Tag Archives: Companies Act 2013

“CRC” Name Reservation under Companies Act using “RUN” problems faced by Professionals

Dear Friends,

 

We are filing representation before the Ministry of Corporate Affairs on behalf of professional suffering from  Rejection of Name by CRC.

I am Fellow member of the Institute of Company Secretaries of India  and in Practice since 2010 . I myself had loss some big assignments and lost money due to rejections by the CRC .

We believe that the officer sittings in CRC are not corrupt, but  there is some corruption due to which people are earning Rs 30,000/- to 50,000/- for name approval which in normal case would have been rejected by the CRC.

We are going to file a representation to the PMO office to the Ministry of Finance and Ministry of Corporate Affairs informing them the issues we professionals  and entrepreneurs are facing to “Start Business”

We are requesting you to kindly share why your Company name or Company Incorporation was rejected so that we can compile it and file it with our representation.

Sharing some of Rejection stories:

 

Sr. No Name E Mail Reason for Rejection Reason for Rejection
1 Deepak Singhal sdeepak.cs@gmail.com The biggest Reason is NAME IS TOO GENERAL And for TM atleast they should mention under which class it is registered,  as earlier ROC gives clear remarks that this word is registered under this class
2 K. Sankara Subramanian <shankartheacs5@gmail.com> In our case, the promoter is holding a valid TM under class 14 and applied for incorporation with that TM Name. But the Form was marked for resubmission stating the name resembles with a TM under class 35. I think they are not even looking into the attachments or explanation letters.
3 sweety kapoor <sweetykapoor53@rediffmail.com> so but  my colleague  did not get the  first name approved through  run and rs.1000/- gone later second name which had  a simliar name got approved strange
4 Sourabh Singhal <cs.sourabh89@gmail.com> Most common Reason

Name is Too General

5 Durga Bansal <bansal.durga14@gmail.com> In my case, they rejected application 2 times for want of more documents and when third time we submitted the application with all the desired documents then they rejected saying the name is resembling with an existing company but the name given was totally different.
6 Manoj Jain <jain.csmanoj@gmail.com> my concern is why ROC cancel the SRN of INC for the change of name and ask for re-application through RUN and again rejected the application on the same grounds which was accepted earlier at the time of filing INC-1. they should migrate all the approves SRN applied through INC-1.what about the Companies who got the approval from Stock Exchanges and shareholders on the basis of earlier approval In that case it seen name was approved through INC-1 but  rejected in RUN
7 Harshit Shah <cs.harshitshah@yahoo.com> Name applied: _____ Capital Advisors Private Limited (Purely advisory activity does not need SEBI approval)

In-principle approval of concerned regulator is not provided as proposed name includes the word such as Insurance, Bank, Stock Exchange, Venture Capital, Asset Management, Nidhi, or Mutual Fund.
Proposed name   indicated   finance/credit/NBFC etc   activity but declaration according to rule 8(2)(b)(XIII) read with rule 8(2)(b)(III) of Companies Incorporation rules 2014 is not attached.

Name is resembling /closely resembling Companies/LLP

8 Manisha Menon <advmanisha28@gmail.com> Dear All,

I have till now tried four times to get one simple name for our Company. Everytime I am getting complaint that the name has been trademarked or the name remotely resembles to some other Company’s name. Again we have put for name approval. We are facing more difficulty because “RUN” does not have resubmission option. It only gets rejected and our Client’s loose money just like that. Its a very bad idea that MCA has brought. Its a loss of money for the clients. We do not mind paying stamp duty but name approval form should have resubmission option.

Regards,
Manisha
ACS 33083

9 Gyaneshwar Sahai <gyaneshwar.sahai@gmail.com> Name is resembling /closely resembling Companies/LLP
10 Aarti Bhasin <aartibhasin0203@gmail.com> I faced the reason that the name is too generic (which was not the case as the same was available when I checked under “name availability” on MCA services). I find it totally unjustifiable.
11 Taruna Kalra <taruna.cs@gmail.com> 1. they are not checking attachments properly. in hurry, they sent form in re-submission, without checking that attachments are already there
12 Mittal Shah <consultmittal@gmail.com> We have filed name approval application under RUN on MCA portal SRN G75638643 on 3 February 2018 for “LIFESTYLE CLUB AND LESIURE PRIVATE LIMITED” which is rejected by CRC on 6 February 2018 on the basis that  vide – Name is resembling /closely resembling Companies/LLP. The rejection letter stated that Proposed name is closely resemble with existing/reserved Company(s)/LLP(s) ‘LIFESTYLE CLUBOTELS PRIVATE LIMITED’ , ‘LIFESTYLE LEISURES PRIVATE LIMITED’ and many others. Hence, it is not considerable as per the provisions of Sec 4(2) of Cos Act-2013 r.w. ,Companies (INC) Rules, 2014.

Therefore, we again filed another application for name on 6 February 2018 itself as the client eagerly wants to form a company vide SRN G75901363 after checking availability of the desired name on the portal. Accordingly we applied for a modified new name “RC LIFESTYLE CLUB AND LEISURE PRIVATE LIMITED” which was also rejected again after waiting for two days on the similar grounds. Proposed name is nearly resembling with the names of the existing/reserved company/LLP ” RC LEISURE PRIVATE LIMITED”. Hence, not considerable as per the provisions of section 4(2) of the Companies Act -2013.   Proposed name with  “RC” is a TM under Class 36,  Hence not considerable in view of provisions of rule 8(2) (a) (ii) of Companies (Inc.) Rules, 2014.    hence the form is rejected.

We have also raised ticket for service complaint on MCA portal asking for possible solution as the client is in urgency to form a company and start a deal, the government on the public communication as well as on MCA portal saying that now incorporation of a company is “zero fee”, and “starting a business much easier” but we did not find any solution from the compliant that we raised also, two names were rejected causing delay of almost 5 days and still we are back in the same position. Government should either provide some window to check name from all angles by the customer only else provide few name options while applying so alternative names can be approved at least and business can be started without LOSING TIME AND MONEY. MCA tickets only give caveated answers, there is no solution provided.

We need alternative solution on name approval as we do not see any similarity in this class of proposed business. If both these names are not available we wish to continue with “LIFESTYLE LIVING CONCEPTS PRIVATE LIMITED” , we have LLP reserved with the same name.

this is a draft email summarizing our complaints with CRC.

13 DEEPAK SADHU <csdeepakmails@gmail.com> Hi All

It has become a scary assignment to take up incorporation…..I will not be sure if approval of the name will be sought or not….

Please help….I am ready for volunteering to the Ministry and ICS

14 Alpi Nehra alpinehracs@gmail.com Name is resembling /closely resembling Companies/LLP.
15 Akshat Garg cs.akshatgarg@gmail.com> Name Applied : AYUSHI PROGOLD PRIVATE LIMITED                                            Reason for Rejection Present name of the company includes/indicates “Finance/Investment/Stock Broking etc”  which is allowed , subject to in principal approval from the concerned regulatory authority is furnished, for the proposed name change.
16 Pratik Dhodia <cspratik.d@gmail.com> We also filed Name Application through RUN, Got rejected twice, Reason being “approval of Regulatory Body Required” Though the Main Object of the Proposed Company was Carrying on Financial Advisory & Consultancy Business.
17 Anu Pasrija <anupasrija@gmail.com> Hi

I am not understanding the basic idea of bringing this RUN feature into picture . It is not doing any ease of business .So much exercise needs to be done while applying for the name which is actually very time consuming  Over that CRC is taking almost 2-3 days for approval  rather rejection I must say which is making us speechless before the Clients . We cannot quote exact fees to the client  because we  dont know how many attempts it would take for name approval .

Incorporation has really become a tough assignment to take up

18 CS Praveen Pandey cspraveenpandey@gmail.com Proposed Name – AIMS MAX GARDENIA HOMES PRIVATE LIMITEDProposed names  with  prefix “AIMS” is  a  TM under Class  36 or many more   Rule 8(2) (a) (ii) of Companies (Inc.) Rules, 2014 Hence, not considerable as per the provisions of section 4(2) of the Companies Act -2013. – in Our application name is  AIMS MAX GARDENIA
19 FCS Mahesh Grandhi <mahesh.gpa@gmail.com> We filed for the proposed name with the prefix which includes capital word and like i.e., capitalman and its going to be take up only infrastructure objects and we filed three times and they are asking to submit declaration of Nbfc/Rbi /Sebi which is under rule 8 of INC rules. But Promoters are not convincing to give declaration as required by mca as their proposed company is not a capital trading company

there shall be some stringent rule for capital trading companies …. mere having prefix of the word capitalman, how can anyone give declaration .

20 Harshit Shah <cs.harshitshah@yahoo.com> Name applied was: BHT Commodities Private Limited.

Reason for rejection:
Proposed name is nearly resembling to the existing/reserved  company’s name/LLP’s name BRIO FORCE FITNESS PRIVATE LIMITED and many others. Hence, proposed name is not considerable as per the provisions of section 4(2)of Companies Act, 2013. Proposed name includes word” BHT  ” is existing trademark under Application Number:  1547712 Class / Classes:  35  and many others. <<The trademark is expired>> Thus, proposed name is not considerable as per Rule 8(2)(a)(ii)of Companies(Incorporation)rule, 2014.The proposed name with word COMMODITIES and objects  are too wide & diverse accordingly, indicates that the company carry on finance/investment related activities but declaration according to rule 8(2)(b)(XIII)&(iii) of Companies Incorporation rules 2014 is not attached.Hence, rejected.

21 Mayank Arora cs@mayankarora.co.in The Biggest reason we are getting is of TRADEMARK, in case name doesnt fall in the same class than also they raise objection.

In one case MNC wanted to Form a IT Company in India with the same name but CRC did not allow and raised an Objection that Name is too general, PFA Rejection letter

22 Sandip Jejani Dear Concern

1. One of my client is having four Companies starting with the name “Sahyog”

a. Sahyog Kuries Pvt. Ltd.
b. Sahyog Megachits Pvt. Ltd.
c. Sahyog Realcon Ltd.
d. Sahyog Township Pvt. Ltd.

These Companies are almost 20 years old (Directors and Shareholders common in all) but while applying for the name of new Company the form has got rejected on the ground that it is a trade mark of some other Companies.

The name required is:

a. Sahyog Finance Pvt. Ltd.
b. Sahyog Loans Pvt. Ltd.

2. Second Client is having two Companies starting with the name “Anisha” (15 to 20 years old with common Directors and Shareholders)

a. Anisha Interno Pvt. Ltd.
b. Anisha Appliances Pvt. Ltd.

The name required is:

a. Anisha Industries Pvt. Ltd.
b. Anisha Foods Pvt. Ltd.

Please look into the matter and suggest.

23 More Legal Services <onuscg@gmail.com> Name includes a registered trademark/application to trademark registration
24 Sanajy Dholkia sanjayrd65@gmail.com The name was made available under old INC 1 and while Filing Form 24 with ROC
they are asking for RUN SRN Applied under RUN on 6th Feb No answer and still showing

Plz share your story

Thanking you

Kashif Ali

FCS, LL.B, M.Com

Kashif Ali & Associates

(Company Secretaries)

C-100, New Friends Colony, Sarai Juelna, Opp Escort Heart Institute, New Delhi-25
Ph:  9718483209, mail: cs.kashifali@gmail.com

 

 

 

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CONDONATION OF DELAY SCHEME 2018”

Ministry of Corporate Affairs in September 2017 had disqualified approx 3,09,614/- directors who were associated with the companies who had failed to file their annual statements and Annul Return with Registrar of Companies for lass three Financial Years. You can search for defaulting director on http://www.mcadefaulter.com

To give these defaulting Companies and their directors a final chance to remove themselves from defaulter list, Ministry of Corporate Affairs had on 29th December 2017 vide its circular No 16/2017 issued a scheme named “Condonation of Delay Scheme 2018”

Kashif Ali, a fellow member of the Institute of Company Secretaries of India and owner of ‘Kashif Ali &  Associates, Company  Secretaries’ Delhi, has analyzed this scheme and bring it to you for easy understanding.

 

MCA CONDONATION OF DELAY SCHEME 2018”

 

Scheme is available:                        From: 1st January 2018 to 31st March 2018

 

Scheme is available for:                 Companies whose status is “Active” on MCA Portal

 

Scheme is not available for:          Companies who are struck off  or whose ame has been removed from the ROC u/s 285(5)

 

 Process to avail this scheme:

  1. DIN of all disqualified directors shall be re activated- automatically during the validity of the scheme

  1. Defaulting company shall file “overdue documents” with statutory fees and additional fees.

  1. After successful filing of all overdue documents , the company shall seek condonation of delay in E form E-CODS

  • *The Filing fees for E-form CODS shall be Rs. 30,000/-
  • ** For companies whose name have been struk off u/s 248 and had filed application for revival u/s 252 of the Act , the DIN of those directors shall only be re-activated after NCLT Order

 

What if Company do not avail this scheme?

  1. The DIN of defaulting directors shall be deactivated .
  2. ROC shall take all necessary actions under the companies Act 2013 against companies who had not availed this scheme

 

What are overdue documents or which E-form can be filed under this scheme?

Under this scheme only the following e forms can be filed.

Srt. No. Name of the E-form Purpose
1. Form 20B / MGT-7 Form for filing

Annual return by a

company having share capital

2. Form 21A/MGT-7

 

– Particulars of Annual return

for the company not having share capital

3. Form 23AC, 23ACA, 23AC-XBRL, 23ACA-XBRL, AOC-4, AOC-4(CFS), AOC (XBRL) and AOC-4(non-XBRL) – Forms for filing Balance Sheet/Financial Statement and profit and loss account.

 

4. Form 66 –

 

Form for submission of Compliance Certificate with the Registrar
5. Form 23B/ADT-1.

 

 

– Form for intimation for Appointment of Auditors

CLICK HERE TO READ FULL TEXT OF THIS CIRCULAR

 

Thanks & Regards:

For KASHIF ALI & ASSOCIATES

Company Secretaries

Kashif Ali

FCS, LL.B, M.Com

C-100, Ground Floor, Sarai Julena

New Friends Colony, New Delhi-25

Call us : +91 9718483209

Mail us : cs.alikashif@gmail.com

 

The Companies Amendmnet Act 2015

Dear,

Companies Amendment Act, 2015 has been notified in Official gazette on 26th May 2015. Highlights of the amendments are as follow:

  1. Requirement of minimum paid up capital to be done away with.
  1. Having a Common Seal is not mandatory.
  1. Section 11 pertaining to Commencement of Business Certificate to be ommited.
  1. Penalty for violation of provision regarding acceptance/invitation of deposits stipulated by inserting section 76A. Minimum penalty is 1 crore maximum is Rs. 10 Crore.
  1. Dividend not to be given unless previous years losses/depreciation not provided in previous Year are set off from current year profits.
  1. Concept of omnibus approval for RPT by audit committee inserted in section 177.
  1. Exemption given under rules of section 185 regarding giving loans to WOS and subsidiary to be incorporated in section itself.
  1. Only ordinary resolution will be required for related party transaction.
  1. No shareholder approval reqd. in case of Related party Transaction between holding and WOS if accounts of subsidiary company are consolidated.

Section wise amendment are as follow:

 

Sr. No. Section Number Amendments
1. In section 2 (i) in clause (68), the words “of one lakh rupees or such higher paid-up share capital” shall be omitted;
2. (ii) in clause (71), in sub-clause (b), the words “of five lakh rupees or such higher paid-up capital,” shall be omitted.
3. In section 9 the words “and a common seal” shall be omitted
4. Section 11 shall be omitted.
5. In section 12 in sub-section (3), for clause (b), the following clause shall be substituted, namely:-

“(b) have its name engraved in legible characters on its seal, if any;”.

6. In section 22 (i) in sub-section (2),-

(a) for the words “under its common seal”, the words “under its common seal, if any,” shall be substituted;

(b) the following proviso shall be inserted, namely:-

“Provided that in case a company does not have a common seal, the authorisation under this sub-section shall be made by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary.”;

(ii) in sub-section (3), the words ”and have the effect as if it were made under its common seal” shall be omitted

7. In section 46 in sub-section (1), for the words “issued under the common seal of the company”, the words “issued under the common seal, if any, of the company or signed by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary” shall be substituted
8. Insertion of new section 76A

Punishment for contra-

vention of section 73 or section 76.

“76A. Where a company accepts or invites or allows or causes any other person to accept or invite on its behalf any deposit in contravention of the manner or the conditions prescribed under section 73 or section 76 or rules made thereunder or if a company fails to repay the deposit or part thereof or any interest due thereon within the time specified under section 73 or section 76 or rules made thereunder or such further time as may be allowed by the Tribunal under section 73,-

(a) the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees; and

(b) every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both:

Provided that if it is proved that the officer of the company who is in default, has contravened such provisions knowingly or wilfully with the intention to deceive the company or its shareholders or depositors or creditors or tax authorities, he shall be liable for action under section 447.”.

9. In section 117 (i) in clause (g), the word ”and’’ occuring at the end shall be omitted; (ii) after clause (g), the following proviso shall be inserted, namely:-

“Provided that no person shall be entitled under section 399 to inspect or obtain copies of such resolutions; and”.

10. In section 123 , in sub-section (1), after the third proviso, the following proviso shall be inserted, namely:-

“Provided also that no company shall declare dividend unless carried over previous losses and depreciation not provided in previous year or years are set off against profit of the company for the current year.”.

11. In section 124 in sub-section (6),-

(i) for the words, brackets and figure “unpaid or unclaimed dividend has been transferred under sub-section (5) shall also be”, the words “dividend has not been paid or claimed for seven consecutive years or more shall be” shall be substituted;

(ii) after the proviso, the following Explanation shall be inserted, namely:-

Explanation.For the removal of doubts, it is hereby clarified that in case any dividend is paid or claimed for any year during the said period of seven consecutive years, the share shall not be transferred to Investor Education and Protection Fund.”.

12. In section 134 in sub-section (3), after clause (c), the following clause shall be inserted, namely:-

“(ca) details in respect of frauds reported by auditors under sub-section (12) of section 143 other than those which are reportable to the Central Government;”.

13. In section 143 for sub-section (12), the following sub-section shall be substituted, namely:-

“(12) Notwithstanding anything contained in this section, if an auditor of a company in the course of the performance of his duties as auditor, has reason to believe that an offence of fraud   involving such amount or amounts as may be prescribed, is being or has been committed in the company by its officers or employees, the auditor shall report the matter to the Central Government within such time and in such manner as may be prescribed:

Provided that in case of a fraud involving lesser than the specified amount, the auditor shall report the matter to the audit committee constituted under section 177 or to the Board in other cases within such time and in such manner as may be prescribed:

Provided further that the companies, whose auditors have reported frauds under this sub-section to the audit committee or the Board but not reported to the Central Government, shall disclose the details about such frauds in the Board’s report in such manner as may be prescribed.”.

14. In section 177 in clause (iv), the following proviso shall be inserted, namely:-

“Provided that the Audit Committee may make omnibus approval for related party transactions proposed to be entered into by the company subject to such conditions as may be prescribed;”.

15. In section 185 in sub-section (1), in the proviso, after clause

(b), the following clauses and proviso shall be inserted, namely:-

“(c) any loan made by a holding company to its wholly owned subsidiary company or any guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company; or

(d) any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company:

Provided that the loans made under clauses (c) and (d) are utilised by the subsidiary company for its principal business activities.”.

16. In section 188 (a) in sub-section (1),-

(i) for the words “special resolution”, at both the places where they occur, the word “resolution” shall be substituted;

(ii) after the third proviso, the following proviso shall be inserted, namely:- “Provided also that the requirement of passing the resolution under

first proviso shall not be applicable for transactions entered into between

a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.”;

(b) in sub-section (3), for the words “special resolution”, the word “resolution” shall be substituted.

17. In section 212 in sub-section (6), for the words, brackets and figures “the offences covered under sub-sections (5) and (6) of section 7, section 34, section 36, sub-section (1) of section 38, sub-section (5) of section 46, sub-section (7) of section 56, sub-section (10) of section 66, sub-section (5) of section 140, sub-section (4) of section 206, section 213, section 229, sub-section (1) of section 251, sub-section (3) of section 339 and section 448 which attract the punishment for fraud provided in section 447″, the words and figures “offence covered under section 447” shall be substituted.
18. In section 223 in sub-section (4), in clause (a), for the words “by the seal”, the words “by the seal, if any,” shall be substituted.
19. In section 248 in sub-section (1),-

(i) in clause (a), after the word ‘incorporation’, the word ‘or’ shall be inserted; (ii) clause (b) shall be omitted.

20. In section 419 in sub-section (4), the words “or winding up” shall be omitted.
21. In section 435 (i) for the words “trial of offences under this Act”, the words “trial of offences punishable under this Act with imprisonment of two years or more” shall be substituted;

(ii) the following proviso shall be inserted, namely:-

“Provided that all other offences shall be tried, as the case may be, by a Metropolitan Magistrate or a Judicial Magistrate of the First Class having jurisdiction to try any offence under this Act or under any previous company law.”.

22. In section 436 in clause (a), for the words “all offences under this Act”, the words, brackets and figures “all offences specified under sub-section (1) of section 435″ shall be substituted.
23. In section 462 for sub-section (2), the following sub-sections shall be substituted, namely:-

”(2) A copy of every notification proposed to be issued under sub-section (1), shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days, and if, both Houses agree in disapproving the issue of notification or both Houses agree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by both the Houses.

(3) In reckoning any such period of thirty days as is referred to in sub-section (2), no account shall be taken of any period during which the House referred to in sub- section (2) is prorogued or adjourned for more than four consecutive days.

(4) The copies of every notification issued under this section shall, as soon as may be after it has been issued, be laid before each House of Parliament.”.

You can download the said notification from the following link:

http://mca.gov.in/Ministry/pdf/AmendmentAct_2015.pdf

SECRETARIAL AUDIT UNDER COMPANIES ACT 2013

Secretarial Audit

SECRETARIAL AUDIT

‘Secretarial Audit’ has been introduced by recently enacted Companies Act, 2013.  It is a process to check compliance made by the Company under Corporate Law & other laws, rules, regulations, procedures etc. It is a mechanism to monitor compliance with the requirements of stated laws and processes. Periodical examination of work is necessary to point out errors & mistakes and to make a robust compliance mechanism system in an organization.

Every company needs to comply hundreds of Laws, rules, regulations. These laws are complex and non-compliances would attract major risk to company. Periodically inspecting the records of company gives exact information whether, and if so, to what extent Company has complied with the laws applicable to the Company.

Secretarial Audit gives comfort to the regulators, stakeholders and management that company has disciplined approach to evaluate and improve effectiveness of risk management, control, and governance processes

SECRETARIAL AUDITOR

Only a member of the Institute of Company Secretaries of India holding certificate of practice (company secretary in practice) can conduct Secretarial Audit and furnish the Secretarial Audit Report to the Company.

WHICH COMPANIES ARE REQUIRED TO APPOINT SECRETARIAL AUDITOR?

As per section 204 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, following companies are required to obtain ‘Secretarial Audit Report’ form independent practicing company secretary;

  1. Every listed company
  1. Every public company having a paid-up share capital of Fifty Crore rupees or more; or
  1.  Every public company having a turnover of Two Hundred Fifty Crore rupees or more.
  • “Turnover means the aggregate value of the realisation of amount made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year. [Section 2(91)]
  • Secretarial Audit is also mandatory to a private company which is a subsidiary of a public company, and which falls under the prescribed class of companies

APPOINTMENT OF SECRETARIAL AUDITOR

As per Rule 8 of the Companies (Meetings of Board and its powers) Rules, 2014, Secretarial Auditor is required to be appointed by means of resolution passed at a duly convened Board meeting and resolution for appointment shall be filed with Registrar of Companies within 30 days in E-form MGT-14.

It is advisable for Secretarial Auditor to get the letter of engagement from the company. Secretarial Auditor should formally accept the letter of engagement. Further, as a prudent corporate practice, it is advisable that change in the Secretarial Auditor during the year is reported to the members in the Board’s Report.

SCOPE OF SECRETARIAL AUDIT

Secretarial auditor has to examine, check and report compliances made by the company under the following laws and rules made there-under during the period under review;

  1. The Companies Act, 2013 (the Act) and the rules made there-under;
  1. The Securities Contracts (Regulation) Act, 1956 (‘SCRA’) and the rules made there-under;
  1. The Depositories Act, 1996 and the Regulations and Bye-laws framed there-under;
  1. Foreign Exchange Management Act, 1999 and the rules and regulations made there-under to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings;
  2. The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’):-
  • The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
  • The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992;
  • The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;
  • The Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999;
  • The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008;
  • The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client;
  • The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; and
  • The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998;
  1. Secretarial Standards issued by The Institute of Company Secretaries of India.

  1.  The Listing Agreements entered into by the Company with  Stock Exchange(s), if applicable;

  1. Other laws as may be applicable specifically to the company

Recently Institute of Company Secretaries of India (ICSI) has issued FAQs on Secretarial Audit and has clarified “Other Laws”, the text of the same is reproduced as below:

 The Council of the ICSI at its 226th meeting held on November 21, 2014 decided on the Scope of Secretarial Audit as regards “point (vi) …….( other laws as may be applicable specifically to the company)”, which is placed as under:

  • Reporting on compliance of ‘Other laws as may be applicable specifically to the company shall include all the laws which are applicable to specific industry for example; for Banks- all laws applicable to Banking Industry; for insurance company-all laws applicable to insurance industry; likewise for a company in petroleum sector- all laws applicable to petroleum industry; similarly for companies in pharmaceutical sector, cement industry etc.
  • Examining and reporting whether the adequate systems and processes are in place to monitor and ensure compliance with general laws like labour laws, competition law, environmental laws etc.

   Format of Secretarial Audit Report also requires reporting on whether-

  • The Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Independent Directors.
  • The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.
  • Adequate notice is given to all directors to schedule the Board Meetings, agenda and detailed notes on agenda were sent at least seven days in advance, and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.
  • Majority decision is carried through while the dissenting members’ views are captured and recorded as part of the minutes.
  • There are adequate systems and processes in the company commensurate with the size and operations of the company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.

Moreover Secretarial Auditor is required to report and provide details of specific events and actions occurred during the reporting period having major bearing on the affairs of the Company pursuant to above referred laws/ rules & regulations. Few events were also given as example in the format of audit report.

However in case of financial laws like tax laws and Customs Act etc., Secretarial Auditor may rely on the Reports given by Statutory Auditors or other designated professional.

 POWERS TO SECRETARIAL AUDITOR

The Companies Act, 2013 has empowered secretarial auditor and has given him all rights and powers as given to statutory auditor. As per section 204 of the Companies Act, 2013, the secretarial auditor company shall be entitled to require from the officers of the company such information and explanation as he may consider necessary for the performance of his duties as auditor.

 PUNISHMENT FOR DEFAULT

Sub-Section 4 of Section 204 of the Companies Act, 2013, provides that if a company or any officer of the company or the company secretary in practice, contravenes the provisions of section 204 of the Act, the company, every officer of the company or the company secretary in practice, who is in default, shall be punishable with fine which shall not be less than 1 lakh rupees but which may extend to 5 lakh rupees.

Moreover as per sub section (15) of section 143 of the Companies Act, 2013, if a secretarial auditor, has reason to believe that an offence involving fraud is being or has been committed against the company by officers or employees of the company, he shall immediately report the matter to the Central Government within such time and in such manner as may be prescribed. Failure to do so shall attract a fine which shall not be less than 1 lakh rupees but which may extend to 25 lakh rupees.

PROFESSIONAL RESPONSIBILITY AND PENALTY FOR INCORRECT AUDIT REPORT

Section 448 of Companies Act, 2013 deals with penalty for false statements. the section provides that if in any return, report, certificate, financial statement, prospectus, statement or other document required by, or for the purposes of any of the provisions of this Act or the rules made thereunder, any person makes a statement,

(a) which is false in any material particulars, knowing it to be false; or

(b) which omits any material fact, knowing it to be material,

     he shall be liable under section 447.

Section 447 deals with punishment for fraud which provides that any person who is found to be guilty of fraud, shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud. In case, the fraud in question involves public interest, the term of imprisonment shall not be less than three years.

In terms of Section 448, a Company Secretary in Practice is liable to attract penal provision if, he makes statement in the Secretarial Audit Report which is false is any material particulars, knowing it be false or omits any material fact knowing it to be material.

Besides, the Company Secretary in Practice shall be liable for professional or other misconduct mentioned in First or Second Schedule or in both the Schedules to the Company Secretaries Act, 1980 and where held guilty, be liable to the following actions:

             (i)  where found guilty of professional or other misconduct mentioned in the First Schedule:

a. reprimand;

b. removal of name from the register of members upto a period of three months

c. fine which may extend to one lakh rupees.

  1. where found guilty of professional or other misconduct mentioned in the Second Schedule:

a. reprimand;

b. removal of name from the register of members permanently or such period as may be thought fit by the Disciplinary Committee;

c. fine which may extend to five lakh rupees.

Thanks & Regards

KASHIF ALI & ASSOCIATES
268, Business India Complex,
Uday Park, New Delhi-110049
Call us : +91 9718483209

Note: Kindly note that the entire contents of this article have been developed on the basis of relevant statutory provisions and as per the information existing at the time of preparation i.e.  Act, notification, clarifications & circular issued by MCA. Though we have made upmost efforts to provide authentic information, however we do not undertake any liability in any way whatsoever, to any person in respect of anything arising by reliance upon the content of this article.  It shall not be used as a legal opinion and not to be used for rendering any professional advice.

AMENDMENT IN COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY) RULES, 2014

The Central government vide its notification dated 12th September 2014, has make amendments in sub rule (6) of rule 4 of Companies (Corporate Social Responsibility Policy) Rules, 2014 . The amended sub rule (6) of rule 4 of these rules is as follow, amendments are in red colour;

 

Rule 4 : CSR Activities

(6) Companies may build CSR activities of their own personnel as well as those of their Implementing agencies through Institutions with established track record of at least three financial years but such expenditures including expenditure on administrative overhead shall not exceed five percent of total CSR expenditures of the Company in one financial year

You can download the notification from the following link;
http://mca.gov.in/Ministry/pdf/NCA_Rules_12092014.pdf

Thanks & Regards:

KASHIF ALI & ASSOCIATES
Company Secretaries

268, Business India Complex,
Uday Park, New Delhi-110049
Call us: +91 9718483209
Mail:  cs.kashifali@gmail.com