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Criteria based obligations & privileges under Companies Act, 2013

Determining obligations and privileges under the Companies Act, 2013 is a significant but tedious task and in this articles we have made an attempt to explain in easy manner Criteria based obligations and privileges under Companies Act, 2013.

CS S. K. Goyal

Determining obligations and privileges under the Companies Act, 2013 is  a significant but tedious task and in this articles we have made an attempt to explain in easy manner Criteria based obligations and privileges under Companies Act, 2013.

The applicability or non-applicability of many of provisions of the Companies Act, 2013 (the Act) to a company are criteria based. In other words these provisions are not applicable equally to all companies. Criteria may be in the form of – (i) Nature of Company, like Public or Private or Listed; (ii) Size of Paid-up Capital; (iii) Size of Turnover; (iv) Size of Net Worth; (v) No. of Shareholders; (vi) Size and source of borrowings, etc. These criteria are manifold in the Companies Act, 2013 compared to the Companies Act, 1956.

Criteria as mentioned above are subject to change from time to time and as and when there is any change therein, a company must check criteria based provisions. The illustrative list of situations when a Company must review applicability or non-applicability of criteria based provisions is as follows:

a. Amendment(s) in Law or criteria;

b. Preparation of annual audited financial statements;

c. Increase or reduction in paid-up capital;

d. Significant change in number of shareholders;

e. Change in nature of the Company;

f. Increase or decrease in borrowings, etc.

Although, the correct determination of applicability or non-applicability of provisions is significant in view of harsh prosecution provisions in the Act, it is a very tedious task too. Furthermore, this tedious task has to be repeated every time as when there is change in any of the criteria or the Rule as mentioned above. It becomes more complex or tedious in case of large number of group companies or when a company law practitioner handles a large number of companies.

In order to give a better understanding and also as an effort to make this process simpler with accuracy and saving in time, a TEMPLATE marked as Annexure 1 – Criteria based obligations and privileges under the Companies Act, 2013 is attached.

Download Annexure 1 – Criteria based obligations and privileges under the Companies Act, 2013

The attached TEMPLATE lists the criteria based obligations and privileges in separate sheets in the form of questions, with a mention of the criteria by way of comments. Furthermore, if we put or select the aforesaid information of a Company in the ‘Company Info. Sheet’ of the TEMPLATE, it determines automatically the applicability (obligations) or non-applicability (privileges) of criteria based provisions under the Act to the company in the form of ‘Yes’ or ‘No’.

[For further queries or clarifications, mails may be sent at – csskgoyal@gmail.com]

Disclaimer: This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. One should not act upon the information contained in this publication or the TEMPLATE  without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in the attached TEMPLATE.

Categories: Company Law

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