Appointment of a director other than a retiring director in the General Meeting

Section 160 provides for the right of persons other than the retiring directors to stand for the directorship at any general meeting of the Company, if he or some other member intending to propose him as a director complies with the requisites given under Section 160 as explained under.

The following requisites of Section 160(1) must be complied with:

  • The company must receive a notice proposing a person as a candidate for directorship, to be appointed as a director at a general meeting of the company and not necessarily only at an annual general meeting.
  • The notice of candidature can be given either by the candidate himself or by any member of the company.
  • The notice must be in writing and signed by the candidate himself or the member giving it.
  • The notice must be given not less than 14 days before the meeting. This means notice must reach the company at least on the 14th day before the date of the meeting.
  • The notice must be left at the registered office of the company and must be given in the manner stipulated in Section 20 of the Companies Act, 2013.
  • The notice must be accompanied by an amount of Rs. 1, 00,000, by cheque or demand draft.
  • Amount of Rs. 1 lakh shall be refunded to the person who deposits the money, if the person proposed gets elected as a director or gets more than 25% per cent of total valid votes cast either on show of hands or on poll on such resolution.

Key Consideration:

  • Section 160 is not applicable on Private Companies.

The following procedure is to be followed for Appointment of a director other than a retiring director in the General Meeting [Section 160 & Rule No. 8, 13, 17 and 18 of Companies (Appointment and Qualification of Directors) Rules, 2014]- http://bit.ly/2sEMaHd

Incorporation of a Section 8 Company Under Companies Act, 2013

Where it is proved to the satisfaction of the Central Government that a person or an association of persons proposed to be registered under this Act as a limited company

(a) Has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;

(b) Intends to apply its profits, if any, or other income in promoting its objects; and

(c) Intends to prohibit the payment of any dividend to its members,

the Central Government may issue licence on such conditions as it deems fit. [Section 8(1)]

Points to be kept in mind before incorporation of a Section 8 Company:

  • 8 Co. can only be incorporated as a Limited Company.
  • Decide regarding the proposed name to be applied, objects to be carried by the Company, proposed registered office address, authorized capital, number of promoters, number of directors, and number of shares to be subscribed by each promoter.
  • The name of the company should be in consonance with the principal objects of the company as set out in the memorandum of association. Every name need not be necessarily indicative of the objects of the company, but when there is some indication of objects in the name, then it shall be in conformity with the objects mentioned in the memorandum. [Rule 8(2)(b)(ii) of Companies (Incorporation) Rules, 2014]
  • The proposed name should not fall in the ambit of undesirable names specified in Rule 8 of Companies (Incorporation)Rules, 2014
  • Name of Section 8 Company shall include the words Foundation, Forum, Association, Federation, Chambers, Confederation, Council, Electoral trust and the like words. [Rule 8(7) of the Companies (Incorporation) Rules, 2014]
  • Objects of Section 8 Company must be the promotion of Commerce, Art, Science, Sports, Education, research, social welfare, religion, Charity, protection of environment or any such other object [Section 8(1)(a)]
  • It should intend to apply its profits, if any or other income in promoting its objects. [Section 8(1)(b)]
  • It should intend to prohibit the payment of dividend to its members. [Section 8(1)(c)]
  • No need to add the word Limited or Private Limited to its name.[Proviso to Section 4(1)(a) and Section 8(1)]
  • License from Central Government is required to be taken. (Section 8(1)
  • A partnership firm is allowed to be a member of the Section 8 company [Section 8(3)]
  • Section 8 company shall enjoy all the privileges and be subject to all the obligations of limited companies. [Section 8(2)]
  • There must be at least 2 or 3 subscribers to the memorandum in case company is proposed to be incorporated as private company or public company respectively. [Section 3(1)(a) and Section 3 (1)(b)]
  • Minimum number of Directors required is 2 Directors or 3 Directors, in case company is proposed to be incorporated as private company or public company respectively with a maximum limit of up to 15 Directors. A Company may appoint more than 15 directors after passing a special Resolution in a general Meeting. [Section 149(1)(a) (b)]
  • Section 8 company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two days in the previous calendar year.[(Section 149(3)]
  • All the Directors should have valid DIN. (In case the proposed directors dont have a Director Identification number (DIN) allotted to them, Pl. Ref. procedure for DIN Application.)
  • Digital Signature for any one of the Director is required to digitally sign the E-Forms to be submitted with the Registrar of Companies.

KNOW MORE PROCEDURE FOR INCORPORATION OF A SECTION 8 COMPANY :- https://lexcomply.com/3i0w

What is the procedure to Right Issue of Shares under Companies Act 2013?

What is the procedure to Right Issue of Shares under Companies Act 2013? 

In accordance with the provisions of clause (a) sub-section (1) of Section 62, where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered to persons who, at the date of the offer, are holders of equity shares of the company in proportion, as nearly as circumstances admit, to the paid-up share capital on those shares by sending a letter of offer.

Key Considerations:

  • Right issue means offer of shares to the equity shareholders of the Company, as on the date of offer, in proportion to the capital paid up on their shares. (Section 62(1)(a)
  • Shares shall be offered on rights basis by sending a letter of offer fulfilling the prescribed conditions. (Section 62(1)(a)
  • Unless the articles of the company otherwise provide, the offer of rights issue shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person.
  • Board Resolution for considering the issue of shares on rights basis cannot be passed by circulation. (S.179 (3)(c).

The following procedure is to be followed for Rights Issue of Shares by a Company under Section 62:- Read Here

What is the procedure to Right Issue of Shares under Companies Act 2013?

Secretarial Audit for Public Companies

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  • Compulsion for Secretarial Audit : Following classes of companies are required to appoint Secretarial Auditor for auditing the secretarial and related records of their companies:
  • Every Listed Public Company; or
  • Public Companies having a paid up capital of Rupees fifty crore or more; or
  • Public companies having a turnover of two hundred fifty crore rupees or more.

[Section 204(1) & Rule No. 9(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014]

  • Professional eligible to conduct Secretarial Audit: The Secretarial Audit shall be conducted by a Company Secretary in Practice who shall submit his Secretarial Audit Report to the Board.
  • Company Secretary in Practice means a Company Secretary who is deemed to be in Practice under Section 2(2) of Company Secretaries Act, 1980 [Section 2(25)]
  • Secretarial Auditor shall be appointed by passing a resolution in Board meeting and not by circulation. [Section 179(3)(k) read with Rule 8(4) of the Companies (Meetings of Board and its Powers) Rules, 2014]

The following procedure is to be followed for appointment of a Secretarial Auditor for issue of Secretarial Audit Report of the Company under Section 204 read with Rule No. 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014- Click Here

Code of conducts under Insolvency and Bankruptcy Board of India Regulations, 2016

bankruptcyeditInsolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016

The Insolvency and Bankruptcy Board of India has issued the Notification on Insolvency and Bankruptcy Board of India. These Regulations shall come into force on 29thNovember, 2016.

The purpose of the Act is to build up a strong legal system related to the Bankruptcy and Insolvency.
This step opens a new opportunities of practice for professionals in the areas of Corporate and Individual Insolvency, Corporate Liquidation Process. 

Some Code of Conducts to be complied by Insolvency Professionals:

  1. Insolvency professionals must maintain integrity by being honest, straightforward, and forthright in all professional relationships.
  1. Insolvency professionals must not misrepresent any facts or situations and should refrain from being involved in any action that would bring disrepute to the profession.
  1. Insolvency professionals must act with objectivity in his professional dealings by ensuring that his decisions are made without the presence of any bias, conflict of interest, coercion, or undue influence of any party, whether directly connected to the insolvency proceedings or not.
  1. An insolvency professional appointed as an interim resolution professional, resolution professional, liquidator, or bankruptcy trustee should not himself acquire, directly or indirectly, any of the assets of the debtor, nor knowingly permit any relative to do so.
  1. An insolvency professional, or his relative must not accept gifts or hospitality which undermines or affects his independence as insolvency professional.

Know More:- Insolvency and Bankruptcy Board of India Regulations, 2016

Holding 100% Control over a company – Section 89 of the Companies Act, 2013

Companies Act, 2013, gives freedom to the Companies to do anything, which is legal and in the interest of stakeholders but with the approval of authority or by intimating authority in a manner as may be prescribed by the act.

In Companies Act, 2013, section 89 is the only section which gives a way to a person/company to hold 100% control over a company.Under section 89 we have 2 options to incorporate a company having full control over it by a single person:

1- OPC (One Person Company)
2- With the help of sec 89

In case of OPC only “PRIVATE COMPANY” can be registered by one person
But under Section 89 not only Private Company but also “PUBLIC COMPANY” can be registered by required number of members but ultimately controlled by single person.

The purpose of this section is as follow:-

1- To satisfy the requirement of minimum number of members (i.e. 2 in case of Pvt. Ltd. and 7 in case of Pub. Ltd. )
2- To make a wholly owned subsidiary company

Example for understanding to this section easily:

Mr. A wants to hold 100% shareholding in X Pvt. Ltd, but he can’t do so as he will have to take care the limit of minimum number of members, so in that case he will need at least one more person to fulfill minimum Requirement i.e. 2 (at least)
Now he can present a person say Mr. B, on his behalf whose name shall be presented on register of members but indirectly he will be the owner(beneficial owner) and will be controlling company.

In this case
Mr. B is Registered Owner
Mr. A is Beneficial Owner
X Pvt. Ltd. Is Company

Same example can also be taken for Public Company (where there must be at least 7 members).
In place of X Pvt. Ltd., any company can be there.

In this section responsibility arises on 3 persons namely:
1- Registered owner
2- Beneficial owner
3- Company

Intimation to Registrar:

Under this section Registered owner/ Beneficial owner/ Company is required to intimate to ROC after entering his name in register of members or change therein the declaration so filed.

1- Registered owner shall file with COMPANY, a declaration in form MGT-4 within 30 days of entering his name in register of members or change therein as the case may be.

2- Beneficial owner shall file with COMPANY, a declaration in form MGT-5 within 30 days of entering his name in register of members or change therein as the case may be.

3- Company Shall file with ROC, a return in form MGT-6 within 30 days of receiving such declaration.

Penalty as per Section 89(5) & Section 89(7):

1-Registered owner:
Fine may extend to Rs. 50,000 and if offence is continuing one with a further fine which may extend to Rs. 1,000 for every day. Here we can see that shareholder is also punishable under this section which doesn’t happen usually.

2-Beneficial owner:
Fine may extend to Rs. 50,000 and if offence is continuing one with a further fine which may extend to Rs. 1,000 for every day. We can see that shareholder is also punishable under this section which doesn’t happen generally.

3- Company and officers:
Fine not less than Rs. 5,00 but may extend to Rs. 1,000 and if offence is continuing one with a further fine which may extend to Rs. 1,000 for every day.

Note: Government companies are exempted from this section vide notification dated 5th June, 2015.

Disclaimer : This is an effort by Lexcomply.com to contribute towards improving compliance management regime. User is advised not to construe this service as legal opinion and is advisable to take a view of subject experts. 

Overview on Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016

bankruptcyedit

The Insolvency and Bankruptcy Board of India has issued the Notification on Insolvency and Bankruptcy Board of India. These Regulations shall come into force on 29th November, 2016.

Purpose

At present, there are multiple overlapping laws and adjudicating forums dealing with financial failure and insolvency of companies and individuals in India. The current legal and institutional framework does not aid lenders in effective and timely recovery or restructuring of defaulted assets and causes undue strain on the Indian credit system. Recognising that reforms in the bankruptcy and insolvency regime the Government introduced the Insolvency and Bankruptcy Code, 2016.

This step opens a new opportunities of practice for professionals in the areas of Corporate and Individual Insolvency, Corporate Liquidation Process.  

Who can be eligible?

An Individual who

  1. Is a resident of India
  2. Have prescribed qualification as provided under the regulations
  3. Is of sound mind
  4. Should be a fit and proper person
  5. Is not a minor
  6. Is not an undischarged insolvent or has not applied to be adjudicated as an insolvent
  7. Have not convicted any offence with imprisonment and others as prescribed under the regulations

Qualifications and Experience required getting registration

According to these regulations an Individual shall be eligible for registration as an insolvency professional, if he –

  1. has passed the National Insolvency Examination;
  2. has passed the Limited Insolvency Examination, and has fifteen years of experience in management, after he received a Bachelor’s degree from a university established or recognized by law; or
  3. has passed the Limited Insolvency Examination and has ten years of experience as –
  • A chartered accountant enrolled as a member of the Institute of Chartered Accountants of
    India
  • A company secretary enrolled as a member of the Institute of Company Secretaries of India,
  • A cost accountant enrolled as a member of the Institute of Cost Accountants of India, or
  • An advocate enrolled with a Bar Council.

How can a person apply?

An individual enrolled with an insolvency professional agency as a professional member may make an application to the Board in Form A of the Second Schedule to these Regulations, along with a non-refundable application fee of ten thousand rupees to the Board.

If the Board is satisfied, after such inspection or inquiry as it deems necessary that the applicant is eligible under these Regulations, it may grant a certificate of registration to the applicant to carry on the activities of an insolvency professional in Form B of the Second Schedule to these Regulations, within sixty days of receipt of the application, excluding the time given by the Board for presenting additional documents, information or clarification, or appearing in person, as the case may be.

Disclaimer : This is an effort by http://www.Lexcomply.com to contribute towards improving compliance management regime. User is advised not to construe this service as legal opinion and is advisable to take a view of subject experts.