Chapter XI
MISCELLANEOUS
A. DISCLOSURES IN DIRECTORS'
REPORT [Topic 282-283]
B. INSPECTION AND PROSECUTION
[Topic 284]
C. NIDHIS/MUTUAL BENEFIT
SOCIETY [Topic 285‑289]
D. REFUND OF REGISTRATION FEE
[Topic 290]
E. INSPECTION/COPYING OF
DOCUMENT [Topic 291]
F. SEEKING OF RELIEF BY A
PRIVATE COMPANY [Topic 292]
G. MEMBERSHIP OF HOLDING
COMPANY [Topic 293]
H. PRIVILEGES OF GOVERNMENT
COMPANY [Topic 294]
I. PRE‑INCORPORATION
CONTRACTS [Topic 295]
J. COMPOUNDING OF OFFENCE
[Topic 296]
K. CORRECTION OF DOCUMENTS
[Topic 297]
L. INSPECTIONXERTIFIED
COPIES OF DOCUMENT [Topic 298]
M. CREDIT RATING [Topic
299]
N. PAYMENT OF ADDITIONAL
FEES [Topic 300]
[Topic 282‑283]
Topic 282
1. If you are issuing the Board's Report to be attached to the
balance‑sheet to be laid before the company in the next Annual General
Meeting, make sure that it incorporates a statement showing the name of every
employee of the company who:
(a) If employed throughout the financial year, was in receipt of
remuneration for that year which, in the aggregate, was not less than twenty‑four
lakhs' rupees; or
(b) If employed for a part of the financial year, was in receipt
of remuneration for any part of that year, at a rate which, in the aggregate,
was not less than two lakhs rupees per month. [Section 217(2A) read with Rule
1A of the Companies (Particulars of Employees) Rules, 1975].
2. In addition to the names of the employees as per item 1
above, the report shall also contain the following particulars:
(a) Designation
of the employee;
(b) Remuneration
received;
(c) Nature
of employment, whether contractual or otherwise;
(d) Other
terms and conditions;
(e) Nature
of duties of the employee;
(f) Qualification
and experience of the employee;
(g) Date
of commencement of employment;
(h) The
age of such employee;
(i) The
last employment held by such employee before joining the company;
(j) If employed throughout the financial year or part thereof,
was in receipt of remuneration in that year which in the aggregate, or as the
case may be, at a rate which, in the aggregate, is in excess of that drawn by
the managing director or whole‑time director or manager and holds by
himself or along with his spouse and dependent children not being less than two
per cent of the equity shares of the company. [Rule 2 of the Companies
(Particulars of Employees) Rules, 1975 read with Section 217(2A)(a)(iii)].
3. In addition to the above particulars, the report shall also
indicate whether such employee is a relative of any director or manager of the
company, and if so, the name of such director. [Section 217(2A)(b)(i)].
4. The report shall also include statement with respect to the
conservation of energy, technology absorption, foreign exchange earnings and
outgo in such manner as is given in the Companies (Disclosure of Particulars in
the Report of Board of Directors) Rules, 1988 vide Topic 283.
5. Please keep in mind that if any person being a director,
fails to take all reasonable steps to comply with the aforesaid requirements,
he will in respect of each offence be punishable with imprisonment for a term
upto 6 months or with fine upto Rs. 20,000/- or with both. [Section 217(5)].
6. Please also keep in mind that if any person not being a
director, having been charged by the Board of Directors with the duty of seeing
the said requirements are complied with, makes default in doing so, he will be
punishable in respect of each offence with imprisonment for a term of 6 months
or with fine of upto Rs. 20,000/- or with both. [Section 217(6)]
7. Note that if your company's paid‑up share capital is
less than Rs. 50 lakhs but is equal to or more than Rs. 10 lalchs, your company
is required to obtain a Compliance Certificate from a secretary in whole‑time
practice to be filed with the Registrar of Companies mentioning therein inter
alia that the company has duly complied with the requirements of section 217 as
per paragraph 13(v) of the Form of Compliance Certificate appended to the
Companies (Compliance Certificate) Rules, 200l. [Section 383‑A(1)
proviso].
Topic 283
1. If you are issuing the Board's Report to be attached to the
balance‑sheet to be laid before the company in the next Annual General
Meeting, make sure that it discloses particulars with respect to conservation
of energy, technology absorption, foreign exchange earnings and outgo in the
following manner: [Section 217(1)(e)]
(a) For
conservation of energy:
(i) what
measures have been taken by the company for energy conservation;
(ii) what additional investments and proposals have been
implemented for reduction of consumption of energy;
(iii) what impact of the aforesaid two measures was there on
reduction of energy consumption and also on the cost of production of goods of
the company consequently;
(iv) details of total energy consumption and also energy
conservation per unit of production in Form A of the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988, in respect of
industries specified in the Schedule of the said Rules. [Rule 2(A) of the
Companies (Disclosure of Particulars in the Report of Board of Directors)
Rules, 1988].
(b) For technology absorption what efforts have been made by the
company in the absorption of technology as per Form B of the Companies
(Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.
[Rule 2(B) of the Companies (Disclosures of Particulars in the Report of Board
of Directors), Rules, 1988].
(c) For
foreign exchange earnings:
(i) what activities have been taken relating to exports of the
company and also what initiatives have been taken by the company to increase
such exports, development of new export markets for products and services and
also for export plans;
(ii) how much of the total foreign exchange have been used and how
much foreign exchange have been earned by the company. [Rule 2(c) of the
Companies (Disclosure of Particulars in the Report of Board of Directors) Rules,
1988].
2. Check before disclosing the particulars under step 1(a)
above whether your company is engaged in the following industries:
(a) Textile, (b) Fertilizer, (c) Aluminium, (d)
Steel, (e) Refineries, (f) Petro‑chemicals and chemicals, (g) Cement, (h)
Dairy & Food Processing, (i) Cold Storage Plant, 0) Electric arc furnaces,
Oa) Chlor alkali, Ob) Edible oil, Oc) Engineering (steel forging and re‑rolling),
(k) Glass, (1) Jute, (m) Paper, (n) Refractory and Pottery, (o) Tea, (p) Tyre,
(q) Sugar, (r) Drugs & Pharmaceuticals. [Schedule to the Companies
(Disclosure of Particulars in the Report of Board of Directors) Rules, 1988].
3. Please keep in mind that if any person being a director,
fails to take all reasonable steps to comply with the aforesaid requirements he
will be punishable in respect of each offence with imprisonment for a term of 6
months or with fine of up to Rs. 20,000/‑ or with both. [Section 217(5)].
4. Please also keep in mind that if any person not being a
director, having been charged by the Board of Directors of your company with
the duty of seeing the said requirements are complied with, makes default in
doing so, he will be punishable in respect of each offence with imprisonment
for a term of 6 months or with fine of up to Rs. 20,000/‑ or with both.
[Section 217(6)].
5. Note that if your company's paid‑up share capital is
less than Rs.50 lakhs but is equal to or more than Rs.10 lakhs, your company is
required to obtain a Compliance Certificate from a secretary in whole‑time
practice to be filed with the Registrar of Companies mentioning therein inter
alia that the company has duly complied with the requirements of section 217 as
per paragraph 13(v) of the Form of Compliance Certificate appended to the
Companies (Compliance Certificate) Rules, 2001.[Section 383‑A (1)
proviso].
[Topic 284]
DO
YOU ANTICIPATE INSPECTION OF BOOKS BY THE REGISTRAR OF COMPANIES?
1. Make sure that your company is maintaining the following
books, registers and records and making necessary entries therein :
(i) Register of investments in shares and securities not held in
company's name. [Section 49(7) and (8)];
(ii) Register
of securities bought back. [Section 77A(9)].
(iii) Register
of Charges. [Section 143];
(iv) Register
of Members and Index of Members. [Sections 150 and 151]
(v) Register
of Debentureholders and Index of Debentureholders. [Section 152];
(vi) Foreign
Register of Members and of Debentureholders, if any. [Section 157(1)];
(vii) Minute Books of General Meeting, Board Meeting and any
committee of the directors. [Section 193];
(viii) Books
of account. [Section 209];
(ix) Register
of Contracts. [Section 301(1) and (5)];
(x) Register
of Directors, Managers and Secretary. [Section 303];
(xi) Register
of Directors Shareholdings. [Section 307(1) and (5)];
(xii) Register
of Loans. [Section 370(1C) and (1F)];
(xiii) Register of Investments. [Section 372(6)
and (9)];
(xiv) Register of investments, loans, guarantee
or security. [Section 372A(5)].
(xv) Share Transfer Register;
(xvi) Register of Deposits. [Companies
(Acceptance of Deposits) Rules, 1975];
(xvii) Attendance Register‑Directors'
Meetings;
(xviii) Attendance Register‑Members' Meetings;
(xix) Proxy Register.
(xx) A copy of the debenture trust deed.
[Section 117A(2)]
2. See that
these books and records are kept up‑to‑date and are preserved
according to the provisions of the Companies (Preservation and Disposal of Records)
Rules, 1966.
3. The
Registrar of Companies or any such officer of Government as may be authorised
by the Central Government or any such officer of the Securities and Exchange
Board of India as may be authorised by it is empowered to make an inspection of
the books of account and other books and papers of a company without giving any
previous notice to the company. [Section 209A(1)].
4. Please keep
in mind that if your company is a listed public company of a public company
intending to get listed, the inspection by the SEBI will be made in respect of
matters covered under the following sections:
1. 55 to 58.
2. 59 to 84.
3. 108, 109,
110, 112, 113, 116, 117, 118, 119, 120, 121, 122, 206, 206A and 207. [Section
55A].
5. Keep also in mind that the Inspecting
Officer can have access to the following:
(i) books of account of firm in which your
company is a partner;
(ii) documents
and papers for getting information about your company's joint ventures with
other bodies that are not companies;
(iii) relevant
documents and other materials connected with ‑the appointment of the
former managing agents.
6. Remember that if there is any inspection it shall be the
duty of every director, other officer or employee of the company to produce to
the inspector all such books of account and other books and papers of the company
in his custody or control and to furnish him with any statement, information or
explanation relating to the affairs of your company as the said person may
require of him within such time and at such place as he may specify. [Section
209A(2)].
7. Also remember that if there is any inspection it shall be
the duty of every director, other officer or employee of your company to give
to the person making inspection, all assistance in connection with the
inspection which your company may be reasonably expected to give. [Section
209A(3)].
8. Please keep in mind that if default is made in complying
with the provisions of section 209A, every officer of your company who is in
default will be punishable with fine which will not be less than Rs. 50,000/‑
and also with imprisonment for a term of 1 year. [Section 209A(8)].
9. Note that if your company's paid‑up share capital is
less than Rs.50 lakhs but is equal to or more than Rs. 10 lakhs, your company
is required to obtain a Compliance Certificate from a secretary in whole‑time
practice to be filed with the Registrar of Companies mentioning therein inter
alia that the company has kept and maintained all registers as stated in
Annexure 'A' to this Certificate, as per the provisions and the rules made
thereunder and all entries therein have been duly made as per paragraph I of
the Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001. [Section 383‑A(1) proviso].
Topic 285
A. WHERE YOU APPREHEND PROSECUTION WHICH
HAS NOT BEEN FILED -
1. Make an application for relief by way of a petition to the
High Court of the State where the registered office of your company is
situated. [Section 633(2) read with Rule 11(a)(23) of the Companies (Court)
Rules 1959].
2. Verify the said petition by an affidavit in Form No. 3 of
the Companies (Court) Rules, 1959 and file it along with the petition. [Rule 21
of the Companies (Court) Rules, 1959].
3. Have the affidavit notarised by the Notary Public or sworn
before the Oath Commissioner after taking signature of the applicant.
4. Serve a notice on the concerned Registrar of Companies and
on any other person whom the High Court may direct to show cause why the relief
sought for should not be granted. [Section 633(3)].
5. Keep in mind that even where the Registrar of Companies has
filed a criminal complaint despite notice of a petition for relief under
section 633(2) the petition is maintainable and can be disposed of by the court
with an appropriate order. [P.S. Bedi v. ROC, Delhi and Haryana, (1985) 2 Comp
LJ 122 (Del)].
B. WHERE
PROSECUTION HAS ALREADY BEEN FILED
1. Make an application to the concerned Court by way of a judge's summons
where the prosecution has been filed for relief. [Section 633(1) read with Rule
11(b)].
896 § Topic 285 Chap.
XI‑Misc.‑B. Inspection and Prosecution
2. In this application set out the grounds and circumstances to
show that the accused has acted honestly and reasonably and that having regard
to all the circumstances of the case like, e.g., that when the offence was
committed, the accused was not the officer of the company.
3. Serve a notice on the concerned Registrar of Companies' and
on any other person whom the High Court may direct to show causes why the
relief sought for should not be granted. [Section 633(3)].
Topic 286
DO
YOU WISH TO AVAIL OF THE FACILITY OF RESOLVING YOUR COMPANY'S DISPUTE BY THE
LOK ADALAT?
[Circular No. 10/99 [F. No. 12/22/99‑CL‑V]
dated 7th December, 1999, issued by the Department of Company Affairs]
1. Before referring your company's dispute related to any
matter concerning the Department of Company Affairs, to Lok Adalat, please note
the following:
(a) The Lok Adalat is conciliatory mechanism where not only
disputes pending in courts can be resolved but even matters which have not
reached a formal adjudicatory forum, that is matters of pre‑litigative
stage can also be settled by resolving them amicably at the threshold so as to
avoid any litigation at a later stage.
(b) All the cases, in which the courts situated in Delhi have
jurisdiction, may be referred to this Lok Adalat.
(c) If a legal action can be entertained by courts in Delhi, the
same may also be referred to the Lok Adalat for resolution.
(d) The jurisdiction of the Lok Adalat will be co‑extensive
with that of courts located in Delhi.
(e) The scope of the Lok Adalats is very wide so as to include
all types of disputes with the only exception of non‑compoundable
criminal offences.
(f) A Lok Adalat can pass an award only on the basis of a
compromise or settlement between the parties and not otherwise.
(g) An award made by the Lok Adalat in terms of the compromise
will be deemed to be decree of a civil court and will be binding and
nonappealable.
2. Note that the Department of Company Affairs has nominated a
Nodal Officer to whom appropriate cases may be referred to.
3. If your company wants to avail of the facility of resolution
of your company's dispute by the Lok Adalat, contact the Nodal Officer with
necessary application in the prescribed proforma for referring them to the Lok
Adalat.
4. Make the application for settlement of the legal dispute at
the prelitigation stage in triplicate in the proforma given in Annexure 1 at
the filing counter of the Department of Company Affairs, Shastri Bhavan, Dr.
Rajendra Prasad Road, New Delhi‑ 110 001.
5. Make the application for setting the case pending in
court/tribunal through Lok Adalat in triplicate in the pro forma given in
Annexure 1‑A, as aforesaid.
6. Before making the application to the Lok Adalat, call a
Board Meeting after giving notice to all the directors of your company as per
section 286 to take the approval of the Board to make the application to the
Lok Adalat and also to authorise any director of the company or the company
secretary of the company to file the application and also to take necessary
steps and actions in connection with the application by passing a Board
Resolution.
7. Please keep in mind that every office of the company whose
duty is to give notice of the Board Meeting as aforesaid and who fails to do so
will be punishable with fine of up to Rs. 1000/‑. [Section 286(2)].
8. Keep in mind that the Lok Adalat in sitting in the premises
of Patiala House till a suitable permanent accomodation is located and it has
started functioning from 11th
December, 1999.
9. Also
keep in mind that no filing fee is required for making this application.
C. NIDHI/MUTUAL BENEFIT SOCIETY
[Topic 287‑289]
Topic 287
1. Make an applicationf on a plain paper giving all the details
in support of your being declared as a Nidhi or Mutual Benefit Society, as
there is no prescribed form.
2. Address the application to the Secretary, Department of
Company Affairs, Ministry of Law, Justice and Company Affairs, Shastri Bhavan,
5th Floor, 'A' Wing, Dr. Rajendra Prasad Road, New Delhi‑110 001, along with
three certified true copies of audited balance‑sheets and profit and loss
accounts for the last three financial years and the Memorandum and Articles of
Association of the company which is going to be declared as Nidhi or Mutual
Benefit Society.
3. Annex to the application all documentary evidence in support
of your statements in the application.
4. See that you comply with the following guidelines for
declaration of your company as a Nidhi or Mutual Benefit Society:
(i) The objects inter alia are to enable the members to save
money, invest their savings and secure loans at favourable interest;
(ii) The
nominal value of its equity shares shall not be less than Rs. 10/each;
(iii) The shares are not offered to the public for subscription but
allotted to those who desire to take advantage of depositing and borrowing
money;
(iv) The
business is restricted specifically to its members only;
(v) The business is confined to receiving deposits and lending
money to members and does not extend to carrying on any other business or
trade;
(vi) They
do not open any new current accounts with its members;
(vii) They have large and unwieldy membership which should not be
less than two thousand members;
(viii) They do not carry on chit fund or hire purchase business or
leasing business or insurance business or acquisition of shares or debentures
issued by any body corporate except the shares of another nidhi, if
specifically permitted by the Central Government;
(ix) The Department has not received any serious complaints of
mismanagement by the Nidhi companies;
(x) No serious defaults have been committed by these companies in
complying with the provisions of the Companies Act;
(Xi) Such
a company should not give to any of its members or shareholder loans exceeding
(a) two lakh rupees, where the total amount of deposits of such
nidhi or mutual benefit society from its members are two crore rupees or less;
(b) one per cent of the total deposits or seven lakhs fifty
thousand rupees, whichever is less, where deposits of such nidhi or mutual
benefit society from its members are more than two crore rupees but are twenty
crore rupees or less;
(c) twelve lakh rupees, where the deposits of such nidhi or
mutual benefit society from its members are more than twenty crore rupees but
are fifty crore rupees or less;
(d) fifteen lakh rupees, where the deposits of such nidhi or
mutual benefit society from its members are more than fifty crore rupees.
(Xii) Such a company should not give to any of its member or
shareholder loans and advances exceeding Rs. 7,50,000/‑ if it does not
make any profits in the preceding years.
5. If the Central Government declares your company to be a
Nidhi or Mutual Benefit Society by notification in the Official Gazette as a
result of your application made to it then take note of the exemptions and
modifications of the Companies Act, 1956, applicable to the Nidhi or Mutual
Benefit Society.
6. Ensure that after the publication of the Central
Government's notification declaring your company to be a nidhi or mutual
benefit society your total net owned funds excluding the proceeds of
preferential capital is not less than Rs. 10 lacs or such amount as the Central
Government may specify from time to time.
7. Further
ensure that the nidhi or mutual benefit society declared as such do not do the
following:
(i) open any new branch unless it has earned profit for the last
3 continuous years and subject to this condition open up to 3 branches within
the revenue district and beyond 3 branches outside the district with the prior
permission of the regulatory authority;
(ii) admit
as a member any body corporate or trust;
(iii) make any preferencial allotment of shares to any person or
group of persons but shall make only rights issue of shares;
(iv) acquire control of any other company by way of acquisition of
shares or by composition of the Board of Directors of such company;
(v) allow use of its name by any other body corporate whose main
object is to earn profit by borrowing and lending;
(vi) enter
into any financial dealing with any person other than its members;
(vii) take
further deposits from or lend further money to any body corporate;
(viii) carry
on any business other than the business of borrowing or lending in its own
name;
(ix) enter
into any partnership arrangement in its borrowing or lending activities;
(x) give loans without the security in the form of gold, silver,
jewellery for a period exceeding 1 year or immovable property where such loan
shall not exceed 50% of the value of that property or fixed deposits, kishan
Vikas Patra/National Saving Certificate or Scheme/Insurance Policies or other
Government Securities;
(xi) pledge
any type of security lodged with it by its members;
(xii) be allowed to raise deposits exceeding 20 times of its net
owned funds as per the last audited balance sheet;
(xiii) open deposit accounts other than fixed deposit account,
recurring deposit account and saving deposit account;
(xiv) open branches or collection centres or offices or deposit
centres by whatever name called outside the state in which the registered
office is situated;
(xv) enter into any arrangement for the change of its management
without a sepcial resolution passed in its general meeting and approval of the
Central Government;
(xvi) accept
deposit for a period of less than 3 months;
(xvii) grant loan to a director for an amount exceeding Rs. 15 lakhs
and if already granted then bring it down to Rs. 15 lakhs within a period of 1
year;
(xviii) obtain certificate every year from the statutory auditors
certifying that it has complied with the directions specified in this
notification and has maintained its books of account according to recognised
principles of accounting;
(xix) ensure that interest rates on deposits accepted by and loans
given by your company are in conformity with such regulations that may be
issued by the Reserve Bank of India, from time to time;
(xx) ensure that a person does not hold a post of a director in your
company for continuous period of more than 10 years except with the approval of
the concerned Regional Director.
(xxi) invest and continue to invest with effect from September, 2001
in unencumbered term deposit with a scheduled commercial bank other than a co‑operative
bank or a regional rural bank an amount which shall not be less than 10% of the
deposits outstanding at the close of business on the last working day of the
second preceding month;
(xxii) comply with the directions given by such special officer
appointed by the Central Government;
(xxiii) allow special audit to be conducted by the auditors appointed by
the Central Government;
8. Keep in mind that Central Government if satisfied that the
circumstances have arisen it is necessary in public interest and after
recording the reasons in writing, may relax any of the directions for proper
working of your company as a Nidhi or Mutual Benefit Society.
9. If you are already an existing nidhi or mutual benefit
society you should try to reach the amount of Rs. 25 lacs as mentioned
aforesaid before the 31st day of December, 2002.
10. Keep in mind that if any company declared as a Nidhi company
by the Central Government does not function in the spirit of a Nidhi company,
it can rescind the declaration granted to that company. [Notification dated 26‑3‑1999].
Topic 288
1. Keep in mind that a Nidhi or Mutual Benefit Society can
accept deposits not exceeding 20 times of its net owned funds as per its last
audited balance sheet.
2. Also keep in mind that within the aforesaid limit, a Nidhi
or Mutual Benefit Society can open the following kinds of deposit accounts,
subject to the conditions stipulated below
(a) Fixed deposit account which can be opened for a minimum
period of 12 months and a maximum period of 60 months;
(b) Recurring deposit account which can be opened for a minimum
period of 12 months and a maximum period of 60 months;
(c) Saving deposit account the maximum balance in which at any' ‑given
time qualifying for interest shall not exceed Rs.20,000/‑ and the rate of
interest shall not be more than 2% above the rate of interest payable on
savings ban account by nationalised bank.
3. Ensure
that every application for deposit contains the particulars as stipulated
below:
(i) name
of your Nidhi or Mutual Benefit Society;
(ii) date
of incorporation of your Nidhi or Mutual Benefit Society;
(iii) the
business carried out by your Nidhi or Mutual Benefit Society;
(iv) brief particulars of the management of your Nidhi or Mutual
Benefit Society along with the names addresses and occupation of your
directors;
(v) profits of the Nidhi before and after making provision for
tax for the last three financial years;
(vi) dividend
declared by the Nidhi as per latest three balance sheets;
(vii) mode
of repayment of deposit;
(viii) maturity
period of deposit;
(ix) interest
payable on deposit;
(x) the rate of interest which shall be payable to the depositor
in case depositor withdraws the deposit prematurely;
(xi) the
terms and conditions subject to which a deposit shall be accepted/renewed;
(xii) any other special features relating to terms and conditions
subject to which the deposit is accepted /renewed.
4. Ensure that at the end of the application form but before
the signature of the depositor, the following verification clause by the
depositor is appended:
"I have gone through the financial and other
statements/particulars/representations furnished/made by the Nidhi and after
careful consideration I am making the deposit with the Nidhi at my own risk and
volition".
5. Obtain proper introduction of the new depositors before
opening their accounts and accepting the deposits and keep on its record, the
evidence on which it has relied upon for the purpose of such introduction.
6. Allot to every deposit holder at least a minimum of ten
equity shares or shares equivalent to Rs 100/‑ whichever is higher.
7. Offer interest on fixed and recurring deposits as determined
by the Regulatory Authority, subject to other conditions.
8. Note that the Regulatory Authority here is the concerned
Regional Director of the Department of Company Affairs where the registered
office of the Nidhi is located.
9. Permit
fixed deposit account to be foreclosed by the depositor subject to specific
conditions.
10. Invest and continue to invest, with effect from September,
2001, in unencumbered term deposits with a Scheduled Commercial Bank, other
than a Cooperative Bank or a Regional Rural Bank, an amount which shall not be
less than 10% of the deposits outstanding at the close of business on the last
working day of the second preceding month.
Topic 289
1. Note that your company declared as a Nidhi or Mutual Benefit
Society under section 620A after the publication of this notification should
adhere to the prudential norms given below for revenue recognition and
classification of assets in respect of mortgage loans/jewel loans, etc.
2. Recognise income including interest or any other charges on
nonperforming assets of your Nidhi or Mutual Benefit Society only when it is
actually realised and where any such income is recognised before the asset
became non‑performing and remaining unrealised, reverse such income in
the current year's profit and loss account.
3. Classify assets of mortgage loan as Standard Asset, Sub‑Standard
Asset, Doubtful Asset and Loss Asset.
4. Keep in mind that a Standard Asset means the asset in
respect of which no default in repayment of principal or payment of interest is
perceived and which does not disclose any problem, nor carry more than normal
risk attached to the business and your company does not require to make any
provision for such an asset.
5. Also keep in mind that a Sub‑Standard Asset will be
that borrowal account which is non‑performing
asset reschedulement or renegotiations or rephasement of the loan instalment or
interest repayment would not change the classification of assets unless the
borrowal account has satisfactorily performed for at least 12 months after such
reschedulement or renegotiations or replacement and your company is required to
make 10% provision of the aggregate outstanding amount.
6. Further keep in mind that Doubtful Asset will be those
borrowal account which remained non‑performing for more than one year,
but up to two years and your company is required to make 50% provision of the
aggregate outstanding amount.
7. Remember that Loss Asset will be that borrowal account which
remained non‑performing for more than two years, or where the documents
executed may become invalid, if subjected to legal processes, as per the
opinion of your Nidhi or its internal auditor or by the inspecting authority
during the course of its inspection and for such an asset your company is
required to make 100% provision of the aggregate outstanding amount.
8. In case of loans against jewellery, government securities or
own deposits etc., ensure that the aggregate outstanding amount is recovered
within next three months after the due date of repayment specified at the time
of grant of such loans.
9. In case of interest income and/or instalment of loans
against jewellery, Government securities or own deposits etc., remaining
unrealised as per payment schedule, enforce your Nidhi company's claim against
the security within three months of such date of repayment by the borrowers and
make 100% provision to the extent of unrealised amount being the deficit in the
current year's profit and loss account.
10. Note that the Central Government if satisfied that the
circumstances have arisen and if found in public interest, after recording the
reason in writing, may relax any of the directions mentioned above either
generally or for any specified period, subject to such terms and conditions, as
the Government may specify, for avoiding any hardship to any Nidhi or a class
of Nidhis.
[Topic 290]
Topic 290
1. Please note that if you have paid more than Rs. 80 lakhs as
registration fee to the Registrar of Companies then, you can ask for a refund
of that amount exceeding Rs. 80 lakhs.
2. Please also note that if your company's nominal share
capital is of the order of rupees two hundred sixty‑five crores and
seventy lakhs (Rs. 2,65,70,00,000) or more, then you have to pay Rs. 2 crores
as registration fee and not a paise more as the said sum of Rs. 2 crores is the
maximum limit of registration fee to be paid to the concerned Registrar of
Companies on registration.
3. If your company's nominal share capital is more than rupees
two hundred sixty‑five crores and seventy lakhs and you have paid to the
concerned Registrar of Companies as registration fee, more than Rs. 2 crores,
then, ask for a refund of the additional fee paid over and above the said sum
of Rs. 2 crores.
4. Make an application to the concerned Registrar of Companies
in the form of a letter on a plain paper preferably on the letter head of the
company (there is no prescribed form) asking for the refund of the excess
registration fee paid over and above Rs. 2 crores.
5. Attach
along with the above application the following documents:
(i) A certified true copy of the receipt issued by the office of
the concerned Registrar of Companies at the time of payment of the excess
initial registration fee;
(ii) A Statement
showing the authorised and paid‑up capital of your company;
(iii) A
certified true copy of the Certificate of Incorporation of your company;
(iv) Original copy of the receipted treasury challan or cash of Rs.
120/‑ evidencing th6 payment of application fee as prescribed under
Schedule X to the Companies Act, 1956.
6. In case of difficulty in getting the refund, correspond with
the Central Government in the Department of Company Affairs, Ministry of Law,
Justice & Company Affairs, Shastri Bhavan, 5th Floor, 'A' Wing, Dr.
Rajendra Prasad Road, New Delhi‑ 110, 001.
7. On receipt of the refund of the excess registration fee,
issue an acknowledgement in receipt of the refund to the concerned Registrar
of Companies.
8. Make
necessary adjustments in preliminary expenses in the books of account of your
company.
E.
INSPECTION/COPYING OF DOCUMENT
[Topic 291]
Topic 291
1. Please note that any document (auditor's report, balance‑sheet,
profit and loss account, copy of contract etc.) filed with the Registrar of
Companies along with the Prospectus can be inspected or a copy or extract
obtained during fourteen days beginning with the date of publication of the
Prospectus by paying a nominal fee.
2. For only inspection, the fee is Rs. 50/- for each inspection
and for obtaining a certified copy or extract of any such document, five rupees
per page of the document. [Section 610(1) read with Rule 21A].
3. Authorised representatives of the Income‑tax
Department, Police, Reserve Bank of India and other Government Departments can
have free inspection of any document filed with the Registrar.
4. If you want to inspect or obtain certified copies of any
document filed along with the Prospectus of any company after fourteen days
from the date of publication of that prospectus, then do the following [Section
610(1), Proviso]:
(i) Apply to the concerned Regional Director (Central Government
has delegated this power vide GSR 288(E), dated 31‑5‑1991)
requesting for permission to do so;
(ii) Makethe application in the form of a letter (as there is no
prescribed form for this) preferably in the letter head of the company stating
detailed reasons for making such inspection or obtaining certified copies of
the documents and also reasons for doing it after fourteen days of the
publication of the Prospectus;
(iii) Enclose the receipted treasury challan or demand draft
evidencing payment of requisite application fee as prescribed by the Companies
(Fees on Applications) Rules, 1999 to the above application;
(iv) On receipt of the permission from the Regional Director,
approach the concerned Registrar of Companies along with certified true copy of
the approval letter and then inspect or take copies of documents after paying
the fee as required to be paid under Section 610(1)(a) and (b).
5. No process for compelling the production of the document, kept
by the Registrar of Companies shall issue from any Court or the Company Law
Board except with the leave of that court or the Company Law Board and any such
process, if issued, shall bear thereon a statement that it is issued with the
leave of the Court or the Company Law Board [Section 610(2)].
6. If the application fee as mentioned in item 4(iii) is paid
by way of treasury challan, then pay the requisite application fee in cash into
any of the specified branches of the Punjab National Bank through a challan,
three copies of which obtained from the said branch of the bank for credit.
7. The description of the Head of account of the treasury
challan should be as prescribed under Rule 22(2) of the Companies (Central
Government's) General Rules. and Forms, 1956 and as amended vide GSR 251(E),
dated 21‑6‑1996 (w.e.f. 21‑6‑1996). For account head
and code please see Rule 22(2) in Appendix 1.
8. Two copies of the treasury challan will be given back to the
depositor out of which the original copy should be attached to the application.
9. If the application fee as mentioned in item 4(iii) is paid
through demand draft, then draw the demand draft in favour of "Pay and
Accounts Officer, Department of Company Affairs, New Delhi or Mumbai or Kolkata
or Chennai", and payable at any bank located in New Delhi or Mumbai or
Kolkata or Chennai as the case may be depending on the jurisdiction of the
Regional Director of the region in which the registered office of the company
is located and the said demand draft should be attached to the application.
10. In any other case for obtaining certified copies of documents
and paper taken on record by the Registrar of Companies, you have to provide
required number of non‑judicial stamp papers depending on the number of
copies you are obtaining to the Registrar of Companies.
11. Note that as per the Citizen's Charter of the Department of
Company Affairs, Schedule II Serial No. 9, the said application made to the
Regional Director will be processed within 7 days. [File No. 5/25/99‑CL‑V;
Press Note No. 9/99, dated 9‑8‑1999].
F. SEEKING
OF RELIEF BY A PRIVATE COMPANY
[Topic 292]
Topic 292
1. Please note that if you are a private limited company and
subject to any one of the following defaults, namely:
(i) Removal
of restriction on the right to transfer shares; or
(ii) Induction of number of members to more than fifty (excluding
existing and past employees); or
(iii) Invitation
to public to subscribe for any shares in or debentures of the company,
then you will lose all the privileges of a private
limited company given by or under the Companies Act, 1956 and you will be
treated as a public limited company for all practical purposes. [Section 43].
2. If
you want to seek relief from accidental default on the above counts, then do
the following:
(i) Make an application to the Company Law Board by way of a
petition to be prepared in Form No. 1 in Annexure II of the Company Law Board
Regulations, 1991.
(ii) Address the forwarding letter to the petition to the Bench
Officer, Company Law Board, Northern Region Bench, New Delhi or Eastem Region
Bench, Kolkata, or Western Region Bench, Murnbai or Southern Region Bench,
Chennai, as the case may be depending on the jurisdiction of the particular
Bench on the situation of the registered office of the company, whose shares
are involved. [Regulation 7(2) read with Annexure I of the Company Law Board
Regulations, 1991].
(iii) The
following will be enclosed to the petition:
(a) Certified true copy of the Memorandum and Articles of
Association of the company.
(b) Certified true copies of documents showing that the default
has been committed in complying with the conditions laid down in clause (iii)
of sub‑section (1) of section 3.
(c) Affidavit verifying the petition which should be prepared on
non‑judicial stamp paper of the requisite value prevalent in the State
and should be either notarised by the Notary Public or sworn before the Oath
Commissioner.
(d) Demand
Draft evidencing payment of the fee of Rs. 200/-.
(e) Memorandum of Appearance in Form No. 5 of the Company Law
Board Regulations, 1991, with a certified true copy of the Board Regulation or
the executed Vakalatnama as the case may be.
3. See that the affidavit is drawn up in the first person and
states the full name, age, occupation and complete residential address of the
deponent and is signed by the deponent. [Regulation 14(5) of the Company Law
Board Regulations, 1991].
4. If the deponent as mentioned above is not personally known
to the person before whom the affidavit'is sworn, he should then be identified
by a person who is known to the person before whom the affidavit is sworn.
[Regulation 14(6) of the Company Law Board Regulations, 1991].
5. See that the affidavit clearly and separately indicates
statements which are true to the knowledge of the deponents' information
received by the deponent, belief of the deponent and information based on legal
advice. [Regulation 14(7) of the Company Law Board Regulations, 1991].
6. Where any statement is stated to be due to the information
received by the deponent, the affidavit should also include the name and
complete residential address of the person from whom the deponent believes that
information to be true. [Regulation 14(8) of the Company Law Board Regulations,
1991].
7. Please ensure that the aforesaid petition is written,
typewritten, cyclostyled or printed, neatly and legibly on one side of the
substantial paper of foolscap size in double and separate sheets shall be
stitched together and every page consecutively numbered. [Regulations 11(1) of
the Company Law Board Regulations, 1991].
8. See that the number and dates specified in the petition are
expressed in figures as well as in words. [Regulations 11(2) of the Company Law
Board Regulations, 1991].
9. The petition should be divided into separate paragraphs
which should be numbered serially and shall state thereon, the matter and the
name of the company to which it relates. [Reguation 12 of the Company Law
Board.Regulations, 1991].
10. Affix
Court fee stamp of the requisite value4 on the petition before sub mission.
11. Please ensure that the aforesaid petition is presented either
by the petitioner or through the authorised representative of the petitioner
whether an individual or a company in person to the office of the concerned
Bench or sent by registered post with acknowledgement due addressed to the
Bench Officer of the concerned Bench, in original and two extra copies thereof
[Regulation 14(1) of the Company Law Board Regulation, 1991].
12. Pay the filing fee of Rs. 200/‑ as per Rule 3 read with
Rules 4 and 5 of the Company Law Board (Fees on Applications and Petitions)
Rules, 1991 by way of demand draft drawn in favour of Pay and Accounts Officer,
Department of Company Affairs, New Delhi or Calcutta or Mumbai or Chennai.
13. On receipt of certified copy of the order of the Company Law
Board, be satisfied that your company is relieved from the consequences of
unable to enjoy the privileges of a private company.
G.
MEMBERSHIP OF HOLDING COMPANY
[Topic 293]
Topic 293
DO YOU WISH YOUR COMPANY TO BE A MEMBER
OF ITS HOLDING COMPANY?
1. Please note that a subsidiary company is prohibited from
becoming a member of its own holding company. [Section 42(1)].
2. Please also note that if by inadvertence, the subsidiary
company has been allotted shares by its holding company, such allotment will be
totally void.
3. If you want to make your subsidiary company a member or
shareholder of its holding company, then do the following:
(i) Make your subsidiary company to hold shares in its holding
company in trust for any other member or members.
(ii) See that the holding company or any other subsidiary of it
does not have beneficial interest in the shares held in trust by your
subsidiary company, except by way of security for the purpose of a transaction
entered into in the ordinary course of a business.
4. Instead
of adopting the procedure in item 3 above, you can also:
(i) Hold the shares of a particular company in the name of your
own company which is not yet a subsidiary of that other company and become its
member;
(ii) After becoming a member of that company, make your company a
subsidiary of that other company by applying the provisions of Section 4;
(iii) Do not exercise voting power in the
meeting of the holdings company. [Section 420].
5. In order to
enjoy both the membership and the voting rights in your holding company, you
can do the following:
(i) Hold the
shares of any other company (to become holding company afterwards) not in the
name of your own company but as a trustee of some other persons;
(ii) See that
the other company whose shares are held by company in trust or any other
subsidiary of that company does not have beneficial interest under the trust;
(iii) After
becoming a member of that company, make your company a subsidiary of that other
company (now becoming the holding company) by applying the provisions of
Section 4. [Section 42(2)(b) and (3)].
6. If your
subsidiary company is, or becomes a legal representative of any deceased member
of your holding company, then your company can become member of your holding
company and can also enjoy voting rights. [Section 42(2)(a)].
H.
PRIVILEGES OF GOVERNMENT COMPANY
[Topic 294]
Topic 294
DO YOU WISH TO VERIFY THE PRIVILEGES
ENJOYED BY GOVERNMENT COMPANIES? [SECTIONS 617 & 620]
1. Please
note that:
(a) A Government company, that is, a company in which not less
than fifty‑one per cent or more of the paid‑up share capital is
held by the Central Government or by one or more State Governments or together,
is eligible to certain privileges by way of exemption from any modifications in
the Act. A subsidiary of a Government company is also a Government company;
(b) The Central Government has already directed, by a series of
Gazette Notifications that some of the provisions of the Act shall not apply to
any Government company or shall apply to it only with such exceptions,
modifications and adaptations as are specified in the notifications. [Section
620(1)];
(c) Provisions of Sections 618, 619 and 619A, relating to
prohibition of appointment of managing agents, audit and auditors and
preparation and submission of Annual Report cannot be modified or dispensed
with by Gazette Notification. [Section 620(1)].
2. The
various modifications notified so far in relation to Government companies are:
(i) Requirements with respect to Memorandum of Association
[Section 13(1)(a)]‑ A Government company is not required to use the
words "Limited" or the words "Private Limited" as last word
or words as part of its name. [GSR No. 1234, dated 30‑12‑1958];
(ii) Change of name [Section 21]‑ A Government
company is not required to pass a Special Resolution or take the approval of
the Central Government if the change in name consists only in the deletion of
the word 'Private' from its name. [GSR No. 1649, dated 13‑11‑1965]';
(iii) Registration of change of name [Section 23]‑ If
the change in the name of a Government company is only the deletion of the word
'Private' from the existing name, ' then, the Registrar, on being informed
within three months from the change, will make necessary alterations in the
Certificate of Incorporation already issued to the company and need not issue a
fresh Certificate of Incorporation as in other cases. [GSR No. 1649, dated 13‑11‑1965];
(iv) Reduction of capital [Sections 100 to 103]‑ If a
Government company wants to reduce capital, then it has to apply to the Central
Government and not to the Court for confirming the proposed reduction of share
capital and it has to produce such confirmation order of the Central Government
before the concerned Registrar for registration. The Government company has to
publish the notice of registration in such manner as the Central Government
(not the Court) may direct. The procedure for reduction of share capital of a
Government company is the same as in Topic 37 except that wherever the word
'Court' is mentioned, it should be read as 'Central Government'. [GSR No. 238,
dated 2‑2‑1978];
(v) Annual General Meeting [Section 166(1) second proviso and
section 166(2)]‑ For a Government company for the word
"Registrar" used in second proviso to sub‑section (1) the words
"the Central Government" shall be substituted and in sub‑section
(2) for the words, "some other place within the city, town or village in
which the registered office of the company is situated" the words
"such other place as the Central Government may approve in this behalf'
shall be substituted. [GSR No. 1473, dated 16‑12‑1961];
(vi) Books of Account to be kept by company [Section 209(3)(b)]‑
The provisions of clause (b) of Sub‑section 93 of Section 209 will
not apply to any Government company engaged in the promotion and development of
industries, to the extent it relates to income from
(a) interest
on seed money loans or bridge loans;
(b) interest on instalments due on the cost of industrial plots
or sheds allotted to entrepreneurs;
(c) Claims from the Central Government or State Government in
relation to special rebate on the sale of Handloorn clothes as declared by the
Ministry of Textiles (Office of the Development Commissioner for Handloom) from
time to time as a special measure for boosting the sale of handloom clothes
produced in different parts of the country:
Provided that such accrued income, which is not
accounted for in the books of account, is disclosed by way of a note in the
company's annual accounts. [GSR No. 770(E), dated 10‑9‑1990];
(vii) Board's Report [Section 217(1)(e)]‑ The provisions
of the said clause read with the Companies (Disclosure of Particulars in the
Report of Board of Directors) Rules, 1988, framed thereunder shall not apply to
Hindustan Aeronautics Limited, Bangalore, which is a Government company. [GSR
No. 769(E), dated 10‑9‑1990];
(viii) Loan to companies [Section 370]‑ A Goverrunent
company can give loan to any other Government company without any restriction
mentioned in section 370 provided that the entire share capital of both the
lending Government company and the other Government company is held by the
Central Government and its nominees or a State Government and its nominees. The
only thing the Government company is required to do for giving any loan or
guarantee or providing any security to any company under Section 370 is to take
the permission of the Administrative Ministry which is in charge of the
Government company. [GSR No. 309, dated 20‑2‑1978]; This exemption
was given under section 370 which has ceased to be effective from 31‑10‑1998
with the commencement of the Companies (Amendment) Act, 1999, dated 12‑3‑1999.
Exemption afresh has to be given under the new section 362A inserted by the
said Amendment Act.
(ix) Offences against act to be cognizable only on the complaint
of the company or authorised person of the Central Government, compromise or
arrangement with creditors and members [Section 391]‑ For making a
compromise or arrangement, no appeal will lie from the order of the Central
Government with the creditors or members of the Government company. It is to
apply to the Central Government for the required meeting and also for
sanctioning the compromise or arrangement approved by the creditors or members
and not to the Court. The Government company must also file a certified copy of
the order of the Central Government with the concerned Registrar. The procedure
for making compromise or arrangement with the creditors/debtors of the
Government company will be the same except that wherever Court is mentioned, it
should be read as the Central Government. [GSR No. 238, dated 2‑2‑1978];
(x) Power of High Court to enforce compromise and arrangements
[Section 392]‑ For a Government company, the Central Government and
not the High Court will have the power to supervise the carrying out of
compromise or arrangement ordered by it and also to make modification and
directions r6garding any matter relating to it. [GSR No. 238, dated 2‑2‑1978];
(xi) Facilitating, reconstruction and amalgamation of Government
companies [Section 394]‑ For reconstruction and amalgamation of
Government companies as a result of compromise or arrangement with the
creditors or members of the Goverment company, the Central Government and not
the Court has the power to sanction such proposed reconstruction and
amalgamation by an order. [GSR No. 238, dated 2‑2‑1978];
(xii) Offences against act to be cognizable only on complaint by
Registrar, shareholder or Government [Section 621(1)]‑ ln Sub‑section
(1) the words "the Registrar or of a shareholder of the company"
shall be omitted for the purpose of Government companies [GSR No. 236, dated 31‑1‑1978].
3. The various exemptions allowed to Government companies by
Gazette Notifications are the following:-
(i) Private company to become public company in certain cases
[Section 43A]‑ A private company which is also a Government company
and whose entire paid‑up share capital is held by the Central Government
or any State Government or Governments, then it will not become a deemed public
company on the happening of the following:
(a) twenty‑five per cent or more of the paid‑up share
capital of the private company is held by one or more bodies corporate. [Section
43A(1)];
(b) average annual tum‑over of the private company during
the relevant period (three consecutive financial years) is rupees one crore or
more. [Section 43A(1A)];
(c) twenty‑five per cent or more of the paid‑up share
capital of a public company is held by the private company in question.
[Section 43A(1B)]. [GSR No. 577(E), dated 16‑7‑1985];
(ii) Transfer of shares not to be registered except on
production of instrument of transfer [Section 108]‑ A Government
company is not required to register transfer of shares on production of the
instrument of transfer in the prescribed Form [Form No. 7B] in respect of
shares held by nominees of Government. [GSR No. 579(E), dated 167‑1985];
(iii) Restrictions on commencement of business of a public
company in relation to any item falling under other objects in the Memorandum
of Association [Section 149(2A)]‑ A Government company whose entire
paid‑up share capital is held by the Central Government or any State
Government or State Governments, then it need not pass a Special Resolution and
file a declaration with the Registrar if it wants to commence any business
falling under other objects of the Memorandum of Association. [GSR No. 577(E),
dated 16‑7‑1985];
(iv) Statutory meeting and statutory report [Section 165]‑
A Government company which is also a public company is not required to hold
a statutory meeting and to file a statutory report. [GSR No. 578(E), dated 16‑7‑1985];
(v) Declaration by persons not holding beneficial interest in
any share [Section 187C]‑ Govemment companies are exempted from
following the provisions of Section 187C, that is, they are not required to
give declaration of holding beneficial interest in any share in the prescribed
form within thirty days. ‑ [GSR No. 232, dated 31‑1‑1978];
(vi) Investigation of beneficial ownership of shares in certain
cases [Section 187D]‑ A Government company will not be subject to
appointment of Inspectors by the Central Government to investigate and report
on the fulfillment of the filing of necessary declaration of holding beneficial
interest in any share under Section 187C. [GSR No. 578(E), dated 16‑7‑1985];
(vii) Maximum managerial remuneration and managerial remuneration
in case of absence or inadequacy of profits [Section 198]- Government
companies are exempted from following the restrictions of paying maximum
remuneration of eleven per cent of net profits of company in a financial year
to all managerial personnel. They are also exempted from following the
condition of paying Rs. 50,000 to their directors with the approval of the
Central Government in case of inadequacy of profits. [GSR No. 235, dated 31‑1‑1978];
(viii) Unpaid dividend to be transferred to special dividend
account [Section 205A]‑ Govemment companies whose entire paid‑up
share capital is held by the Central Government or by any State Government(s),
are exempted from following the provisions of Section 205A regarding transfer
of dividends to special dividend account after the expiry of forty‑two
days from the date of declaration of dividend, and also from the restrictions
of declaring dividend out of reserves in case of inadequacy or absence of
profits. [GSR No. 580(E), dated 16‑7-1985].
(ix) Payment of unpaid or unclaimed dividend from 'the General
Revenue Account of the Central Government [Section 205B]‑ A
Government company, whose entire paid‑up share capital is held by the
Central Government or by any State Government or Governments, if a person wants
to claim any unpaid dividend need not apply to the Central Government but to
such Government company directly. (GSR No. 577(E), dated 16‑7‑1985];
(x) Appointment of directors, ascertainment of the preparation
of directors to retire by rotation in every Annual General Meeting and persons
entitled to stand for directorship [Sections 255, 256 & 257]‑ Govemment
companies, whose entire paid‑up share capital is held by the Central
Government or by any State Government or partly by the Central Government and
partly by one or more State Governments and subsidiaries of such Government
companies, whose entire paid‑up share capital is held by the holding
Government companies, are exempted from the following provisions ofi
(a) appointment
of directors in General Meeting;
(b) retirement of one‑third of directors out of two‑thirds
of directors retiring by rotation; and
(c) right to persons other than retiring directors to stand for
directorship. [GSR No. 906, dated 30‑ 7‑1981].
(xi) Increase in number of directors [Section 259]‑
Government companies which are public companies and their subsidiaries do not
require to take the number beyond twelve. [GSR No. 235, dated 31‑1‑1978];
(xii) Appointment of directors to be voted on individually [Section
263]‑ A Government company whose entire paid‑up share capital is
held by the Central Government or any State Government or Governments, then
such Government company can make a motion for appointment of two or more
directors by a single resolution with passing any prior Board resolution
stating that such an action will be taken unanimously. [GSR No. 577(E), dated
16‑7‑1985];
(xiii) Consent of candidate for directorship to be filed with the
company and consent to act as director to be riled with the Registrar [Section
264]‑ In a Government company, whose entire paid‑up share
capital is held by the Central Government or any State Government or
Governments, directors are not required to file with the company their consent
in writing to act as directors if appointed and also not required to file a
consent with the Registrar within thirty days of their appointment in Form No.
29. [GSR No. 577(E), dated 16‑7‑1985];
(xiv) Option to adopt proportional representation for the
appointment of directors [Section 265]‑ A Government company, whose
entire paid‑up share capital is held by the Central Government or by any
State Government or Governments cannot provide in its Articles the appointment
of directors by proportional representation. [GSR No. 577(E), dated 16‑7‑1985];
(xv) Restrictions on appointment or advertisement of a director
[Section 266]‑ A Government company, whose entire paid‑up share
capital is held by the Central Government or by any State Government or
Governments is not required to follow the provisions of filing a consent in
writing with the Registrar for appointing any of its directors by the Articles
or for giving the names of directors or proposed directors in the Prospectus or
statement in lieu of Prospectus before the registration of Articles and before
publication of Prospectus and before filing statement in lieu of Prospectus.
[GSR No. 577(E), dated 16‑7‑1985];
(xvi) Amendment of provision relating to the appointment, re‑appointment
of whole‑time or non‑rotational directors [Section 268]- All
Government companies which are public companies and their subsidiaries do not
have to take approval of the Central Government for amending any provision
relating to the appointment or re‑appointment of the managing, whole‑time
or non‑rotational directors. [GSR No. 235, dated 31‑1‑1978];
(xvii) Appointment or re‑appointment of managing or whole‑time
director or manager [Sections 269 & 388]‑ All Government
companies which are public companies and their subsidiaries do not require to
take the approval of the Central Government for appointing or reappointing
their managing directors or whole‑time directors or managers. [GSR No.
235, dated 31‑1‑1978];
(xviii) Appointment of sole selling agents [Section 294]‑ A
Government company is not required to take the approval of the company in a
General Meeting for appointing sole selling agents for any area and may also
appoint such a sole selling agent for a term exceeding five years. [GSR No.
578(E), dated 16‑7‑1985];
(xix) Power of Central Government to prohibit the appointment of
sole selling agents in certain cases [Section 294AA(2) & (3)]‑ A
Govemment company is not required to take previous approval of the Central
Government for appointing any individual, body corporate or firm having
substantial interest in that Government company as sole selling agent. A
Government company, whose paid‑up share capital is Rs. 50 lakhs or more
is not required to appoint sole selling agents by passing Special Resolution
and taking approval of the Central Govemment. [GSR No. 578(E), dated 16‑7‑1985];
(xx) Loans to directors [Section 295]‑ A Government
company is not required to take previous approval of the Central Government for
making any loan, or giving any guarantee or providing any security in
connection with a loan to any directors of the company, to any firm in which
any director is a relative or partner, to any private company in which any
director is a director or member. Only thing the Government company is to do
for this is to take the permission of the Administrative Ministry which is in
charge of it. [GSR No. 581(E), dated 16‑7‑1985];
(xxi) Entering into contracts in which directors are interested
[Section 297]‑ All Government companies are exempted from taking
previous appyoval of the Central Government and consent of their Board of
Directors in respect of contracts entered into by them with any other
Government company. [GSR No. 233, dated 31‑1‑1978];
(xxii) Register of directors' shareholding [Section 307]‑
A Government company, whose entire paid‑up share capital is held by the
Central Government or by any State Government or Governments is not required to
keep a register showing the number, description and amount of any shares/debentures
held by the company's directors of the company itself or any other body
corporate. [GSR No. 577(E), dated 16‑7-1985];
(xxiii) Duty of directors and persons deemed to be directors to make
disclosure of shareholdings [Section 308]‑ The directors of a
Government company, whose entire paid‑up share capital is held by the
Central Government or by any State Government or Governments are not required
to give notice in writing to the company about their shareholding and such
notice is not required to be given at a Board Meeting or to be read at a Board
Meeting. [GSR No. 577(E), dated 167‑1985];
(xxiv) Determination and payment of remuneration to directors
[Section 309]‑ All Government companies which are public companies or
their subsidiaries are exempted from determining and paying remuneration to
directors in accordance with the restrictions and conditions of section 309. No
Central Government approval is necessary for paying remuneration to them in
excess of five per cent or ten per cent of net profits in case of managing or
whole‑time director and one per cent or three per cent of net profits in
case of other directors. [GSR No. 235, dated 31‑1‑1978];
(xxv) Increase in remuneration of directors and managers [Sections
310, 311 & 388]‑ All Government companies which are public
companies or their subsidiaries do not require to take approval of the Central
Government for increasing the remuneration of manager or directors including
managing or whole‑time director ordinarily and for increasing the
remuneration of managing or whole‑time director or manager on appointment
or re‑appointment. [GSR No. 235, dated 31-1‑1978];
(xxvi) Number of companies of which one person may be appointed
managing director/manager [Sections 316 & 386*]‑ A Government
company, whose entire paid up share capital is held by the Central Government
or any State Government or State Governments may appoint or employ any person
as the managing director/manager of the company who is already a managing
director or manager of more than one company. [GSR No. 577(E), dated 16‑7‑1985];
(xxvii) Managing director not to be appointed for more than rive years
at a time [Section 317]‑ A Government company whose entirentire paid‑up
share capital is held by the Central Government or any State Government or
Governments can appoint its managing director for more than five years at a
time. [GSR No. 577(E), dated 16‑7‑1985];
(xxviii) Purchase by company of shares etc. of other companies‑[Section
372],‑ Provisions of this section will not apply to any company established
with the object of financing where a State Government has made or agreed to
make, to the company a special advance for the purpose of making loans or
advances to or subscribing to the capital of
private industrial enterprises in India. [GSR No.
990, dated 9‑8‑1975]; This exemption was given under section 372
which has ceased to be effective from 31‑10‑1998 with the
commencement of the Companies (Amendment) Act, 1999, dated 12‑3‑1999.
Exemption afresh has to be given under the new section 372A inserted by the
said Amendment Act.
(xxix) Remuneration of manager [Section 387]‑ All
Government companies are exempted from taking previous approval of the Central
Government for paying remuneration to their managers in excess of five per cent
of net profits. [GSR No. 235, dated 31‑1‑1978].
I. PRE‑INCORPORATION CONTRACTS
[Topic 295]
Topic 295
DO
YOU WISH TO ADOPT PRE‑INCORPORATION CONTRACTS?
1. See that the power to enter into and adopt pre‑incorporation
contracts is given in the objects, incidental or ancillary to the attainment of
the main objects clause of the Memorandum of Association of the company.
2. See that the Articles of Association of your company also
give power to the directors to adopt such pre‑incorporation contract in
the Board Meeting.
3. Prepare a statement of the pre‑incorporational
contracts giving the amount involved in each contract separately.
4. After obtaining Certificate of Incorporation of your
company, convene a Board Meeting after giving notice to all the directors of
the company as per section 286 (being the First Board Meeting) and place the
statement prepared as in item 3 above before the Board Meeting.
5. Please keep in mind that every officer of the company whose
duty is to give notice of the Board Meeting as aforesaid and who fails to do so
will be punishable with fine of up to Rs. 1000/‑. [Section 286(2)].
6. See that the statement is initialled by the Chairman of the
Board Meeting and then pass a resolution adopting the pre‑incorporation
contract.
7. If your company is a public company, then file a certified
true copy of the above Board Resolution with the concerned Registrar of
Companies along with the Statement in lieu of Prospectus for obtaining
certificate of commencement of business under section 149(2) of the Companies
Act, 1956.
8. Please also keep in mind that if your company commences
business or exercises borrowing powers in contravention of section 149, then
every person who is responsible for the contravention will without prejudice to
any other liability be punishable with fine upto Rs. 5,000/- for every day
during which the contravention continues. [Section 149(6)].
9. In case of public company, any contract made before
obtaining certificate of commencement of business but after incorporation shall
be only provisional and such contract will only be binding on the company on
the date the company obtains certificate of commencement of business. [Section
149(4)].,
10. For a detailed study on the subjects "Pre‑incorporation
Contracts binding on the persons who make them" and how to make "Pre‑incorporation
Contracts binding" refer "A. RAMAIYA's GUIDE TO THE COMPANIES ACT,
15th Edition, 2001, page 475, S. 46 et. seq.
[Topic 296]
Topic 296
1. Your company itself or the officer or officers in default
should make an application on plain paper (there is no prescribed form)
preferably on the letter head of the company to the concerned Registrar of
Companies in duplicate specifying therein clearly the nature of offence, the
date or period during which the offence was committed or continued, the name
and address of officers of the company who have committed the offence and the
prayer made. [Regulation 40(1) of the Company Law Board Regulations, 1991 read
with Section 621‑A(1)(a)].,
2. No
fee is required to be paid to the Registrar of Companies along with the
aforesaid application.
3. The concerned Registrar of Companies will forward the
application together with his comments thereon to the concerned Regional Bench
of the Company Law Board within whose jurisdictiont the registered office of
the company is situated.
4. Note that as per the Citizen's Charter of the Department of
Company Affairs, Schedule III, Serial No. 12, the said report by the Registrar
of Companies will be sent to the Regional Bench of the Company Law Board within
30 days. [File No. 5/25/99‑CL‑V; Press Note No. 9/99, dated 9‑8‑1999].
5. The concerned Regional Bench of the Company Law Board on
scrutiny of the said application from the Registrar of Companies, give to the
company a notice of hearing.
6. The company's authorised representative will attend the
hearing of the application, on receipt of the notice and explain the reasons
for committing the offence and pray for compounding of the offence on payment
of a reasonable cost.
7. Please ensure that the aforesaid application$ is made to the
Regional Director of the concerned region where the registered office of the
company is situated, if the maximum amount of fine which may be imposed for the
offence committed, does not exceed Rs. 50,000/‑. [Section 621A(1)(b),
2(b) and (3)].
8. Please ensure that offence for which application for compounding
is made is an offence punishable with fine or imprisonment or both.
9. Please also ensure that the offence for which application
for compounding is made is not an offence punishable with imprisonment only or
with imprisonment and also with fine. [Section 621A(1)].
10. On obtaining the order of the Regional Bench of the Company
Law Board or the Regional Director as the case may be follow the directions
given in the order and make the payment fixed after compounding the offence, by
way of demand draft favouring "Pay and Accounts Officer, Department of
Company Affairs, New Delhi or Kolkatta or Mumbai or Chennai as the case may be
depending on the Regional Bench of the Company Law Board or the Regional
Director of the region, and payable at, New Delhi or Kolkata or Murnbai or
Chermai. For payment of application fee by way of demand draft to the Regional
Director, Northern Region, Kanpur, draw the demand draft in favour of
"Regional Director, N.R. Department of Company Affairs, Kanpur."
11. In case prosecution is pending before the court, it is open
to the company and officers in default being prosecuted to make an application
for compounding and after the offence is so compounded, the court shall
discharge the company/its officers, as the case may be.
12. While compounding the offence, the Company Law Board/Regional
Director, may direct any officer of the company to file a return or other
document(s) in question within such time, as may be specified in the order and
noncompliance of the order shall be punishable offence.
13. Compounding of an offence does not amount to conviction by a
court of law and the prohibition contained in paragraph 1(a) in Schedule XIII of the
Act does not apply.
14. It is open to the Company Law Board/Regional Director to compound
more than one offence under one charging section at a time and from the date of
such compounding, a similar offence committed subsequent to the date of
compounding of this first offence, cannot be compounded within a period of
three years from that date.
15. In the case of the company, the composition fee shall be paid
from its funds. Directors/officers in default shall pay the composition fee
from their personal funds.
16. Note that if your company's paid‑up share capital is
less than Rs. 50 lakhs but is equal to or more than Rs. 10 lakhs, your company
is required to obtain a Compliance Certificate from a secretary in whole‑time
practice to be filed with the Registrar of Companies attaching thereto a list
of prosecution if any initiated against or show cause notices received by the
company for alleged offences under the Act and also the fines and penalties or
any other punishment imposed on the company in such cases as per paragraph 31
of the Form of Compliance Certificate appended to the Companies (Compliance
Certificate), Rules, 2001.[Section 383‑A(1) proviso].
17. Further note that if your company is under liquidation even
then there is no legal bar for composition of an offence under section 621A
provided the conditions specified in that section and guidelines if any are
fulfilled and the provisions of section 146 does not bar criminal proceedings
against the directors of the company for any offence committed under the
Companies Act, 1956 and the offences are compoundable under section 621A. [General
Circular No. 6/2002, dated 6‑3‑2002]
[Topic 297]
Topic 297
1. Check up with the Office of the concerned Registrar of
Companies of the State or the Union Territory in which the registered office of
your company is situated to find out whether any of the documents filed with it
is found to be defective or incomplete in any respect.
2. Rectify the defect, if there is any, or complete the
document if any one of them is incomplete by going to the concerned Additional
or Assistant Registrar of Companies, who is in‑charge of your Company as
per the registration number of your company.
3. The concerned Registrar of Companies can on its own, after
scrutiny of the documents intimate your company to come to its office and
rectify or complete the incomplete documents filed with it before it can record
or register those documents.
4. Please ensure that official who will visit the office of the
concerned Registrar of Companies' and rectify or complete the documents
required to be rectified and completed, should be either a principal officer of
the company as per section 2(30) for whom Form No. 32 in duplicate is filed by
your company or any other person authorised to do so by a duly executed power
of attorney.
5. Ensure that the power of attorney is prepared on a non‑judicial
stamp paper of the requisite value and executed by the signatory of the document
which is to be rectified and duly notarised by the Notary Public or sworn
before the Oath Commissioner.
6. No fee is required for rectification or correction of any
document filed with the Registrar of Companies.
7. Board
Resolution should not be insisted upon for appointing a power of attorney.
L. INSPECTION/CERTIFIED COPIES OF DOCUMENTS
[Topic 298]
Topic 298
1. Visit the office of the Registrar of Companies along with an
application in the form of a letter mentioning therein the fee of rupees fifty
in cash. [Section 610(1)(a) read with Regulation 25(1) of the Companies
Regulations, 1956, read with Rule 21A of the Companies (Central Government's)
General Rules and Forms, 1956].
2. The applicant will only be permitted to inspect the
documents specified in the application only in the presence of a person
authorised by him in this behalf and only during office hours that is between
10.30 AM and 3.30 PM. [Regulation 25(2) read with Regulation 15 of the
Companies Regulations, 1956].
3. Please ensure that the principal officer of your company or
the person authorised by a duly executed power of attorney to do the inspection
does not make a verbatim copy of the documents inspected, but he may take notes
in respect of the contents of the documents inspected only by using a pencil.
[Regulation 25(3) of the Companies Regulations, 1956].
4. If you want to obtain certified copies of any document, from
the Registrar of Companies, please go to the office of the Registrar of
Companies and give in writing the documents of which the certified copies are
wanted and mention therein the name of the company certified copies of whose
documents are wanted and its registration number, along with a fee of requisite
amount in cash to be determined on the basis of Rs. 5/‑ per page of the
document.
5. In case of obtaining certified copy of Certificate of
Incorporation of any company then the requisite fee is Rs. 50/- per copy.
[Section 610(1)(b) read with Rule 21A(8)(ii) of the Companies (Central
Government's) General Rules & Forms, 1956].
6. For obtaining certified copies of any document a non‑judicial
stamp paper of the requisite value should also be submitted to the office of
the Registrar of Companies along with the fee mentioned above.
7. Ensure that court fee stamp of the requisite value is
affixed on the letter asking for certified true copies.
[Topic 299]
Topic 299
DO
YOU WISH TO APPLY FOR CREDIT RATING?
1. Check
whether your company is likely to issue one or any combination of the following
:-
(a) commercial
paper;
(b) fixed
deposit;
(c) non‑convertible
debentures;
(d) preference
shares;
(e) fully
convertible debentures to be converted before eighteen months of theissue;
(f) partly
convertible debentures maturing before eighteen months of the issue;
(g) bonds.
2. If yes, then make an application to one of the following
four credit rating agencies in the prescribed format supplied by the concerned
agency to whom the application is made:
(i) Credit
Rating Information Services of India Limited (CRISIL);
(ii) Investment
Information and Credit Rating Agency of India Limited (ICRA);
(iii) Credit
Analysis and Research Limited (CARE).
(iv) FITCH
Credit Ratings India Private Ltd.
3. The said application should be accompanied by the required
fee as prescribed by the concerned Credit Rating Agency either by way of
cheque or demand draft.
4. Before
making the application to the credit rating agency do the following:
(a) pass a Board Resolution allowing you to make an application
to the credit rating agency and enter into a written agreement;
(b) pass a Board Resolution authorising one of the directors of
the company or the secretary of the company to make the application and to do
any act or deed as may be necessary to obtain the credit rating certificate
from the credit rating agency.
5. Ensure
that the said written agreement include the following provisions
(i) the rights and liabilities of each party in respect of the
rating of securities should be defined;
(ii) the
fee to be charged by the credit rating agency should be specified;
(iii) your company should agree to a periodic review of the rating
by the credit rating agency during the tenure of the rated instrument;
(iv) your company should agree to co‑operate with the credit
rating agency in order to enable the latter to arrived at and maintain true and
accurate rating of your company's securities and should in particular provide
to the later, true, adequate and timely information for the purpose;
(v) the credit rating agency should disclose to your company the
rating assigned to the securities of your company through regular methods of
dissemination, irrespective of whether the rating is or is not accepted by your
company;
(vi) your
company should agree to disclose in the offer document
(a) the rating assigned to your company's listed securities by
any credit rating agency during the last 3 years, and
(b) any rating given in respect of your company's securities by
any other credit rating agency which has not been accepted by your company;
(vii) your company should agree to obtain a rating from at least two
different rating agencies for any issue of debt securities whose size is equal
to or exceeds, Rs. 100 crores. [Regulation 14 of SEBI (Credit Rating Agencies)
Regulations, 1999]
6. Furnish further information if asked by the analysts of the
concerned credit rating agency after perusal of the application submitted by
you.
7. Allow to have an inspection of your company's books and
records by the analysts of the concerned credit rating agency if they require
to do so before giving the rating.
8. In the aforesaid case, credit rating is compulsory, but one
can also make an application to any one of the credit rating agencies for
credit assessment of companies or undertakings intending to obtain financial
assistance from Commercial Banks, Financial Institution, Investment Institution,
Factoring Companies and Financial Service Companies, as such credit rating
helps the lender to judge the capability of the companies undertaking to repay
the interest and principal amount of loan provided.
9. An application can be made to one of the credit rating
agencies for general assessment by banks and other potential users such as non‑banking,
non‑financial agencies for the purposes of merger, amalgamation,
acquisition, joint venture, collaboration and factoring of debts.
10. Ensure that credit rating agency to whom your company has
applied for credit rating of any one or more of your securities or instruments
is holding a valid certificate of registration from SEBI under SEBI (Credit
Rating Agencies) Regulations, 1999.
[Topic 300]
Topic 300
1. Keep in mind that documents or papers required to be filed
with the Registrar of Companies within a specified time may be filed after the
expiry of that specified time on payment of such additional fee not exceeding
ten times the amount of the fee specified in Schedule X to the Act [Section
611(2)].
2. Check whether authorised share capital of your company is
within rupees one crore or above rupees one crore.
3. For delay in filing Form No. 5 relating to increase in
authorised share capital, upto one year, two per cent per month on the fee
payable under Schedule X, para I.3 or II.11 as the case may be.
4. For documents other than Form No. 5, in case of delay of one
month, one time normal filing fee as per Schedule X and in case of delay beyond
one month but upto three months, two times normal filing fee as per Schedule X
and in case of delay beyond three months and upto six months, four times the
normal filing fee as per Schedule X and in case of delay beyond six months,
upto one year, six times of normal filing fee as per Schedule X and in case of
delay beyond one year and upto two years, eight times of normal filing fee as
per Schedule X and in case of delay of more than two years, nine times of
normal filing fee as per Schedule X.
5. In respect of filing of particulars of charges and
modification of charges under Section 125/135 for delays upto thirty days, one
time normal filing fee as per Schedule X but if the delay is beyond thirty days
for filing particulars and modifications of charges and in case there is any
delay in filing of satisfaction of charges then condonation of delay
application has to be made to the concerned Regional Bench of the Company Law
Board under Section 141 vide Topic 205.
6. Ensure that additional fees are paid at the time of delayed
filing of the documents as specified above.
7. Please keep in mind that the levy of the above fixed rates
of additional fee will be regulated with effect from 1st May, 1995.
8. Note
that additional filing fee may either be paid in cash or by way of demand
draft or treasury challan.