Note for Thought: Exchange of notes and coins

We have all seen a meme in social media wherein it was written in Devanagari script on a Rs. 10 currency note that “Sonam Gupta bewafa hai”, which means Sonam Gupta is unfaithful. It was probably written by some jilted lover to show the frustration on his rejected proposal. Almost everyone has faced a situation when they have got their clothes washed with currency notes in the pocket. I also remember an incident wherein a person offered high value currency notes in a temple near lighted earthen lamps which caught fire and note was significantly burnt. Currency notes are fragile and often these old, torn, burnt notes find way to our pocket while doing day to day transactions.

Most of us try to get rid of these kid of notes by using such notes in transactions at grocery store, petrol pumps and vegetable sellers etc. But little do we know that a person holding such notes has right to get them exchanged at bank branches. The regulator and supervisor of overall financial system in India, Reserve Bank of India (RBI) has issued detailed guidelines for exchange of notes and coins by the general public.

In this Article, I have attempted to define the rights of a person to receive fresh quality notes in exchange of defective notes.

1. In order to understand the scheme of RBI, it is necessary to understand the under which category such notes would fall. But before that, it is to be noted that a customer can get this exchange service at any of banks. It is not necessary that they should hold any account with such bank or branch. Banks are mandated to provide facility for exchange of notes and coins not only to their customers but also to others.

2. For the purpose of discussion, these notes can be categories into three types, i.e. Soiled Notes, Mutilated Notes and Other Defective Notes.

(i) Soiled Note: A soiled note is one which has become old due to normal wear and tear and also includes two-piece note pasted together with no essential feature missing.
In case you receive Soiled Notes, then you may request the bank to deposit Soiled Notes in the bank account maintained at the Bank or use such notes towards payment of Government dues. Banks are mandated exchange Soiled Notes over the counter, free of charge if the number of notes presented are less than 20 or Rs. 5000 in value. However, if the number of notes or value of such note exceeds the aforesaid threshold, then banks may accept them, against receipt, for value to be credited later.

(ii) Mutilated Note: A mutilated note is a note of which a portion is missing or which is composed of more than two pieces.

A person holding mutilated notes can request for exchange of mutilated notes. Such mutilated notes need to be accepted, exchanged and adjudicated in accordance with Reserve Bank of India (Note Refund) Rules, 2009. As per this Rules, mutilated notes need to be adjudicated by prescribed officer of the designated branch of the Bank in the accordance with the rules given thereunder. It is to be noted that value of such mutilated note depends upon the calculation of the area of the single largest undivided piece of the note. It means if a note is torn into three parts, the value of such note shall be corresponding to the area of single largest piece.

In case mutilated branches are not able to adjudicate the notes or number of notes presented is more than 5 but not exceeding Rs. 5000 in value, then nearby currency chest branch needs to be contacted either via concerned branch or directly. In any case, the exchange value shall be received by the concerned person with 30 days of tendering the mutilated notes.

(iii) Other defective Note (i.e. Extremely brittle, burnt, charred, stuck up Notes): Under this category, it includes notes which have turned extremely brittle or are badly burnt, charred or inseparably stuck up together and, therefore, cannot withstand normal handling. Such notes shall not be accepted at the branch. The holder of such notes are required to approach concerned issue office where it shall be adjudicated and exchanged under a special procedure.

3. Coins and small denomination notes: A person use coins at bank branches for either transactions or exchange. No bank branches can refuse to accept small denomination notes and / or coins tendered at their counters. However, it is to be noted that with effect from June 30, 2011, the coins of 25 paisa and below cannot be used as legal tender.

4. Information to general public: In order to ensure that general public has information about exchange facility, all bank branches are required to display at their branch premises, at a prominent place, a board indicating the availability of note and coin exchange facility.

5. Grievance redressal: Any person aggrieved with the services provided by the banks in this regard may approach Banking Ombudsman concerned, following the procedure as laid under Banking Ombudsman Scheme, 2006.

So, next time when you receive defective notes inadvertently, you do not need to get rid of such notes by hiding it in other notes and giving it at Grocery store. Just walk into the nearest branch of any bank and ask them to exchange these notes.

All that Glitters is not Gold Card Scheme

RBI has recently issued an advisory that Gold Card scheme as contained in “Master Circular on Rupee / Foreign Currency Export Credit and Customer Service To Exporters dated July 01, 2015” needs to strictly implemented by the banks. This advisory was issued by RBI upon receiving representations from the industry that banks are not extending benefits of Gold Card Scheme to eligible exporters.

Export plays an important role in a developing economy like India. Indian Government lays special emphasis on the promotion of export and takes different initiatives from time to time in this direction.

Gold Card Scheme was introduced by Reserve Bank of India (RBI) in the year of 2004 with the objective of promotion of export by simplifying the access of credit to the exporters and borrower friendly terms of credit.

In order to understand Gold Card Scheme, we need to understand the salient features of this Scheme, which are enumerated below:

Eligibility

Exporters including those in small and medium sectors with good track record would be eligible for issue of Gold Card by the banks.

Preferential Treatment

Gold Card holder exporters, depending on their track record and credit worthiness, will be granted better terms of credit including rates of interest than those extended to other exporters by the banks. It is to be noted that the applicable rate of interest to be charged under the Gold Card Scheme will not be more than the general rate for export credit in the respective bank.

Applications for credit (including sanction and renewal) will be processed at norms simpler and under a process faster than for other exporters.

The charges schedule and fee-structure in respect of services provided by banks to exporters under the Scheme will be relatively lower than those provided to other exporters.

Gold Card holders would be given preference in the matter of granting of packing credit in foreign currency.

'In-principle' limits will be sanctioned for a period of 3 years with a provision for automatic renewal subject to fulfilment of the terms and conditions of sanction.

Catering of contingent needs

A stand-by limit of not less than 20 per cent of the assessed limit may be additionally made available to facilitate urgent credit needs for executing sudden orders. In the case of exporters of seasonal commodities, the peak and off-peak levels may be appropriately specified.

In case of unanticipated export orders, norms for inventory may be relaxed, taking into account the size and nature of the export order.

Gold Card holders, on the basis of their track record of timely realization of export bills, will be considered for issuance of foreign currency credit cards for meeting urgent payment obligations, etc.

Sans Collateral

Banks would consider waiver of collaterals and exemption from Export Credit Guarantee Corporation of India (ECGC) guarantee schemes on the basis of Gold Card holder's creditworthiness and track record.

Timelines

Fresh applications / renewal of limits and adhoc limits requests from Gold Card holders would be processed quickly by banks within 25 days / 15 days and 7 days for fresh applications / renewal of limits and ad hoc limits, respectively.

Excluded

The scheme will not be applicable for exporters blacklisted by ECGC or having overdue bills in excess of 10% of the previous year’s turnover.

In a nutshell, this scheme incentivise good behaviour of an exporter. The only concern with this scheme is that the scheme in the current form is high level. Thus, it gives lots of discretionary scope to the banks which needs to be narrowed down to bring more clarity. Nonetheless, the scheme has a very earnest objective and similar scheme should be extended to other areas as well particularly for micro, small and medium enterprises.

Digital Banking: A reality in India

1. Introduction:

India is a land of opportunities. Right from the ancient ages to the modern age, Indians have always strived hard to innovate new things and technology. We have taken great leaps in technology including space technology and information technology.

On February 15, 2017, ISRO launched 104 Satellites in a single flight. This is in addition to the fact that Aryabhat was probably the first astronaut of the world.

First Information Technology Company of India i.e. Tata Consultancy Services (TCS) was founded way back in 1968. Infosys was founded in the year of 1981. Bangalore is known as the Silicon Valley of India and also the IT Capital of India. Hyderabad, Chennai, Gurgaon are other cities where multinational companies are lined up to open their office.

Similarly today every company wants to use the advancement in the area of information technology. They want to use these technology to provide quicker and more effective services. Banks are also one of those industry which is relying heavily on new technology. We have moved from the era of “standing in queue for hours to transfer money” to “transfer of funds with few clicks on our mobile or laptop”.

2. Online Products

Banks were the early adapters of technology and now they are bearing fruits of the same. Now you can open bank accounts online with few clicks. You don’t even need to visit branches and fill up lengthy documents.
Further, online shopping on Amazon or Flipkart etc. have become possible because of online banking. You can sit at home, browse hundreds of products, select them and pay online for selected products.
Below is some of the online accounts being offered by various banks in India:

1. digiSavings (DBS India)
2. Abacus Digital Saving Account (RBL Bank)
3. Kotak 811 (Kotak Mahindra Bank)

In addition to the above, online wallets like Paytm and FreeCharge are very popular now a days.

RBI makes it mandatory for the banks to offer the facility of passbook or statement of account to all its customers. To comply with this requirement, almost all the banks have started offering statement of account. Further, to make it more convenient, banks send statement of account to their customers on the e-mail id registered with them. This e-statement of account has multiple advantage over the traditional passbook or statement of accounts, viz.-

(i) Customer does not need to go branches to update their passbook or wait for the statement of account to come through post. While in case of e-statement, customer receives it instantly.
(ii) Further, e-statement of account is more secure and its usually password protected and only the customer can open it.
(iii) You can easily refer it at anytime and anywhere in the world. You just need internet connectivity.

Some of the banks have also introduced the concept of e-passbook.
Almost all the banks have also started receiving Form 15 G / H and issuing form 16A to their customers. These digital forms have advantages similar to that of e-statement of accounts.

3. E- KYC

Every bank is required to follow certain customer identification procedure while undertaking a transaction either by establishing an account based relationship or otherwise and monitor their transactions.
Banks undertake Know Your Customer (KYC) process to identify their customers. KYC has been a very important task of a bank as any lapse in such process would expose the bank to legal and regulatory risk.

RBI has recently clarified that the e-KYC service of Unique Identification Authority of India (UIDAI) shall be accepted as a valid process for KYC verification under the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005. It clarifies that:
(a) the information containing demographic details and photographs made available from UIDAI as a result of e-KYC process is treated as an ‘Officially Valid Document’; and
(b) transfer of KYC data, electronically to the bank from UIDAI, is accepted as valid process for KYC verification.
In such e-KYC process, the banks obtains authorisation from the customers authorising UIDAI by way of explicit consent to release his/her identity/address through biometric authentication by way of finger print or iris scan.

Some of the banks have started with OTP-based e-KYC for on-boarding of customers. In this process, the customer does even need to do biometric authorisation for releasing his identity rather the customer receives OTP on his mobile number (mapped with his Aadhaar) available with UIDAI and the same is used to authorisation. This is a quicker option than the biometric authentication. By this method of OTP-based e-KYC, the customer can open his account anytime and anywhere. It is to be noted that although account open by means of OTP-based e-KYC has certain restrictions, for e.g. the aggregate balance of shall not exceed rupees one lakh and the aggregate of all credits in a financial year, in all the deposit taken together, shall not exceed rupees two lakh.

4. C-KYC

Another initiative taken by the government is establishment of Central KYC Records Registry (CKYCR) to receive, store, safeguard and retrieve the KYC records in digital form of a customer.

Government of India has authorised the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), to act as, and to perform the functions of the CKYCR.

The ‘live run’ of the CKYCR has started with effect from July 15, 2016 in phased manner beginning with new ‘individual accounts’.
Using this CKYC facility, the bank can verify the identity of the customer and perform the initial due diligence of the customer using the KYC identifier. KYC identifier is a unique identifier for the customer generated by CKYCR.
Using CKYC, the bank can perform below activities:
(i) Search;
(ii) Upload of customer’s KYC information;
(iii) Download of customer’s KYC information; and
(iv) Update of customer’s KYC information

CKYC has not yet implemented fully and once implemented fully, it will go a long way in revolutionise the KYC process in particular and banking in general.

5. Anti- Money Laundering (AML) Solution

Money is the key objective for most of the criminal activity. Banks and other financial institutions are used by criminals to launder the money received through criminal activity. The use of banks and other financial institutions is a great concern the management of such institutions, regulatory and legal authorities. Number of initiatives has been taken to contain the risk of money laundering.
Money laundering basically involves three steps:

(i) Placement;
(ii) Layering; and
(iii) Integration

Thus, it is imperative upon banks to safeguards their organisation from being used by criminals. Earlier banks used to receive information from the customer at the time of on-boarding and later screen them against list of prohibited individuals and entities. This used to take lot of time and there were lots of chances of mistake.

Some of the institutions have started providing AML solution, which is quick and easy to use. A customer can be screened against sanction list issued by various organisations with few click of computer. Further, such solutions also provide facilities of transaction monitoring and reporting of various forms / reports to the regulator very easy.

6. Payment Mode:

Cash deposit followed by cheque has been two most popular mode of payment in India. However, electronic means of payment i.e. NEFT (National Electronic Funds Transfer), RTGS (Real Time Gross Settlement) and IMPS (Immediate Payment Service) has gained popularity in recent years.

Further, after demonetisation, Unified Payment Interface (UPI) has become the most preferred mode of transfer. It is a quick and easy way to send and receive money using without entering additional bank information. For using UPI, the customers need to create a Virtual Payment Address (VPA) of their choice and link it to any bank account. The VPA acts as their financial address and users need not remember beneficiary account number, IFSC codes or net banking user id/password for sending or receiving money.

Such electronic transfers are instantaneously (except NEFT) and the customer does not even need to visit branches. This is secure also as there is no physical movement of cash. Even for NEFT, RBI has recently introduce 11 additional settlement batches during the day (at 8.30 am, 9.30 am, 10.30 am ……… 5.30 pm and 6.30 pm), taking the total number of half hourly settlement batches during the day to 23.

To promote electronic mode of payment, the Government has launched Bharat Interface for Money (BHIM) app. BHIM app uses Unified Payments Interface (UPI) and by using this customer can make instant bank-to-bank payments and pay and collect money using just Mobile number or VPA.

7. Archival of Documents:

Another important aspect of digital banking is to maintain a record of all transactions, the nature and value of which may be prescribed.

As per the PMLA, the account opening records including identification documents should be kept for 10 years from the date of cessation of the transaction/ relationship between the customer and the bank and transaction records including credit/ debit slips, cheque and other form of vouchers. The terms “cessation” generally means closure of account.

Aforesaid requirement of preservation of records is usually cost lots of money to the bank. However, digital banking where there is minimal requirement of physical documents has cleared this concern of banks to a large extent. Digital documents are easy to transfer, archive, search and involves less costly.

8. E-mail and Fax indemnity:

E-mail and Fax indemnity is an important tool in hands of banks to save themselves from the liability arising from use of online or digital mode of sending instructions. In this document, the bank make customer aware of risks involved in using e-mail or fax as mode of sending instructions to banks for transacting with bank and take confirmation from the customer that customer shall indemnify the bank if any liability arise out of use of such mode by the customer.

9. Robot:

Small-time private sector lender City Union Bank was the first among Indian banks to introduce robot in its branch last year. Since then many banks (HDFC, Canara Bank etc.) have started using humanoid robots to assist its customers for service ranging from guiding customers in relevant counter, account balance, interest rate on different products, charges, transaction history etc. By integrating such Robots with Core Banking System of the bank, banks can offer many more services to the customers.

10. Queue management system:

Banks can even manage customers at their branches by using app-based token. Instead of using paper challan, Digital Challan can be used to facilitate to digitally initiate request by customers for services like cash deposit, fund transfer and cheque clearing etc.
Digital Feedback System and grievance redressal mechanism can be another step in direction of a digital bank.

11. Conclusion

Thus, we have seen that digital banking is a reality in India. Every day new services are being added under this ambit. This has made the life of people much easier. However, there is reluctance on the part of customers to fully trust it. People have to adopt digital banking. Demonetisation has played an important to nudge people in this direction. But Banks have to demonstrate that digital banking is not only convenient but also secure. Further, if implemented properly and encouraged, digital banking will go a long way to achieve financial inclusion.

Disputes relating to property

Disputes relating to property, particularly immovable property like Flat and land is not uncommon these days. Main reasons for dispute relating to immovable property are poorly drafted documents relating to transfer of property, complication in property laws and ignorance of basic laws among general public. Sometimes a person, who has purchased the property even after conducting reasonable due diligence, finds himself in legal dispute. Usually this happens when the the title of a person, who has sold the property to buyer, gets questioned by a third party.

Transfer of Property Act, 1882 which primarily deals with transfer of immovable property provides protection to such bona fide buyers. In this Article I have tried to throw some light on right of such bona fide buyers and related aspects:


What is sale and how it can be effected?

As per Section 54 of Transfer of Property Act, 1882, sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. Transfer on immovable property of the value of one hundred rupees and upwards, can be made only by a registered instrument.

What is contract for sale and how is it different from sale deed?

A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property.

On the other hand, Sale Deed is present in nature and by virtue of its execution between the parties can creates right, title, interest in the property.

After terms and conditions of contract for sale are fulfilled and complied with, buyer should immediately insist for execution of sale deed by the owner.

Can a property be transferred pending a suit relating thereto?

Answer to this question lies in section 52 of Transfer of property Act, 1882, which says that during the pendency of any suit in relation to any immovable property, said property cannot be transferred or otherwise dealt with by any party to the suit or proceeding except under the authority of the Court and on such terms as it may impose. Section 52 is reproduced below for reference:

Section 52 - Transfer of property pending suit relating thereto

During the pendency in any Court having authority within the limits of India excluding the State of Jammu and Kashmir or established beyond such limits by the Central Government of any suit or proceeding which is not collusive and in which any right to immoveable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the Court and on such terms as it may impose.

Explanation. -For the purposes of this section, the pendency of a suit or proceeding shall be deemed to commence from the date of the presentation of the plaint or the institution of the proceeding in a Court of competent jurisdiction, and to continue until the suit or proceeding has been disposed of by a final decree or order and complete satisfaction or discharge of such decree or order has been obtained, or has become unobtainable by reason of the expiration of any period of limitation prescribed for the execution thereof by any law for the time being in force.

What are the rights available to bona fide purchaser of an immovable property, when title of seller of such property is questioned?

Section 41 of the Transfer of Property Act, 1882 protects the interest of bona fide purchaser. It is an exception to the rule of “nemo dat quod non habet” (no one gives what he doesn't have). As per this section if a person after being satisfied that seller is the owner of property and purchases the property for consideration, the transfer shall not be violable on the ground that the transferor was not authorised to make it. Section 41 is reproduced below for reference:

Section 41 - Transfer by ostensible owner

Where, with the consent, express or implied, of the persons interested in immoveable property, a person is the ostensible owner of such property and transfers the same for consideration, the transfer shall not be violable on the ground that the transferor was not authorised to make it:

Provided that the transferee, after taking reasonable care to ascertain that the transferor had power to make the transfer, has acted in good faith.

What will happen when an unauthorised person sells the property and later acquires interest in the same property?

As per Section 43 of the Transfer of property Act, 1882, if an unauthorised person represents that he is the owner of the property and transfer the said property for consideration, the buyer shall, at his option, have interest in the property, if such unauthorised person later on acquire any interest in the said property.

For example, if Mr. A, claiming that he is the owner of the property which actually belong to Mr. B, sold that property to Mr. C for consideration. Mr. A later on buys the property from Mr. B. Mr. A cannot claim that sale of property to Mr. C is not valid as when he sold him the property he was not the real owner.

Section 43 is reproduced below for reference:

Section 43 - Transfer by unauthorized person who subsequently acquires interest in property transferred

Where a person fraudulently or erroneously represents that he is authorized to transfer certain immovable property and professes to transfer such property for consideration, such transfer shall, at the option of the transferee, operate on any interest which the transferor may acquire in such property at any time during which the contract of transfer subsists.

Nothing in this section shall impair the right of transferees in good faith for consideration without notice of the existence of the said option.


Why Documents involving sale or transfer or immovable property, gift, leave and license and lease should be registered?

Registration Act, 1908 deals with laws relating to registration of documents. The purpose of the Registration Act, 1908 is the conservation of evidence, assurance, title, publication of documents and prevention of fraud. Registration of some documents like sale deeds of immovable property, is compulsory.

Registered documents carry a certificate of registration which is endorsed by the registering officer and is signed, sealed and dated by him. Endorsement by sub-registrar on a registered document is prima facie proof of its valid execution or consideration. Registered documents are admissible as evidence in a court of law since they have evidentiary value in the eyes of the law.

Registered documents safeguard the interest of a buyer since it takes effect in respect of the said property as against every unregistered document relating to the same property.

Registration of a document is also a notice to the general public regarding the transaction in question.
Registration can normally be done only after payment of proper stamp duty. Registered documents serve as proof of payment of proper stamp duty. {However, the court has held that the sub-registrar cannot refuse acceptance of document for registration despite the fact that the proper stamp duty has not been paid. The reason being that a sub-registrar is not a collector who can impound the documents.}

Although the Transfer of Property Act provides protection to the buyer of property, the buyer cannot ignore his responsibility of undertaking due diligence before buying the property. After all, there is a golden rule "Caveat Emptor" i.e. buyer beware.

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DISCLAIMER:
The opinions expressed herein are for informational purposes only. Nothing herein shall be deemed or construed to constitute legal advice or opinion. Discussions on, or arising out of this, blog between contributors and other persons shall not create any attorney-client relationship.

How to get a succession certificate

A succession certificate is issued by a civil court to the legal heirs of a deceased person. If a person dies without leaving a will, a succession certificate can be granted by the court to realise the debts and securities of the deceased. It establishes the authenticity of the heirs and gives them the authority to have securities and other assets transferred in their names as well as inherit debts. It is issued as per the applicable laws of inheritance on an application made by a beneficiary to a court of competent jurisdiction.

A succession certificate is necessary, but not always sufficient, to release the assets of the deceased. For these, a death certificate, letter of administration and no-objection certificates will be needed.

Application: A petition needs to be filed with the district court or high court within whose jurisdiction the asset is located.

Details: The name and relationship of the petitioner, names of all heirs of the deceased, details about the time, date and place of death should be mentioned in the application. A copy of the death certificate has to be produced.

Process: The court typically issues a notice in the newspapers for a given period (generally 45 days). If no one contests the petition on the expiry of this period, the court passes an order for issuance of succession certificate.

Fees: The court levies a fixed percentage of the value of the estate as fee for issuance of the certificate.

Points to note
The court fee has to be paid in the form of judicial stamp papers of the required amount, after which the certificate is typed, duly signed and delivered.

In addition to the court fee, the lawyer's fee also needs to be taken into account.

If the petition is not contested, the court usually issues a succession certificate in five to seven months.


Please feel free to reach me for any clarification, I'll be happy to assist.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL).)

Companies (Amendment) Bill, 2014

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, today approved the introduction of the Companies (Amendment) Bill, 2014 in Parliament to make certain amendments in the Companies Act, 2013.

The Companies Act, 2013 (Act) was notified on 29.8.2013. Out of 470 sections in the Act, 283 sections and 22 sets of Rules corresponding to such sections have so far been brought into force. In order to address some issues raised by stakeholders such as Chartered Accountants and professionals, following amendments in the Act have been proposed:

1. Omitting requirement for minimum paid up share capital, and consequential changes. (For ease of doing business);

2. Making common seal optional, and consequential changes for authorization for execution of documents. (For ease of doing business);

3. Prescribing specific punishment for deposits accepted under the new Act. This was left out in the Act inadvertently. (To remove an omission);

4. Prohibiting public inspection of Board resolutions filed in the Registry. (To meet corporate demand);

5. Including provision for writing off past losses/depreciation before declaring dividend for the year. This was missed in the Act but included in the Rules;

6. Rectifying the requirement of transferring equity shares for which unclaimed/unpaid dividend has been transferred to the IEPF even though subsequent dividend(s) has been claimed. (To meet corporate demand);

7. Enabling provisions to prescribe thresholds beyond which fraud shall be reported to the Central Government (below the threshold, it will be reported to the Audit Committee). Disclosures for the latter category also to be made in the Board’s Report. (Demand of auditors);

8. Exemption u/s 185 (Loans to Directors) provided for loans to wholly owned subsidiaries and guarantees/securities on loans taken from banks by subsidiaries. (This was provided under the Rules but being included in the Act as a matter of abundant caution);

9. Empowering Audit Committee to give omnibus approvals for related party transactions on annual basis. (Align with SEBI policy and increase ease of doing business);

10. Replacing ‘special resolution’ with ‘ordinary resolution’ for approval of related party transactions by non-related shareholders. (Meet problems faced by large stakeholders who are related parties);

11. Exempt related party transactions between holding companies and wholly owned subsidiaries from the requirement of approval of non-related shareholders. (corporate demand);

12. Bail restrictions to apply only for offence relating to fraud u/s 447. (Though earlier provision is mitigated, concession is made to Law Ministry & ED);

13. Winding Up cases to be heard by 2-member Bench instead of a 3-member Bench. (Removal of an inadvertent error);

14. Special Courts to try only offences carrying imprisonment of two years or more. (To let magistrate try minor violations).


Please feel free to reach me for any clarification. I'll be happy to assist.

One Person Company under Companies Act, 2013

Introduction

Companies Act, 2013 has recently introduced the concept of One Person Company (OPC). There is a growing inquisitiveness in the mind of many corporate professional, entrepreneurs and students as to what is this concept. In this Article, this concept has been explained, provisions relating to OPC in Companies Act, 2013, its comparison with various other types of entities, its benefits and limitation etc.

Although the concept of OPC has been recently introduced in India, similar concept already exists in many other counties including Australia, USA, and Pakistan etc.

Meaning & features of One Person Company (OPC)

OPC is a type of company wherein the company has only one person as a member this person contributes capital to the company. This person acts in different capacity of promoter, director and member. OPC structure is similar to that of a proprietorship concern without the problems generally faced by the proprietors. One most important feature of OPC is that the risks of business are limited to the extent of the value of shares held by such person in the OPC. This would enable a person to take the risks of doing business without getting the liabilities attached to his personal assets. OPC has a separate legal identity from its shareholders i.e., the company and the shareholders are two different entities for all purposes.

OPC is incorporated as a private limited company with one member and may also have at least one director. To ensure the continuity of business and safeguard the interest of different stakeholders, it is required to nominate the name of the person who shall, in the event of sole member’s death or his incapacity, manage the affairs of the company till the date of transmission of shares to legal heirs of the demised member. A minor cannot become member or nominee of the OPC or hold share with beneficial interest. Letters ‘OPC’ to be suffixed with the name of One Person Companies to distinguish it from other companies.

Provisions relating to OPC under Companies Act, 2013

Sec.2(40) Proviso: Financial Statement of One person Company
Sec. 2 (62) Definition of One Person Company
Sec. 2 (68) Definition of Private Limited Company
Sec. 3 Formation of Company
Sec. 4 Memorandum
Sec. 12 (3) Second Proviso Registered office of Company
Sec. 92 (1) Proviso Annual return
Sec. 96 (1) Annual general meeting
Sec. 122 Applicability of Chapter VII to One Person Company
Sec. 134 (1) & (4) Financial Statement, Board’s report etc.
Sec.137 (1) Third Proviso Copy of Financial Statement to be filed with the Registrar
Sec.149 (1) Company to have Board of Directors
Sec. 152 Appointment of Directors
Sec. 173 (5) Meetings of Board
Sec.193 Contract by One Person Company

OPC vis-à-vis Sole Proprietorship

Sole Proprietorship is one of the most favoured business entities for budding entrepreneurs. The prime reasons for its popularity are – (a) absence of legal formalities for its creation; and (b) sole control over the business. Despite the above two important benefits of sole proprietorship, there are some lacunas in this form of business entity which is abhorred by many. Major lacuna of sole proprietorship is that it has no separate existence. It is devoid of the “limitation of liability” enjoyed by a private / public company or limited liability partnership.

OPC vis-à-vis Private Limited Company

Private Limited Company is another most popular business entity in India. Private Limited Company is also an incorporated entity. However, it differs from OPC on several aspects mentioned below:

1. Minimum No. of Board meeting: In case of OPC, only 2 meetings are required to be held in a year. However, in case of 1 director, no board meeting required. Only resolution needs to be recorded. While in case of Private/ Public Company, minimum 4 meetings are required to be held in a year.

2. Annual General Meeting : In case of OPC, there is no requirement of holding any general meeting.

3. Minimum No. of directors: In case of OPC, there is requirement of only 1 director.

4. Cash-flow statement: OPC need not prepare cash flow statement.

Conversion of OPC to other type of Company and vice- versa

When the paid-up share capital of OPC exceeds Rupees Fifty Lac or its average annual turnover during the relevant period exceeds Rupees Two Crore, such OPC need to mandatorily convert itself, within six months of the date of such increase into a private / public company.
Similarly, a private company having paid-up capital of Rupees Fifty Lac or less or average annual turnover during the relevant period is two Crore or less may convert itself into OPC by passing a special resolution in general meeting. No objection from its members and creditors shall precede such special resolution.