CS Deepak Amrutkar
We all are aware about Tax Planning, Financial Planning. But considering change in Legal and regulatory environment and ongoing amendments in the Companies Act, 2013 and rules made thereunder from time to time, it is essential to undergo a Company Law Planning Process. The intentions of the Government seems to be fair and transparent manner of functioning of all Companies/Entities and stress on better Corporate Governance. The management of companies, its Directors and Professionals like Company Secretaries both in employment and Practice need to understand and implement Company Law Planning for better Compliance of all applicable Laws including Company Law.
Various Sections of the Companies Act, 2013 and rules made thereunder have undergone a sea change. Company Directors and Company Secretaries and Chartered Accountants need to understand Basic Provisions of the Companies Act, 2013 and future effects of changes in Law on the functioning of Companies which need to be considered while implementing Company Law Planning :
- Changes in Definitions : Important definitions like Associate Company, Holding Company, Subsidiary Company (Layers of Subsidiary Companies) , Interested Director, Independent Director, Related Party Transactions, Small Company, Turnover, Net Worth of Company, Key Managerial Personnel, have undergone major changes and need planning accordingly.
- Incorporation of Company : (a) Main Object of the company should be Only one restricted to One Business activity and Other Business activities prohibited. (b) Only three directors can be First Directors who need not be disqualified under Section 164 of the Companies Act, 2013. (c) Name application through RUN process which is faster and a condition that company need to be registered within 20 days of Name Approval (c) Self declaration by proposed director would suffice and need not be on stamp Paper and Notary.
- Issue of Securities : There is a Complete overhaul and substitution of Section 42. Restriction on use of funds unless Form PASS 3 Filed provides a deterrent to companies and strictly follow the Shares issue process in Letter and Spirit and Plan accordingly.
- Disclosure : Declaration in respect of Beneficial Interest in shares/Securities pursuant to Selection 89 of the Companies Act, 2013 casts a responsibility on shareholders to comply with the Law. Register of Significant Beneficial owners in a Company need to be maintained Under Section 90 of the Companies Act, 2013. Substantial Shares & Shareholding Planning need to be considered. It is proposed and under consideration for compulsory dematerialization of shares/securities of all unlisted Public Companies to opt for dematerializations of Securities on priority basis.
- Acceptance of Deposits: Section 73 of the Companies Act, 2013 need to be carefully understood and prohibited deposits need to be avoided. Deposits, Unsecured Loans from Directors, shareholders and their relatives and others are accepted within Limits. Proper Planning in this area is essential.
- Payment of Dividend : The Companies (Amendment Act, 2017 provides that in case of inadequate or absence of profits in any financial year, if any company propose to declare dividend out of accumulated profits earned by it in previous years and transferred to free reserves. Also Companies may declare Interim Dividend during financial year or at any time during the period from closure of financial year till holding of Annual General Meeting. Companies need to plan Dividend payment accordingly.
- Annual Filing : Companies need to file Audited Balance Sheet on or before 29th October and ROC Annual Return on or before 29th Payment of Government/ROC Fees Structure has changed substantially and Section 403 of the Companies Act plays a crucial role. Companies need to file on time and plan accordingly.
- Directors and their Appointment : Section 165 of the Companies Act, 2013 states that a person cannot hold directorships in more than 20 companies with some exclusions. Now it is proposed to file Form DIR 3 (KYC) by every Director having DIN Number including disqualified Directors on or before 31st August, 2018.
The purpose of this article is to create awareness about Company Law Planning, Every Listed Company, Unlisted Public Companies, Private Limited Companies, One Person Companies and Limited Liability Partnerships should consider above points and other amendments to be Company Law Compliant to avoid heavy Penalties.
Disclaimer : The Views expressed in this Article are based upon prevailing facts and changes in Law to date and views expressed are purely personal in nature. Readers are advised to seek expert opinion before arriving at a decision.