Major areas which requires attention of Professionals- Companies Act, 2013

CA Santosh Mishra

After Companies Act, 2013 drastic changes arise in day to day function of Companies even Private Limited Companies. Here I will try to light on those changes.

1) RESOLUTION:

As per section 117 every Company shall file resolution and agreement with ROC in MGT-14 within 30 days from the date passing of such resolution. We can divide in four category of such resolution which to be file with ROC:-

i)   Resolution which is prescribed under section 117(3)

ii) Resolution which is prescribed under section 179(3)

iii)  Resolution which is prescribed under Companies Rule 8(5) of (Meeting of Board and its Power) Rule,2014

iv)  Others provisions

 i)  Resolution which is prescribed under section 117(3):-

a.     Special Resolution;

b.     Resolutions which have been agreed to by all the members of a company, but which, if not so agreed to, would not have been effective for their purpose unless they had been passed as special resolutions;

c.      Resolution which is related to appointment and re-appointment of MD;

d.      Resolutions or agreements which have been agreed to by any class of members but which, if not so agreed to, would not have been effective for their purpose unless they had been passed by a specified majority or otherwise in some particular manner; and all resolutions or agreements which effectively bind such class of members though not agreed to by all those members;

e.      Resolution which is related to power of Board of Director under clause (a) and (b) of section 180(1);

f.       Resolution which is related to winding-up of a company;

ii) Resolution which is fall under section 179(3):-

a)     Resolution which is related to call of unpaid money;

b)     Resolution which is related to buy back of shares;

c)      Resolution which is related to issue of securities;

d)     Resolution which is related to borrow of money;

e)     Resolution which is related to investment of fund;

f)       Resolution which is related to give loan or guarantee;

g)     Resolution which is related to approval of financial statement;

h)     Resolution which is related to diversification of business;

i)        Resolution which is related to Amalgamation or Merger or Re-Construction;

j)        Resolution which is related to take over or acquire substantial part of business;

iii)  Resolution which is fall under Rule(8) :-

a)     Resolution which is related to donation of political party;

b)     Resolution which is related to appointment(s) and removal(s) of KMP

c)      Resolution which is related to appointment(s) and removal(s) of one level below of KMP;

d)     Resolution which is related to appointment(s) of secretarial auditor and internal auditor;

e)     Resolution which is related to accept noting of interest of director;

f)       Resolution which is related to investment above of 5% of Paid up share capital or Free reserve;

g)     Resolution which is related to accept Public deposit ;

h)     Resolution which is related to change term and conditions of Public deposit;

i)        Resolution which is related to approval of quarterly, half yearly and annual financial statements;

2)    Loan from Directors ,Relatives, shareholders and Company:-

After 1st April, 2014 many companies is facing lot of problem regarding generation of funds because all way of traditional source for generation of fund has been dead after Companies Act,2013 i.e. loan from Friends and Relatives, loan from share holders and loan from same management company.

A Private Limited company can generate fund only through following source:-

a)     Loan from Bank and Financial institutions;

b)    Loan from director: any amount received from a person who, at the time of the receipt of the amount, was a director of the company The director from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others;

c)     Loan From Company: But shall not same management company because as per section 185 no company can directly or “indirectly” advance loan to its “directors” or to “other persons in whom directors are interested”.

• Meaning of ‘indirect’: The word ‘indirect’ used means that the company does not give a loan to director through the agency of one or more intermediaries. The word ‘indirect’ cannot be read as converting what is not a loan into a loan.
• Meaning of ‘other persons’: in case of Private Limited Company of which  such director is a director or member;

[Note – Relative of Director are not covered under this]

Conclusion: A Company can not give loan to such company where common director

d)    Issue securities: A private company may issue securities only through following way:-

• Issue Right shares
• Issue fresh issue through Private placement

e)     Advance from Debtors: Company may accept advance from debtors but such advance should not exceed from 365 days otherwise these types of advances treat as a deposit and all the provisions of section 73 and 74 shall apply accordingly.

3)    Maximum cap on loan and investment:

As per section 186 Board of Directors of a company can approve transactions if the aggregate of all such existing and proposed transactions does not exceed higher of the following two limits:

a. 60% of its paid-up share capital, free reserves and securities premium account; or

b. 100% of its free reserves and securities premium account.

→ Section 186 covers 3 types of specified transactions entered into by a company directly or indirectly:

a. Loans to any person or other body corporate;

b. Guarantee or security given in connection with a loan to any other body corporate or person; and

c. Acquisition by way of subscription, purchase or otherwise, the securities of any other body corporate.

→Section 186 is applicable from 1.4.2014.  All transactions entered into up to 31.3.2014 will be covered by corresponding Section 372A of Companies Act 1956 which is not in force now.

→ Section 185 is applicable from 12.9.2013.  All transactions entered into up to 12.9.2013 will be covered by corresponding Section 295 of Companies Act 1956 which is not in force now.

(The author is a practicing CA at Patna base Firm. He can be reached at santosh.mishra.92123015@facebook.com, Ph.-9570558536)