GOVERNANCE, RISK &
COMPLIANCES
APPOINTMENT OF WOMAN DIRECTOR
Appointment of at least one Woman Director on Board of the
Company.
Rule 3 Companies (Appointment and Qualification of Directors)
Rules, 2014.
provide the class of company to appoint one woman director:
Every listed company and
Every Public company with the paid up capital of Rs. 100 cr or
more, or with turnover of Rs. 300 cr or more.
within 1 year from the notification of provision.
Company which has incorporated under the Act , and which fall
under above mentioned limit shall comply with the requirement
within period of 6 months form the date of incorporation.
APPOINTMENT OF INDEPENDENT DIRECTOR
Total no. of Directors shall be independent director in case of listedcompany.
Rule 4 of Companies (Appointment and Qualification of Directors)Rules, 2014
The following class or classes of companies shall have at least twodirectors as independent directors:
(i) the Public Companies having paid up share capital of ten crorerupees or more; or
(ii) the Public Companies having turnover of one hundred crorerupees or more; or
(iii) the Public Companies which have, in aggregate, outstandingloans, debentures and deposits, exceeding fifty crore rupees:
RESIDENT DIRECTOR
Every company shall have at least one Director who
stayed in India for a period of not less than 182 days in
previous calendar year.
NOMINEE DIRECTOR
The Act provides that subject to Articles, Board can
appoint a Director nominated by any institution in
pursuance of any law or agreement or government in
case of government company.
Lenders nominee will be covered in this section.
ALTERNATE DIRECTOR
Articles of association should authorise the appointment of alternate
director or has been authorised in general meeting.
The Act provides that an Alternate Director can only be appointed in
case a Director leaves India for a period of not less than 3 months.
A person cannot act as alternate director to more then one director
in company.
Provision of automatic reappointment as director shall be applicable
to original director and no on alternate director.
ADDITIONAL DIRECTOR
Subject to power given in its articles of association, the board may
appoint additional director in the company.
Additional Director will hold office till next annual general meeting or
the last date on which such meeting should have held in accordance
with law
A person, who fails to get appointed as a director in a general
meeting, cannot be appointed as an Additional Director.
MAXIMUM NO. OF DIRECTORS IN A COMPANY
Maximum limit of Directors in Public Company and Private Company
has been limited to 15.
The number can be increased beyond 15 by passing special
resolution, CG approval not required.
Independent directors will not be counted in the total number of
Directors, for calculation of retiring director by rotation.
NO. OF DIRECTORSHIPS FOR AN INDIVIDUAL
A person cannot become Director in more than 20.
The maximum number of Public Companies in which a person can
be appointed as a Director shall not exceed 10, Including
directorship in Private Companies that are either Holding or
Subsidiary Company of a Public Company.
All existing directors, if holding such office in more than specified
limits shall be under an obligation to comply with this limit within a
period of one year from commencement of act by resigning from
excess companies.
CONSENT TO ACT AS DIRECTOR
Rule 8 Companies (Appointment and Qualification of Directors)
Rules, 2014
Every person who has been appointed to hold the office of a director
shall on or before the appointment furnish to the company a consent
in writing to act as such in Form DIR-2.
A company shall within 30 days of appointment file such consent
with ROC in From DIR-12
RESIGNATION OF DIRECTOR
Director may resign form the board and Company will have to
intimate the ROC within 30 days form receipt of notice of
resignation in DIR-12 and also post the information on its website ,
if any. (Rule 15 of Companies Appointment and Qualification of
Directors)
Directors are required to mandatorily forward their resignations,
along with detailed reason for resignation, to the Registrar within 30
days of resignation in Form DIR-11. (Rule 16 of Companies
Appointment and Qualification of Directors)
Resignation is effective from the date of receiving by company or
the date, if any specified by director in the notice, whichever is later.
REMOVAL OF A DIRECTOR
Special notice is required to be given by the members to
be considered by board for the removal of director :-
Provided such special notice shall be given by such no.
of members:
holding not less that 1% of total voting power or
holding share on which aggregate sum not exceeding
Rs. 5 Lakh has been paid up.
VACATION OF OFFICE OF DIRECTOR ( S
167)
A director shall vacate his office if :-
he incurs any of the disqualifications specified in section 164;
he absents himself from all the meetings of the Board of Directors
held during a period of 12 months with or without seeking leave of
absence of the Board;
he acts in contravention of the provisions of section 184 relating to
entering into contracts or arrangements in which he is directly or
indirectly interested;
he fails to disclose his interest in any contract or arrangement in
which he is directly or indirectly interested, in contravention of the
provisions of section 184;
he becomes disqualified by an order of a court or the Tribunal;
VACATION OF OFFICE OF DIRECTOR
he is convicted by a court of any offence, whether involving
moral turpitude or otherwise and sentenced in respect thereof
to imprisonment for not less than six months:
he is removed in pursuance of the provisions of this Act;
he, having been appointed a director by virtue of his holding
any office or other employment in the holding, subsidiary or
associate company, ceases to hold such office or other
employment in that company.
NOMINATION OF A PERSON FOR THE OFFICE OF
DIRECTOR IN GENERAL MEETING SECTION 160
A person who is not a retiring director in terms of section 152 shall,
be eligible for appointment to the office of a director .
has, not less than 14 days before the meeting, left at the registered
office of the company, a notice in writing under his hand signifying his
candidature as a director or, as the case may be, the intention of
such member to propose him as a candidate for that office.
The company has to follow the process as defined u/s 160 for
regularization of additional director on the board in general meeting
of company.
NOMINATION OF A PERSON FOR THE OFFICE OF
DIRECTOR IN GENERAL MEETING
The amount of 1 Lakh or such higher sum as may be prescribed, to
be deposited along with notice of nomination of any person for the
office of director on his own or by any member.
The amount so deposited will be refunded in case the person so
proposed gets more than 25% of the total votes cast, irrespective of
whether he is appointed or not.
NOMINATION OF A PERSON FOR THE OFFICE
OF DIRECTOR
Rule 13 of Companies Appointment and Qualification of Directors)
The company shall, not less than 7 days before the general meeting,inform its members of the candidature of a person or the intention ofa member to propose such person as a candidate for that office:
1. by serving individual notices,; and
2. by placing notice of such candidature or intention on the website ofthe company.
Provided that individual notice shall not be required if companypublish such candidature of a person, not less than 7 days before themeeting ,in one vernacular newspaper and one in Englishnewspaper circulating in the district where registered office of thecompany situated.
DUTIES OF DIRECTORS
A director of a company shall act in accordance with the articles.
A director shall act in good faith in order to promote the objects of thecompany as a whole, and in the best interests of the company andfor the protection of environment.
A director exercise his duties with due and reasonable care, skill anddiligence and independent judgment.
A director shall not involve in a situation in which he may have adirect or indirect interest that conflicts, with the interest of thecompany.
DUTIES OF DIRECTORS (CONT…)
A director of a company shall act in accordance with the articles.
A director shall act in good faith in order to promote the objects of the
company as a whole, and in the best interests of the company and
for the protection of environment.
A director exercise his duties with due and reasonable care, skill and
diligence and independent judgment.
A director shall not involve in a situation in which he may have a
direct or indirect interest that conflicts, with the interest of the
company.
Disclosure in Director reports,
Annual Return
DISCLOSURE IN BOARD REPORT
Financial Information Corporate information
Information about BOD and committees
Managerial Personnel
Disclosure in Board Report
DISCLOSURE IN BOARD REPORT
Financial Information
Particulars of Loan, guarantees or investments [section 186]
Contracts or agreements with related parties [section 188 (1)]
Explanation or comments by the Board on every qualification
reservation or adverse remark or disclaimer made by the auditor in
the report
The amount, if any, which proposes to carry to any reserve.
The amount if any, which it recommends should be paid as dividend.
material changes and commitments, if any, affecting the financial
position of the company
Financial summery/highlights
Directors Responsibility Statement.
DISCLOSURE IN BOARD REPORT
Details relating to Deposits.
Detailed reasons for revision of financial statement
and Board report.
DISCLOSURE IN BOARD REPORT-
CORPORATE INFORMATION
The state of company's’ affairs
Number of meetings of the Board.
Extract of annual return;
Explanation or comments by board on every qualification
resolution or adverse remarks or disclaimer made by the
company secretary in practice in his secretarial audit report.
Conservation of energy, technology observation, foreign
exchange earnings and outgo
a statement indicating development and implementation of a
risk management policy including element of risk
DISCLOSURE IN BOARD REPORT-
CORPORATE INFORMATION
The Details about policy developed and implemented on CSR
initiatives taken during the year and reason for not spending the
requisite amount.
A Report on the performance and financial position on subsidiaries,
associates and joint venture
Change in nature of business
Name of Companies which have become or ceased to be its
subsidiaries, associates and joint venture during the year and the
reason therefore.
Details of Significant and material orders passed by the regulators or
courts and tribunals impacting the going concern status and
companies operations in future.
DISCLOSURE IN BOARD REPORT-
CORPORATE INFORMATION
Details of establishment of vigil mechanism.
Disclosure of reasons for not accepting the recommendation
of audit committee for appointment of auditor.
INFORMATION ABOUT BOARD OF DIRECTORS
AND COMMITTEES
Every listed company and
every public company having PSC 100 Cr. or more or o/s loans orborrowings or debentures or deposits exceeding 200 Cr.
Have to disclose companies policy on director’s appointment andremuneration with criteria for determining qualification, positiveattributes, independence of directors etc.
Statement of declaration given by independent directors.
Every listed company and every public company having PSC of 25 Cr.or more calculated as at the end of the preceding F.Yr.
shall include a statement indicating the manner in which annualevaluation have been made by the Board of its own performanceand that of its committees and individual directors.
Details of directors or KMP who have appointed or have resignedduring the year.
INFORMATION ABOUT BOARD OF DIRECTORS
AND COMMITTEES
Composition of Audit Committee
Disclosure of non- acceptance of recommendation of auditcommittee.
Disclosure of policy formulated by nomination and remunerationcommittee relating to remuneration for the directors, KMP and otheremployees.
Composition of CSR Committee.
Disclosure of content of policy of CSR.
Disclosure of appointment of independent Director
INFORMATION ABOUT BOARD OF DIRECTORS
AND COMMITTEES
Disclosure of commission to be received by Managing or whole
time director of the company from its holding or subsidiary company
Disclosure about the facts of resignation of director.
The Directors Responsibility Statement shall also include the
statement that the directors had devised proper systems to ensure
compliance with all applicable laws and operating effectively.
DISCLOSURE IN BOARD REPORT -COMPANIES
(APPOINTMENT AND REMUNERATION OF MANAGERIAL
PERSONNEL) RULES, 2014 – RULE 5
Every listed company shall disclose in the Board’s report-
(i) the ratio of the remuneration of each director to the medianremuneration of the employees of the company for the financialyear;
(ii) the percentage increase in remuneration of each director, ChiefFinancial Officer, Chief Executive Officer, Company Secretary orManager, if any, in the financial year;
(iii) the percentage increase in the median remuneration of employeesin the financial year;
(iv) the number of permanent employees on the rolls of company;
DISCLOSURE IN BOARD REPORT -COMPANIES (APPOINTMENT AND
REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 – RULE 5
(v) the explanation on the relationship between average increase inremuneration and company performance.
(vi) comparison of the remuneration of the Key Managerial Personnelagainst the performance of the company;
(vii) variations in the market capitalisation of the company, priceearnings ratio as at the closing date of the current financial yearand previous financial year and percentage increase overdecrease in the market quotations of the shares of the company incomparison to the rate at which the company came out with thelast public offer in case of listed companies, and in case ofunlisted companies, the variations in the net worth of the companyas at the close of the current financial year and previous financialyear;
DISCLOSURE IN BOARD REPORT -COMPANIES (APPOINTMENT AND
REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 – RULE 5
(viii) average percentile increase already made in the salaries ofemployees other than the managerial personnel in the lastfinancial year and its comparison with the percentile increase inthe managerial remuneration and justification thereof and point outif there are any exceptional circumstances for increase in themanagerial remuneration;
(ix) comparison of the each remuneration of the Key ManagerialPersonnel against the performance of the company;
(x) the key parameters for any variable component of remunerationavailed by the directors;
(xi) the ratio of the remuneration of the highest paid director to that ofthe employees who are not directors but receive remuneration inexcess of the highest paid director during the year; and
(xii) affirmation that the remuneration is as per the remuneration policyof the company.
DISCLOSURE IN BOARD REPORT [RULE 5(2)]
Every Listed company in its board’s report shall include astatement showing the name of every employee of thecompany who-
(i) if employed throughout the financial year, was in receipt ofremuneration for that year which, in the aggregate, wasnot less than sixty lakh rupees;
(ii) if employed for a part of the financial year, was in receiptof remuneration for any part of that year, at a rate which,in the aggregate, was not less than five lakh rupees permonth;
DISCLOSURE IN BOARD REPORT [RULE
5(2)CONT..]
(iii) if employed throughout the financial year or part thereof, was inreceipt of remuneration in that year which, is in excess of thatdrawn by the :
managing director or
whole-time director or
manager and
holds by himself or along with his spouse and dependent children,not less than two percent of the equity shares of the company.
DISCLOSURE IN BOARD REPORT
[RULE 5(2)CONT..]
Provided that :
particulars of employees outside India, not being directors or theirrelatives, drawing more than Rs. 60 lakh per financial year or Rs. 5lakh p/m, decided by the Board, shall not be circulated to the membersin the Board’s report,
such particulars shall be filed with the ROC with the financial statementand Board Reports.
such particulars shall be made available to any shareholder on aspecific within three days from the date of receipt of such request fromshareholders.
in case of request received after the date of completion of AnnualGeneral Meeting, such particulars shall be made available to theshareholders within seven days from the date of request.
Meeting, Quorum, Additional
Returns
MEETING OF BOARD
AND ITS POWERS
NUMBER OF BOARD MEETINGS IN AN YEAR
At least 4 meetings should be held each year for Public and
Private Companies
For One Person Company, Small Company and Dormant
Company at least 1 meeting of the Board of Directors must be
held in each half of a calendar year
Gap between 2 meetings
Not more than 120 days shall elapse between two meetings in
case of Board Meeting of Public and Private Companies.
For One Person Company, Small Company and Dormant
Company, the gap between the two Meetings shall not be less
than 90 days.
NOTICE OF BOARD MEETING
A Meeting of Board shall be called by giving at least 7 days
notice to each Director, however shorter notice of a meeting
for urgent matters be called, if one Independent Director is
present in the Meeting, if any.
Even if Independent Director is not present then such
resolution has to be ratified by one of the Independent
Directors, if any.
RULE 3
MEETINGS OF BOARD THROUGH VIDEO
CONFERENCING OR OTHER AUDIO VISUAL MEANS
For convening and conducting Board meetings through video
conferencing or other audio visual means:
Every company shall make necessary arrangements to avoid
failure of any video or audio visual
Chairman and CS shall take due and reasonable care about the
integrity , ensure availability of proper equipments, ensure
quality of audio and video, record the proceeding, safekeeping
of tape recording , no unauthorized person attending or have
access to proceeding of the meeting
RULE 3
MEETINGS OF BOARD THROUGH VIDEO
CONFERENCING OR OTHER AUDIO VISUAL MEANS
Notice shall inform the availability of option
Director intends to avail the option shall send the confirmation
as sufficiently in advance before schedule date of meeting .
Director may given advance intimation for attending the
meetings through video conference for each calendar year.
MEETINGS OF BOARD THROUGH VIDEO
CONFERENCING OR OTHER AUDIO VISUAL MEANS
The following matters shall not be dealt with in any meeting
held through video conferencing or other audio visual
means:
to approve the annual financial statements; and
to approve the Board’s report.
approval of prospectus;
audit committee meeting for consideration of accounts;
approval of amalgamation, merger, Demerger, takeover,
acquisition
RESOLUTION BY CIRCULATION
Resolution by circulation shall be approved if it is consented by
majority of Directors.
Such circular resolution is to be sent to all the directors of
company at their usual Indian registered address by post,
courier, hand delivery, electronic means.
All resolutions passed by circulation shall have to be mandatorily
noted in the next Board Meeting and should be made part of the
Minutes
ADDITIONAL RETURNS
Return of changes in shareholding position of promoters and top
ten shareholders.-
Every listed company shall file with the Registrar, a return in Form
No.MGT.10 along with the fee with respect to changes relating to
either increase or decrease of two percent, or more in the
shareholding position of promoters and top ten shareholders of the
company in each case, either value or volume of the shares, within
fifteen days of such change.
As per MCA Circular 17/ 2014 dated 11.06.2014, till an e-form for
MGT 10 is available, the stakeholders are required to file form MGT
10 physically with all other attachments with Form GNL 2.
REPORT ON ANNUAL GENERAL MEETING.
The report in pursuance of the provisions of sub-section (1) of
section 121 shall be prepared by every listed company in the
following manner, namely:-
the report in addition to the minutes of the general meeting;
the report shall be signed and dated by the Chairman of the meeting
or in case of his inability to sign, by any two directors of the company,
one of whom shall be the Managing director, if there is one and
company secretary of the company
REPORT ON ANNUAL GENERAL MEETING.
the report shall contain the details in respect of the following,
namely:-
the day, date, hour and venue of the annual general meeting;
confirmation with respect to appointment of Chairman of the
meeting;
number of members attending the meeting;
confirmation of quorum;
REPORT ON ANNUAL GENERAL MEETING.
confirmation with respect to compliance of the Act and the Rules,
secretarial standards made there under with respect to calling,
convening and conducting the meeting;
business transacted at the meeting and result thereof;
particulars with respect to any adjournment, postponement of
meeting, change in venue; and
any other points relevant for inclusion in the report.
The copy of the report prepared in pursuance of sub-section (1) of
section 121 and sub-rule (1), shall be filed with the Registrar in Form
No. MGT.15 within thirty days of the conclusion of the annual general
meeting along with the fee.
RESOLUTION TO BE FILED WITH ROC
SECTION 117
A copy of every resolution or any agreement, in respect of matters
specified in sub-section (3) together with the explanatory
statement under section 102.
Every special resolutions;
any resolution of the Board of Directors of a company or
agreement executed by a company, relating to the
appointment, re-appointment or renewal of the appointment, or
variation of the terms of appointment, of a managing director;
RESOLUTION TO BE FILED WITH ROC
SECTION 117
resolutions requiring a company to be wound up voluntarily passed
in pursuance of section 304
resolutions passed in pursuance of sub-section (3) of section 179;
and
(h) any other resolution or agreement as may be prescribed and
placed in the public domain.
In Form No. MGT.14 along with the fee. Rule 24 Companies
(Management and Administration) Rules, 2014
RESOLUTION TO BE FILED WITH ROC
SECTION 117 PURSUANT TO SEC 179(3)
to make calls on shareholders in respect of money unpaid on their shares;
to authorise buy-back of securities under section 68;
to issue securities, including debentures, whether in or outside India;
to borrow monies;
to invest the funds of the company;
RESOLUTION TO BE FILED WITH ROC
SECTION 117
to grant loans or give guarantee or provide security in respect
of loans;
to approve financial statement and the Board’s report;
to diversify the business of the company;
to approve amalgamation, merger or reconstruction;
(j) to take over a company or acquire a controlling or
substantial stake in another company;
RULE 8 OF COMPANIES (MEETINGS OF
BOARD AND ITS POWERS) RULES, 2014 to make political contributions;
to appoint or remove key managerial personnel
to take note of appointment(s) or removal(s) of one level below theKey Management Personnel;
to appoint internal auditors and secretarial auditor
to take note of the disclosure of director’s interest andshareholding;
to buy, sell investments held by the company (other than tradeinvestments), constituting five percent or more of the paid upshare capital and free reserves of the investee company;
to invite or accept or renew public deposits and related matters;
to review or change the terms and conditions of public deposit;
to approve quarterly, half yearly and annual financial statements orfinancial results as the case may be.
Secretarial Standards
SECRETARIAL STANDARDS 118(10)“ UNIFORM WAY TO MAINTAIN PROCEEDINGS”
For the First time, Secretarial Standards has been introduced
and provided statutory recognition in the law.
“Every company shall observe Secretarial Standards with
respect General and Board Meetings specified by the Institute
of Company Secretaries of India constituted under section 3 of
the Company Secretaries Act, 1980 and approved by the
Central Government”.
Yet to be prescribed and notified.
DISCLOSURE IN ANNUAL RETURN
[SECTION 92 ]
Every company shall prepare an annual return in the prescribed formcontaining the particulars as they stood on the close of the financialyear regarding-
its registered office, principal business activities, particulars of itsholding, subsidiary and associate companies.
its shares, debentures and other securities and shareholdingpattern.
its indebtedness
its members and debenture holders along with changes thereinsince the close of the previous financial year;
its promoters, directors, key managerial personnel along withchanges therein since the close of the previous financial year;
meetings of members or a class thereof, Board and its variouscommittees along with attendance details;
remuneration of directors and key managerial personnel;
DISCLOSURE IN ANNUAL RETURN
[SECTION 92 ]
penalty or punishment imposed on the company, its directors or officers
and details of compounding of offences and appeals made against
such penalty or punishment;
matters relating to certification of compliances, disclosures as may be
prescribed;
details, as may be prescribed, in respect of shares held by or on behalf
of the Foreign Institutional Investors indicating their names, addresses,
countries of incorporation, registration and percentage of shareholding
held by them; and
such other matters as may be prescribed
and signed by a director and the Company Secretary, or where there is no
Company Secretary, by a Company Secretary in practice.
IN case of Small company and one person company, no
company secretary then annual return can be signed by another
director of company.
DISCLOSURE IN ANNUAL RETURN
[RULE 11 ] COMPANIES (MANAGEMENT AND
ADMINISTRATION) RULES, 2014 Every company shall prepare its annual return in Form No MGT 7.
the annual return, filed by a listed company or a company having paid-
up share capital of
Ten crore rupees or more or
turnover of Fifty crore rupees or more,
Shall be certified by a Company Secretary in practice.
The certificate shall be in Form No. MGT. 8 and specifying that the
annual return discloses the facts correctly and adequately and that the
company has complied with all the provisions of this Act.
Extract of annual return [Rule 12]
The extract of the annual return to be attached with the Board’s Report
shall be in Form No. MGT.9.
A copy of the annual return shall be filed with the Registrar .
MCA NOTIFICATION(GENERAL CIRCULAR NO. 22/ 2O14 , DATED 25.06.2014)
Form MGT 7 shall not apply to annual return in respect of
companies for the F.Y. ended on or before 1st April, 2014
and for annual return pertaining to earlier years.
These companies may file their annual return in form
applicable as per the Companies act, 1956.
Thanks
Arun Gupta
managing counsel
factum legal , advocates & solicitors
Tel : (O) 011-41066313 (M) 9810275571
www.factumlegal.com;
“All Great Changes are preceded by CHAOS”