Law Solicitors and Advocates Saturday, 11th October, 2014 Weekly Corporate Updates MCA News & Circulars Version of forms DIR – 6, DPT – 4, MGT – 10, ADT – 3, 17 LLP, DIR – 12 was modified on 02nd October, 2014. • • Companies which do not have any of their Directors/Signatory details registered in the MCA 21 system and who are desirous of filing DIR – 3C Form are requested to get at least one authorised signatory registered by contacting the concerned Registrar of Companies. Instructions have already been issued to ROCs and RDs in this regard. Form DIN – 3 is replaced by Form DIR – 3C. In light of peak filing period, View Public Documents service would be disabled between 13th Oct, 2014 to 18th Oct, 2014 (9.00 A.M. to 9.00 P.M.) Other Updates CLSS scheme is ending on 15 October, 2014, professionals are requested to file e-form DIR 3C for updating Directors details of the Companies and thereafter file the overdue documents as part of CLSS Scheme. th Indiacorp Law 0120-4214372, 9650826950, 9810894275 [email protected], [email protected] www.indiacorplaw.com Articles………………………………….. lets better understand the Companies Act, 2013 together by A. K. Kuchhal APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL SECTION-196:- • • • • • • • APPOINTMENT OF MANAGING DIRECTOR, WHOLE TIME DIRECTOR OR MANAGER In a Company, a Managing Director and a Manager cannot be appointed or employed at the same time. Term of appointment: - MD, WTD or Manager- a term not exceeding 5 year at a time. (Provided no re-appointment shall be made earlier than one year before the expiry of his term. Requirement to be appointed as MD, WTD or Manager:1. Is not below the Age of 21 years or has attained the age of 70 years ( Appointment of a person who has attained the age of 70 years shall be made by passing Special resolution along with Explanatory statement for appointment with justification for appointment) 2. Is an undischarged insolvent/ has been adjudged as Insolvent at any time. 3. has at any time suspended payment to his creditors / made a composition with Creditors 4. Should not be convicted by a court of an offence for a period of more than six months. Terms and conditions of appointment and remuneration should be approved by BOD but subject to approval of Shareholders. Approval of Central Government is also required if such appointment is at variance to the conditions specified in Schedule V. Matters to be included in Board Meeting and General Meeting Notice:1. Terms and conditions of such appointment 2. Remuneration payable 3. Such other matters including interest of director or directors in such appointments Return (Form) should be filed within 60 days in Form MR - 1. If any appointment of MD, WTD or Manager is not approved by the Shareholders-Any act done by him before such approval shall not be deemed to be invalid. Indiacorp Law 0120-4214372, 9650826950, 9810894275 [email protected], [email protected] www.indiacorplaw.com SECTION 197:- OVERALL MAXIMUM MR AND MR- IN CASE OF ABSENCE OF INADEQUACY OF PROFITS. Total MR Payable by a Public Co. to its Directors, including MD, WTD and its Manager in respect of a F.Y shall not exceed 11% of NP of the Company for that FY computed as per Sec 198 except that the remuneration of the Director shall not be deducted from the gross profits; • For payment of Remuneration exceeding 11% - Authorization in General Meeting + CG approval (Subject to the provisions of Schedule V) • Without the approval of Shareholders in GM1. Remuneration payable to any one – MD/WTD or Manager shall not exceed 5% of NP 2. If more than one MD, WTD or manager- shall not exceed 10% of NP to all such Directors and Manager taken together. 3. Remuneration payable to Directors (other than MD/Manager/WTD) shall not exceed a) 1% of NP (if Company is having MD, WTD or manager) b) 3% of NP (in any other case). • The aforesaid percentage shall be exclusive of any sitting fee payable. • If in any Financial Year there is no profit or inadequate profit – Remuneration to be paid in accordance with Schedule V (and if not able to comply with such provisions then with previous approval of CG) • Remuneration payable shall be determined either by – a) Articles of the Company; or b) By resolution; or c) If Articles so requires, by SR (The aforesaid amount shall be inclusive of remuneration payable to him for the services rendered by him in any other capacity – other than the services rendered in professional capacity) • A Director may receive remuneration by way of fee for attending Meetings of the Board or Committee thereof – such sum as may be decided by the Board of Directors, which shall not exceed Rs. 1 Lac per meeting. • For Independent Directors and Women Directors, the sitting fee shall not be less than the sitting fee payable to other Directors. • Director or Manager may be paid remuneration either by way of monthly remuneration or at a specified % of NP of the Co • An Independent Director shall not be entitled to any Stock Option. But is entitled for receiving Sitting fee, reimbursement of expenses for attending the meeting ad Profit related Commission as approved by the Board. • Indiacorp Law 0120-4214372, 9650826950, 9810894275 [email protected], [email protected] www.indiacorplaw.com • If any Director draws or receives, directly or indirectly any sum in excess of limits specified or without CG approval – by way of remuneration – He shall refund such sums to the Company and until such sum is refund, hold it in trust for the Company. The Company shall not waive the recovery of any such unless permitted by CG. • In case where Schedule V is applicable on grounds of No profits or Inadequate Profits – Any increase in Remuneration must be in accordance with the conditions as provided in that schedule. And if such conditions are not complied – Approval of CG requires. • Any insurance taken by Company for indemnifying its KMP against any liability in respect of negligence, default, breach of duty or trust – Premium paid on such Insurance not be treated as remuneration. • But if such person proved to be guilty, then premium paid on such insurance shall be treated as part of remuneration. • Any Director, who is MD/WTD/Manager and is receiving any remuneration from the Company – is not disqualified from receiving any remuneration or commission from any holding or subsy Co. of such Co. subject to its disclosure in Boards report. SECTION 198:- CALCULATION OF PROFITS Additional requirements as per Co’s Act, 2013: For the purpose of computing remuneration of any Director or Managerial personnel the following things to be deducted – • • Expenses incurred in that year, Any excess of expenditure over the incomes of any previous years remain unsatisfied out of the income of those years. The balance income remaining after all such deductions should be the sum on which the said % should be calculated. SECTION 199:- • • • RECOVERY OF REMUNERATION IN CERTAIN CASES Where a Company is required to re-state its financial statements due to Fraud or noncompliance with any requirement of Act and the rules made thereunder – Company recover from past/ present MD, WTD, Manager or CEO Who during the period for which accounts are re-stated, received remuneration in excess of what would have been paid. SECTION 200:- CENTRAL GOVERNMENT OR COMPANY TO FIX LIMIT WITH REGARD TO REMUNERATION In case of inadequate or no profits, the Central Government may fix remuneration within the limits specified in the Act, at such amount or % of profits of the Company, as it may deem fit. Indiacorp Law 0120-4214372, 9650826950, 9810894275 [email protected], [email protected] www.indiacorplaw.com • • • • • • • • While fixing the remuneration, the Central Government shall consider the following – The Financial and operating performance of the Company during the 3 preceeding Financial Years; The relationship between remuneration and performance; The remuneration or commission drawn by the individual concerned in any other capacity; The remuneration or commission drawn by him from any other Company; Professional qualifications and experience of the individual concerned; The principle of proportionality of remuneration within the Company, ideally by a rating methodology which compares the remuneration of Directors to that of other Directors on the Board who receives remuneration and employees or executives of the Company; Whether remuneration policy for Directors differs from remuneration policy for other employees and if so, an explanation for the difference; The securities held by the Director, including options and details of the shares pledged as at the end of the preceding Financial Year. SECTION 201:- • • • • FORMS OF AND PROCEDURE IN RELATION TO CERTAIN APPLICATIONS Every Application will be made in Form No. MR.2 Before any application is made by a Co. to CG, there shall be issued by or on behalf of Co. general notice to Members, indicating nature of application proposed to be made. Such notice shall be published at least 1 in principal language newspaper circulating in the dist. Where the registered office is situated and at least 1 in English language newspaper circulating in that dist. Copies of the notices together with certificate by the Co. as to the due publication thereof shall be attached to the application. SECTION 202:MANAGER COMPENSATION FOR LOSS OF OFFICE OF MD OR WTD OR A company may make payment to a managing or whole-time director or manager, but not to any other director, by way of compensation for loss of office, or as consideration for retirement from office or in connection with such loss or retirement. The compensation payable, shall not exceed the remuneration which he would have earned if he had been in office for the remainder of his term or for three years, whichever is shorter, calculated on the basis of the average remuneration actually earned by him during a period of three years immediately preceding the date on which he ceased to hold Indiacorp Law 0120-4214372, 9650826950, 9810894275 [email protected], [email protected] www.indiacorplaw.com office, or where he held the office for a lesser period than three years, during such period. No such payment shall be made to the director in the event of the commencement of the winding up of the company, whether before or at any time within 12 months after, the date on which he ceased to hold office, if the assets of the company on the winding up, after deducting the expenses thereof, are not sufficient to repay to the shareholders the share capital, including the premiums, if any, contributed by them. SECTION 203:• APPOINTMENT OF KMP APPLICABILITY 1. Every listed company and every other public company having a paid-up share capital of Ten Crore rupees or more. 2. A Company other than a Company covered above which has a paid – up Share Capital of Rs. 5 crore or more shall have a whole time Company Secretary. • 1. 2. 3. KMP INCLUDES MD, or CEO, or Manager and in their absence a WTD Company Secretary; and CFO An individual shall not be appointed or re-appointed as the Chairperson of the Company, as well as MD/CEO of the Company at the same time. Except: a) The Articles of such a Company provides otherwise; or b) The Company does not carry multiple businesses. The above said provisions are not applicable on Companies engaged in multiple businesses and which has appointed one or more CEO for each such business. Other Provisions: Every whole time KMP of a company shall be appointed by means of a Board Resolution containing the terms and conditions of appointment including the remuneration. A whole Time KMP shall not hold office in more than one Company except in its Subsidiary Company at the same time. Nothing contained in this sub – section shall disentitle a KMP from being a Director of any Company with the permission of the Board. Indiacorp Law 0120-4214372, 9650826950, 9810894275 [email protected], [email protected] www.indiacorplaw.com Whole time KMP holding office in more than 1 Company at the same time on the commencement of this Act shall within a period of 6 months from such commencement choose 1 Company hold office of KMP. Company may appoint or employ a person as its MD, if he is the MD or Manager of one and of not more than 1 other Company and such appointment/employment is approved by the resolution passed at a meeting of the Board unanimously and of which meeting and of the resolution to be moved thereat specific notice has been given to all Directors then in India. In case the office of KMP is vacated – Resulting vacancy to be filled up by the Board within 6 months from the date of such vacancy. SECTION 204:• SECRETARIAL AUDIT FOR BIGGER COMPANIES APPLICABILITY 1. Every Listed Company 2. Every public company having a turnover of two hundred fifty crore rupees or more. 3. Every public company having a paid-up share capital of fifty crore rupees or more • COMPLIANCES TO BE DONE 1. Secretarial Audit Report in Form No. MR.3 2. To be annexed with Board Report • SIGNING 1. By a Company Secretary in practice • PENAL PROVISIONS 1. Company, every office in default 2. Fine not less than One Lakh and may extend to Five Lakh rupees. It shall be the duty of the Company Secretary to give all assistance and facilities to the PCS for auditing the secretarial and other records of the Company. The Board of Directors, in their report made in terms of sub – sec (3) of Sec 134 shall explain in full any qualification or observation or other remarks made by the PCS in his report. SECTION 205: • • FUNCTIONS OF COMPANY SECRETARY The functions of the Company Secretary shall include:To report to the Board about compliance with the provisions of this Act, the rules made thereunder and other laws applicable to the Company; To ensure that the Company complies with the applicable secretarial standards; Indiacorp Law 0120-4214372, 9650826950, 9810894275 [email protected], [email protected] www.indiacorplaw.com • • • • • • • • to provide to the directors of the company, collectively and individually, such guidance as they may require, with regard to their duties, responsibilities and powers; to facilitate the convening of meetings and attend Board, committee and general meetings and maintain the minutes of these meetings; to obtain approvals from the Board, general meeting, the government and such other authorities as required under the provisions of the Act; to represent before various regulators, and other authorities under the Act in connection with discharge of various duties under the Act; to assist the Board in the conduct of the affairs of the company; to assist and advise the Board in ensuring good corporate governance and in complying with the corporate governance requirements and best practices; and to discharge such other duties as have been specified under the Act or rules; and such other duties as may be assigned by the Board from time to time. Thanking You, Team Indiacorp 0120 - 421 4372, 9650826950, 9810894275 [email protected], [email protected] www.indiacorplaw.com Disclaimer: This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither India Corp Law nor any other member of the India Corp Law organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor. Indiacorp Law 0120-4214372, 9650826950, 9810894275 [email protected], [email protected] www.indiacorplaw.com