Company Act 2013 Seminar Presentation

8/11/2019 Company Act 2013 Seminar Presentation

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By CA. Prakash Wohra


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RELATED PARTY:

RELATED PARTY: (Sect. 2 (76)relatedparty,with reference to a company, means(i) a director or his relative;(ii) a key managerial personnel or his relative;(iii) a firm, in which a director, manager or his relative is a partner;(iv) a private company in which a director or manager is a member or

director;(v) a public company in which a director or manager is a director or

holds along with his relatives, more than two per cent. of its paid-

up share capital;(vi) any body corporate whose Board of Directors, managing director ormanager is accustomed to act in accordance with the advice,directions or instructions of a director or manager;

(vii) any person on whose advice, directions or instructions a director ormanager is accustomed to act:Provided that nothing in sub-clauses (vi) and (vii) shall apply to the

advice, directions or instructions given in a professional capacity;(viii) any company which is(A) a holding, subsidiary or an associate company of such company; or(B) a subsidiary of a holding company to which it is also a subsidiary;

(ix) such other person as may be prescribed;


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RELATIVES: (Section 2 (77)relative,with reference to any person, means any one who is relatedto another, if

(i) they are members of a Hindu Undivided Family;(ii) they are husband and wife; or

(iii) one person is related to the other in such the followingmanner, namely:-

(1) Father: Provided that the term Fatherincludes step-father.

(2) Mother: Provided that the term Motherincludes the step-

mother.(3) Son: Provided that the term Sonincludes the step-son.

(4) Sonswife.

(5) Daughter.

(6) Daughtershusband.

(7) Brother: Provided that the term Brotherincludes the step-brother;

(8) Sister: Provided that the term Sisterincludes the step- sister.


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(List of Relative) 1. Father

2. Mother (including step-mother)

3. Son (including step-son)

4. Sonswife 5. Daughter (including step-daughter)

6. Fathersfather

7. Fathersmother

8. Mothersmother

9. Mothersfather

10. Sonsson

11. Sonssonswife

12. Sonsdaughter

13. Sonsdaughtershusband

14. Daughtershusband

15. Daughtersson

16. Daughterssonswife 17. Daughtersdaughter

18. Daughtersdaughtershusband

19. Brother (including step-brother)

20. Brotherswife

21. Sister (including step sister)

22. Sistershusband

Meaning of r l tiv

A person shall be deemed to be a relative of another if, and only if,-

(a) they are members of a Hindu undivided family; or(b) they are husband and wife; or(c) the one is related to the other in the manner indicated in Schedule IA as under:

From the above we find that the definitions of relative under new companies act, 2014has been restricted to the persons in ascending and descending order with brother andsisters only.Whereas, in old provisions of Companies Act, 1956, it was more large and extensive


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(1) On and after the commencement of this Act, no company shallinvite, accept or renew deposits under this Act from the public except in

a manner provided in Chapter V: (2) A company may, subject to the passing of a resolution in general

meeting and subject to such rules as may be prescribed in consultationwith the Reserve Bank of India, accept deposits from its members onsuch terms and conditions, subject to the fulfillment of certainconditions, namely: circulars, deposit not less than 15% in separate

bank account , deposit insurance , certificate regarding not commitmentof any default, providing security, if any. filing a copy of the circularalong with such statement with the Registrar within thirty days beforethe date of issue of the circular; deposit repayment reserve account etc.

Deposit includes any receipt of money by way of deposit or loan or inany other form, by a company, but does not include any amount

received

Cont


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From the Central /State Government or a State Legislature, local or anyother statutory authority. ;

From foreign Governments,

From foreign or international banks,

From multilateral financial institutions or

From foreign Governments owned development financial institutionsetc.;

From any banking company or

From institution notified by the Central Government, or

From a co-operative bank ;

From Public Financial Institutions;

From issue of commercial paper or

From any other instruments issued in accordance with the guidelines or

notification issued by the Reserve Bank of India; From any other company; (Inter Corporate Deposits)

Cont..


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subscription to any securities, including share application money oradvance towards allotment of securities pending allotment, provided theallotment is made within sixty days from the date of receipt of theapplication money or advance for such securities and such application

money or advance is refunded to the subscribers within fifteen days

from the date of completion of sixty days.

From a director of the company

From the issue of bonds or debentures From an employee of the company not exceeding annual salary.

From any non-interest bearing amount received or held in trust

in the course of, or for the purposes of, the business of the company

From the promoters by way of unsecured loan as per stipulation oflending financial institution or a bank.

by a Nidhi company in accordance with the rules made under section406 of the Act.


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Repayment of deposits etc. accepted before commencement of this

Act. (Sec. 74)

(1) Where in respect of any deposit accepted by a company before thecommencement of this Act, the amount of such deposit or part thereof orany interest due thereon remains unpaid on such commencement or

becomes due at any time thereafter, the company shall

(a) file, within a period of three months from such commencement orfrom the date on which such payments, are due, with the Registrar astatement of all the deposits accepted by the company and sumsremaining unpaid on such amount with the interest payable thereon alongwith the arrangements made for such repayment.; and

(b) repay within one year from such commencement or from the date onwhich such payments are due, whichever is earlier.

(2) The Tribunal may on an application made by the company, afterconsidering the financial condition of the company allow further time asconsidered reasonableto the company to repay the deposit.

3) If a company fails to comply with the above it shall, in addition tothe payment of deposit and the interest due, be punishable with fine ofnot less than one crore rupees but which may extend to ten crore rupeesand every officer of the company who is in default shall be punishablewith imprisonment upto seven years or with fine of not less than twenty-five lakh rupees but which may extend to two crore rupees, or with both.


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Filling of Documents, Forms with ROC. (Rules 16,19 and 20)

16. Every company to which these rules apply, shall on or before the30th day of June, of every year, file with the Registrar, a return in FormDPT-3 along with the fee as provided in Companies (Registration Officesand Fees) Rules, 2014 and furnish the information contained therein as

on the 31st day of March of that year duly audited by the auditor of thecompany.

19. Applicability of sections 73 and 74 to eligible companies.-

It is hereby clarified that in case of a company which had accepted orinvited public deposits under the relevant provisions of the CompaniesAct, 1956 and rules made under that Act (hereinafter known as EarlierDeposits) and has been repaying such deposits and interest thereon inaccordance with such provisions, the provisions of clause (b) of sub-section (1) of section 74 of the Act shall be deemed to have beencomplied with if the company complies with requirements under the Actand these rules and continues to repay such deposits and interest duethereon on due dates for the remaining period of such deposit in

accordance with the terms and conditions and period of such EarlierDeposits and in compliance with the requirements under the Act andthese rules;

20. Statement regarding deposits existing as on the date ofcommencement of the Act shall be in Form DPT-4.


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ACCEPTANCE OF DEPOSITS FROM PUBLIC BY

CERTAIN COMPANIES: (Sec. 76) (1) Notwithstanding anything contained in section 73, a public

company, having such net worth or turnover as may be prescribed, mayaccept deposits from persons other than its members subject tocompliance with the requirements provided in sub-section (2) of section73 and subject to such rules as the Central Government may, inconsultation with the Reserve Bank of India, prescribe:

Provided that such a company shall be required to obtain the rating

(including its net worth, liquidity and ability to pay its deposits on duedate) from a recognized credit rating agency for informing the public therating given to the company at the time of invitation of deposits fromthe public which ensures adequate safety and the rating shall beobtained for every year during the tenure of deposits:

Provided further that every company accepting secured deposits from

the public shall within thirty days of such acceptance, create a charge onits assets of an amount not less than the amount of deposits accepted infavour of the deposit holders in accordance with such rules as may beprescribed.


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On and from the commencement of these rules,

No company referred to in sub-section (2) of section 73 andno eligible company shall accept or renew any deposit, whethersecured or unsecured, which is repayable on demand or uponreceiving a notice within a period of less than six months or more

than thirty-six months from the date of acceptance or

renewal of such deposit:

Provided that a company may, for the purpose of meeting anyof its short-term requirements of funds, accept or renew such

deposits for repayment earlier than six months from the date ofdeposit or renewal, as the case may be, subject to the conditionthat-

(a) such deposits shall not exceed ten per cent. of the

aggregate of the paid up share capital and freereserves of the company, and

(b) such deposits are repayable not earlier than threemonths from the deposits or renewal thereof.


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For inviting deposits from its members or other public

following requirements needs to be fulfilled:

a. Advertisementsor circulars by registered post includingspeed post or by electronic mode in Form DPT-1-

b. an advertisement in Form DPT-1 for the purpose in Englishlanguage in an English newspaper and in vernacularlanguage in one vernacular newspaper having widecirculation in the State in which the registered office of thecompany is situated.

c. Every company inviting deposits from the public shallupload a copy of the circular on its website, if any.

d. enter into a contract for providing deposit insuranceat least thirty days before the issue of circular oradvertisement or at least thirty days before the dateof renewal, as the case may be.

e. Creation of security.

f. Appointment of trustee for depositors.

g. Meeting of depositorsh. Maintenance of liquid assets and creation of deposit

repayment reserve account.-

i. Maintaining of registers of deposits.

j. Return of deposits to be filed with the Registrar


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PUNISHMENT FOR CONTRAVENTION-

If any company referred to in sub-section (2) of section 73 or any eligible

company inviting deposits or any other person contravenes any provision

of these rules for which no punishment is provided in the Act, the company

and every officer of the company who is in default shall be punishable with

fine which may extend to five thousand rupees and where the

contravention is a continuing one, with a further fine which may extend to

five hundred rupees for every day after the first day during which the

contravention continues.


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From the above details following terms emerges which clears the above

contention:

Public deposits for which certain terms and conditions are applicable.

Secured or unsecured loans from banks, financial institutions etc. Loan against commercial paper or any other instruments.

Loan from another Company i.e. inter corporate deposits.

amount received towards subscription to any securities, including shareapplication money or advance towards allotment of securities pendingallotment provided the allotment is madewithin sixty days from the dateof receipt of the application money or advance for such securities and

such application money or advance is refunded to the subscribers within

fifteen days from the date of completion of sixty days.

Amount received from a person who, at the time of the receipt of theamount, was a director of the company:

Amount receivedfrom an employee of the company not exceeding hisannual salary.

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Amount received in the course of, or for the purposes of, the business ofthe companyprovided that such advance is appropriatedagainst supplyof goods or provision of services within a period of three hundred andsixty five daysfrom the date of acceptance of such advance.

Advance received in connection with consideration for property under anagreement or arrangement;

Security deposit for the performance of the contract for supply of goodsor provision of services;

Advance received under long term projects for supply of capital goods.

Amount brought in by the promoters of the company by way ofunsecured loan in the stipulation of any lending financial institution or a

bank. This exemption shall be available only till the loans of financialinstitution or bank are repaid and not thereafter;

Under the new act, even private company has to seek permission frommembers in general meeting before accepting such loans or deposits.

No such approval was required under old Companies Act, 1956. Earlier, the above provisions were mainly applicable to Public Limited

Companies only. Now all these are made applicable to private companiesalso.


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Where family has sufficient owned funds and do not require any financial

assistance.

Where out of total family members including HUFs only two or three

persons are directors.

Where old share application money kept for long duration or at least formore than 60 days.

Business advance for more than 365 days. Even genuine advance for

goods having manufacturing cycle of more than 365 days.

Even financial assistance obtained but fully repaid shortly.

Advance security deposit of employee kept with the company but he or

she leaves the company and such deposit is not yet refunded.


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No company shall directly or indirectly advance any loan, including anyloan represented by book debt, to any of its director or to any otherperson in whom the director is interested.

The expressions toany of its director or to any other person in whomthe director is interestedis also defined as under:

(a) Any director od a lending company or of a company which is itsholding company; or any partner or relative of any such director;

(b) Any firm in which any such director or relative is a partner;

(c) Any private Company of which any such director is a director ormember; (It means inter corporate deposits within group as well.)

(d) Any body corporate at a general meeting of whichnot less than25 of total voting power may be exercised or controlled by anysuch director or by two or more such directors, together or

(e) Any body corporate, the board of directors, managing director or

manager, whereof is accustomed to act in accordance with thedirections or instructions of the board or any director or directorsof the lending company.

(f) This covers guarantees also. It means not only loans but corporateguarantees are also covered.


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PENALTIES AND PROSECUTION:(a) Minimum fine of Rs. 5.00 lacs (Maximum up to Rs. 25.00

lacs) to the Company.

(b) Minimum fine of Rs. 5.00 lacs (Maximum up to Rs. 25.00lacs) or imprisonment up to 6 months or both to all suchdirectors.

CAUTION:(a) It is to be noted that existing loans on the date of

applicability of new provisions shall not be covered butany addition or renewal will be covered.

(b) Similarly any outstanding corporate guarantee will alsonot be covered. However any fresh guarantee or renewal of

such old guarantee will be subject to new provisions andare prohibited.


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Thanks..

Company Act 2013 Seminar Presentation

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