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.
Showing posts with label Companies Act. Show all posts
Showing posts with label Companies Act. Show all posts
Tuesday, December 2, 2014
Tuesday, November 25, 2014
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.
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.
Wednesday, June 18, 2014
Registration of charge with Registrar of Companies (ROC) under Companies Act, 2013
I. CHARGES THAT REQUIRE REGISTRATION IN ROC FOR COMPANIES
Earlier Companies Act, 1956 (“1956 Act”) cast an obligation on the Company to register with ROC only specified charges (these charges were specified 1956 Act itself) and not all charges created on property / undertaking of the Company.
The Companies Act, 2013 (“2013 Act”) on the other hand requires the company to register the particulars of a charge created by it on its property or assets or any of its undertakings with Registrar of Companies (ROC).
The 2013 Act defines ‘charge’ as an interest or lien created on property/ assets/ undertaking of the company as security. In view of this definition of ‘charge’ it appears that even pledges/ lien of moveable property will have to be registered with ROC under the 2013 Act since there are no charges specified in the Act.
II. TIME LIMIT
Charges are required to be registered with the ROC having jurisdiction over Registered Office of the company, under Section 77 of the Companies Act, 2013, within 30 days from the date of its creation.
III. FORMS FOR CREATION OR MODIFICATION OF CHARGE
Charges must be registered with the ROC by filing the particulars in Form No.CHG-1 (earlier Form-8) along with duly verified and certified copies of the documents/records/creating such charges with the requisite fee thereon.
IV. CONDONATION OF DELAY BY ROC
ROC may, on being satisfied that the company had sufficient cause for not filing the particulars and instrument of charge, if any, within a period of thirty days of the date of creation of the charge, allow the registration of the same after thirty days but within a period of three hundred days of the date of such creation of charge or modification of charge on payment of additional fee. [Please check the section “Additional fees” on calculation of additional fees]
Two important aspects which may be noted here:
a.Power of ROC to condone the delay is discretionary and there must be sufficient reason to for not registering the charge with specified period of 30 days.
b. Three hundred days shall be calculated from the date of creation of charge. It means effectively the Act provides for additional 270 days.
The application for delay shall be made in Form No.CHG-1 and supported by a declaration from the company signed by its secretary or director that such belated filing shall not adversely affect rights of any other intervening creditors of the company.
V. CERTIFICATE OF REGISTRATION
Where a charge is registered with ROC, he shall issue a certificate of registration of such charge in Form No.CHG-2.
This certificate holds utmost importance. Please see the section relation to “Effect of non-registration of charge” for more information.
VI. MODIFICATION OF CHARGES
Process for modification of charge is similar to that of creation of charge described above.
VII. SATISFACTION OF CHARGES
A company shall within a period of thirty days from the date of the payment or satisfaction in full of any charge registered under Chapter VI, give intimation of the same to ROC in Form No.CHG-4 along with the fee. ROC shall then issue a certificate of registration of satisfaction of charge in Form No.CHG-5.
VIII. EFFECT OF REGISTRATION OF CHARGE WITH ROC
Where any charge on any property or assets of a company or any of its undertakings is registered under the provisions of Companies Act, 2013, any person acquiring such property, assets, undertakings or part thereof or any share or interest therein shall be deemed to have notice of the charge from the date of such registration.
IX. CONSEQUENCES OF A CHARGE NOT BEING REGISTERED
It specifies that every charge created by a company is required to be registered unless such a charge is registered the charge shall be void against a liquidator or any subsequent charge.
The 1956 Act provided that the no charge created by a company shall be taken into account by the liquidator or any other creditor unless particulars thereof with copy of instrument creating charge have been filed with ROC within 30 days of creation of charge.
The 2013 Act contains more stringent provisions in this regard, i.e. no charge created by a company shall be taken into account by the liquidator or any other creditor unless it is duly registered and a certificate of registration of such charge is given by ROC.
X. PERSONS AUTHORISED TO CREATE CHARGE
It shall be the duty of every company creating a charge to register the particulars of the charge signed by the company and the charge-holder.
If a company fails to register the charge within the period of 30 days, the Charge holder may apply to the ROC for registration of the charge along with the instrument created for the charge. ROC may, on such application, within a period of fourteen days after giving notice to the company, unless the company itself registers the charge or shows sufficient cause why such charge should not be registered, allow such registration of charge. The charge holder in such case shall be entitled to recover from the company the amount of any fees or additional fees paid by him to ROC for the purpose of registration of charge.
XI. Fees payable
As per 2013 Act, applicable fees on CHG-1 correspond to the nominal share capital of the Company in the below manner:
Nominal Share Capital::: Normal fee payable
Less than 1,00,000::: Rs.200/-
1,00,000 to 4,99,999::: Rs.300/-
5,00,000 to 24,99,999::: Rs.400/-
25,00,000 to 99,99,999::: Rs.500/-
1,00,00,000 or more::: Rs.600/-
Additional Fees
Period of delays::: Fee applicable
upto 30 days::: 2 times of normal fees
More than 30 days and upto 60 days::: 4 times of normal fees
More than 60 days and upto 90 days::: 6 times of normal fees
More than 90 days and upto 180 days:: 10 times of normal fees
More than 180 days::: 12 times of normal fees
YOUR COMMENTS & SUGGESTIONS:
Comments and suggestions are read and very welcome. We really appreciate your time. Thanks in advance.
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.
(I am thankful to my Seniors and friends for helping me to write this blog.)
Earlier Companies Act, 1956 (“1956 Act”) cast an obligation on the Company to register with ROC only specified charges (these charges were specified 1956 Act itself) and not all charges created on property / undertaking of the Company.
The Companies Act, 2013 (“2013 Act”) on the other hand requires the company to register the particulars of a charge created by it on its property or assets or any of its undertakings with Registrar of Companies (ROC).
The 2013 Act defines ‘charge’ as an interest or lien created on property/ assets/ undertaking of the company as security. In view of this definition of ‘charge’ it appears that even pledges/ lien of moveable property will have to be registered with ROC under the 2013 Act since there are no charges specified in the Act.
II. TIME LIMIT
Charges are required to be registered with the ROC having jurisdiction over Registered Office of the company, under Section 77 of the Companies Act, 2013, within 30 days from the date of its creation.
III. FORMS FOR CREATION OR MODIFICATION OF CHARGE
Charges must be registered with the ROC by filing the particulars in Form No.CHG-1 (earlier Form-8) along with duly verified and certified copies of the documents/records/creating such charges with the requisite fee thereon.
IV. CONDONATION OF DELAY BY ROC
ROC may, on being satisfied that the company had sufficient cause for not filing the particulars and instrument of charge, if any, within a period of thirty days of the date of creation of the charge, allow the registration of the same after thirty days but within a period of three hundred days of the date of such creation of charge or modification of charge on payment of additional fee. [Please check the section “Additional fees” on calculation of additional fees]
Two important aspects which may be noted here:
a.Power of ROC to condone the delay is discretionary and there must be sufficient reason to for not registering the charge with specified period of 30 days.
b. Three hundred days shall be calculated from the date of creation of charge. It means effectively the Act provides for additional 270 days.
The application for delay shall be made in Form No.CHG-1 and supported by a declaration from the company signed by its secretary or director that such belated filing shall not adversely affect rights of any other intervening creditors of the company.
V. CERTIFICATE OF REGISTRATION
Where a charge is registered with ROC, he shall issue a certificate of registration of such charge in Form No.CHG-2.
This certificate holds utmost importance. Please see the section relation to “Effect of non-registration of charge” for more information.
VI. MODIFICATION OF CHARGES
Process for modification of charge is similar to that of creation of charge described above.
VII. SATISFACTION OF CHARGES
A company shall within a period of thirty days from the date of the payment or satisfaction in full of any charge registered under Chapter VI, give intimation of the same to ROC in Form No.CHG-4 along with the fee. ROC shall then issue a certificate of registration of satisfaction of charge in Form No.CHG-5.
VIII. EFFECT OF REGISTRATION OF CHARGE WITH ROC
Where any charge on any property or assets of a company or any of its undertakings is registered under the provisions of Companies Act, 2013, any person acquiring such property, assets, undertakings or part thereof or any share or interest therein shall be deemed to have notice of the charge from the date of such registration.
IX. CONSEQUENCES OF A CHARGE NOT BEING REGISTERED
It specifies that every charge created by a company is required to be registered unless such a charge is registered the charge shall be void against a liquidator or any subsequent charge.
The 1956 Act provided that the no charge created by a company shall be taken into account by the liquidator or any other creditor unless particulars thereof with copy of instrument creating charge have been filed with ROC within 30 days of creation of charge.
The 2013 Act contains more stringent provisions in this regard, i.e. no charge created by a company shall be taken into account by the liquidator or any other creditor unless it is duly registered and a certificate of registration of such charge is given by ROC.
X. PERSONS AUTHORISED TO CREATE CHARGE
It shall be the duty of every company creating a charge to register the particulars of the charge signed by the company and the charge-holder.
If a company fails to register the charge within the period of 30 days, the Charge holder may apply to the ROC for registration of the charge along with the instrument created for the charge. ROC may, on such application, within a period of fourteen days after giving notice to the company, unless the company itself registers the charge or shows sufficient cause why such charge should not be registered, allow such registration of charge. The charge holder in such case shall be entitled to recover from the company the amount of any fees or additional fees paid by him to ROC for the purpose of registration of charge.
XI. Fees payable
As per 2013 Act, applicable fees on CHG-1 correspond to the nominal share capital of the Company in the below manner:
Nominal Share Capital::: Normal fee payable
Less than 1,00,000::: Rs.200/-
1,00,000 to 4,99,999::: Rs.300/-
5,00,000 to 24,99,999::: Rs.400/-
25,00,000 to 99,99,999::: Rs.500/-
1,00,00,000 or more::: Rs.600/-
Additional Fees
Period of delays::: Fee applicable
upto 30 days::: 2 times of normal fees
More than 30 days and upto 60 days::: 4 times of normal fees
More than 60 days and upto 90 days::: 6 times of normal fees
More than 90 days and upto 180 days:: 10 times of normal fees
More than 180 days::: 12 times of normal fees
YOUR COMMENTS & SUGGESTIONS:
Comments and suggestions are read and very welcome. We really appreciate your time. Thanks in advance.
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.
(I am thankful to my Seniors and friends for helping me to write this blog.)
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