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

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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

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. 

Incorporation of A Public limited Company

Section 2 (71) states that a public company means a company which:

  1. is not a private company;
  1. has a minimum paid-up share capital , as may be prescribed:

Provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purpose of this act even where such subsidiary company continues to be a private company in its articles.

Points to be kept in mind before incorporation of a Public 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, 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

The Company must have minimum Paid Up Share Capital as may be prescribed.

There must be at least 7 subscribers to the memorandum of Association of the company [Section 3(1)(a)]

Minimum number of Directors required is 3 Directors upto a maximum Limit of 15 Directors [Section 149(1) (a) & (b)]. A company can appoint more than 15 directors after passing a special Resolution in a general Meeting.

Every 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 Directors should have valid DIN. (In case the proposed directors don’t have a Director Identification number (DIN) allotted to them, Pl. Ref. procedure for DIN Application and allotment)

Digital Signature for any one of the Director is required to digitally sign the E-Forms to be submitted with the Registrar of Companies.

The Following Procedure to be followed for Incorporation of a Public Limited Company

Provisions under Companies Act, 2013

Various Committees and provisions under Companies Act, 2013

 

  1. CSR Committee (Section 135 of Companies Act 2013)

Every company having the following criteria shall contribute in every financial year, at least two per cent. Of the average net profits of the company made during the three immediately preceding financial years

Net Worth: Rs. 500 Crores     Turnover: Rs. 1000 Crores          Profits: Rs. 5 Crores

  1. Audit Committee (Section 177 of Companies Act 2013)

Every public company having the following criteria shall constitute an audit committee .The paid up share capital or turnover or outstanding loans, or borrowings or debentures or deposits, as the case may be, as existing on the date of last audited Financial Statements shall be taken into account for the purpose

Paid up Capital: Rs. 10 Crores   Turnover: Rs. 100 Crores       O/s Loans: Rs. 50 Crores

  1. Nomination and Remuneration Committee (Section 177 of Companies Act 2013)

The Board of Directors of every listed company and the companies under following criteria shall constitute the Nomination and Remuneration Committee consisting of three or more non-executive directors out of which not less than one-half shall be independent directors

Paid up Capital: Rs. 100 Crores             O/s Loans: Rs.50 Crores

  1. Vigil Mechanism (Section 177 of Companies Act 2013) Every listed company or following class of companies, shall establish a vigil mechanism for directors and employees to report genuine concerns

 O/s Loans: Rs. 50 Crores

  1. CARO (Companies Auditor Report Order, 2016)

It shall apply to every company including a foreign company as defined in clause (42) of section 2 of the Companies Act, 2013 (18 of 2013 except– 1. Insurance Companies 2. Banking Companies 3. Section -8 Companies  4. One Person Company and a Small Company   5. Private Company not being a holding or a subsidiary company of a public company having the Following criteria during the Financial Year as per the Financial Statements:

Paid up Capital: Rs.1 Crore     Borrowings: Rs.1 crore           Profit: Rs. 10 Crores

  1. XBRL (Extensible Business Reporting language)

The companies following under following criteria are required to file their financial statements using XBRL Mode and the companies listed with any Stock Exchange(s) in India and their Indian subsidiaries; or (r (i)all companies who were required to file their financial statements for FY 2010-11. However, banking companies, insurance companies, power companies and Non-Banking Financial Companies (NBFCs) are exempted.

Paid up Capital: Rs.5 Crores           Turnover: Rs. 100 Crores                     

  1. MGT-8 (Section 92(2) of Companies Act 2013)

Applicable for Listed Companies and the Companies under the following criteria

Paid up Capital: Rs. 10 Crores        Turnover: Rs. 50 Crores                     

  1. Internal Audit (Section 138 of Companies Act 2013)

Every listed company:      Always applicable

In the case of Unlisted Public companies, the following criteria should be fulfilled

 Paid up Capital: Rs. 50 Crores    Turnover: Rs. 200 Crores    O/s Loans: Rs. 100 Crores 

 O/s Deposits: Rs. 25 Crores

In the case of Private companies, the following criteria should be fulfilled

 Turnover: Rs.200 Crore               O/s Loans: Rs. 100 Crore

  1. Women Director (Section 149 of Companies Act 2013)

Every listed Company:    Always applicable

Every other public Company, the following criteria should be fulfilled

Paid up Capital: Rs. 100 Crores         Turnover: Rs. 300 Crores