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.
Friday, August 4, 2017
Thursday, September 10, 2015
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.
YOUR COMMENTS & SUGGESTIONS:
Comments and suggestions are read and very welcome. We really appreciate your time. You may also post your queries here, I will be happy assist.
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.
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.
YOUR COMMENTS & SUGGESTIONS:
Comments and suggestions are read and very welcome. We really appreciate your time. You may also post your queries here, I will be happy assist.
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.
Tuesday, December 2, 2014
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).)
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.
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.
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.)
Tuesday, February 11, 2014
Validity of Power of Attorney (POA): Death of Principal
One question which may validly arise in the mind of any person in relation to Power of Attorney (POA) is that what shall happen if the person executing POA has died? This is question of more importance for people working particularly in banking industry. There are many transactions in banking sector which is executed by the attorneys on behalf of the principal on the strength of POA on day-to-day basis. In this Article, we have tried to examine the legal aspect of validity of POA, after the death of its principal.
Power of Attorney as an Agency
A power of attorney is a delegation of authority in writing by which one person is empowered to do an act in the name of the other. The person who acts on behalf of another person (the principal) by his authority, express or implied, is called an agent and the relation between him and his principal is called agency.
A power of attorney holder is nothing but an agent as defined in S. 182 of the Indian Contract Act, 1872. The authority of an agent is his power to affect his principal’s position by doing acts on his behalf.
Termination of a Power of Attorney
Generally speaking, a power of attorney can be terminated or cancelled by the principal by revoking his authority or by the power of attorney holder renouncing his authority.
According to S. 201 of the Contract Act, an agency can be terminated by the principal by revoking his authority or by the agent renouncing his authority. S. 201 of the Contract Act also states that an agency terminates, inter alia, by death of principal or agent.
Judicial Pronouncements
Radhabai vs Mongia (AIR 1939 Nag. 274): If the power-of-attorney holder exceeds his limits as per the power granted to him, by the instrument, then the provision of 'indemnity' in case of an act done in good faith does not apply, even if he was unaware of the determination of his power in consequence of revocation of power by or death/insolvency of the principal.
A holder of a power-of-attorney or an agent cannot go beyond the principal [Mahendra Pratap Singh & Anr. v. Smt. Padam Kumari Devi, A.I.R. 1993 All. 143].
Conclusion
According to established case laws read with Section 3 of Power of Attorneys Act 1882 and S. 182, 201 of the Contract Act, due to the demise of the person executing power of attorney, the power of attorney becomes null and void.
Readers may post their query here in this regard. I will be happy to assist.
Power of Attorney as an Agency
A power of attorney is a delegation of authority in writing by which one person is empowered to do an act in the name of the other. The person who acts on behalf of another person (the principal) by his authority, express or implied, is called an agent and the relation between him and his principal is called agency.
A power of attorney holder is nothing but an agent as defined in S. 182 of the Indian Contract Act, 1872. The authority of an agent is his power to affect his principal’s position by doing acts on his behalf.
Termination of a Power of Attorney
Generally speaking, a power of attorney can be terminated or cancelled by the principal by revoking his authority or by the power of attorney holder renouncing his authority.
According to S. 201 of the Contract Act, an agency can be terminated by the principal by revoking his authority or by the agent renouncing his authority. S. 201 of the Contract Act also states that an agency terminates, inter alia, by death of principal or agent.
Judicial Pronouncements
Radhabai vs Mongia (AIR 1939 Nag. 274): If the power-of-attorney holder exceeds his limits as per the power granted to him, by the instrument, then the provision of 'indemnity' in case of an act done in good faith does not apply, even if he was unaware of the determination of his power in consequence of revocation of power by or death/insolvency of the principal.
A holder of a power-of-attorney or an agent cannot go beyond the principal [Mahendra Pratap Singh & Anr. v. Smt. Padam Kumari Devi, A.I.R. 1993 All. 143].
Conclusion
According to established case laws read with Section 3 of Power of Attorneys Act 1882 and S. 182, 201 of the Contract Act, due to the demise of the person executing power of attorney, the power of attorney becomes null and void.
Readers may post their query here in this regard. I will be happy to assist.
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