Ready Reckoner To Various Limits and Applicability Of Major Sections Under The Companies Act, 2013

Memorizing and recalling each and every limit and applicability of various sections in an act so enormous is not an easy task. Following is a ready reckoner – bringing together the applicability limits of all such provisions at one place – something which can be bookmarked and be easily referred on the go.

1. SMALL COMPANY U/S 2(85)
“Small company” means a company, other than a public company,—
  • Paid-up share capital of which does not exceed Rs. 50 lakh or such higher amount as may be prescribed which shall not be more than Rs. 10 crores; AND
  • Turnover of which as per profit and loss account of immediately preceding financial year does not exceed Rs. 2 crore or such higher amount as may be prescribed which shall not be more than Rs. 100 crore.
Provided that nothing in this clause shall apply to—
(A) A holding company or a subsidiary company;
(B) A company registered under section 8; or
(C) A company or body corporate governed by any special Act.

2. COMPANIES EXEMPT FROM CASH FLOW STATEMENT U/S 2(40)

All the company except mentioned below required to prepare Cash Flow Statement:

    • One Person Company;
    • Small Company; and
    • Dormant Company.

3. ACCEPTANCE OF DEPOSITS BY COMPANIES U/S 73

As a general rule, no company (except banks & NBFCs) can accept or renew deposits from the public. Following are the exceptions:

(A) In case of a Private Company:

A private company can – after passing resolution in general meeting – accepts deposits from its members if it does not exceed 100% of the company’s paid-up share capital, free reserves and securities premium account. This limit does not apply to the following private companies:

        • which is a start-up for 10 years from the date of its incorporation;
        • which is not a subsidiary or associate company to any other company, and the borrowings of such company from any financial institutes, banks or body corporate is less than twice of the paid-up share capital, or Rs. 50 crore, whichever is less and the said company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits.

(B) In case of a Public Company:

Other Companies can – after passing a resolution in general meeting – accept or renew deposits from its members. It may be a secured or unsecured deposit that is repayable on demand or repayable upon notice for a period of 6 months to 36 months from the acceptance or renewal date.

However, for the purpose of meeting short term requirements of funds a company can accept or renew such deposit for repayment earlier than 6 months from the date of acceptance or renew subject to certain conditions which are as follows:

        • Such deposits should not exceed 10% of the company’s paid-up share capital, free reserves and securities premium account; AND
        • Such deposits should not be repayable before 3 months from the date of the deposits or their renewal.

4. CORPORATE SOCIAL RESPONSIBILITY (CSR) U/S 135

It applies to every company (including a foreign company), if it satisfies one or more of the following criterion during the immediately preceding financial year:

    • The net worth of the company is Rs. 500 crore or more;
    • The turnover of the company is Rs. 1,000 crore or more;
    • The net profit of the company is Rs. 5 crore or more.

It is further provided that the Board shall ensure that such company spends in every FY, at least 2% of the average net profits of the company made during the 3 immediately preceding FYs.

5. FILING OF FINANCIAL STATEMENTS U/S 137 USING XBRL TAXONOMY

Companies falling in the following categories will have to file their Financial Statements using the Extensible Business Reporting Language (XBRL) taxonomy:

    • All companies listed with any Stock Exchange(s) in India and their Indian subsidiaries; or
    • All companies having paid-up capital of Rs. 5 crore and above; or
    • All companies having turnover of Rs. 100 crore and above; or
    • All companies which were hitherto covered under the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2011.

However, companies in Banking, Insurance, Power Sector and Non-Banking Financial Companies are exempted from XBRL filing.

6. INTERNAL AUDIT U/S 138

Following class of companies shall be required to appoint internal auditors:

    • Every listed company;
    • Every unlisted public company having:

1. paid up share capital of Rs. 50 crore or more during the preceding financial year; or

2. turnover of Rs. 200 crore or more during the preceding financial year; or

3. outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 100 crore or more at any point of time during the preceding financial year; or

4. outstanding deposits of Rs. 25 crore or more at any point of time during the preceding financial year; and

    • Every private company having:

1. turnover of Rs. 200 crore or more during the preceding financial year; or

2. outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 100 crore or more at any point of time during the preceding financial year.

7. ROTATION OF AUDITORS U/S 139

Below mentioned companies shall not appoint or re-appoint an individual as auditor for more than 1 term of 5 consecutive years; and an audit firm as auditor for more than 2 terms of 5 consecutive years:

    • Listed companies;
    • Every unlisted public company having paid-up share capital of Rs. 10 crore or more;
    • Every Private company having paid-up share capital of Rs. 50 crore or more;
    • All companies having paid-up share capital below the limits mentioned in (i) and (ii) above, but having public borrowings from financial institutions, banks or public deposits of Rs. 50 crore or more.

Further provided that the concept of rotation of auditors shall not apply to One Person Companies or Small Companies.

8. CARO 2020 (REQUIRED U/S 143(11))

It shall apply to every company including a foreign company, EXCEPT:

    • A banking company;
    • An insurance company;
    • A company licensed to operate under section 8 of the Companies Act;
    • A One Person Company defined u/s 2(62) and a small company defined u/s 2(85); and
    • A private limited company,

1. Not being a subsidiary or holding company of a public company;

2. Having paid up capital and reserves & surplus not more than Rs. 1 crore as on the balance sheet date;

3. Does not have total borrowings exceeding Rs. 1 crore from any bank or financial institution at any point of time during the financial year; and

4. Does not have total revenue (including revenue from discontinuing operations) exceeding Rs. 10 crore during the financial year.

Further provided that the Order shall not apply to the auditor’s report on consolidated financial statements.

9. COST RECORDS AND COST AUDIT U/S 148

(A) Application of Cost Records

The specified class of companies*, including foreign companies, engaged in the production of goods or providing services, having turnover from all its products and services of Rs. 35 crore or more during the immediately preceding FY (MSMED are exempt).

*Specified class of companies:

REGULATED SECTORS

NON-REGULATED SECTORS

Telecommunication, Electricity, Petroleum & Gas, Drugs &Pharma, Fertilizers, and Sugar Turbo jets, Arms & Ammunitions, Steel, Rubber & allied products, Coffee, Tea, Cement etc.

(B) Applicability of Cost Audit

CONDITION

REGULATED SECTORS

NON-REGULATED SECTORS

Overall turnover (from all products & services) during immediately preceding FY is Rs. 50 crore or more; and Rs. 100 crore or more; and
Aggregate turnover of individual products or services for which cost records required to be maintained as per above is Rs. 25 crore or more. Rs. 35 crore or more.

However, the requirement of cost audit shall not apply to a company:

    • Whose revenue from exports, in foreign exchange, exceeds 75% of its total revenue; or
    • Which is operating from an SEZ.
    • which is engaged in generation of electricity for captive consumption through Captive Generating PIant.

10. WOMAN DIRECTOR U/S 149

Following companies have to mandatorily appoint at least one woman director:

    • Listed company;
    • Public company with paid up share capital of Rs. 100 crore or more;
    • Public company with turnover of Rs. 300 crore or more.

11. INDEPENDENT DIRECTOR U/S 149

Following companies are required to appoint independent directors in their board of directors:

    • Listed companies – Total number of independent directors should be greater than or equal to “one-third” of the total number of directors (i.e. fraction rounded-off as 1);
    • Public companies (except joint venture, wholly-owned subsidiary and dormant company) with:

1. Paid-up capital of Rs. 10 crore or more;

2. Turnover of Rs. 100 crore or more;

3. Outstanding loans, debentures and deposits, in aggregate, exceeding Rs. 50 crore –

The total number of independent directors should be greater than or equal to 2.

12. AUDIT COMMITTEE U/S 177

Constitution of Audit Committee is mandatory for:

    • Listed companies;
    • Every public company having paid-up share capital of Rs. 10 crore or more;
    • The public companies having turnover of Rs. 100 crore or more;
    • The public companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding Rs. 50 crore or more.

13. VIGIL MECHANISM FOR DIRECTORS AND EMPLOYEES U/S 177

Establishment of vigil mechanism for directors & employees is mandatory for:

    • Listed companies;
    • Companies which have accepted deposits from public;
    • Companies which have borrowed money from Banks & Public Financial Institutions more than Rs. 50 crore.

14. NOMINATION AND REMUNERATION COMMITTEE U/S 178

Constitution of Nomination & Remuneration Committee is mandatory for:

    • Listed companies;
    • Every public company having paid-up share capital of Rs. 10 croreor more;
    • The public companies having turnover of Rs. 100 crore or more;
    • The public companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding Rs. 50 crore or more.

15. STAKEHOLDERS’ RELATIONSHIP COMMITTEE U/S 178

Constitution of Stakeholders’ Relationship Committee is mandatory if the no. of shareholders, debenture-holders, deposit-holders or any other security holders is greater than 1000.

16. LOANS TO DIRECTORS AND OTHER SPECIFIED PERSONS U/S 185

This section applies to all companies, whether public or private. Later, following companies were exempted by MCA:

    • Private Companies, subject to fulfillment of following conditions:

1. No body corporate should have invested in the share capital of the company;

2. The borrowings of such company from bank and financial institutions or any other body corporates is less than:

    • Twice of its paid-up share capital; or
    • 50 crore,

whichever is less; and

1. No default has been made in the repayment of such borrowings which are subsisting at the time of making transaction under this section.

    • Government Companies, provided such company had attained the approval from the concerned ministry or department of Central Government and/or State Government prior to giving of any loan or guarantee or security.

17. LOANS AND INVESTMENTS BY A COMPANY U/S 186

No company shall directly or indirectly —

    • give any loan to any person/body corporate;
    • give any guarantee or provide security in connection with a loan to any other body corporate/person; and
    • acquire by way of subscription, purchase or otherwise, the securities of any other body corporate,

exceeding:

    • 60% of its paid-up share capital + free reserves + securities premium; or
    • 100% of its free reserves + securities premium

unless prior approval by means of a special resolution passed at a general meeting is obtained.

Further, this section is not applicable to:

    • Loan made or guarantee given or security provided by Banking or Insurance or Housing Finance Company in its ordinary course of business or a company engaged in the business of financing of companies or of providing infrastructural facilities;
    • Any investment

1. made by an investment company;

2. made in shares allotted in pursuance of clause (a) of sub-section (1) of section 62 or in shares allotted in pursuance of rights issues made by a body corporate;

3. made, in respect of investment or lending activities, by NBFC.

18. RELATED PARTY TRANSACTIONS U/S 188

SCOPE / COVERAGE / APPLICABILITY

PRESCRIBED LIMIT

Sale, purchase or supply of any goods or materials, directly or through an agent
  • 10% of turnover
Buying, selling or otherwise disposing off property of any kind, directly or through an agent
  • 10% of net worth
Leasing of property of any kind
  • 10% of turnover
Availing or rendering of any services, directly or through agent
  • 10% of turnover
Appointment at office or place of profit (OPP) in the company, its subsidiary or associate company Monthly remuneration up to Rs. 2.5 Lakh
Subscription of any securities or derivatives thereof, of the company 1% of net worth

The legal requirement under the section:

NATURE OF REQUIREMENT

IF ABOVE LIMIT EXCEEDED

IF ABOVE LIMIT NOT EXCEEDED

Consent of Board at BM with disclosure in the agenda of the BM and interested director not to be present Required Required
Resolution of members with disclosure in the explanatory statement and member, if a related party, not to vote on the resolution Required Not Required

19. APPOINTMENT OF KMP U/S 203

Every listed company and every other public company having a paid-up share capital of Rs. 10 crore or more shall have whole-time key managerial personnel, i.e. “MD/WTD/Manager/CEO” and “CS” and “CFO”.

Further, every private company which has a paid-up share capital of Rs. 10 crore or more shall have a whole-time CS.

20. SECRETARIAL AUDIT U/S 204

Constitution of Nomination & Remuneration Committee is mandatory for:

    • Listed companies;
    • Every public company having paid-up share capital of Rs. 50 crore or more;
    • The public companies having turnover of Rs. 250 crore or more;
    • Every company having outstanding loans or borrowings from banks or public financial institutions of Rs. 100 crore or more.

*******

DISCLAIMER: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point in time and prepared with due accuracy & reliability. Readers are requested to check and refer to the relevant provisions of the statute, latest judicial pronouncements, circulars, clarifications etc. before acting on the basis of the above write up. The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that the author is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

Author Bio

Qualification: CA in Practice
Company: Tarun Mehta & Co.
Location: Indore, Madhya Pradesh, India
Member Since: 08 May 2021 | Total Posts: 3
CA Abhinandan Jain is a CA in practice and is a partner in Tarun Mehta & Co. based in Indore (M.P.). He is currently extending his expertise and experience in Income Tax, Goods & Services Tax, Company Law and MCA Compliances, Banking and related fields. He can be reached out at abhinandan.j1 View Full Profile

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