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Companies Act 2013 - Some New Concepts: Part 1

Companies Act 2013 has ushered in lot of changes. Right from One Person Company to Secretarial Audits. Also special emphasis has been laid on Corporate Social Responsibilities and Corporate Governance in the Companies' Act 2013 In this presentation we will try and understand some of these changes. Our main objective is to understand what these changes are and what effect do they have on the working and the administration of a company.

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Companies Act 2013 - Some New Concepts: Part 1

  1. 1. BlueLotus Strategy Consulting © BlueLotus Strategy Consulting © Companies Act, 2013
  2. 2. BlueLotus Strategy Consulting © New Concepts introduced Key Managerial Personnel (KMP) Corporate Social Responsibility Dormant Company Fraud Secretarial Audit Subsidiary and Holding Company One Person Company Small Company Code of Independent Directors Related Party Secretarial Standards Special Court and Conciliation Panel
  3. 3. Like Private Limited Entity One director One shareholder Exempt from holding quarterly board meeting Exempt from holding General Meetings Cash Flow Statement is not mandatory in financial preparations BlueLotus Strategy Consulting © This helps the promoters where they are reluctant to introduce any other Director or shareholder Lesser no. of compliances Beneficial to Sole Proprietors who want to give shape as a Company to their existing business Introduction of One Person Company
  4. 4. During the Audit if any misconduct of management against depositors or members may be noted, the professional can give advise to the members or depositors in filing class action suits. Represent the case in front of Tribunal Key Managerial Personnel are also covered BlueLotus Strategy Consulting © A lawsuit that allows large number of people with common interest in a matter to sue or be sued as a group Reduction in cost and time involved in legal proceedings Auditors, experts and Consultants will be more cautious in their work and avoid any manipulations Increased scope for consultants due to increased litigations Introduction of Class Action Suits
  5. 5. Mandatory for certain class of companies to form CSR committee Evolve new disclosure requirements in board report- professional will undertake timely reporting of CSR activity Board to specify reasons for not spending the amount on CSR- professional will aiding board in making decision on CSR expenditure Need to disclose information regarding CSR expenditure in notes to accounts which leads to increased scope and role for statutory auditors BlueLotus Strategy Consulting © Every company with net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more or a net profit of Rs 5 crore or more during any financial year to constitute a CSR Committee of the Board Helps to achieve sustainable development of an organization Corporate Social Responsibility and Sustainability Reporting
  6. 6. Compulsory for certain class of companies Secretarial Audit report to be a part of board’s report All qualification remarks required to be addressed by the board in their board report Huge Penalty from INR 1lac to 5 lacs on company Every Practicing Company Secretary is also liable for penalty BlueLotus Strategy Consulting © Every Listed Company or a class of companies is required to hold secretarial audit Opportunity for Legal Consultants as the same will be carried on by Practicing Company Secretary Secretarial Audit
  7. 7. Assist organization in preparation of code of conduct for prohibition of insider trading Creating Chinese wall to protect the Unpublished Price Sensitive Information Reporting Opportunities for the Statutory Auditor for violation of Insider Trading Internal Auditor can monitor the transactions which leads to Insider Trading BlueLotus Strategy Consulting © Helpful in building effecting Environment which is free from any chances of fraud Human Resource people can assist the management in defining the code of conduct of employee to prohibit the insider trading Insider Trading
  8. 8. Defined under Section 2(13) which includes both books and papers (Sec 2(13)) and financial Statements (Sec 2(40)) Consolidation of accounts for companies having subsidiaries, associate and joint company Maintenance of accounts in electronic form is permitted Maintenance of Accounts at place other than Registered Office by intimating Registrar within seven days BlueLotus Strategy Consulting © Green Initiative introduced Opportunity to the Internal Auditor to filter the information which should be shown to the outsiders as accounts are available in electronic form Monitoring can be done by Statutory Auditors on real time basis as accounts are available in e form now Financial Statements
  9. 9. Legal Interpretation- law interpretation would open a different area for company secretary and other consultants Strategic Advisory- Practising Company Secretary report is obtained at the time of merger or acquistions Litigation Consultancy- due to huge penalty number of suits would be increased in an organisation Compliance Consultancy- assist independent directors in discharging their duties and functions BlueLotus Strategy Consulting © Being number of compliances are applicable, professional like consultants can propose a good governance audit to the company This audit help the organisation in standarisation of process which lead to better governance Tremendous opportunities
  10. 10. Another area for advisory and consultancy as provisions are more stringent now Transaction related to any kind of property are covered Related members can not vote on any resolution KMP and directors who are not interested but are a party to violation are also liable for penal provisions Huge Penalties for listed (Civil + Criminal) and other than listed companies (Civil) BlueLotus Strategy Consulting © Any person or his relative who can change the decision of board or Top Management is deemed to related. Definition/Category of Related Party has now been prescribed under companies Act Any transaction involving these parties deemed to be a Related Party Transaction. Related Party Transactions
  11. 11. To be undertaken by Company Secretary before appointing Independent Director Certain data bank shall be maintained for the person appointed as Independent Director by Central Government and Central Government can outsource this job to the outsiders BlueLotus Strategy Consulting © A due diligence exercise shall take place before appointing any Independent Directors Helps to ascertain the eligibility of independent director All the records of the company will be regularised before appointing an independent director Due diligence Scope
  12. 12. Opportunities for HR and related consultants though Job Profile Revision of the existing and newly appointed persons. New opportunities for consultants as they can assist the KMP in discharging their functions effectively to reduce the chances of litigations Define new KRA of the persons covered under in the definition of KMP’s BlueLotus Strategy Consulting © KMP in relation to the company means: the chief executive officer or the managing director or the manager; the company secretary; the whole-time director; the chief financial officer; and such other officer as may be prescribed Key Managerial Personnel (KMP)
  13. 13. BlueLotus Strategy Consulting © Risk Assessment can bring opportunities for Internal Auditors and Consultants- one can laid down the internal control procedures and other can verify the execution of the same Secretarial Standards are mandatory- Scope for secretarial practices Other Opportunities e-Compliance tool is really become critical for every organization as it offer the timely Updation and monitoring, reporting to top management of compliances on real time basis Directors and KMP are exposed to less risk by reviewing the compliances on regular basis
  14. 14. BlueLotus Strategy Consulting © www.bluelotusstrategy.com
  • goenka_s_k

    May. 20, 2015

Companies Act 2013 has ushered in lot of changes. Right from One Person Company to Secretarial Audits. Also special emphasis has been laid on Corporate Social Responsibilities and Corporate Governance in the Companies' Act 2013 In this presentation we will try and understand some of these changes. Our main objective is to understand what these changes are and what effect do they have on the working and the administration of a company.

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