactions Revenue Transactions Commercial Transactions Capital issues Loans Dividends Debentures Guarantees Auditors Engagements / Services Managerial Remuneration Borrowings Investments ECBs Deposits Related Party Transactions Non Related Party Transactions

Thank You Financial Transactions – General Check the Object Clause of the Memorandum of Association Impact of activities ultra virus to the provisions of the Memorandum of Association Personal Liability of Directors Transactions Void / Voidable Action against the Directors / the Company Thank You

Loans made to are utilized for its principal business activities Loan to Directors etc. Section 185 of the Companies Act, 2013 Save as otherwise provided in the Act, a company is not allowed the followings, directly or indirectly: Advance any loans (including book debts ); or Give guarantee or provide security in connection with loan to directors or any person in whom the director is interested. Exemptions Ordinary course of business where the interest charged is not less than RBI bank rate. Transactions with WOS Guarantee / security to bank for loan to its subsidiary. Private Limited Companies subject to certain conditions Loan to MD / WTD as per company policy or shareholders’ approval (SR) Loans made to are utilized for its principal business activities

Loan to Directors etc. Section 185 of the Companies Act, 2013 Who is the person in whom director is interested: Directors of the Company or its holding company, their partners and relatives Firms of above directors, their relatives Private companies in which such directors are director or member Body corporates in which such directors hold more than 25% of voting rights Body corporates whose Board, MD, or manager are accustomed to act in accordance with direction of board or director(s) of lending company

Thank You Loan to Directors etc. Section 185 of the Companies Act, 2013 Exemptions to Private Limited companies [MCA notification No. F No. 2/11/ 2014- CL V dt. June 5, 2015] The provisions of Chapter XII, Section 185 does not apply to Private Limited companies satisfying following criteria: In whose share capital no other body corporate has invested any money If the borrowing of such company from bank or financial institution or any body corporate is less than twice of its paid up share capital or Rs. 50 crores, which ever is lower Such company has no default in repayment of such borrowings subsisting at the time of making transaction under this section Thank You

Thank You Loan to Directors etc. Section 185 of the Companies Act, 2013 Exemptions w.r.t. Subsidiaries / Wholly owned subsidiaries The provisions of Section 185 does not apply : any loan made by a holding company to its wholly owned subsidiary company or any guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company; or any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company. Provided that the loans made under clauses (c) and (d) are utilized by the subsidiary company for its principal business activities. Proviso to Sub section (1) Inserted by the Companies (Amendment) Act, 2015 Thank You

Loan to Directors etc. Section 185 of the Companies Act, 2013 Ordinary Course of Business? Business is different from trade or commerce Relationship of the activity with the principle business activity of the Company Authorisation for the activity in the MoA Frequency of the activity Can a company give guarantee to a director for loan given to a third party u/s. 185? Only the guarantees / security in connection with Loan to a director is prohibited. Guarantees to directors in connection with Loan to third parties is not prohibited.

Loans and Investments by a company Section 186, 179 of the Companies Act, 2013] Layers of Investment companies A company shall unless otherwise prescribed, make investments through not more than two layers of investment companies. Investment Company means a company whose principal business is the acquisition of shares debentures or other securities What does the Principal Business means? The commercial activities undertaken by the Company As per object clause of the Company RBI’s 50:50 Asset income criteria

Loans and Investments by a company Section 186, 179 of the Companies Act, 2013 Nature of Transactions: Loan, Investment in securities of a body corporates, Guarantees / security in connection with loans. Limits: Higher of 60% of the paid capital, free reserves and securities premium or 100% of free reserves (including securities premium). General Exemption: Banking Company, Insurance, Housing Finance, NBFCs, Infrastructure facility companies (except for investments) Exemption from Special Resolution: Wholly Owned Subsidiaries / Joint Venture Company. All other requirements e.g. minimum interest, board approval, register maintenance etc. applicable to such companies

Loans and Investments by a company Section 186, 179 of the Companies Act, 2013] Whether purchase of debentures by by a company an Investment or a Loan? Does the investment by a company in Mutual Funds attracts the provisions of Section 186? If a company gives a sales tax surety (guarantee) for a company, does it require compliance of Section 186?

Loans and Investments by a company Section 186, 179 of the Companies Act, 2013] X Limited with paid up share capital of 1000 Cr. want to give loan to its subsidiary in which it hold 70% equity. The balance 30 % is held by a director of the Company. The loan has to be in the ordinary course of business since the director hold >25% voting rights in the Company. Audit Committee approval under section 177 since this is a transaction with related party. Compliances under Section 186 Compliances under Section 184 Can the Board delegate its power to make investments etc. to its principle officer / board committee under section 179? The provisions of section 179 enable the board to generally delegate its power of investments to the Principle officer / board committee. Since under section 186 there is no specific provision, the Board cannot delegate its power to make investments etc. to its committee or principle officers.

Related Party Transactions [Section 2(76), 177, 188, Rule 15-Chapter XII, F. No. 1/1/2014 dt.5/6/2015] Who is a related party ? Directors, KMPs of the Company or its Holding company and their relatives; Firm in which a director, manager or his relative is a partner; Private company in which a director or manager is a member or director; Public company in which a director or manager is a director and along with his relatives holds, two per cent or more of its paid-up share capital; Any person on whose advice, directions or instructions the board of director or MD or manager is accustomed to act, except in professional capacity; Holding, subsidiary, fellow subsidiary associate companies or joint ventures. (Does not apply to private limited companies) Paid up share capital [Section (2(64) ] Vs. total share capital [Rule (2(r) of Chapter 1]

Related Party Transactions [Section 2(76), 177, 188, Rule 15-Chapter XII, F No. 1/1/2014 dt.5/6/2015] Related Party under Section 2(76) is different from AS 18 Subject CA13 AS18 Investing entity with 20% or more investment in subject matter entity other than Holding Companies (associate company under AS 18) No Yes CFO and CS and their relatives Directors’ personal interest entities Investing entity for Joint venture Holding, Subsidiaries, fellow subsidiaries and Associates of Pvt. Ltd. companies

Transactions Covered under section 188 Related Party Transactions [Section 2(76), 177, 188, Rule 15-Chapter XII, F No. 1/1/2014 dt.5/6/2015] Transactions Covered under section 188 Sale, purchase and supply of any goods and material Availing or rendering of any services Selling or otherwise dispose off or buying property of any kind Appointment of any agent for purchase or sale of goods , material, services, property Leasing of property of any kind Underwriting the subscription of any securities of the company Such RP appointment to any office or place of profit in the company, its subsidiary or associate company

Related Party Transactions [Section 2(76), 177, 188, Rule 15-Chapter XII, F No. 1/1/2014 dt.5/6/2015] Sale, purchase or supply of any goods and material directly or via agent Limit: 10% of the turnover or 100 Crore whichever is lower. Selling, buying or disposing of property of any kind directly or via agent Leasing of property of any kind Limit: 10% of the turnover or 10% of net worth or 100 Crore whichever is lower. Availing or rendering of any services directly or via agent Limit: 10% of the turnover or 50 Crore whichever is lower. RP appointment to any office or place of profit of company, subsidiary or associate company Limit: Monthly remuneration of 2.5 lakh. (Turnover/Net-worth to be taken from previous year audited Financials)Section 134(3)(q), Rule 8(1) , 5(iv) of the Companies (Accounts) Rule 2014]

Related Party Transactions [Section 177, 188, Rule 15-Chapter XII, F No. 1/1/2014 dt.5/6/2015] Related Party Transactions A related party “transaction” is a transfer of resources, services or obligations between a company and a related party, regardless of whether a price is charged.   Explanation: A “transaction" shall be construed to include single transaction or a group of transactions in a contract All material Related Party Transactions shall require approval of the shareholders through special resolution and the related parties shall abstain from voting on such resolutions. Provided that a transaction with a related party shall be considered material if the transaction / transactions to be entered into individually or taken together with previous transactions during a financial year, exceeds ten percent of the annual consolidated turnover of the company as per the last audited financial statements of the Company.

Related Party Transactions [Section 177, 188, Rule 15-Chapter XII, F No. 1/1/2014 dt.5/6/2015] Board Approval Related party + Specified transactions + within the exemption limits specified. Board approval + Ordinary resolution Related Party + Specified transactions + not falling within the exemption limits specified. Neither Board approval nor Ordinary resolution Transaction in ordinary course of business and at Arm’s length. Approval of Audit Committee(u/s 177 of Companies Act, 2013) All the transactions (specified or not, in ordinary course or not, at Arm’s length or not) with the related parties require approval of Audit Committee.

Related Party Transactions [Section 188, Rule 15-Chapter XII, F No. 1/1/2014 dt.5/6/2015] Transactions with Related Parties u/s. 177 Every Audit Committee shall act in accordance with the terms of reference specified in writing by the Board which shall inter alia include: (iv) Approval or any subsequent modification of transactions of the company with related parties Provided that the Audit Committee may make omnibus approval for the related party transactions proposed to be entered into by the company subject to such conditions as may be prescribed. How should a company deal with the following transactions with related parties? Dividends, Managerial Remunerations, Capital issues, Loans etc.

Thank You Deposits [Section 73-76 of the Companies Act, 2013 The Companies Acceptance of Deposit Rules 2014] No company shall invite, accept or renew deposits under this Act from public except in a manner provided under Chapter V of the companies Act, 2013. Deposits includes any receipt of money by way of deposit or loan or any other form by a company but does not include: (a) Receipts from Government (b) Loans / fin. assistance from banks / PFIs (c) Commercial papers (d) Inter corporate transactions (d) Share application money (e) Loan from directors Secured / compulsory convertible (g) Security deposits from bonds / debentures employees – upto 1 year salary (h) Normal advance against goods/services (i) Security deposit under a contract Advance for supply of capital goods (k) Relatives of directors of Pvt. Of Cos. (w.e.f. Sept 15, 2015) Thank You

Thank You Deposits [Section 73-76 of the Companies Act, 2013 The Companies Acceptance of Deposit Rules 2014] Doctrine of Ejusdem Generis to understand the meaning of any other form. Where specific words are followed by a general expression, the general expression is limited to the shared characteristics of the specific words, even though the general expression may ordinarily have a much broader meaning Thank You Would the following transactions fall in the definition of Deposit: Gold Schemes Unsecured debentures to other companies The transactions under litigation

Financial Transactions Under the Companies Act, 2013 Loans to Directors & related entities 185 Investments Loans/Guaran-tee/security by companies 186 Related Party Transactions 188 Contracts in which directors interested 184 Borrowings 180 Deposits 73

Thank You CS Rajendra Chopra Sr. Vice President & Company Secretary Bharti Airtel Limited rajendra.chopra@bharti.in