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Different Monetary Limits under Companies Act, 2013

Ankur Garg 
on 12 May 2014

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Different Monetary Limits under Companies Act, 2013 read with Notified Rules

Dear All,

Please find below certain monetary limits prescribed for different purposes under Companies Act, 2013 at one place. I hope that this compilation would be useful for you all as a quick reference.

Appointment of key Managerial Personnel

Section 203(1) read with Rule 8 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (Chapter 13).

Every listed company and every other public company having a paid-up share capital of 10 crore rupees or more shall have whole-time key managerial personnel.

Meaning of KMP:

Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,—

(i) Managing Director, or Chief Executive Officer or manager and in their absence, a whole-time director;

(ii) Company Secretary; and

(iii) Chief Financial Officer

Secretarial Audit report

Section 204(1) read with Rule 9(1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (Chapter 13) the other class of companies shall be as under-

(a) every public company having a paid-up share capital of 50 crore rupees or more; or

(b) every public company having a turnover of 250 crore rupees or more.

The format of the Secretarial Audit Report shall be in Form No.MR.3.

Appointment of Woman Director on the Board

Second Proviso to Section 149(1) read with Rule 3 of The Companies (Appointment and Qualification of directors) Rules, 2014 (Chapter 11).

The following class of companies shall appoint at least one woman director-

(i) every listed company;

(ii) every other public company having -

(a) paid–up share capital of 100 crore rupees or more; or

(b) turnover of 300 crore rupees or more:

Paid up share capital or turnover, as the case may be, as on the last date of latest audited financial statements shall be taken into account.

Time Frame for appointment: A company, which has been incorporated under “the Act” and is covered by Section 149(1) shall comply with such provisions within a period of 6 months from the date of its incorporation. Further as per interpretation Existing Companies are required to appoint women Director within a period of 1 year as desired by Section 149(2).  

Vacancy: Any intermittent vacancy --- woman director--- shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or three months from the date of such vacancy whichever is later.

Number of independent Director

Section 149(4) read with Rule 4 of The Companies (Appointment and Qualification of directors) Rules, 2014 (Chapter 11).

The following class or classes of companies shall have at least two directors as independent directors –

(i) the Public Companies having paid up share capital of 10 crore rupees or more; or

(ii) the Public Companies having turnover of 100 crore rupees or more; or

(iii) the Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding 50 crore rupees:

Paid up share capital or turnover, as the case may be, as on the last date of latest audited financial statements shall be taken into account.

Vacancy: Same in case of Women Director.

Where a company ceases to fulfil “any of 3 conditions” for three consecutive years, it shall not be required to comply with these provisions until such time as it meets any of such conditions;

Certification of Annual Return by PCS

Section 92(2) read with Rule 11 of The Companies (Management and Administration) Rules, 2014 (Chapter 7).

(1) Every company shall prepare its annual return in Form No. MGT.7.

(2) The annual return, filed by a listed company or a company having paid-up share capital of 10 crore rupees or more or turnover of 50 crore rupees or more, shall be certified by a Company Secretary in practice and the certificate shall be in Form No. MGT.8.

Note: As per Rule 12(1) The extract of the annual return to be attached with the Board’s Report shall be in Form No. MGT.9.

Manner of circulation of Financial Statements

Section 136(1) read with Rule 11 of The Companies (Accounts) Rules, 2014 (Chapter 9).

In case of all listed companies and such public companies which have a net worth of more than 1 crore rupees and turnover of more than 10 crore rupees, the financial statements may be sent-

(a) by electronic mode to such members whose shareholding is in dematerialised format and whose email Ids are registered with Depository for communication purposes;

(b) where Shareholding is held otherwise than by dematerialised format, to such members who have positively consented in writing for receiving by electronic mode; and

(c) by dispatch of physical copies through any recognised mode of delivery as specified under section 20 of the Act, in all other cases.

Appointment of Internal Auditor

Section 138 read with Rule 13 of The Companies (Accounts) Rules, 2014 (Chapter 9).

The following class of companies shall be required to appoint an internal auditor or a firm of internal auditors, namely:-

(a) Every listed company;

(b) Every unlisted public company having-

(i) paid up share capital of 50 crore rupees or more during the preceding financial year; or

(ii) turnover of 200 crore rupees or more during the preceding financial year; or

(iii) outstanding loans or borrowings from banks or public financial institutions exceeding 100 crore rupees or more at any point of time during the preceding financial year; or

(iv) outstanding deposits of 25 crore rupees or more at any point of time during the preceding financial year; and

(c) Every private company having-

(i) turnover of 200 cr. rupees or more during the preceding financial year; or

(ii)outstanding loans or borrowings from banks or public financial institutions exceeding 100 crore rupees or more at any point of time during the preceding financial year:

Provided that an existing company covered under any of the above criteria shall comply with the requirements of section 138 and this rule within six months of commencement of such section.

Explanation.- For the purposes of this rule –

(i) the internal auditor may or may not be an employee of the company;

(ii) the term “Chartered Accountant” shall mean a Chartered Accountant whether engaged in practice or not.

(2) The Audit Committee of the company or the Board shall, in consultation with the Internal Auditor, formulate the scope, functioning, periodicity and methodology for conducting the internal audit

Appointment of Rotational Auditor u/s 139(2)

Section 139(2): No listed company or a company belonging to such class or classes of companies as may be prescribed, shall appoint or re-appoint—

(a) an individual as auditor for more than one term of five consecutive years; and

(b) an audit firm as auditor for more than two terms of five consecutive years:

Section 139(2) read with Rule 5 of The Companies (Audit and Auditors) Rules, 2014 (Chapter 10).

For the purposes of sub-section (2) of section 139, the class of companies shall mean the following classes of companies excluding one person companies and small companies:-

(a) all unlisted public companies having paid up share capital of rupees 10 crore or more;

(b) all private limited companies having paid up share capital of rupees 20 crore or more;

(c) all companies having paid up share capital of below threshold limit mentioned in (a) and (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees 50 crores or more.

Constitution of Audit and Nomination and Remuneration Committee

Section 177 and 178 read with Rule 6 of The Companies (Meetings of Board and Its Powers) Rules, 2014 (Chapter 12).

The Board of directors of every listed companies and the following classes of companies shall constitute an Audit Committee and a Nomination and Remuneration Committee of the Board-

(i) all public companies with a paid up capital of 10 crore rupees or more;

(ii) all public companies having turnover of 100 crore rupees or more;

(iii) all public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding 50 crore rupees or more.

Explanation.- 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 purposes of this rule.

 Establishment of Vigil Mechanism

Section 177(9) read with Rule 7 of The Companies (Meetings of Board and Its Powers) Rules, 2014 (Chapter 12).

Establishment of vigil mechanism.- (1) Every listed company and the companies belonging to the following class or classes shall establish a vigil mechanism for their directors and employees to report their genuine concerns or grievances-

(a) the Companies which accept deposits from the public;

(b) the Companies which have borrowed money from banks and public financial institutions in excess of 50 crore rupees.

(2) The companies which are required to constitute an audit committee shall oversee the vigil mechanism through the committee and if any of the members of the committee have a conflict of interest in a given case, they should recuse themselves and the others on the committee would deal with the matter on hand.

(3) In case of other companies, the Board of directors shall nominate a director to play the role of audit committee for the purpose of vigil mechanism to whom other directors and employees may report their concerns.

  Related Party

First proviso to Section 188(1) read with Rule 15(3) of The Companies (Meetings of Board and Its Powers) Rules, 2014 (Chapter 12).

Rule 15(3): For the purposes of first proviso to sub-section (1) of section 188, except with the prior approval of the company by a special resolution-

(i) a company having a paid-up share capital of 10 crore rupees or more shall not enter into a contract or arrangement with any related party; or

(ii) a company shall not enter into a transaction or transactions, where the transaction or transactions to be entered into -

(a) as contracts or arrangements with respect to clauses (a) to (e) of sub-section (1) of section 188 with criteria, as mentioned below -

(i) sale, purchase or supply of any goods or materials directly or through appointment of agents exceeding 25% percent of the annual turnover as mentioned in clause (a) and clause (e) respectively of sub-section (1) of section 188;

(ii) selling or otherwise disposing of, or buying, property of any kind directly or through appointment of agents exceeding 25% percent of net worth as mentioned in clause (b) and clause (e) respectively of sub-section (1) of section 188;

(iii) leasing of property of any kind exceeding 10% percent of the net worth or exceeding 10% percent of turnover as mentioned in clause (c) of sub-section (1) of section 188;

(iv) availing or rendering of any services directly or through appointment of agents exceeding 10% percent of the net worth as mentioned in clause (d) and clause (e) of sub-section (1) of section 188;

(b) appointment to any office or place of profit in the company, its subsidiary company or associate company at a monthly remuneration exceeding two and half lakh rupees (Rs. 2,50,000) as mentioned in clause (f) of sub-section (1) of section 188; or

(c) remuneration for underwriting the subscription of any securities or derivatives thereof of the company exceeding 1% percent of the net worth as mentioned in clause (g) of sub-section (1) of section 188.

Explanation.- (1) The Turnover or Net Worth referred in the above sub-rules shall be on the basis of the Audited Financial Statement of the preceding Financial year.

(2) In case of wholly owned subsidiary, the special resolution passed by the holding company shall be sufficient for the purpose of entering into the transactions between wholly owned subsidiary and holding company.

(3) The explanatory statement to be annexed to the notice of a general meeting convened pursuant to section 101 shall contain the following particulars namely:-

(a) name of the related party ;

(b) name of the director or key managerial personnel who is related, if any;

(c) nature of relationship;

(d) nature, material terms, monetary value and particulars of the contract or arrangement;

(e) any other information relevant or important for the members to take a decision on the proposed resolution.

Thanks

CS Ankur Garg


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