CLSP - I Unit - 1.pptx

UNIT – I
Introduction – Definition of Company –
Characteristics – Lifting of the Corporate Veil –
Kinds of Company.
Secretary – Definition – Types of Secretaries –
Company Secretary – meaning – functions U/s.205
– Duties – Role & Responsibilities – statutory
duties and liabilities – appointment – removal

According to Section (20)
“Company‖ means a company
incorporated under this Act or
under any previous company law”

Based on membership
Public Limited Company
 Not a Private limited Company.
 AOA has No Restriction Clause.
 No Minimum Paid up capital required.
 Min members is 7.
 Max members is Unlimited.
 Subsidiary of Limited Co is deemed to be Limited Co.
Private limited
 No Minimum Paid up capital required.
 Min members is 2.
 Max members is 200.
 Right to transfer is Restricted.
 Invitation to subscribe to securities of the company is
prohibited.

OPC
Section 2 (62) only one person as a member.
Only one person encourage entrepreneurship and
corporatization of business.
It is a Private limited.
Only Resident of India can Incorporate.
No Minor can become a member/nominee.
MOA indicates the Name of the other member
(Person Nominated) to be Member if in the case of
Death.
Can’t carryout NBFC.

Small Company
Paid up capital not more than 50 Lakhs.or such
higher amount should not exceed 10cr.
Turnover as per last P&L does’nt exceed 2cr, or
such higher amount as may be prescribed should’nt
exceed 100cr.
EXCEPTION:
Does’nt apply for Holding and Subsidiary Company, or Body
Corporate governed by Special Act.

Based on Liability.
 Limited by Share.
 Limited by Guarantee.
 Unlimited Co.

Based on Control
 Holding and Subsidiary Co.
 Associate Co.
Based on Access to Control
 Listed Co.
 Unlisted Co.
Other Co.
 Government Co.
 Foreign Co.
 Dormant Co.
 Statutory Co.(Co. which incorporated after passing “SPECIAL
ACT” in Parliament) (eg. LIC)
 Chartered Co. (companies are established under a charter or a
special order of a monarch or a king or a queen) (eg. EAST
INDIA CO.)

 Separate personality of a company is a statutory privilege, It should
be used to do legitimate business purpose only.
 If fraudulent and dis-honest use is made then individual can’t take
shelter behind the “Corporate personality”.
 The Court will break through the corporate shell and apply the
principle/doctrine of what is called as “lifting of or piercing the
corporate veil”.
 The corporate veil is lifted when in defence proceedings, such as for
the evasion of tax, an entity relies on its corporate personality as a
shield to cover its wrong doings.
 The shareholders cannot ask for the lifting of the veil for their
purposes.

Section 7(7) - “Furnishing False Information on
Incorporation”.
Section 251(1) - “Fraudulent Application for
removing name of the Company from the register of
the Companies”.
Section 339 - “Fraudulent Conduct of business
during Winding up”.

 Commission of Fraud or Improper Conduct:
In Jones v. Lipman, (1962) I. W.L.R. 832
 A agreed to sell certain land to B. Pending completion of
formalities of the said deal,
 A sold and transferred the land to a company which he had
incorporated with a nominal capital of £100 and of which he and
a clerk were the only shareholders and directors.
 This was done in order to escape a decree for specific
performance in a suit brought by B.
 The Court held that the company was the creature of A and a
mask to avoid recognition and that in the eyes of equity A must
complete the contract, since he had the full control of the limited
company in which the property was vested, and was in a
position to cause the contract in question to be fulfilled.

 Use of Corporate personality as agency
instrumentally:
In Re. R.G. Films Ltd. (1953) 1 All E.R. 615
 An American company produced a film in India
technically in the name of a British Company,
 90% of whose capital was held by the President of
the American company which financed the production
of the film.
 Board of Trade refused to register the film as a
British film which stated that English company
acted merely as the nominee of the American
corporation.

 Conducted against public policy:
 Person having control over enemy country:
In Connors Bros. v. Connors (1940) 4 All E.R. 179
 The principle was applied against the managing director who
made use of his position contrary to public policy.
 In this case the House of Lords determined the character of
the company as "enemy” company, Since the persons who
were de facto in control of its affairs, were residents of
Germany, which was at war with England at that time.
 The alien company was not allowed to proceed with the
action, as that would have meant giving money to the
enemy, which was considered as monstrous and against
“public policy”.

 The sole purpose was to evade the taxes:
Re. Sir Dinshaw Manakjee Petit, A.I.R. 1927 Bombay 371
 The facts of the case are that the assessee was a wealthy man enjoying
large dividend and interest income.
 He formed 4 private companies and agreed with each to hold a block
of investment as an agent for it.
 Income received was credited in the accounts of the company but the
company handed back the amount to him as a pretended loan.
 This way he divided his income in 4 parts in a bid to reduce his tax
liability.
 But it was held the company was formed by the assessee purely and
simply as a means of avoiding supertax and the company was
nothing more than the assessee himself.
 It did no business, but was created simply as a legal entity to
ostensibly receive the dividends and interests and to hand them over
to the assessee as pretended loans. The Court decided to disregard
the corporate entity as it was being used for tax evasion.

 Avoidance of welfare legislation:
The Workmen Employed in Associated Rubber Industries Limited,
Bhavnagar v. The Associated Rubber Industries Ltd., Bhavnagar and
another, A.I.R. 1986 SC1.
 The facts of the case were that a new company was created wholly by
the principal company with no assets of its own except those
transferred to it by the principal company,
 with no business or income of its own except receiving dividends
from shares transferred to it by the principal company i.e. only for
the purpose of splitting the profits into two hands and thereby
reducing the obligation to pay bonus.
 The Supreme Court of India held that the new company was formed
as a device to reduce the gross profits of the principal company and
thereby reduce the amount to be paid by way of bonus to workmen.
 The amount of dividends received by the new company should,
therefore, be taken into account in assessing the gross profit of the
principal company.

 Where it is found that a company has abused its corporate
personality for an unjust and inequitable purpose, the court
would not hesitate to lift the corporate veil. Further, the
corporate veil could be lifted when acts of a corporation are
allegedly opposed to justice, convenience and interests of revenue
or workmen or are against public interest.
 Lifting the Corporate Veil of Small Scale Industry:
 Where small scale industries were given certain exemptions and the
company owning an industry was controlled by some group of persons
or companies, it was held that it was permissible to lift the veil of the
company to see whether it was the subsidiary of another company and,
therefore, not entitled to the proposed exemptions.

 Use of Corporate Veil for Hiding Criminal Activities:
 Where the defendant used the corporate structure as a device or
facade to conceal his criminal activities (evasion of customs and
excise duties payable by the company), the Court could lift the
corporate veil and treat the assets of the company as the realisable
property of the shareholder.

 According to Section 2(24) of the Companies Act, 2013, “Company
Secretary” or ‘Secretary’ means a company secretary as defined in
clause (c) of Sub-section (1) of Section 2 of the Company Secretaries
Act, 1980 and who is appointed by a company to perform the
functions of a company secretary under this Act.
 According to clause (c) of Sub-section (1) of Section 2 of the
Company Secretaries Act, 1980, a company secretary means a person
who is a member of the Institute of Company Secretaries of India.
 Therefore, ‘Company Secretary’ means a person who is a member of
the Institute of Company Secretaries of India (ICSI) and who is
appointed by a company to perform the functions of a company
secretary. The functions of company secretary have been detailed in
section 205 of the Act.

According to Section 205 the functions of the company secretary
shall include,—
(a) to report to the Board about compliance with the provisions of
this Act, the rules made thereunder and other laws applicable to the
company;
(b) to ensure that the company complies with the applicable
secretarial standards issued by the Institute of Company secretaries
of India (ICSI) and approved by the Central Government.
(c) to discharge such other duties as may be prescribed.

The Central Government has prescribed following duties of Company
Secretary:-
(1) 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;
(2) to facilitate the convening of meetings and attend Board, committee
and general meetings, and maintain the minutes of these meetings;
(3) to obtain approvals from the Board, general meetings, the
Government and such other authorities as required under the provisions
of the Act;
(4) to represent before various regulators, Tribunal and other authorities
under the Act in connection with discharge of various functions under
the Act;

(5) to assist the Board in the conduct of the affairs of the company;
(6) to assist and advise the Board in ensuring good corporate
governance and in complying with the corporate governance
requirements and best practices; and
(7) to discharge such other duties as have been specified under the
Act or rules; and
(8) such other duties as may be assigned by the Board from time to
time.
Section 205(2) provides that provisions contained in section 204 in
relation to secretarial audit and section 205 in relation to functions of
company secretary shall not affect the duties and functions of the Board
of Directors, chairperson of the company, managing director or whole-
time director under this Act, or any other law for the time being in force.

The role of a company secretary may
conveniently be studied from three different
angles:
(a) as a statutory officer,
(b) as a co-ordinator,
(c) as an administrative officer.

The company secretary is an officer responsible for compliance with
numerous legal requirements under different Acts including the
Companies Act, 2013 as applicable to companies.
The responsibilities of company secretary has also increased as he has
been included in the definition of Key Managerial Personnel as defined
in section 2(51) of the Act, who are also liable to punishment by way of
imprisonment, fine or otherwise for violation of the provisions of the
Companies Act which hold the “officers in default” under Section 2(60).
1.Company Secretary is one of the key managerial person of a company.
All companies (including Private Companies) are required to appoint
Company Secretary in whole time employment whose paid up Share
Capital is 5 crore rupees of more.

2.Company Secretary is not a ‘managerial personnel’ for purpose of
restriction on remuneration under section 197 of Companies Act, 2013.
His salary is not considered for purpose of computation of ‘managerial
remuneration’ under section 197 of the Companies Act, 2013, unless he
is also a director of the company.
3. The various provisions and rules framed under the Companies Act
make it obligatory for the secretary to sign the annual return filed with
the Registrar [Section 92], duty to report fraud [Section 143(12)] and to
make declaration under Section 7(1) of the Act before incorporation of a
company confirming that all the requirements of Act and the Rules
thereunder have been complied with in respect of registration of a
company and the Registrar may accept such a declaration as sufficient
evidence of such compliance.

4. Under Regulation 18(1)(e) of the SEBI (Listing Obligations
and Disclosure Requirements) Regulations, 2015 the Company
Secretary shall act as the secretary to the Audit Committee in
case of a listed company.
5. Under the Indian Stamp Act it is the duty of a secretary to see
that the documents such as letter of allotment, share certificate,
debentures, and mortgages are issued duly stamped. He is the
principal officer under Section 2(35) of the Income Tax Act,
1961.
6. The most important task of the company pertaining to
statutory and legal obligations comes upon the secretary. Under
the Companies Act, he has to either comply with the various
provisions of the Act or is liable to be fined or imprisoned for
non-compliance of his obligations.

7.Thus the responsibility of a secretary as a statutory
officer has been greatly expanded by enactment of
various economic statutes, like Competition Act,
Industries (Development and Regulation) Act,
Foreign Exchange Management Act, SEBI Act,
SCRA and Depositories Act.

The concept of Peter Drucker provides for the company
secretary to co-effectively play a co-ordinating role to
achieve the tasks the Board has set itself to.
1.Evidenced by the various conditions imposed in the
loan agreements entered into between the financial
institutions and the assisted companies. Company
managements look to the company secretary for
implementation of the conditions in the loan agreements.
2. The financial institutions stipulate that in the case of
companies assisted by them financially, compliance
certificate as per their format duly certified by the
company secretary should be furnished periodically at the
Board meetings.

3. Furnishing of the certificate requires skill of
coordination between the company secretary and the
functional heads and the factory manager.
4. The Company Secretary as a co-ordinator has an
important role to play in administration of the company’s
business and affairs. It is for the secretary to ensure
effective execution and implementation of the
management policies laid out by the Board.
5. The position that the company secretary occupies in the
administrative set-up of the company makes his function
as one of co-ordinator and link between the top
management and other levels.

6. He is not only the communicating channel between the Board
and the executives but he also co-ordinates the actions of other
executives vis-a-vis the Board. The ambit of his role as a co-
ordinator also extends beyond the Company and he is the link
between the Company and its shareholders, the society and the
Government.
Thus, the role of a company secretary as a co-ordinator has two
aspects, namely internal and external. The internal role of a co-
ordinator extends to the Board including the Chairman and
Managing Director, various line and staff personnel, the trade
unions and the auditors of the company. His role as an external
co-ordinator extends to the relationship of the company with
shareholders, Regulators, Government and Society.

1.Trade Union(s)
 Secretary is responsible either directly or through his assistants with
industrial relations, Secretary must exercise extreme caution while dealing
with Trade Union officials whether they belong to recognised unions or not.
 He must ensure that proper notes are kept of the discussions and
negotiations and all decisions arrived at during such negotiations. Whenever
long-term settlement with recognised unions are finalised he should see that
the agreement embodying these settlements are in accordance with the
relevant statutes applicable.
 It is the responsibility of the Secretary through the Human
Relations/Industrial Relations to ensure compliance with the provisions of
various labour legislations such as Industrial Disputes Act, 1947,
Employees’ Provident Funds and Miscellaneous Provisions Act, 1952,
Payment of Bonus Act, 1965, Payment of Gratuity Act, 1972, Payment of
Wages Act, 1936, etc.

2. Auditors
 Apart from the statutory audit, services of the company’s auditors are required
for certifications required under various statutes and, therefore, the Secretary
must liaise very closely with the auditors.
 It may be pointed out that copies of minutes of Board meetings and general
meetings should be made available for the inspection of the auditors during the
statutory annual audit.
 Secretary is to ensure that before their appointment, proper certificate is
obtained under Section 141 (3) (g) of the Companies Act, 2013.
 The company secretary, on behalf of the company is required to file a notice
with the Registrar about appointment within 15 days of the annual general
meeting.
Further, with regard to Secretarial audit, section 204(2) provides that it shall be the
duty of company to give all assistance and facilities to Company Secretaries in
practice for auditing the secretarial and related records.

3. Shareholders
The relationship with the shareholders is an important sphere of his co-
ordinating role and, therefore, the Secretary will have to maintain proper
relationships with the shareholders of the company.
 Secretary should ensure that there is no delay in the inspection of
books and registers required by a shareholder provided all formalities
are complied with.
 Secretary must ensure that extracts of registers demanded by
shareholders are furnished to them within the prescribed time.
 Secretary is to ensure that all correspondence from shareholders is
dealt with promptly and their queries are answered as far as possible
keeping the statutory provisions in mind.

3. Shareholders
As part of public relations, Secretary should be able
to give time without prior notice to shareholders
who personally come for information, to furnish
documents or any other matter.
Secretary must also ensure that requests for issues
of duplicate certificates/dividend warrants and
intimation of address are dealt with properly and
promptly. This is important as the image of the
company will, to a great extent, depend on the
relationship of the Secretary with the shareholders.

4. Government
 All the information and correspondence with the
government are normally co-ordinated or routed
through the Secretary to ensure uniform reporting. The
Secretary has a very important role vis-a-vis the
government. He should endeavour to have information
on government policies and programmes in advance
wherever possible to ensure effective implementation.
Good relationship with the Government can be
developed where the company sincerely tries to
implement various statutes in letter as well as in spirit.

5. Organizational Administration
 Since the secretary has an opportunity of looking at the entire organisation,
secretary has the scope to advise the top management including the Board
of directors on the need to develop a good structure.
 Since the secretary collects, interprets and assimilates information relating
to all aspects of business to aid and assist the Board in carrying out its
function, secretary, therefore, gets an opportunity to know the strengths and
the weaknesses of the functional executives.
 In his role as administrator, wherever applicable he has to make a detailed
analysis of various activities, decision- making machinery, inter-
departmental relationship and their functioning.
 Secretary has, therefore, to ensure that the organisational structure is always
under constant study. The making of such examination and study and the
consequent advice and recommendation for making changes is a task which
the company secretary has to perform.

6. Financial Administration
 Since various monthly and periodical operating reports and financial
statements are routed for consideration of the board through the
secretary and should analytically study these statements.
 Thus, as a secretary to the board, the Company Secretary in
consultation with the Finance Manager has to devise suitable and
proper systems of accounting procedure, internal control and
internal audit with a view to safeguarding the company’s funds.
 The Company Secretary should have a good knowledge of
budgetary control and procedures, accounts and other related
matters. He is also expected to be proficient in dealing with matters
connected with taxation.

6. Financial Administration
The Company Secretary is generally assisted by the
Chief Accountant in the discharge of his functions
relating to financial administration. In many
companies, the Secretary is also the Chief
Accountant.
Secretary has to negotiate with banks and financial
institutions the terms of finance both for working
capital requirements and capital expenditure.

1.Declaration regarding compliance with requirement of
registration
 In terms of section 7(1) (b) of the Companies Act, 2013, a
company gets incorporated by submitting memorandum and
articles duly signed along with a declaration in a prescribed
form that all requirements of Act and rules have been
complied with in respect of registration of company.
 Such declaration in prescribed form can be signed by an
Advocate, a chartered accountant, cost accountant or
company secretary in practice who is engaged in the
formation of the company and by a person named in the
articles as a director, manager or secretary of the company.

2. Authentication of documents, proceedings and
contracts
 Authentication is more than simply attestation.
 Authentication is attestation made by proper officer by which Secretary
certifies that a record is in due form of law and that the person who certifies
is the officer appointed to do so.
 A document or proceeding requiring authentication by a company or
contract made by or on behalf of a company may be signed by any key
managerial personnel or an officer or employee of the company duly
authorized by the Board in this behalf. [Section 21].
 Now, having a common seal is optional [vide Companies (Amendment)
Act, 2015]. If, in case, a company does not have a common seal, the
requirement of law would be complied with if such requirements is done by
two directors or by a director and the Company Secretary, wherever the
company has appointed a Company Secretary.

3. Signing share certificate
 Share certificates of the company should be signed by two
directors (out of which one should be Managing Director or
whole time director, if appointed) and Secretary or other
person authorized by Board.
4. Signing annual return
 Annual return to be filed with Registrar of Companies has to
be signed by a director and Company Secretary. If Company
does not have Company Secretary, the return can be signed by
company secretary in practice. [Section 2(1)]
5. Appear before NCLT
 A Company Secretary can appear before National Company
Law Tribunal (NCLT) on behalf of the company [Section
432]

6. Signing of financial statements
 The financial statement of a company is required to be
signed on behalf of the Board at least by the
Chairperson of the company or by two directors out of
which one shall be Managing Director and the chief
executive officer (If he is director), the chief financial
officer and the Company Secretary wherever they are
appointed [Section 134(1)].
7. Secretary of audit committee
 Company Secretary will be secretary of Audit
Committee which is required to be formed by listed
companies as per Corporate Governance Code
prescribed by SEBI through listing agreement.

8. Secretary as Compliance Officer of listed company
As per clause (1) of Regulation 6 of SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015, a listed company is required to appoint the
company secretary to act as ‘Compliance Officer’, who will be responsible for
the following –
(a) ensuring conformity with the regulatory provisions applicable to the listed
entity in letter and spirit.
(b) co-ordination with and reporting to the Board, recognised stock
exchange(s) and depositories with respect to compliance with rules, regulations
and other directives of these authorities.
(c) ensuring that the correct procedures have been followed that would result
in the correctness, authenticity and comprehensiveness of the information,
statements and reports filed by the listed entity.
(d) monitoring email address of grievance redressal division as designated by
the listed entity for the purpose of registering complaints by investors.

9. Demat shares
Secretary has to coordinate between depository and
stock exchange in case of demat shares.
10. Additional duties
In addition to statutory duties of company secretary,
he is often entrusted with additional duties like
looking after legal matters, personnel matters,
finance and sometime even general administration.

Company Secretary has been defined as ‘Officer in default’
along with Managing Director, Manager and Whole-time
Director etc. Thus, he can be punished in respect of offences
under Companies Act. He may be held liable as Key Managerial
Personnel also under various provisions of the Act.
Summons to company in civil matters can be served on a
Secretary
As per rule 2 of order 9 of Code of Civil Procedure, in case of
suit against a corporation, summons can be served on –
(a) Company Secretary, Director or other principal officer of the
corporation or
(b) By leaving it or by sending by post to registered office of the
corporation.

1. Advertise the post, collect applications, hold interview, short list the
individuals for the position, and finalise the terms of appointment.
2. Convene a Board meeting after giving notice to all the directors of the
company as per section 173 of the Act. At the board meeting, place the
proposal of appointing Company Secretary with the details of the person
finalized and pass a resolution appointing the company secretary and
approving the terms and conditions of his appointment.
3. File return of appointment of company secretary with the Registrar in
Form DIR.12 within 30 days from the date of appointment (date of joining
office) and Form MGT.14 is also required to be filed along with such fee as
specified in Companies (Registration of Offices and Fees) Rules, 2014.
The particulars of Company Secretary, Income-tax PAN, Membership
details (will be validated from ICSI records), residential details, date of
appointment, e-mail ID of the person for communication purpose are
required to be filled in the Form.

4. A Company Secretary shall not hold office in more than one
company except in its subsidiary company at the same time.
5. Make entries in the Register of directors and key managerial
personnel under Section 170 of the Act.
6. Inform the Stock Exchange(s) where the company is listed.
7. Since key managerial personnel are included in ‘related party’ as
defined in section 2(76) of the Act, Please verify whether the
company secretary so appointed involved in any related party
transactions within the provisions of Section 188 of the Act. If yes,
then comply with the requirements in this regard.

A company secretary can be removed or dismissed like any other employees of
the organization. Since he is appointed by Board, the Board of directors of a
company has absolute discretion to remove a company secretary or to
terminate his services at any time for any reason or without any reason.
However, principles of natural justice like show cause notice, hearing,
reasoned order etc. must be followed.
1. A Company Secretary can be removed in accordance with the terms of
appointment and the Board can record the same.
2. Convene a Board meeting after giving notice to all the directors of the
company as per section 173, place the matter of removal/resignation of the
Company Secretary and pass a resolution to the effect.
3. File Form DIR-12 in electronic mode within thirty days with the
Registrar of Companies together with requisite filing fees. Evidence of
Cessation (for example Resignation Letter) is an optional attachment.
4. Inform the stock exchange where the company is listed.

5. Make entries in the Register maintained for recording the particulars of
Company Secretaries under section 170.
7. Issue a general public notice, if it is so warranted, according to size and
nature of the company.
8. The resulting vacancy shall be filled up by the Board at a meeting of the
Board within a period of six months from the date of such vacancy.

 ICAI has given technical guide on easy Incorporation of companies through
on integrated Web form called “SPIC+”.
 As part of PM initiative of ease of doing business,the MCA has brought in
advanced integrated Form SPIC+ (e-form-32) which facilitates the user's
ease in company Incorporation.
 SPIC+ is an integrated Web form offering 10 Services by Central
Government Ministries & Department.(MCA, Ministry of Labour &
Department of Revenue in Ministry of Fininance and 1 state Govt
(Maharastra).
 Uing SPIC+ Form the following types of companies can be incorporated in
india;
 Part-I Company
 Producer Company
 Section 8 Company(was not available in INC-29)
 New Company-Public/Private or OPC.

Changes to offences:
 It removes the penalty for certain offences. For example, it removes
the penalties which apply for any change in the rights of a class of
shareholders made in violation of the Act. Note that where a specific
penalty is not mentioned, the Act prescribes a penalty of up to Rs
10,000 which may extend to Rs 1,000 per day for a continuing
default.
 It removes imprisonment in certain offences. For example, it
removes the imprisonment of three years applicable to a company
for buying back its shares without complying with the Act.
 It reduces the amount of fine payable in certain offences. For
example, it reduces the maximum fine for failure to file annual
return with the Registrar of Companies from five lakh rupees to
two lakh rupees.
 Under the Act, one person companies (i.e., companies with only one
member) or small companies (i.e., with lower paid-up share capital and

 The e-Form-32 has other added benefits wherein the
DINs get allotted to those proposed Director who don't
hold DIN,& PAN,TAN,PF and ESIC registration can
also be obtained along with Incorporation as a single
procedure.
 The facility is available of GST number and opening
Bank account.

Changes to offences:
 The Bill:
I. Extends this provision to all producer companies and
start-up companies,
II. Extends this provision to apply to violation of any
provision of the Act,
III. Limits the maximum penalty to two lakh rupees for
the company and one lakh rupees for a defaulting
officer.

Direct listing in foreign jurisdictions:
 The Bill empowers the central government to allow certain classes of
public companies to list classes of securities (as may be prescribed) in
foreign jurisdictions.
Exclusion from listed companies:
 The Bill empowers the central government, in consultation with the Securities and
Exchange Board of India, to exclude companies issuing specified classes of securities
from the definition of a "listed company".
Remuneration to non-executive directors:
 The Act makes special provisions for payment of remuneration to
executive directors of a company (including managing director and other
whole-time directors) if the company has inadequate or no profits in a
year. For example, if a company has an effective capital of up to five
crore rupees, the annual remuneration to its executive directors
cannot exceed 60 lakh rupees. The Bill extends this provision to non-
executive directors, including independent directors.

Beneficial shareholding:
 Under the Act, if a person holds beneficial interest of at least 10% shares in a
company or exercises significant influence or control over the company,
heshe is required to make a declaration of his interest to the company.
 The company is required to note the declaration in a separate register.
 The Bill empowers the central government to exempt any class of persons from
complying with these requirements if considered necessary in public interest.
Exemptions from filing resolutions:
 The Act requires companies to file certain resolutions with the Registrar of
Companies.
 These include resolutions of the Board of Directors of the company to borrow
money, or grant loans. However, banking companies are exempt from filing
resolutions passed to grant loans, or to provide guarantees or security for a loan.
 This exemption has been extended to registered non-banking financial companies
and housing finance companies.

Corporate Social Responsibility (CSR):
 Under the Act, companies with net worth, turnover or profits above a specified
amount are required to constitute CSR Committees and spend 2% of their
average net profits in the last three financial years, towards its CSR policy.
 The Bill exempts companies with a CSR liability of up to Rs 50 lakh a year from
setting up CSR Committees.
 Further, companies which spend any amount in excess of their CSR obligation in
a financial year can set off the excess amount towards their CSR obligations in
subsequent financial years.
Periodic financial results for unlisted companies:
 The Bill empowers the central government to require classes of unlisted
companies (as may be prescribed) to prepare and file periodical financial results,
and to complete the audit or review of such results.
Benches of NCLAT:
 The Bill seeks to establish benches of the National Company Law Appellate
Tribunal. These shall ordinarily sit in New Delhi or such other place as may be
notified.

CLSP - I Unit - 1.pptx

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CLSP - I Unit - 1.pptx