STATUTORY REQUIREMENTS
Introduction
Indian companies are now governed by Companies Act 2013 and company has to comply with various statutory provisions as per different sections of Companies Act 2013. Services offered by us include:
- Incorporation of company
- Filing of documents with Registrar of Companies
- Conducting Statutory Audit at the year end.
- Assistance in drafting Director’s Report covering statutory points to be covered.
- Assistance covering Annual General Meeting and Statutory Compliance thereof.
- Statutory provisions relating to various meetings like Board Meetings, Statutory Meetings, their due dates and documents to be filed with Registrar of Companies.
- Consultancy for other different provisions as applicable to company.
Company Law
A company is one which is registered under the provisions of the Companies Act 2013 (Companies Act). A company may be either a private company which by its constitutional documents, restricts the right of its members to transfer their shares in the company, prohibits invitation to the public to subscribe to its shares, debentures or other securities or to invite deposits from the public and which limits the total number of its members to 200 or a public company which does not have prohibition as to transfer of shares or restriction on number of shareholders.
Further, the Companies Act, 2013 has newly introduced the concept of One Person Company (OPC) that is to say, a private company in which only a natural person who is an Indian citizen and resident in India shall be eligible to be the sole member.
A company not having any significant accounting transaction, and which is formed under the 2013 Act for a future project or to hold an asset or an intellectual property or an inactive company may obtain status of a dormant company by applying to the ROC, or
- A company which has not filed financial statements or annual returns for last 2 FYs consecutively will be classified as Dormant Company by the ROC.
- Board meeting is required to be held at least once in each half of a calendar year and the gap between the 2 meetings is not less than 90 days.
- A dormant company will have such number of directors, file such documents and pay such annual fees as may be prescribed.
All private and public companies are required to have a minimum paid-up capital of INR 100,000 and INR 500,000 respectively (though the amounts has been omitted by Companies Act, 2013). Incase certain key words like manufacturing, India, etc, are to be used, there are additional minimum paid-up capital requirements.
The share capital of a company may be of two types, namely, equity share capital and preference share capital. The equity share capital may be issued with voting rights or with differential rights as to dividend, voting or otherwise in accordance with the rules and subject to such conditions prescribed by the Companies (Issue of shares with Differential Voting Rights) Rules, 2001. The preference share capital enjoys a preferential right in the payment of dividends during the lifetime of the company and repayment of capital when the company is wound up. The preference share can be of the following types:
- Cumulative and Non-cumulative preference shares.
- Convertible and Non-convertible preference shares;
- Participating and Non-participating preference shares; or
- Redeemable and Irredeemable preference shares.
A public company may issue equity shares with differential rights as to dividends, voting or otherwise in accordance with the rules made in that behalf. This amendment would help management to raise capital without diluting control by issuing shares without voting rights. At the same time, investors would have the benefit of receiving dividends and bonus shares.
Shifting of registered office
A company proposing to shift its registered office from one state to another is required to pass a special resolution (resolution passed with three-fourths majority) at a meeting of its shareholders. A company proposing to change the place of its registered office from the jurisdiction of one Registrar of Companies to the jurisdiction of another Registrar of Companies (RoC) within a state will have to an application seeking confirmation from the Regional Director for shifting the registered office within the same State from the jurisdiction of one Registrar of Companies to the jurisdiction of another Registrar of Companies, shall be filed by the company with the Regional Director in Form no.INC.23 along with the fee.
Notice of every change of the situation of the registered office, verified in the manner prescribed, after the date of incorporation of the company, shall be given to the Registrar within fifteen days of the change, who shall record the same. The confirmation from the RD shall be communicated within a period of thirty days from the date of receipt of application by the Regional Director to the company and the company shall file the confirmation with the Registrar within a period of sixty days of the date of confirmation who shall register the same and certify the registration within a period of thirty days from the date of filing of such confirmation. The certificate shall be conclusive evidence that all the requirements of the Act with respect to change of registered office have been complied with and the change shall take effect from the date of the certificate.
Buy back of securities
Subject to the provisions of sec 77A, a company may buy back its own securities up to a maximum extent of 25% of its paid-up share capital in any financial year, subject to fulfilling certain conditions. A company may also issue sweat equity shares of a class of shares already issued subject to certain conditions specified under sec 79A.
Subject to the provisions of sec 77A, a company may buy back its own securities up to a maximum extent of 25% of its paid-up share capital in any financial year, subject to fulfilling certain conditions. A company may also issue sweat equity shares of a class of shares already issued subject to certain conditions specified under sec 79A.
A. Every public company is required to have at least three directors and every private company to have at least two directors, subject to a maximum of 12 directors. However, One Person Company may have minimum one director.
A listed public company in India is required to comply with the corporate governance requirements. Accordingly, such a company is mandatorily required to have not less than 50% of the total strength of the board of directors comprising non-executive directors. Depending on whether or not the Chairman is executive or non-executive, the total number of independent directors that it shall appoint will vary between half or one third respectively. Independent directors have been defined to mean directors, who apart from receiving director’s remuneration, do not have any other material pecuniary relationship or transaction with the company, its promoters, its management or its subsidiaries which in the judgment of the board, may affect the independence of judgment of the director.
Listed public companies covered under the prescribed class should have at least one-third of the total number of its directors as independent directors. In the Directors’ Appointment Rules, minimum number of directors for non-listed public companies meeting prescribed criteria has been changed to 2, irrespective of the board size. Also, the criteria for appointment of independent directors have changed in the Directors’ Appointment Rules.
B. No person can hold office of director in more than 20 companies at a time. 2013 Act restricts the number of directorship for an individual to 20. Out of total 20 companies, number of public companies in which a person can be appointed as a director cannot exceed 10.
Notice of every change of the situation of the registered office, verified in the manner prescribed, after the date of incorporation of the company, shall be given to the Registrar within fifteen days of the change, who shall record the same. The confirmation from the RD shall be communicated within a period of thirty days from the date of receipt of application by the Regional Director to the company and the company shall file the confirmation with the Registrar within a period of sixty days of the date of confirmation who shall register the same and certify the registration within a period of thirty days from the date of filing of such confirmation. The certificate shall be conclusive evidence that all the requirements of the Act with respect to change of registered office have been complied with and the change shall take effect from the date of the certificate.
Every company having:
- Net worth of INR 5 billion or more, or
- Turnover of INR 10 billion or more, or
- Net profit of INR 50 million or more,
shall appoint an independent director who is a director (other than managing director or whole-time director or nominee director), who is a person of integrity and has no pecuniary relationship with the company or its holding/ subsidiary/ associate company. Further, he shall not hold (together with his relative) two percent or more of the total voting power of the company.
Mandatory Requirements as Directors
*Transition period to comply with the limit on Directorship – 1 year from the commencement of 2013 Act.
* An exception to the above rule is made for MD or a whole time director (WTD) if such loan is in accordance with the terms of services extended to all employees or is approved by shareholders by special resolution.
a) Managing Director/ Chief Executive Officer/ Manager/ Whole-time Director, and,
b) Company Secretary, and
c) Chief Financial Officer
Each of these classes of KMP is independent and mandatory.
Such whole-time KMP shall not hold office in more than one company, except in its subsidiary at the same time.
*Transition period of 6 months is allowed from commencement of this Act.
C. Now, directors have to annually report in the Directors’ Responsibility Statement, on the existence and effective operations of systems on compliance with all applicable laws.
D. As per 2013 Act, the board of directors is required to meet at least four times in a calendar year. No such meetings need be held compulsorily in India and can be held anywhere in the world.
- Maximum gap between two board meetings should not be more than 120 days.
- Electronic voting for Board and shareholders’ meetings has been introduced.
- Approval of related party transactions by Board of Directors at Board meeting made mandatory.
- At least 7 days’ notice to every director shall be given for the board meeting.
- As till now the foreign directors faced location constraints in attending the board meetings in India, now participation of directors through video-conferencing and other electronic means for board meetings has been permitted and considered equivalent to being in- person, provided such participation is capable of recording and recognizing. [s173(2)] *Further, such meeting can be held anywhere around the world with the aid of video-