1. The Companies Act, 2013 New Concepts N K Jain B.Sc, LLB.,DCL,FCS,FCPS Corporate Advisor Cell: 09818348811 Landline: 0120 - 4263965 E-mail: nkjain1953@gmail.com

2. Statement of objects De-controls Self Regulation Shareholders’ Democracy Encourages new businesses and their growth Higher transparency and more disclosures E-Governance Investor Protection /Minority Shareholders Professionals’ enhanced role & accountability New Set ups: NFRA/SFIO/NCLT/MCP nkjain1953@gmail.com 9818348811 2

3. Chief Executive Officer Sec. 2(18) “Chief Executive Officer” means an officer of a company, who has been designated as such by it. Globally, a person who leads a business enterprise is generally designated as “CEO”. The inclusion of the expression “Chief Executive Officer” in the Act is business oriented. nkjain1953@gmail.com 9818348811 3

4. Chief Financial Officer Sec. 2(19) “Chief Financial Officer” means an officer of a company, who has been designated as such by it. Globally, a person who leads the finance and treasury functions of a business enterprise is generally designated as “CFO”. The inclusion of the expression “Chief Financial Officer” in the Act is business oriented nkjain1953@gmail.com 9818348811 4

5. Company Liquidator Sec. 2(23) “Company Liquidator” means a person appointed by the :- a) Tribunal in case of winding up by the Tribunal; or b) company or creditors, in case of voluntary winding, from a penal of professionals maintained by the Central Government. nkjain1953@gmail.com 9818348811 5

6. Company Liquidator Sec. 2(23) & 275(2) The Panel shall consist of CAs, CSs, Cost Accountants, Advocates, other notified professionals or a firm or a body corporate of persons having a combination of such professional and having at least 10 years’ experience in company matters. [not notified] Liquidation proceedings are extremely rewarding professional engagement in several jurisdictions. nkjain1953@gmail.com 9818348811 6

7. Control Sec. 2(27) “Control” shall include the right to :- i. appoint majority of the directors; or ii. control the management or policy decisions exercisable by a person(s) including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. nkjain1953@gmail.com 9818348811 7

8. Expert Sec. 2 (38) “Expert” includes an engineer, a valuer, a chartered accountant, a company secretary, a cost accountant and any other person who has the power or authority to issue a certificate in pursuance of any law for the time being in force. 8 nkjain1953@gmail.com 9818348811

9. Financial Statement Sec. 2 (40) “Financial Statement” in relation to a company, includes – i. Balance Sheet as at the end of the FY; ii. Profit and Loss Account/ Income and Expenditure Account for the FY; iii. Cash Flow Statement for the FY; iv. Statement of changes in equity; v. Any explanatory note annexed to any document referred to in sub-clause (i) to (iv) 9 nkjain1953@gmail.com 9818348811

10. Key Managerial Personnel Sec. 2 (51) “KMP” in relation to a company means the:– i. Chief Executive Officer or the Managing Director or the Manager; ii. Company Secretary; iii. Whole Time Director; iv. Chief Financial Officer; and v. Such other officer as may be prescribed. 10 nkjain1953@gmail.com 9818348811

11. Key Managerial Personnel Sec.203  Board of every listed company and every other public company having a paid-up share capital of 10 crs or more shall appoint the whole time (i) MD or CEO and in their absence a WTD (ii) a CS and (iii) a CFO.  A WT KMP shall not hold office in more than one company except in its subsidiary company at the same time.  Vacancy in the office of WT KMP shall be filled up by the board within six months. nkjain1953@gmail.com 9818348811 11

12. Serious Fraud Investigation Office (SFIO) Sec. 211& 212 Central Government shall establish SFIO to investigate frauds relating to a company. CG may assign investigation into affairs of a company to SFIO on receipt of a :- a. report of the Registrar; or b. special resolution passed by company; or c. in public interest; or d. on request from central/state government. nkjain1953@gmail.com 9818348811 12

13. Serious Fraud Investigation Office (SFIO) Sec.211 & 212 The SFIO shall be headed by a Director and consist of experts in the fields of corporate affairs, capital market, law, banking, taxation, forensic audit, IT etc. CG may appoint experts in fields of financial, management and cost accounting etc. The CAs and CSs have an opportunity of occupying prestigious positions as an expert in SFIO and play vital role in investigations. nkjain1953@gmail.com 9818348811 13

14. National Company Law Tribunal Sec. 2(90), 408 & 434 The Central Govt. shall set up a NCLT. Following shall stand transferred to NCLT on a date notified by the CG :- i. all cases pending before CLB ; ii. all proceedings under the Companies Act, 1956 including compromise, arrangements and reconstructions and winding up of companies pending before any District Court or High Court. nkjain1953@gmail.com 9818348811 14

15. National Company Law Tribunal Sec. 2(90), 408 & 434 Any reference/enquiry/proceeding/appeal pending before BIFR/Appellate Authority for Industrial and Financial Reconstruction under SICA, 1985 before commencement of the Companies Act, 2013 shall stand abated. Such a company may make a fresh reference to NCLT within 180 days from the commencement of the Companies Act, 2013. CAs, CSs are authorised to appear before NCLT or Appellate Authority to present the case of their clients (Sec. 432). nkjain1953@gmail.com 9818348811 15

16. National Company Law Tribunal Sec. 2(90), 408 & 434 It is a landmark development for the profession of Chartered Accountants and Company Secretaries. It substantially increases the scope of CAs and PCS who have a right to legal representation before NCLT & Appellate Tribunal on all matters including scheme of compromise or arrangement, scheme of merger and amalgamation, winding up of a company etc. nkjain1953@gmail.com 9818348811 16

17. One Person Company Sec. 2(62) OPC means a Company which has only one person as a member. Only a natural person who is Indian citizen and resident in India may form an OPC. No person shall be eligible to incorporate more than one OPC. Memorandum of OPC shall indicate the name of the other person, with his consent, who shall become the member of OPC upon death of subscriber. The member shall be its first Director. The words “One Person Company” shall be mentioned in brackets below the name of OPC, wherever its name is printed, affixed or engraved. 17 nkjain1953@gmail.com 9818348811

18. One Person Company Sec. 2(62) Holding of AGM not mandatory. Business at a GBM is transacted when a resolution is communicated by the member to the OPC and entered in Minutes Book and signed and dated. Business at a BDM (with only 1 director) is transacted by entering a resolution in Minutes Book and signing and dating it. Date of resolution shall be deemed to be the date of meeting. OPC to hold at least one BDM in each half of a calendar year. 18 nkjain1953@gmail.com 9818348811

19. One Person Company Sec. 2(62) OPC cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporate. OPC cannot convert voluntarily into any kind of company unless two years have expired from the date of its incorporation. Where paid up share capital of OPC exceeds 50 lacs or its average annual turnover during relevant period exceeds 2crs, it shall cease to be entitled to continue as a OPC. 19 nkjain1953@gmail.com 9818348811

20. One Person Company Sec. 2(62) The introduction of OPC would encourage entrepreneurship and corporatisation of sole proprietorship business with limited liability of the member. It will generate more investment and jobs. SMEs will be able to avail credit facilities from lending institutions through this new business structure. CAs and CSs can play major role in advising OPCs. nkjain1953@gmail.com 9818348811 20

21. Associate Company (AC) Sec. 2(6) AC in relation to another co. means a co. in which that other co. has a significant influence and includes a JV co. Subsidiary cos. of other co. are excluded. “Significant Influence” means control of at least 20% of total share capital or of business decisions under an agreement. AS 23 defined “Associate” for accounting for investment in Associates. 21 nkjain1953@gmail.com 9818348811

22. Associate Company (AC) Sec. 2(6) The concept of AC included in several provisions in the new law as a measure of good governance: i. Definition of Related Party to ascertain RPTs. ii. Consolidated Financial Statement of AC to be laid before the AGM of the Company. iii. Annual Return of the Company to contain the particulars of its ACs. iv. A person can’t be ID if he is/was promoter of AC or related to promoter or director of AC or has/had pecuniary relationship with AC or its promoters/ directors during current/2 preceding FYs. 22 nkjain1953@gmail.com 9818348811

23. Dormant Company (DC ) Sec. 455 A Company formed and registered under new law for a future project or to hold an asset or intellectual property and having no significant accounting transaction or an inactive company may apply for obtaining the status of a “Dormant Company”. Registrar may allow the status of DC to the applicant company and issue a certificate. DC may apply to become an active company. 23 nkjain1953@gmail.com 9818348811

24. Dormant Company (DC ) Sec. 455 “Inactive Company ” means a company which has not been carrying on any business or operations or has not made any significant accounting transaction during the last 2 FYs or has not filed financial statements and annual returns for the last 2 FYs. “Significant Accounting Transaction” means any transaction other than: a. Payment of fees to the Registrar; b. Payments made to fulfil requirements of law; c. Allotment of shares to fulfil requirements of the Act; d. Payments for maintenance of its office and records. 24 nkjain1953@gmail.com 9818348811

25. Dormant Company (DC ) Sec. 455 Eligibility  Special resolution in the general meeting; or  Issue notice to all shareholders and obtain consent of 3/4 th shareholders (in value).  No inspection, inquiry or investigation;  No pending prosecution under any law;  No outstanding public deposits/defaults;  No outstanding loans, taxes, dues, duties;  Securities not listed on any stock exchange. nkjain1953@gmail.com 9818348811 25

26. Dormant Company (DC ) Sec. 455 Provisions relating to rotation of auditors not applicable to DC. DC shall file a “Return of Dormant Company” annually indicating financial position duly audited by a CA in practice. DC shall continue to file return of allotment and change in directors. 26 nkjain1953@gmail.com 9818348811

27. Small Company Sec. 2(85) “Small Company” means a company other than a public company:- i. paid-up share capital of which does not exceed Rs.50 lacs. or higher prescribed amount not exceeding Rs. 5 crs.; or ii. turnover of which as per its last P&L account does not exceed Rs.2 crs. or higher prescribed amount not exceeding Rs. 20 crs. 27 nkjain1953@gmail.com 9818348811

28. Small Company Sec. 2(85) This clause shall not apply to:-  A holding company or a subsidiary company;  A company registered for charitable objects;  A company governed by any special Act. Small companies are exempted from complying with the requirements of some of the provisions of the Act. nkjain1953@gmail.com 9818348811 28

29. Independent Directors Sec. 149(4) The purpose of induction of Independent Director on the board of a company is to improve objectivity, transparency and accountability in the governance of the company. nkjain1953@gmail.com 9818348811 29

30. Number of IDs  Every listed public company shall have at least 1/3 rd of the total number of directors as IDs.  Following companies shall have at least 2 IDs:-  Public Companies having: i. paid up share capital of 10 crs or more; or ii. in aggregate, outstanding loans, debentures and deposits exceeding 50 crs. iii. turnover of 100 crs or more; or  Nominee directors not to be treated as an ID. 30 nkjain1953@gmail.com 9818348811

31. Tenure of IDs ID can hold office for 2 terms of up to 5 consecutive years each (total 10 years). IDs shall be eligible for re-appointment after cooling period of 3 years. ID shall not be associated with the company in any capacity during the cooling period. Any tenure of an ID on the date of commencement of the Act not to be counted. Every existing company to have IDs within one year from commencement of the Act or from the date of notification of Rules, as may be applicable. 31 nkjain1953@gmail.com 9818348811

32. IDs- Rewards & Liability  IDs may receive sitting fee, reimbursement of expenses for attending meetings & profit related commission but no stock option.  IDs shall abide by the Code of Conduct contained in Schedule 4 of the Act.  An ID shall be held liable only for such acts of omission or commission by a company which had occurred with his knowledge, attributable through board processes, and with his consent or connivance or where he had not acted diligently. 32 nkjain1953@gmail.com 9818348811

33. Separate Meetings of IDs IDs shall hold at least 1 meeting in a year without non-ids and management personnel. All IDs shall strive to attend such meeting. The meeting shall review the performance of: a. Non-IDs and the Board as a whole; b. Chairperson of the company, taking into account the views of EDs and non-EDs; c. Asses the quality, quantity and timeliness of flow of information to the Board. nkjain1953@gmail.com 9818348811 33

34. Performance Evaluation Performance Evaluation of IDs shall be done by the entire Board of Directors excluding the director being evaluated. On the basis of the report of performance evaluation, it shall be determined whether to extend or continue the term of appointment of the ID. Nomination & Remuneration Committee shall carry out evaluation of every director’s performance(Sec.178). nkjain1953@gmail.com 9818348811 34

35. Resident Director Sec. 149(3) Every company shall have at least one director who has stayed in India for a period of not less than 182 days in the previous calendar year. 35 nkjain1953@gmail.com 9818348811

36. Woman Director Sec. 149(1)  The following classes of companies shall appoint at least one WD :- i. every listed company; ii. every other public company having: -  paid-up share capital of 100 crs or more; or  turnover of 300 crs or more. nkjain1953@gmail.com 9818348811 36

37. Woman Director-Implementation Period Sec.149(1) For every company existing on or before the date of commencement of the Act:- Within one year from such commencement. For a company incorporated under the Act:- within a period of six months from the date of its incorporation. It will ensure gender diversity on the Boards of such companies and may improve the quality of decision making. 37 nkjain1953@gmail.com 9818348811

38. Registered Valuers (RV) Sec. 247 Valuation of any property, stocks, shares, debentures, securities, goodwill, any other asset or net worth or liabilities of a company shall be valued by a RV. The RVs shall have prescribed qualifications and experience and registered as a valuer on prescribed terms & conditions. Audit Committee/BoD shall appoint an RV. Section 247 not yet notified. 38 nkjain1953@gmail.com 9818348811

39. National Financial Reporting Authority ( NFRA) Sec. 132 The Central Government ( CG ) may constitute a NFRA to provide for matters relating to accounting/auditing standards which shall:- a) make recommendations to CG on the formulation of accounting and auditing policies and standards for companies or their auditors; b) monitor and enforce compliance with accounting and auditing standards. c) oversee the quality of service of professionals. d) perform such others functions as may be prescribed. 39 nkjain1953@gmail.com 9818348811

40. National Financial Reporting Authority ( NFRA) Sec. 132 NFRA shall have power to investigate into matters of professional or other misconduct committed by any member or firm of CAs. Where professional or other misconduct is proved, NFRA shall have the power to make order for imposing penalty of not less than 10 lac but which may extend to 10 times of the fees received in case of firms. Section not yet been notified. 40 nkjain1953@gmail.com 9818348811

41. Rotation of Auditors Sec.139 No listed company or prescribed classes of companies, excluding small and one person companies, shall appoint/ re-appoint:- i. an individual as an auditor for more than 1 term of 5 consecutive years; and ii. an audit firm as an auditor for more than 2 terms of 5 consecutive years. Period for which individual/firm has been auditor prior to commencement of the Act shall be taken into account for calculating period of 5/10 years. nkjain1953@gmail.com 9818348811 41

42. Rotation of Auditors- Class of Companies a. Listed company; b. Unlisted public companies having paid up share capital of 10 crs or more; c. Private limited companies having paid up share capital of 20 crs or more; d. Companies having paid up share capital of below threshold limit mentioned in (b) & (c) above, but having public borrowings from FIs, banks or public deposits of 50 crs or ^ nkjain1953@gmail.com 9818348811 42

43. Rotation of Auditors Sec.139 An auditor/ audit firm which has completed its term shall not be eligible for re-appointment as an auditor in the same company for 5 years. A period of 3 years from the commencement of the Act has been provided to every company existing on or before such commencement to comply with this provision. nkjain1953@gmail.com 9818348811 43

44. Auditor not to render certain services - Sec. 144 An Auditor appointed under the new law shall provide to the company only such services as are approved by the BOD or the AC but which shall not include any of the following services:- Auditing and book keeping services; Internal audit; Design & implementation of any financial information system; nkjain1953@gmail.com 9818348811 44

45. Auditor not to render certain services - Sec. 144 Actuarial services; Investment advisory and banking services; Outsourced financial services; and Management services. An Auditor or Audit Firm which has been performing any non-audit services shall comply with this provision before the closure of the 1 st FY after commencement of the Act. nkjain1953@gmail.com 9818348811 45

46. Vigil Mechanism Sec. 177 Following classes of companies shall establish a vigil mechanism for their directors and employees to report genuine concerns:- i. Every listed company; ii. Companies which accept deposits from the public; and iii. Companies which have borrowed money from banks and public financial institutions in excess of 50 crs. nkjain1953@gmail.com 9818348811 46

47. Vigil Mechanism Sec. 177 The companies which are required to constitute an AC shall operate the Vigil Mechanism through the AC. In case of other companies, the BOD shall nominate a director to play the role of AC. Adequate safeguards shall be provided against victimisation of employees/directors. Suitable action against repeated frivolous complaints including reprimand. nkjain1953@gmail.com 9818348811 47

48. Secretarial Audit Sec. 204 Every listed and every public company having a paid-up share capital of 50 crs or more or a turnover of 250 crs or more shall annex with its Board’s Report, a Secretarial Audit Report given by a PCS. The BOD in its report shall explain in full any qualification or observation or other remarks made by the PCS in his report. 48 nkjain1953@gmail.com 9818348811

49. Secretarial Audit Sec. 204 The provisions of Sec.143(powers and duties of auditors..) shall mutatis mutandis apply to PCS conducting secretarial audit u/s 204. If a company or any officer of the company or the PCS contravenes the provisions of Sec. 204, the company, every officer of the company or the PCS, who is in default, shall be punishable with fine which shall not be less than 1 lac but which may extend to 5 lac. 49 nkjain1953@gmail.com 9818348811

50. Secretarial Audit Sec. 143(12),(15) & 204 If a PCS conducting SA, has reason to believe that an offence involving fraud is being or has been committed against the company by its officers/employees, he shall immediately report the matter to the Central Government. If a PCS does not comply with the above provision, he shall be punishable with fine of minimum 1 lac and may extend to 25 lac. nkjain1953@gmail.com 9818348811 50

51. Secretarial Standards Sec. 118(10) Every company shall observe secretarial standards with respect to general and board meetings specified by ICSI constituted under section 3 of the Company Secretaries Act,1980 and approved as such by the Central Government. 51 nkjain1953@gmail.com 9818348811

52. Internal Audit Sec. 138 An internal auditor shall either be CA/CMA/ other professional to conduct internal audit of the functions and activities of the company. The central government may prescribe the manner and the intervals in which the internal audit shall be conducted & reported to board. nkjain1953@gmail.com 9818348811 52

53. Internal Audit-Class of Companies to appoint IA a) Every listed company; b) Every unlisted public company having, during the preceding financial year, :- i. paid up share capital of 50 crs or more; or ii. turnover of 200 crs or more; or iii. outstanding loan or borrowing from banks or public FIs exceeding 100 crs or more ; or iv. outstanding deposits of 25 crs or more. nkjain1953@gmail.com 9818348811 53

54. Internal Audit-Class of Companies to appoint IA c) Every private company having:- i. turnover of 200 crs or more during the preceding financial year; or ii. outstanding loans or borrowing from banks or public FIs exceeding 100 crs or more at any point of time during the preceding FY ; Existing company covered under any of the above criteria shall comply with requirement within 6 months of commencement of se.138. nkjain1953@gmail.com 9818348811 54

55. Corporate Social Responsibility Sec. 135 Every company having net worth of 500 crs or more or turnover of 1000 crs or more or a net profit of 5 crs or more during any FY shall constitute a Corporate Social Responsibility Committee(CSRC). The CSRC shall recommend to the Board a CSR Policy and the amount to be incurred on the activities provided in the policy. 55 nkjain1953@gmail.com 9818348811

56. Corporate Social Responsibility Sec. 135 Board shall approve the CSR Policy and disclose it in the Board’s Report and on its website. Board shall ensure that the activities included in the CSR Policy are undertaken by the company. Board to ensure that company spends, in every FY at least 2% of average net profits of the company made during 3 immediately preceding FYs. In case of failure to spend the amount, necessary reasons shall be disclosed in Director’s Report. The company shall give preference to the local areas where it operates while spending the amount. 56 nkjain1953@gmail.com 9818348811

57. CSR Committees CSRC shall consist of at least of 3 directors including at least 1 ID. An unlisted public company or private company not required to appoint an ID shall constitute CSRC without an ID. A private company having only 2 directors shall constitute CSRC with 2 such directors. CSRC of a foreign company shall comprise of 1 person as specified u/s 380 + another person nominated by the foreign company. nkjain1953@gmail.com 9818348811 57

58. Corporate Social Responsibility Sec. 135 Activities for CSR Policies-Schedule VII :- Eradicating hunger, poverty and malnutrition; Preventive health care, sanitation, safe drinking water; Education, employment enhancing vocation skills and livelihood enhancement projects; Gender equality, empowering women, homes for women, orphans, old aged; nkjain1953@gmail.com 9818348811 58

59. Corporate Social Responsibility Sec. 135 Environmental sustainability, quality of water, air & soil, ecological balance, animal welfare; National heritage/art/culture, public libraries; Benefit of armed forces veterans, war widows Promote rural sports, Olympic sports etc.; Contribution to PM’s National Relief Fund; Contributions to CG approved technology incubators & rural development projects. nkjain1953@gmail.com 9818348811 59

60. Companies (CSR Policy) Rules, 2014 Rules shall come into force wef 01.04.2014. CSR Policy includes activities specified in Sch. VII but excludes activities undertaken in the normal course of business of a company. “Net Profit” shall not include the following:- i. profit arising from any overseas branch; ii. dividend received from other companies in India, which are covered and complying with the provisions of Sec 135 of the Act. nkjain1953@gmail.com 9818348811 60

61. Companies (CSR Policy) Rules, 2014 CSR projects/programs/activities done in India only shall amount to CSR expenditure. CSR projects/programs/activities that benefit only the employees/their families shall not be considered as CSR activities. Contribution to any political party u/s 182 of the Act shall not be considered as CSR activity. nkjain1953@gmail.com 9818348811 61

62. Companies (CSR Policy) Rules, 2014 CSR does not include activities undertaken in normal course of business of a company. CSR Policy shall specify that the surplus arising out of CSR activities shall not form part of the business profit of a company. Board Report shall include an AR on CSR. Company shall display its CSR Policy on its website. nkjain1953@gmail.com 9818348811 62

63. Companies (CSR Policy) Rules, 2014 Board of a company may decide to undertake its CSR activities through a:-  Registered Trust;  Registered Society;  Company established by it u/s 8 of the Act;  Company having an established track record of 3 years in undertaking similar programmes Company may also collaborate with other companies for CSR activities. nkjain1953@gmail.com 9818348811 63

64. Class Action Sec. 245 Class action is a collective action filed by the plaintiff on behalf of a class of shareholders or users of goods or services or in relation to matters of public interest, seeking collective remedy. Requisite number of members or depositors may file an application before NCLT, if they are of the opinion, that the management or conduct of the affairs of the company are being conducted in a manner prejudicial to the interest of the company or its members or depositors. 64 nkjain1953@gmail.com 9818348811

65. Class Action Sec. 245 The application for class action may claim damages or compensation or demand any other suitable action from :- i. the company or its directors; ii. the auditor including audit firm of the co; iii. any expert or advisor or consultant or any other person for any incorrect or misleading statement made to the company etc. 65 nkjain1953@gmail.com 9818348811

66. Mediation & Conciliation Panel Sec. 442 The Central Gov. shall maintain a panel of experts to be called as “Mediation and Conciliation Panel” for mediation between parties during the pendency of any proceedings before the Central Govt. or the Tribunal or the Appellate Tribunal under the new law. The Panel shall dispose of the matter referred to it within a period of 3 months from the date of reference. 66 nkjain1953@gmail.com 9818348811

67. E-Governance E-Governance has been proposed for various company processes like maintenance and inspection of documents in electronic form, option of keeping of books of accounts in electronic form, financial statements to be placed on company's website, holding of board meetings through video conferencing/other electronic mode, voting through electronic means etc. nkjain1953@gmail.com 9818348811 67

68. E-Governance Online services would reduce the need for hard copy paper forms and have a positive impact on the environment. It will substantially improve the standards of disclosure and transparency, involve more and more stakeholders in the company processes and provide real time information and service to the shareholders and other stakeholders. nkjain1953@gmail.com 9818348811 68

69. 69 Thank you nkjain1953@gmail.com 9818348811