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.
2. COMPANIES EXEMPT FROM CASH FLOW STATEMENT U/S 2(40)
All the company except mentioned below required to prepare Cash Flow Statement:
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:
(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:
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:
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:
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:
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
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:
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:
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:
|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
|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:
10. WOMAN DIRECTOR U/S 149
Following companies have to mandatorily appoint at least one woman director:
11. INDEPENDENT DIRECTOR U/S 149
Following companies are required to appoint independent directors in their board of directors:
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:
13. VIGIL MECHANISM FOR DIRECTORS AND EMPLOYEES U/S 177
Establishment of vigil mechanism for directors & employees is mandatory for:
14. NOMINATION AND REMUNERATION COMMITTEE U/S 178
Constitution of Nomination & Remuneration Committee is mandatory for:
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:
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:
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.
17. LOANS AND INVESTMENTS BY A COMPANY U/S 186
No company shall directly or indirectly —
unless prior approval by means of a special resolution passed at a general meeting is obtained.
Further, this section is not applicable to:
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||
|Sale, purchase or supply of any goods or materials, directly or through an agent||
|Buying, selling or otherwise disposing off property of any kind, directly or through an agent||
|Leasing of property of any kind||
|Availing or rendering of any services, directly or through agent||
|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:
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