Thursday, July 3, 2014

Important FAQs on Companies Act 2013: ICSI

The Institute of Company Secretaries of India released its Frequently Asked Questions (FAQs) on the Companies Act 2013 on 25th June 2014. The whole document can be downloaded here. Some important extracts of the document are reproduced as under.

Ques: Whether every company is required to alter its Articles of Association as per the new format under the Companies Act, 2013?

Ans: It is not necessary but suggested that whenever a company amends its articles, it should ensure that subsequent to the amendment, the AOA is as per the format specified under the Companies Act, 2013.

Since certain provisions of Companies Act, 2013 require specific clauses in the Articles to carry out operations of any organization, such as for issuance of bonus shares, it is advisable Articles should be altered in line with the new requirements as various provisions themselves require specific clauses to be incorporated in the Articles.

Ques: In terms of Section 73 of Companies Act, 2013 read with Rule 2(1)(c)(vii) of Companies (Terms and conditions of acceptance of Deposit) Rules, 2014, deposits do not include receipt of money from Director of the Company, but money received from a member is treated as deposit. In case deposit is taken from a person who is both a director and a member of the Company, will such receipt of money be treated as deposit or not?

Ans: Any amount received from a person who, at the time of the receipt of the amount, was a director of the company 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 is not considered as deposit.

Although, there is no specific provision which clarifies the question above but a deposit from a member who is also a director should be treated as deposit from a member.

However, contrary to ICSI’s opinion as above, in our personal opinion, if a Director is also a member of a company, any amount received from him should be treated as amount received from Director and not as a deposit from member as many a time, Directors have to hold qualification shares in the company, and this will defeat the exclusion given to money received from Directors to not be treated as Deposits. Therefore, MCA must clarify this.

Ques: By what time are companies required to switch over to the new format of Register of Members, Register of Directors and Key Managerial Personnel and their Shareholding?

Ans: As per Rule 3 of the Companies (Management & Administration) Rules, 2014 all the existing companies, registered under the Companies Act, 1956, shall prepare its registers of members as per the provisions of section 88 of the Companies Act, 2013 within a period of 6 months from the date of commencement of Companies (Management & Administration) Rules, 2014.

Further, after 1st April 2014 all the registers of Directors & KMP shall be prepared as per the provisions of the section 170 of the Companies Act, 2013. The register of directors & director‘s shareholding maintained before 1 April, 2014 as per the provisions of the Companies Act, 1956 need not be converted as per the provisions of the section 170 of Companies Act, 2013.

Ques: Please clarify whether vacation of office of director on account of not attending board meetings under Section 167(1)(b) has prospective or retrospective effect?

Ans: The said section is applicable from 1st April 2014, it means that a director absent himself from the entire board meeting held during a period of twelve months with or without obtaining leave of absence, his office as director shall vacate.

Ques: Are notices of disclosure of interest received from directors in terms of Section 184 of the Companies Act, 2013 required to be filed with the ROC? If yes, in what form?

Ans: In terms of section 117(3)(g) resolutions passed as per section 179(3) the Company is required to file e-form MGT-14 within 30 days of passing the resolution. 179(3) deals with the powers of the boards which may be exercised at board meetings only and as per section 179(3)(k) the rules may prescribe additional matters and rule 8 of Companies (Meeting of Board & its Power) Rules, 2014 requires that the disclosure of directors‘ interest and shareholding should be taken note of only by means of a resolution passed at board meeting. Therefore a company is required to file resolution for taking note of disclosure of director‘s interest and shareholding in Form MGT-14.

Ques: After filling form for Disclosure of interest of Directors, if any changes have been made, whether disclosure from Directors is required again?

Ans: As per section 184, whenever there is any change occurred in the disclosures already made then at first Board Meeting held after such change, shall be disclosed.