Companies act 2013 provisions for raising of funds and issue of securities

2.  ONE PERSON COMPANY
 SMALL COMPANY
 DORMANT COMPANY
 ASSOCIATE
 REGISTERED VALUER
 FINANCIAL YEAR
 CORPORATE SOCIAL RESPONSBILITY (CSR)
 SECRETARIAL AUDIT
 NATIONAL FINANCIAL REPORTING AUTHORITY

3. Means owned by one person and minimum one director
formed as Private limited company
 Holding of AGM is not mandatory
 First member shall be director
 The Memorandum of such a company should indicate the
name nominee

4.  An OPC shall file a copy of financial statement within 180
days from the closure of the FY.
 One Board Meeting in each half of the calendar year
 Gap between the two meeting is not less than 90 days
 No quorum required
One Person to be natural person, Indian citizen and resident in
India

5. Means a Private company Having
Paid-up capital <50L or such higher amount as
may be prescribed, which shall not be
more than Rs. 5 crore
OR
Turnover <2 crore or such higher
amount as may be
prescribed, which shall not be
more than Rs. 20 Crore
Public company can not be small company

6.  Financial statement - may not include the cash flow statement -
Section 2(40)
 Board Meetings- at least 1 Board Meeting in each half of a
calendar year and gap between the two meetings is at least 90
days - Section 173(5)
 Fast Track Merger - need not follow the detailed procedure u/s
230 & 232 - Section 233
 Mandatory rotation of Auditor & maximum term of auditors not
applicable - Rule 5 of Chapter X.
 Signing of Annual Return - signed by the CS, if any, else by the
director - Sec 92 (1)

7.  Where a company is formed and registered for a
 future project or
 to hold an asset/ intellectual property and
 No “significant accounting transaction”
such an inactive company make an application for
obtaining the status of Dormant company.
 Inactive company - carrying on no business or operation or
no significant accounting transaction during last 2 year
or has not filed financial statement & annual return for 2
years.

8.  Registrar shall allow the status and issue a certificate on
consideration of application
 Registrar maintain a register of Dormant Company
 Company which has not filed financial statements for 2
financial years, the Registrar may issue a notice and enter the
name of the company in the Dormant companies register.
Dormant company shall maintain minimum director, file such documents
and pay such annual fees as prescribed by government to maintain the
status of dormant

9.  Company by passing Special Resolution, may make an
application to ROC for obtaining the Dormant Status in Form
MSC- 1
 ROC allow the status of Dormant Company
 Dormant Company shall have:-
• 3 Directors – In case of Public Company
• 2 Directors – In case of Private Company
• 1 Director – In case of One Person Company
Dormant Company to file Annual Declaration within 30 days form end
of financial year to ROC

10. A company in which that other company has a significant
influence, but which is not a subsidiary company of the
company having such influence and includes a joint
venture company.
 Significant influence:
 Control of at least 20% of total share capital, or
 Business decisions under an agreement.
Associate company does not include foreign companies
As per MCA Circular 24/ 2014 dated 25.06.2014 – shares held by a
company in another company in a ‘fiduciary capacity’ shall not be
counted for the purpose of determining the relationship of ‘associate
company’.

11. • Valuation in respect of any property, stocks, shares,
debentures, securities or goodwill or other assets or net worth
of company or its liabilities shall be done by a Registered Valuer.
 Qualification & experience as prescribed by way of Rules.
 Appointment to be effective by audit committee or Board of
Directors;
 Pecuniary penalty & damages is prescribed if valuer commits
default under the section or the rules prescribed;
The practice of taking certificate from any practicing professionals
shall be discontinued.

12.  A registered valuer means a person registered as a valuer
under Chapter XVII
 The following persons shall be eligible to apply for being
Chartered Accountant, Company Secretary, Cost Accountant
in whole time practice, or a person holding equivalent Indian
or foreign qualification, Merchant banker registered with SEBI
 Member of the Institute of Engineers and who is in whole
time practice or person in his employment with qualification
 Member of the Institute of Architects and who is in whole
time practice

13.  Means the period ending on the 31st day of March
every year. (If the Company starts after 1st January,
then the period ending 31st March, of the following
year)
 The National Company Law Tribunal (“NCLT”) shall
have the power to allow a different financial year
for companies which are holding/ subsidiaries of a
company incorporated outside India so as to enable
consolidation of accounts of such companies
Transition period of two years given to fix the financial year to
31st March ending.

14.  Company having net worth of Rs. 500 crores or more or turnover
of Rs 1000 crores or more or net profit of Rs 5 crores or more
during “any financial year” shall have to constitute CSR
committee and implement CSR policies.
CSR Committee:
 Mandatory to constitute CSR Committee of the board
 Constitution: At least 3 Directors, 1 director shall be an
independent director
As per MCA circular No. 21/ 2014 dated 18.06.2014 - “Any
financial year” implies “any of the three preceding financial
years”.

15. Net Worth =
Paid up capital + Reserves created out of profit +
Securities Premium Account
-
[Accumulated losses + deferred expenditures + miscellaneous
expenditures not written off]
Above figures shall not include reserve created out of revaluation of
assets, write back of depreciation and amalgamation

16. Role of CSR Committee:
 Formulate and recommend to the board , a CSR Policy and
activities to be undertaken (specified in Schedule VII and further
additions made by MCA Circular 21/ 2014 dated 18.06.2014)
 Recommend the expenditure to be incurred on such activities.
 Monitor the CSR Policy.
 The company spends at least 2% of the average net profits
made by the company in the preceding three financial years in
accordance with the policy.

17. Board Role and responsibility:
 Disclosure of CSR committee and contents of policy in report
 Board to ensure that that the CSR policy is complied; and
 In case of failure, Board to give reasons in the board’s report.
The huge buzz is whether there will be tax benefit for such
CSR spending ???

18.  Net Profit = Profit before tax (shall not include profit arising
form branches outside India)
 Any dividend received from other companies in India which
are covered under and complying with the provision of section
135 of the Act.
 2% CSR spending - computed as 2% of the average net profits
during every block of 3 years.
 Tax treatment of CSR spend will be in accordance with the IT
Act as may be notified by CBDT.

19.  Activities specified under schedule VII.
 Activities undertaken in pursuance of normal course of
business shall be excluded be excluded from CSR Policy.
 Reporting will be done on an annual basis commencing from
FY 2014-15.

20.  Every listed Company and Companies belonging to such
class of Companies as prescribed will have to mandatorily
get the secretarial audit done.
 By a Practicing Company Secretary;
 Secretarial Audit Report format - Form No.MR.3.
 Annex the same with Director’s Report.
 Qualifications, if any to be specifically explained in
Director’s Report by board.

21.  Other class of companies means:
 (a) every public company having a paid-up share capital of
50 crores rupees or more; or
 (b) every public company having a turnover of 250 crore
rupees or more.

22.  Central Govt. may by notification, constitute a National
Financial Reporting Authority to provide for matters
relating to Accounting and Auditing Standards.
 Make recommendation to CG on formulation and laying
down of accounting policies;
 Enforcement for the compliance of accounting and
auditing standards;
 Special Power have been vested with NFRA.
Power to investigate persons or body corporate for professional or
other misconduct by any member of ICAI

23.  One person Company
 Private Limited company
 Public Limited company

24.  Natural person who is an Indian citizen and resident in India can
incorporate a One Person Company
 A person may make an application in Form No. INC.1 to the Registrar
for the reservation of a name
 Application for registration shall be filed with the Registrar in Form
No.INC.2
Memorandum shall indicate the name of the nominee
Nomination in Form No INC.2 along with consent of nominee
obtained in Form No INC.3 shall be filed with the Registrar at the time
of incorporation
No minor shall become member or nominee of the One Person Company
or can hold share with beneficial interest

25. Nominee may, withdraw his consent by giving a notice in writing to
member and to Company
 The member of One person company shall nominate a nominee
within 15 days of the receipt of the notice of withdrawal
 Member shall send an intimation to the Company, along with the
written consent of nominee in Form No.INC.3.
 Company shall file with registrar within 30 days of receipt of
withdrawal notice :-
a notice of withdrawal of consent and
intimation of the name of nominee in Form No INC.4
the written consent of nominee in Form No.INC.3.

26.  Cessation of member of One Person Company and nominee
becomes member, then member shall nominate within 15 days
a nominee
 Company shall file with the Registrar within 30 days of change:-
Intimation of cessation and nomination in Form No
INC.4;
written consent of nominee in Form No.INC.3
Member of One Person Company intimate the company about:-
changing the name of the nominee and
nominate another person after obtaining prior consent in
Form No INC.3

27. Company may be formed for any lawful purpose by
 7 or more persons – Public Company
 2 or more persons – Private Company
by subscribing their names to memorandum
Memorandum and articles of association shall be signed by:-
Subscriber to the memorandum,
with at least one witness who shall attest and sign
 The memorandum of a company shall state
the name of the company
the State in which the registered office is to be situated
the objects for which the company is proposed to be
incorporated and any matter considered necessary in furtherance thereof

28. the liability of members of the company, whether limited or
unlimited
the share capital of the company
 A person may make an application in Form No. INC.1 to the
Registrar for the reservation of a name
 Registrar on the basis of documents furnished reserve the name
for a period of sixty days
 Memorandum of a company shall be in forms specified in Tables
A,B, C, D and E in Schedule I
 Articles of a company shall be in forms specified in Table F, G,
H, I and J of Schedule I

29. Company shall give notice to the Registrar of provisions of
entrenchment in Form No.INC.2 or Form No.INC.7, as the
case may be.
 For registration of company, an application shall be made
in Form no. INC.7 to the Registrar
Documents to be filed with application:-
 the memorandum and articles of the company
the declaration by professionals in Form No. INC.8.
the affidavit submitted by each of the subscribers
and by first directors in Form No.INC.9

30. the address for correspondence;
 Details of subscriber to the memorandum
 Details of first directors and his interest in other firms
or bodies corporate along with his consent in Form
No.DIR.12
Registrar on the basis of documents filed issue Certificate
of Incorporation in Form No.INC.11
 Registrar shall allot to the company a Corporate Identity
Number.

31.  Company shall not commence any business or exercise any
borrowing powers unless:
Declaration in Form No.INC.21 shall be filed by a
director at the time of commencement of business;
Contents of the form shall be verified by Professionals;
Company has filed with Registrar, verification of its
registered office in Form No.INC.22.

32.  Private Company convert itself into One Person Company by:-
 Passing Special Resolution
if paid up capital is less then 50 lakh and average annual turnover is
less then Rs. 2 crore
 Company should obtain No objection in writing from members and
creditors before passing resolution.
 One person company shall file Form No. MGT. 14. with ROC within 30
days of passing of Special Resolution.
 Company shall file an application in Form No.INC.6 for its conversion
into One Person Company

33. Documents to be attached with application:-
 Affidavit by directors that all members and creditors of
the company have given their consent for conversion
 the list of members and list of creditors
 latest Audited Balance Sheet and the Profit and Loss
Account
 No Objection letter of secured creditors.
If all the filed documents in order then registrar will issue
certificate to this effect.

34.  One Person Company convert itself into private company
within 6 months of the date on which its:-
Paid up share capital is increased beyond fifty lakh
rupees or
 last day of the relevant period during which its
average annual turnover exceeds two crore rupees
 One Person Company alter its memorandum and articles
by passing a resolution according to section 122 (3) of the
Act

35.  One Person Company shall within 60 days give a notice to
the Registrar:-
 In Form No.INC.5 informing that it ceased to be
One Person Company
 And it is required to convert itself into a private
company.
If all the filed documents in order then registrar will issue certificate
to this effect.

36. ISSUE OF SECURITIES
(Section 23)
Public Company Private Company
Public
Offer
Private
Placement
Right/
Bonus
Issue
Private
Placement
Right/
Bonus
Issue
Preferential
allotment
Preferential
allotment

37.  A public company may issue securities—
(a) to public through prospectus ("public offer“)
(b) through private placement
(c) through a rights issue or a bonus issue

38. Equity Shares
 Equity share capital" means all share capital which is not
preference share capital;
Preference Shares
 "Preference share capital" means that part of the issued share
capital of the company which carries or would carry a preferential
right with respect to—
(a) payment of dividend,
(b) repayment, in the case of a winding up or repayment of capital,
of the amount of the share capital paid-up.

39. Company can issue shares on preferential basis
 Approval of shareholders by passing of Special Resolution
 Issue of shares on preferential basis should comply with conditions
laid down in section 42 of the Act
 Price of shares issued by listed company shall not be determined
by the valuation report of a registered valuer.
 Price of shares issued by unlisted company shall be determined by
the valuation report of a registered valuer.

40. Preferential offer made by listed company in accordance with the:-
 provisions of the Act and
 regulations made by SEBI
Offer made by unlisted company in accordance with the:-
 provisions of the Act and
Rule13(2) of Companies (Share Capital and Debenture)
Rules, 2014.

41. Private placement offer letter shall be accompanied by an
application form
It shall sent to the person to whom the offer is made within 30
days of recording the names of persons.
 Company shall make private placement offer:
 By approval of shareholders, by way of a Special
Resolution,
such offer shall be made to not more than 200 persons in
the aggregate in a financial year,
Excluding the QIB and employees.

42. Company make offer to subscribe to securities through issue of
private placement offer letter in Form PAS-4
Letter of offer shall be sent within 30 days of recording of
names
the value of offer per person should be not less than 20
thousand rupees of face value of the securities.

43. Share application money received has to be kept in separate
bank account
 It can not utilized for any purpose other then allotment or
refund
 Share application money can not be received in cash.
 Company shall maintain a complete record of private
placement offers in Form PAS-5:

44. Company increase its subscribed capital by the issue of further
shares.
 Shares shall be offered to existing shareholders
 Offer shall be made by notice specifying:-
 No. of shares offered and
 limiting a time not less than 15 days and not exceeding
30 days from offer date
within which the offer, if not accepted, shall be deemed to
have been decline.
 Offer shall deemed to include a right to :-
 renounce the shares offered to him or any of them in
favour of any other person

45. Further Issue of Share Capital
 The provisions of section related to further issue of capital
will now be applicable to all types of Companies.
 No time limit has been prescribed, Company can anytime
increase its share capital by issue of further shares.
 A Provision is introduced for the offer of shares to employees
for ESOP

46.  Company may issue fully paid-up bonus shares, out of its
 free reserves,
 securities premium account or
Capital Redemption Reserve
subject to the conditions provided.
 Articles must authorize issue of bonus shares;
Approval of shareholders in general meeting;
Not defaulted in payment of interest or principal in respect of FD or
debt securities;
 Not defaulted in payment of statutory dues of the employees ,
such as PF, gratuity and bonus
No company which has once announced the decision of its Board
recommending a bonus issue, can subsequently withdraw the same.

47.  Company cannot issue shares at discount
 other than as sweat equity
 no provision has been provided for any approval under the
Companies Act

48. Company can issue shares at premium
 A sum equal to the premium received on shares shall be
transferred to “Securities Premium Account”
 Share Premium may be utilized for:-
 Issue of fully paid bonus shares.
 Writing off preliminary expenses.
 writing off the expenses of, or the commission paid or
discount allowed on, any issue of shares or debentures
 providing for the premium payable on the redemption
of Preference shares or Debentures.
 purchase of its own shares or other securities.

49. Company can increase its subscribed capital by way of
ESOP, offered to employees
Company require prior approval of shareholders by:-
Passing Special Resolution and
 complying other conditions as prescribed.
 The price of ESOP shall be arrived on the basis of the
report of the Registered Value.

50. Certificate is prima facie evidence of the title of the person
to shares.
 Share Certificate shall be issued in pursuance of :-
 Board Resolution and
 surrender letter of allotment to the company
Share Certificate shall be in Form No. SH.1
Share Certificate specify the:-
the name of person;
 the shares to which it relates and
 amount paid-up thereon
Share certificate signed by:-
 two directors and
 Secretary or any person authorized by the Board

51.  Every company deliver the certificates of all securities:-
within 2 months from incorporation, in the case of
subscribers
 within 2 from the allotment, in the case of any
allotment
within 1 month from the date of receipt by the
company of the instrument of transfer or the intimation of
transmission
within 6 months from allotment of debenture:

52.  Company can register transfer of securities :-
 between persons whose names are entered in the records
of depository.
 Instrument of transfer shall be in Form No.SH.4
 Instrument of transfer with the date of its execution on it
shall be delivered to the company
 within sixty days from the date execution along with the
certificate or
 with the letter of allotment of securities.
Any contract or arrangement between two or more persons in respect
of transfer of securities shall be enforceable as a contract

53.  If Application made by the transferor alone of partly paid
shares:
 the company shall gives the notice of the application to the
transferee in Form No. SH.5 and
 the transferee has to give no objection to the transfer
within two weeks from the date of receipt of notice.
 The transfer of security made by legal representative of a
deceased person shall be valid.

54.  Any share transfer form executed before 1st April,
2014 and submitted to the company within the
prescribed period and the prescribed form as per the
Companies Act, 1956 needs to be accepted by the
companies. (In case of delay of submission the
company may get itself satisfied with the justification)
 If the company refuses such registration of transfer
the company shall give the reasons for refusal.

55. A private Company within 30 days of delivery of
instrument of transfer, send notice of refusal to
 the transferor and
 the transferee
giving reasons for such refusal
The transferee may appeal to the Tribunal against the
refusal :-
within 30 days from the date of receipt of the notice or
 within sixty days of delivery of instrument of transfer
to the company, in case no notice has been sent by the
company

56. If a public company within 30 days of delivery of instrument
of transfer, refuses to register the transfer :-
 the transferee within 60days of refusal or
 where no intimation has been received, within 90 days
of delivery of the instrument of transfer appeal to the
Tribunal
The Tribunal, either dismiss the appeal, or order:-
 transfer registered by the company within 10 days of
the receipt of order; or
 Rectification of the register and
 Also direct the company to pay damages, if any.

57. Thanks
Arun Gupta
managing counsel
factum legal , advocates & solicitors
Tel : (O) 011-41066313 (M) 9810275571
www.factumlegal.com;arun@factumlegal.com