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The Institute has set up a dedicated e-mail id for posting operational difficulties and views relating to Companies Act, 2013. Several pertinent and relevant queries with regard to the Companies Act, 2013 have been received from the stakeholders. The queries which were common and related have been compiled together and response to the same is being provided in the form of Frequently Asked Questions.

These FAQs are academic interpretation of the provisions of the Companies Act, 2013 and rules made thereunder. Due care has been taken in the preparation of responses to reflect true intention of the law. The Institute shall not be responsible for any loss or damage resulting from any action taken on the basis of these responses.


1. Section 2(49) defines the term ‘interested directors’ whereas at various sections reference to section 184 is drawn to mean/define interested director. Section 2(49) is wider than Section 184 leading to confusion – which definition should be applied?

Ans. Section 2(49) of the Companies Act, 2013 defines interested director as a director who is in any way, whether by himself or through any of his relatives or firm, body corporate or other association of individuals in which he or any of his relatives is a partner, director or a member, interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into by or on behalf of a company;

Section 184 (2) provides that every director of a company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement entered into or to be entered into—

(a) with a body corporate in which such director or such director in association with any other director, holds more than two per cent. shareholding of that body corporate, or is a promoter, manager, Chief Executive Officer of that body corporate; or

(b) with a firm or other entity in which, such director is a partner, owner or member, as the case may be, shall disclose the nature of his concern or interest at the meeting of the Board in which the contract or arrangement is discussed and shall not participate in such meeting.

Wherever the term ‘interested director’ appears in the Act and the Rules thereon, read sections 2(49) and 184 together.


2. Whether a private Company having paid-up share capital 45 Lakhs and turnover of Rs. 20 Crores as per last audited balance sheet will be treated as small company or not?


ANS: Such company will be treated as small company. Section 2(85) define a small company as a company other than a public company,—

(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than five crore rupees; or

(ii) turnover of which as per its last profit and loss account does not exceed 2 crore rupees or such higher amount as may be prescribed which shall not be more than twenty crore rupees:

Provided that nothing in this clause shall apply to—

(A) a holding company or a subsidiary company;

(B) a company registered under section 8; or

(C) a company or body corporate governed by any special Act .

Here the word ”OR” is written, it means that a private company fulfilling any one condition i.e either turnover less than Rs. 2 crores or paid up capital less than Rs. 50 lacs will be considered as small company.


3. Whether every company is required to alter its Articles of Association as per the new format under the Companies Act, 2013?


Ans. Sub-section (6) of Section 5 provides that the articles of a company shall be in respective forms specified in Tables, F, G, H, I and J in Schedule I as may be applicable to such company.

Sub-section (9) of section 5 provides that nothing in this section shall apply to the articles of a company registered under any previous law unless amended under the Act.

It is not necessary but suggested that whenever a company amends its articles, it should ensure that subsequent to the amendment, the AOA is as per the format specified under the Companies Act, 2013.

Since certain provisions of Companies Act, 2013 require specific clauses in the Articles to carry out operations of any organization, such as for issuance of bonus shares, it is advisable Articles should be altered in line with the new requirements as various provisions themselves require specific clauses to be incorporated in the Articles.


4. Is section 42 applicable for Right Issue of shares under section 62(1)(a)? Are PAS 4 (Letter of Offer) and PAS 5 (Record of Offer) applicable for Rights Issue of shares?

Ans: As per section 23 of the Companies Act, 2013 a public company can issue securities:-

• To public through prospectus;

• Through private placement by complying with the provisions of part II of chapter III; or

• Through a right issue or bonus issue.

In case of a private company it can issue securities by any method as mentioned above other than to public through prospectus. Thus, there is no need to comply with the provisions of section 42 in case of right issue and accordingly PAS-4 and PAS-5 shall not be applicable in case of right issue.

5. Section 46 read with the Companies (Share Capital and Debentures) Rules, 2014 requires passing of Board Resolution for issuance of share certificates. Under the Companies Act, 1956 such power could be delegated to Committee of the Board. Companies Act, 2013 is silent on this issue.

Ans. Section 179 which deals with powers of Board lists items which are required to be approved by Board at its duly convened meeting. These items are such which require deliberation and discussion at the meeting and of important nature. One such item is ‘issue of securities’.

This matter has already been examined by the MCA and it has, vide its General Circular 19/2014 dated June 12, 2014, clarified with regard to issue of duplicate share certificates, that a committee of Directors may exercise such powers subject to any restrictions imposed by the Board in this regard [in the light of the provisions of section 179, 180 and regulation 71 of table “F” of Schedule I to the Companies Act, 2013].


6. On further issue of shares to existing shareholders under section 62(1)(a): What would be the intimation form viz return of allotment form as form PAS-3 doesn’t mention section 62. It mentions only section 39 which is for public issue and section 42 which is private placement? Whether shareholder’s approval is required for the said issue?


ANS: For every issue, return of allotment (refer section 39) Form PAS 3 will be filed with the ROC irrespective of whether the share is allotted through private, ESOP, Right Issue or Bonus issue. No, shareholder approval is not for a rights issue.


7. In terms of Section 73 of Companies Act, 2013 read with Rule 2(1)(c)(vii) of Companies (Terms and conditions of acceptance of Deposit) Rules, 2014, 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?


ANS: Any amount received from a person who, at the time of the receipt of the amount, was a director of the company furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others is not considered as deposit.

Although, there is no specific provision which clarifies the question above but a deposit from a member who is also a director should be treated as deposit from a member.


8. 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?


ANS: As per Rule 3 of the Companies (Management & Administration) Rules, 2014 all the existing companies, registered under the Companies Act, 1956, shall prepare its registers of members as per the provisions of section 88 of the Companies Act, 2013 within a period of 6 months from the date of commencement of Companies (Management & Administration) Rules, 2014.

Further after 1st April 2014 all the registers of Directors & KMP shall be prepared as per the provisions of the section 170 of the Companies Act, 2013. The register of directors & director’s shareholding maintained before 1 April, 2014 as per the provisions of the companies Act, 1956 needs not to be converted as per the provisions of the section 170 of Companies Act, 2013.

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


Ans. For the financial year ending March 31, 2014, specified companies would be required to file the Compliance certificate as per the provisions of proviso to Sub-section (1) of Section 383A of the Companies Act, 1956.

MCA has vide General Circular 08/2014 dated 04.04.2014 clarified that the financial statements (and documents required to be attached thereto), auditors 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 and that in respect of financial years commencing on or after 1st April, 2014, the provisions of the new Act shall apply. As the compliance certificate forms part of the Board’s Report it shall be filed and attached with the Board’s Report for the year financial year 2013-14.


10. The Annual Return for the financial year ended 31st March 2014 is to be filed in which form?


Ans. MCA vide General Circular dated 25th June, 2014 clarified that Form MGT-7 shall not apply to annual returns in respect of companies whose financial year ended on or before 1st April, 2014 and for annual returns pertaining to earlier years. These companies may file their returns in the relevant Form applicable under the Companies Act, 1956.

Accordingly, the annual return in terms of section 92 of the Companies Act, 2013 in form MGT. 7 as covered in this guidance note will be applicable for the financial years commencing on or after 1st April, 2014.

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