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Highlight and Some question of Company ACT 2013

Binod  
on 24 February 2014

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1. Concept of independent director under new company act vs. Co act 1956     

Ans. 1. directors: Under Section 149 of the 2013 Act, there is a specific obligation on every listed public company that at least one-third of the board of directors should comprise of independent directors. This mirrors the requirement in Clause 49 of the listing agreement, and marks the first time that corporate governance norms have been recognised in company law in India. Additionally, Section 177(3) states that the majority of the members of an audit committee (in a listed company) must be comprised of independent directors.

2. Companies Act, 1956 did not contain any reference to independent directors. Further, the reference found in Clause 49 of the listing agreement is only applicable to listed companies.

Every listed public Company to have at least one-third of the total number of directors as Independent Directors (ID)  

3. Whether  director  liable for all fraud of company under New Act?

4. What is Nidhi Company?

Nidhi company is a company registered under Companies Act and notified as a Nidhi company by Central Government under Section 620-A of Companies Act. It is a non-banking finance company doing the business of lending and borrowing with its members or shareholders.

5. What is Producer Company?

A producer company is basically a body corporate registered as Producer Company under Companies Act, 1956 and shall carry on or relate to any of following activities classified broadly:-

(a) production, harvesting, processing, procurement, grading, pooling, handling, marketing, selling, export of *primary produce of the Members or import of goods or services for their benefit :

(b) rendering technical services, consultancy services, training, education, research and development and all other activities for the promotion of the interests of its Members;

(c) generation, transmission and distribution of power, revitalization of land and water resources, their use, conservation and communications relatable to primary produce;

(d) promoting mutual assistance, welfare measures, financial services, insurance of producers or their primary produce;

i. What is the capital limit of OPC (one person company)

ii. What is Takeover Offer Statement

6. What is Sitting fees? (sec 197)

- A Director may receive remuneration by way of fee for attending meetings of the board or committee

- As per the draft rules-

- Amount of sitting fees payable to a director for attending meetings of the Board or committees to be a maximum of Rs.1 lakh per meeting of the Board or committee

- Board may decide different sitting fee payable to independent and non-independent directors other than whole-time directors

7. What is the Class action, Provision of Class Action suits / class action may be against auditor possible

- For protection of shareholders concept of “Class Action suit” inserted

- Ex= Provision for Internal audit of certain companies

- Suit may be filed by members or depositors or any class of them; against the company. If management or conduct of the affairs of the company are being conducted in a manner prejudicial to the interest of the company, its members or depositors

- Class action suit may be instituted against the auditor including audit firm of the company for any improper or misleading statement made in audit report or fraudulent conduct

8. Meeting through Video Conferencing / minutes of video meeting itself valid or need to sign or not by chairman/ and other director attending meeting? Quorum of that?

- Director can participate in the Board meeting through video conferencing or other audio visual mode as may be prescribed.  Sec 173

- within seven days after receipt of the draft minutes failing which his approval shall be presumed

9. WHICH matter cannot be decided in video conferencing  / Whether all types agenda can be decide on Video conferencing

- To approve the annual financial statements; and

- To approve the board’s report.

10.One person company have a only one director whether require board meeting (Sec 173)

In case of only One Director in OPC, requirement of holding meeting will not apply

11. About board meeting

- NO - At least 4 Board meetings should be held each year, with a gap of not more than 120 days between two Board meetings

- Quarter wise require - No requirement of holding the Board Meeting in every quarter

- OPC/ small co - For One Person Company (OPC), small company and dormant company at least 1 Board meeting must be held in each half of a calendar year with a gap of not  less than 90 days between two Board Meetings

12. Resolution passed requirement majority or not?

Resolution by circulation shall be approved if consented by majority of Directors instead of the requirement of consent of all Directors present in India or by majority of them (as was provided in the Companies Act 1956)

13. What is Treasury stocks?

treasury stock or reacquired stock is stock which is bought back by the issuing company, reducing the amount of outstanding stock on the open market ("open market" including insiders' holdings).

Stock repurchases are often used as a tax-efficient method to put cash into shareholders' hands, rather than paying dividends. Sometimes, companies do this when they feel that their stock is undervalued on the open market. Other times, companies do this to provide a "bonus" to incentive compensation plansfor employees. Rather than receive cash, recipients receive an asset that might appreciate in value faster than cash saved in a bank account. Another motive for stock repurchase is to protect the company against a takeover threat.

14. Independent director absent from board meeting consequence

- At least one independent director to be present at a Board Meeting called at shorter notice to transact urgent business.

- Consequence- In case of absence of independent directors from board meeting, decisions taken at meeting shall be circulated to all the directors and shall be final if ratified by a independent director.

15. Voting  in electronic mode allowed

16. Person who fails to get appointed as a director in a general meeting cannot be appointed as an Additional Director

17. When can alteration director can appoint

Alternate director can only be appointed in case director leaves India for period of not less than 3 months

18.What is provision of appointment of women director

a) At least 1 woman director for prescribed class or classes of companies. 2nd proviso to Section 149(1)

b) As per the Draft Rules: Listed Companies, and every other public company with paid up capital > Rs 100 cr; or turnover > Rs 300 cr.

19. Number of director

Private company = 2

Public company = 3

One person company = 1

Maximum no =  15 (1956 co 12 )

Whether OPC can appointment more than 1 Director?

Ans: Yes.

Can company can appoint more than 15 director?

Ans: Yes, through SR (1956-approval of CG required)

20. Director in maximum 20 companies

21. Independent director can get stock option

ANS- Independent director shall not be entitled to any stock options

22.Whole Time Director shall not be appointed for more than 5 years

23.VACATION OF OFFICE OF DIRECTOR – SECTION 167

- When Director fails to attend all Board Meetings for consecutive period of 12 months. This even when the leave of absence has been granted

- When Director is disqualified by an order of court or Tribunal under any Act not only the Companies Act.

- When all directors have vacated the office:

- The promoter shall appoint minimum number of members

- Central Government may appoint Directors till company makes appointment in General Meeting

24. What is the quorum when no of member in public co is 6000 (121)

5 members personally present  = ≤ 1000 members

15 members personally present = > 1000 members but ≤ 5000 member

30 members personally present = > 5000  members

Private Company   = 2 members personally present

25. Can single person can be proxy for 5 member

- Single person not to be proxy for more than 50 members

- Proxy cannot vote by show of hands

- Member of Private Limited company cannot appoint more than 1 proxy to attend on same occasion

26. Which company need to form(make) SHAREHOLDERS GRIEVENCE COMMITTEE – SECTION 178  and chair man?

- For companies > 1000 shareholders, debenture-holders, deposit-holders and other security holders at any time during a FY

- Chairperson : non-executive director and other members as may be decided by the Board

27. What is AUDIT COMMITTEE…….VIGIL MECHANISM?

- Every listed company or such class of companies shall establish a vigil mechanism

- Mechanism facilitates directors and employees to report genuine concerns

- Adequate safeguards against victimization of persons who use such mechanism

- Provision for direct access to the chairperson of the audit committee

28. CORPORATE SOCIAL RESPONSIBILITY (SECTION - 135)

Every Company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year to constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director

Board shall ensure that at least two per cent of average net profits of the Company made during three immediately preceding financial years is spent in every financial year on such policy

CSR activities to be within India only

29. Fraud and liability of ca   

Where provisions contravened by auditor knowingly or willfully with intention to deceive company or shareholders or creditors or tax authorities, punishable with imprisonment extending not less than one year, and fine being minimum INR 1 Lakh and maximum INR 25 Lakh.


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