What is the one thing that has been attracting every eyeball (apart from Narendra Modi and our new Government) these days?? The one and only Companies Act, 2013. Mounds of doubts, irresistible controversies and even more infinite interpretations are driving the lay man nuts!!! So, we thought of collating few of the most discussed topics and prepare some of the FAQs on Companies Act 2013. So, let the film roll on: 

1) What is a Small Company under Companies Act, 2013?

Small Company means a company which, other than a public company-

• Whose paid-up capital does not exceed Rs. Fifty lakhs or such higher amount as may be prescribed subject to an upper limit of five Crore rupees;
• Turnover of which as per its last profit and loss account does not exceed two Crore rupees or such higher amount as may be prescribed which shall not be more than twenty Crore rupees

For qualifying as “small company”, satisfaction of either of the two conditions is enough. However, holding and subsidiary companies shall be specifically excluded from the scope of work.

2) What types of specified transactions are covered under Section 186?

Section 186 broadly covers the following three types of specified transactions:

• Loans to any person or another body corporate
• Gurantee or security given in connection with a loan to any other body corporate or person
• Acquisition by way of subscription, purchase or otherwise, the securities of any other body corporate.

3) What is the ceiling on the specified transactions that Board of Directors of a company can enter into?

Board of Directors of a Company can authorize the specified transactions provided that the aggregate of all such existing and proposed transactions does not exceed:

• 60% of the paid-up capital, free reserves and securities premium account;
• 100% of its free reserves and securities premium account,

Whichever is higher.

4) Whether every existing company is required to alter its Articles of Association as per the new Format under Companies Act, 2013?

There is no such compulsion for existing companies to alter its Articles. However, if the company undertakes any such activity which requires amendment of the Articles, then the Articles will be amended as per the format of the new Act.

5) In terms of Section 73 of Companies Act, 2013, deposits do not include receipt of money from Director of the Company, but money received from a member is treated as deposit. In case deposit is taken from a person who is both a director and a member of the Company, will such receipt of money be treated as deposit or not?

There is no clarification in this regard as of yet. A conservative approach says that such money will be treated as deposit on the virtue of individual being a “member”. However, a clarification in this regard is highly awaited and needed.

6) Can a company borrow any amount from its Directors?

Yes, a Company can borrow any amount from its Directors provided he furnishes to the company a declaration in writing that amount is not being given out of borrowed funds.

7) By what time are companies are required to switch over to the new format of Register of Members, Register of Directors and Key Managerial Personnel and their Shareholding?

All the existing companies, registered under the Companies Act, 1956, shall prepare its registers of members as per the new format within a period of 6 months from the date of commencement of Companies (Management & Administration) Rules, 2014. However, they will not be required to convert the registers already maintained before 01^st April, 2014.

8) Are companies required to file compliance certificate required in terms of Companies Act, 1956 for the financial year ended March 31, 2014? 

For the financial year ending March 31, 2014, specified companies would be required to file the Compliance certificate. The financial statements, auditor’s report and Board’s report in respect of financial years that commenced earlier than 1st April, 2014 shall be governed by the relevant provisions/ Schedules/ rules of the Companies Act, 1956 itself.

9) The Annual Return for the financial year ended 31st March 2014 is to be filed in MGT-7 or not?

For companies whose financial year ended on or before 1st April, 2014 and earlier will have to file their annual return as per the format specified in Companies Act, 1956. Hence, annual return in MGT-7 will be applicable for financial years commencing on or after 1st April, 2014.

10) How many members are counted as Quorum in case of private limited companies as per Companies Act, 2013?

Two (2) members personally present will constitute a valid quorum in case of a private limited company.

11) What if the Quorum is not present for the meeting?

If quorum is not present within half an hour from the time designated for the general meeting, the meeting shall be adjourned and in the adjourned meeting as well, if the quorum is not satisfied, then the members present shall be considered as Quorum.

12) Supposedly there are two (2) shareholders. Out of these, one cannot attend AGM. Will the presence of one (1) member be considered as the Quorum in the adjourned meeting?

No. One person cannot constitute quorum. This has been explicitly stated by the Letter issued by the Department of Company Affairs in 1961 vide Letter No. 8/16(1)/61-PR.

13) Which companies can opt for e-voting?

• All listed companies.
• Other private companies with not less than 1000 shareholders.

14) Can a member who votes through electronic media attend the meeting personally as well?

From a practical perspective, such a situation is somewhat outrageous. A member who is in the capacity to attend the general meetings personally does not need to resort to voting through electronic means. However, the member is not debarred from attending the meetings personally but he will not be able to cast his vote again.

15) Is show of hands a feasible clause for e-voting?

MCA vide its General Circular 20/2014 dated 17th June, 2014 stated explicitly that voting by show of hands will not be allowed for e-voting process.

16) Does the provisions of proxy apply to a person who resorts to e-voting?

The provision for proxy is applicable when a member is unable to exercise his voting rights owing to his absence from the meeting. E-voting is equivalent to the members voting for themselves. Hence, the concept of proxy is not applicable for e-voting.

17) Is it mandatory for a company to keep its documents records, registers and minutes in electronic form?

The documents, records, registers, minutes may be kept and inspected in electronic form. As per Rule 27 of Companies (Management and Administration) Rules, 2014, it is mandatory for every listed company or a company having not less than one thousand share holders, debenture holders and other security holders, to maintain its records, as required to be maintained under the Act or rules made there under, in electronic form.

18) Is it mandatory for the existing companies under the specified categories to convert to electronic mode from the existing mode?

In case of existing companies, data shall be converted from physical mode to Electronic mode within six months from the date of notification i.e. by 30.09.2014.

19) Is e-voting applicable to a proxy?

No. Proxies are only entitled to vote on a poll.

20) Can a person who is authorized by a power of attorney entitled to e-voting?

Yes.

21) Who can form an OPC?

Any resident, individual can form an OPC. Hence, a foreign national or a body corporate cannot form an OPC.

To know more about OPC, please visit: FAQs on One Person Company

22) What will be the consequences if the appointment of an auditor is not ratified by the shareholders in the AGM?

If the appointment of auditors is not ratified by the members in the General Meeting, then the Board shall appoint another individual/ Firm as its auditor/auditors.

23) For the purpose of rotation of auditors, whether the period for which the individual or the firm has held office as auditor prior to the commencement of the Act shall be taken into consideration for calculating the period of five consecutive years, in case of individual; or ten consecutive years for firm. 

Yes, the period for which the individual or firm has held office for the prior to the commencement of the Act, shall be taken into consideration for the purpose of rotation as per the new Act.

24) What is to be done if any changes take place after filing the form for disclosure of interest by the directors?

In such a situation, the details of such change is to be intimated to the Registrar of Companies and also to the Company at the First Board Meeting that takes place after occurrence of such change.

To know about disclosure of interest of directors, please visit: Disclosure of Interest by Directors

25) Is it mandatory to file the return of appointment for appointing KMPs?

Yes. Appointment of KMPs include appointment of a Managing Director, Whole Time Director, Manger, CEO, CFO and Company Secretary. The ROC has to be informed about such appointment in Form MR. 1. Further, any change in them has to be reported through Form DIR- 12.

26) Can a KMP hold office in any other Company?

A whole time KMP cannot hold office in more than one company except in its subsidiary. However, there is no explicit restriction on the number of subsidiaries in which he can hold such office. On a conservative note, it can be presumed that he can hold such office in only one subsidiary.

27) Are all companies required to appoint a KMP?

No. Every listed company and every other public company having a paid-up capital of Rs. 10 crore or more will have to appoint a whole time KMP.

28) Can a company appoint a single person as Whole Time Director as well as CFO?

The definition of CFO is not very clear in the Act. However, the Act specifically asks for a “whole time KMP”. Hence, it can be safely concluded that CFO and WTD has to be in whole time appointment. So, same person shall not ideally be eligible.

29) What is a dormant company under Companies Act, 2013?

A dormant company under Companies Act, 2013 is accompany which-

• has not been carrying on any business or operation, or
• has not made any significant accounting transaction during the last two financial years, or
• has not filed financial statements and annual returns during the last two financial years.

Where a company is formed and registered under this Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company.

30) Is an existing company incorporated under the old Act eligible to apply for the status of Dormant Company?

Yes, Provided it satisfied the above three conditions which are reproduced below:

• Company has not been carrying on any business or operation, or
• has not made any significant accounting transaction during the last two financial years, or
• has not filed financial statements and annual returns during the last two financial years.

Please stay tuned to this place more updates.

For information on registering your company,please visit: Company Registration

 

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