Showing posts with label Company Law. Show all posts
Showing posts with label Company Law. Show all posts

Friday, March 5, 2021

Career as a Company Secretary



Appointment as Whole time Company Secretary

As per Section 203 read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Every private company which has a paid up share capital of ten crore rupees or more shall have a whole -time company secretary.

Company Secretary as Key Managerial Personnel (KMP)

Every listed company and every other public company having paid-up share capital of ten crore rupees or more is required to appoint the whole time Company Secretary as the Key Managerial Personnel.

Company Secretary as Compliance Officer:

 Under Regulation 6 of the SEBI (LODR) Regulations, 2015, a listed company is required to appoint a qualified company secretary as the compliance officer.

Company Secretary as a part of Senior Management

The senior management will also include chief executive officer/managing director/whole time director/manager and specifically include company secretary and chief financial officer.


Company Secretary as Secretarial Auditor Section 204 of the Companies Act, 2013 , following classes of companies are required to obtain Secretarial Audit Report from Company Secretary in practice and shall annex the same with its Board’s report

(b) Every public company having a paid-up share capital of 50 crore rupees or more; or;

(c) Every public company having a turnover of 250 crore rupees or more.

(d) Every company having loans or borrowings from banks or public financial institutions of one hundred crore rupees or more

Further, pursuant to Regulation 24A of the SEBI (LODR) Regulations, 2015, every listed entity and its material unlisted subsidiaries incorporated in India shall undertake Secretarial Audit and shall annex with its Annual Report, a Secretarial Audit Report, given by a Company Secretary in Practice,

Company Secretary as an Expert

Section 2(38) of the Companies Act, 2013 include the company secretaries as an expert

“Expert” includes an engineer, a valuer, a chartered accountant, a company secretary, a cost accountant and any other person who has the power or authority to issue a certificate in pursuance of any law.

Company Secretary as Registered Valuer

A Company Secretary in practice is recognized to be registered valuer for the asset class “Securities or Financial Assets” under the Companies (Registered Valuer and Valuation) Rules, 2017.

 Company Secretary as Insolvency Professional

A company secretary can become  Insolvency Professional if he has  passed Limited Insolvency Examination and has ten years of experience as  a company secretary enrolled as a member of ICSI.

Company Secretary as Internal Auditor

Company secretary in practice is authorized to undertake internal audit of:

  -Portfolio Managers

  - Stock Brokers/Clearing Members/ Trading Members

   -Credit Rating Agencies

  -Registrar and Share Transfer Agents (RTAs)

  -Internal Audit & Concurrent Audit of Depository Participants

Company Secretary as IPR Expert

The Company Secretaries can act as registered Trade Marks Agent and also advise their client on IPR matters

Advisory services:-

Corporate Laws Advisory Services extend beyond the boundaries of Companies Act, 2013 into the following laws and activities:

– SEBI Act, 1992

 – Securities Contracts (Regulation) Act and Rules and Regulations made thereunder

– Depositories Act

 – Foreign Exchange Management Act

– Environmental and Pollution Control Laws

– Labour and Industrial Laws

–Drafting of Legal Documents

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Tuesday, March 2, 2021

Company Law Quiz


Friday, February 12, 2021



The Ministry of Corporate Affairs, in it’s notification dated 1st February 2021, amended the definition of Small Company in the exercise of power conferred to Central Government vide sub-sections (1) and (2) of section 469 of the Companies Act, 2013. The Finance Minister in Union Budget 2021-2022 had proposed to modify the changes to increase the limit of Paid of share capital and Turnover of Small company.

Earlier the Paid up share capital of Small company was upto 50 Lakhs Rs and Turnover was upto Rs. 2 crores.

After amendment of Companies (Specification of Definitions Details) Amendment Rules, 2021:-

The limit of Paid up share capital has been increased upto 2 crore rupees and Turnover has been increased upto 20 crore Rupees.



After Amendment

Paid up share capital

Upto  50 Lakhs Rs.

Upto 2 crore Rs.


Upto 2 crores Rs.

Upto 20 crores Rs


When shall it come into force?

They above amendment rule shall come into force on the 1st day April, 2021.

What are the Effects of Amendment?

After Amendment of Companies (Specification of Definitions Details) Amendment Rules, 2021, The private Companies which were having Paid up share capital exceeding 50 Lakhs Rupees but less than 2 crore Rupees, and Turnover Exceeding 2 crore Rupees but less than 20 crore Rupees were not classified as Small Companies, but after the MCA notification, such companies now fall under the purview of Section. 2(85) of companies Act 2013. (Small company).

Now let us analyse the impacts of this Amendment:-

The exemption which were earlier available to private companies having PUSC upto 50 lakhs Rupees and turnover upto 2 crore Rupees will now be available to Private Companies whose PUSC is upto 2 Crore Rupees And Turnover upto 20 Crore Rupees.

Increasing the threshold Limit would allow more companies to take advantage of lesser compliance requirements.

Some of the Exemptions available to small companies are as follows:-

Board Meetings:-Small Company is required to hold only 2 Board meetings in a calendar year i.e. one board meeting in each half of the calendar year.

 Cash Flow Statements:- Cash flow statement is not required to be maintained by Small company as a part of its Financial Statements.

Annual Return:. The Annual Return of every Small Company shall be signed by the company secretary or where there is no company secretary by the director of the company.

Rotation of statutory auditors: The provision laid down in Section 139(2) of the Company Act 2013, , is not mandatory for small Company to comply with .

Internal Financial Controls: A small company is not required to report on internal financial monitoring and the company's operational effectiveness in the Audit report.

Remuneration details: – As per section 92 of companies Act, 2013 private companies are required to give a details of remuneration of directors and key managerial personnel , but in small companies only “aggregate amount of remuneration drawn by directors”  is required in annual return.

Lesser Penalties:-Lesser penalties for Small Companies under Section 446B of the Companies Act, 2013. 

Due to this Amendment, Large number of Private Companies can now take advantage of exemptions which will help them to focus more on business prospects thereby saving time from cumbersome procedures in compliance.

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Sunday, August 4, 2019

Buyback of Shares under Companies Act ,2013



Buyback is a mechanism that enables the company to approach the existing shareholders to  repurchase/buyback the shares they hold of the company.Compared to developed nations, buybacks is relatively a fresh idea in India and came simultaneously with introduction of buyback in other emerging markets.It was indeed a huge shift in corporate law because it gave Indian companies another window to restructure their capital requirements, allowing them to use capital more effectively.


S.68 of Companies Act deals with Buyback of Shares by company. This section corresponds to section 77A (Power of company to purchase its own  securities) of the 1956 Act with no changes except that the definition of free reserve has been modified and the penalty provisions has been enhanced.Unlike the provisions of section 67 which prohibits a company to buy-back its own  shares unless reduction of capital is effected, this section dilutes this general prohibition and allows a company whether public or private, to purchase its own shares or other specified securities out of following sources  according to Section 68(1) of the Companies Act, 2013:-

a)         Its free reserves; or
b)         The securities premium account; or
c)         The proceeds of any shares or other specified securities.
However, buy-back of any kind of shares or securities shall not be made out of the proceeds of an earlier issue of the same kind of shares or same kind of other specified securities.

a) Increase in Shareholder Value :-
  Buyback are beneficial to shareholders.The decrease in the number of shares leads to rise in           earning per share(EPS).Since earnings per share is calculated by dividing earnings by total number of outstanding shares, when the total number of shares decreases, earnings per share will increase.

b)  Improve return on Equity :-
  Since the company spends cash to repurchase the shares, the cash holdings in the balance sheet reduces . At the same time the buyback will also reduce shareholders ' equity by the same amount in liabilities side of balance sheet. As a result  subsequent to buyback the Return on Assets (ROA)  and  return on equity ROE( Return on Equity) also raises.

c)  Approval of NLCT /Court not required:-
It constitutes an alternative way to reduce capital without the court /NCLT’s approval.

d)  Provides Exit opportunity:-
Buyback provides investors with exit opportunity when stocks are undervalued or sparsely traded.


No company shall purchase its own shares or other specified  securities unless the following conditions are fulfilled [sub-section (2)].

a) its ARTICLES permit the buy-back ;

b) A SPECIAL RESOLUTION has been passed at a general meeting of the company  authorising the buy-back where the buy-back is 25% or less of the aggregate of paid-up capital and free reserves of the company.

BOARD RESOLUTION would authorize the buyback where the buy-back is 10 % or less of the total paid-up equity capital and free reserves of the company, a Board resolution would authorise such buy-back ; 

c)  the buy-back is 25% or less of the aggregate of paid-up capital and free reserves of the company ;Provided that in respect of the buy-back of equity shares in any financial year, the reference to 25% in this clause shall be construed with respect to its total paid-up equity capital in that financial year ;

d)  DEBT EQUITY RATIO 2:1 : the ratio of the aggregate of secured and unsecured debts owed by the company after buy-back is not more than twice the paid-up capital and its free reserves.

e) FULLY PAID UP SHARES : all the shares or other specified securities for buy-back are fully paid-up;

f)  the buy-back of the shares or other specified securities listed on any recognised  stock exchange is in accordance with the regulations made by SEBI.

g) The buyback in respect of shares or other specified securities not listed on any recognised stock exchange is in accordance Companies (Share Capital and Debentures)Rules, 2014.

Every buy-back should be completed within ONE YEAR from the date of passing of the special resolution or the Board resolution, as the case may be [sub-section (4)]. 

A declaration of solvency has to be filed by the company to the Registrar and SEBI  before the buy-back is proposed. No declaration of solvency shall be filed with the Securities and Exchange Board by a company whose shares are not listed on any recognised stock exchange [sub-section (6)].
As per rule rule 17(3) declaration of solvency should be filed in the Form No. SH.9 along with the fee and signed by at least two directors of the company, one of whom shall be the managing director, if any, and verified by an affidavit as specified in the said Form.

After completion of buy-back –
(i)  FILING OF RETURN :- a return in  has to be filed with RoC and SEBI within 30 days of completion [sub-section (10)].As per rule 17(13) The company, after the completion of the buy-back shall file with the Registrar, and in case of a listed company with the Registrar and the Securities AND Exchange Board of India, a return in the FORM NO. SH.11 along with the fee.

(ii) EXTINGUISHMENT OF SHARES:- all the shares and securities so bought back shall be physically destroyed within seven days of the last date of completion of buy-back [sub-section (7)].

The minimum gap between two buy-backs of securities shall be one year irrespective of whether the same is approved by the Board of directors or the shareholders. Under the 1956 Act, if the buy-back was undertaken pursuant to the approval of the Board of directors, no further offer of buy-back was permissible within 365 days of such buy-back approved by the Board of directors. 

The buy-back under sub-section (1) may be:
b)  From the existing shareholders on a proportionate basis;
c)   From the open market;
d)  By purchasing the securities issued to employees of the company pursuant to a scheme of stock option or sweat equity.

When a company completes a buy-back of its shares it shall not make a further issue of the same kind of shares within a period of six months except by way of a :-
a)  Bonus issue or
b)  In the discharge of subsisting obligations such as conversion of warrants, stock option schemes, sweat equity or
c)  Conversion of preference shares or debentures into equity shares.

The company which has been authorized by a special resolution shall, before the buy-back of shares, file with the Registrar of Companies a letter of offer in Form No SH 8,Such letter of offer shall be dated and signed on behalf of the Board of directors of the company by not less than two directors of the company, one of whom shall be the managing director.

The letter of offer shall be dispatched to the shareholders immediately after filing the same with the Registrar of Companies but not later than 21 days from its filing with the Registrar of Companies.

As per Rule 17 (5) The offer for buy-back shall remain open for a period of not less than fifteen days and not exceeding thirty days from the date of dispatch of the letter of offer.Provided that where all members of a company agree, the offer for buy-back may remain open for a period less than fifteen days.

The company, shall maintain a register of shares or other securities which have been bought-back in FORM NO. SH.10. [rule 17(12)]

There shall be annexed to the return filed with the Registrar in Form No. SH.11, a certificate in Form No. SH.15 signed by two directors of the company including the managing director, if any, certifying that the buy-back of securities has been made incompliance with the provisions of the Act and the rules made thereunder. [rule 17(14)] 

PENALTY: Section 68(11) If a company makes any default in complying with the provisions the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to three lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than one lakh rupees but which may extend to three lakh rupees, or with both

(SECTION 69):-
When a company purchases its own shares out of free reserves or securities premium account,a sum equal to the nominal value of the shares so purchased shall be transferred to the CAPITAL REDEMPTION RESERVE ACCOUNT.The capital redemption reserve account may be applied by the company, in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares.

1. No company shall directly or indirectly purchase its own shares :-
a)   Through any subsidiary company including its own subsidiary companies;
b)   Through any investment company
c)   If a default, is made by the company, in the repayment of deposits interest payment thereon, redemption of debentures or preference shares or payment of dividend to any shareholder, or repayment of any term loan or interest payable thereon to any financial institution or banking company:
However, the buy-back is not prohibited, if the default is remedied and a period of three years has lapsed after such default ceased to subsist.

2. No company shall, directly or indirectly, purchase its own shares in case such company has not complied with the provisions of Section:-
           92 Annual Return,
           123(Declaration of Dividend),
           127(punishment for failure to distribute dividend) and
           129(Financial Statement).


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Tuesday, July 10, 2018



Introduction :
Annual Return of Company acts as a catalogue of in-depth information on various facets of the company. The two sets of information and particulars of company are either based on financial matters or Non-financial matters. The financial position and performance of the company are included in Financial statements which is filed with Registrar of Companies (ROC) in Form AOC-4.
 The non-financial aspects of Company are filed by way of Annual Return in Form MGT-7.

As per section 92 of the the Companies Act, 2013, every company is required to file Annual Return with the Registrar within 60 days from the date on which
1.   Annual General Meeting is actually held or,
2.   from the last day on which AGM should have been held.

 The date of Annual General Meeting is Excluded.

For Foreign Companies:

Rule 7 of the Companies (Registration of Foreign Companies) Rules, 2014 provides that:

Every foreign company shall prepare and file Annual return in form FC.4 within a period of 60 days from the last day of its financial year.

 The Financial years of other countries are different and not necessarily according to Indian Financial Year. Prior to amendments carried out in Companies Act ,Most of the foreign Companies used to apply to Tribunal for allowing them to file annual return according to their financial year. Presently the 
Companies Act has given the flexibility to Foreign Companies to file Annual return according to their financial years. and henceforth it has to be filed within 60 days from the last day of thier Financial year.

     PENALTY :
 If a company fails to file its annual return under section 92, before the expiry of the period specified therein, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees and

 Every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.(Section 92)

Revised Provisos to Section 403(1)- ―Provided that where any document, fact or information required to be submitted, filed, registered or recorded, as the case may be, under section 92  is not submitted, filed, registered or recorded, as the case may be, within the period provided in those section, 
it may be submitted, filed, registered or recorded, as the case may be, after expiry of the period so provided in those sections, on payment of such additional fee as may be prescribed, which shall not be less than one hundred rupees per day and different amounts may be prescribed for different classes of companies.


An Annual Return  contains the information regarding: 

(a) its registered office, principal business activities, particulars of its holding, subsidiary and associate companies;

 (b) its shares, debentures and other securities and shareholding pattern;

 (c) ( deleted)

(d) its members and debenture-holders along with changes therein since the close of the previous financial year;

 (e) its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year; 

(f) meetings of members or a class thereof, Board and its various committees along with attendance details; 

(g) remuneration of directors and key managerial personnel; 

(h) penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment; 

(i) matters relating to certification of compliances, disclosures as may be prescribed;

 (j) details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors and

 (k) such other matters as may be prescribed.

With a view to facilitate ease of doing business and for reducing the burden of One Person Company and Small Company, the Central Government is empowered to prescribe an abridged form of Annual Return.


Under section 92(1) of the Act, the Annual Return is required to be signed both by a director and the Company Secretary, or where there is no Company Secretary, by a PCS. 

PROVIDED THAT , the Annual Return of One Person Company and Small Company shall be signed by the Company Secretary or where there is no company secretary, by the director of the company


The Annual Return of a listed company or 

of a company having a paid up share capital of Rs. 10 Crores or

 more or turnover of Rs. 50 Crores or more 

shall be certified by a PCS in the Form No. MGT

Section 92 (3) :

"Every company shall place a copy of the annual return on the website of the company, if any, and the web-link of such annual return shall be disclosed in the Board's report."

The requirement to attach an extract of Annual Return with the Board‘s Report is omitted under Companies Act Amendment Act 2017. 


If a company secretary in practice certifies the annual return otherwise than in
conformity with the requirements of this section or the rules made thereunder, he shall be
punishable with fine which shall not be less than fifty thousand rupees but which may
extend to five lakh rupees.


(Section 94(1)) The copies of Annual Return are required to be be kept at the Registered Office of the company or with the approval of members by way of a Special Resolution, these can be kept at any place in India, where more than 1/10 th of the total members reside, provided the copy of such resolution is given to the Registrar in advance.


Any member, debenture holder, other security holder or beneficial owner can inspect Annual Return without any payment of fees at such reasonable time, which should not be less than two hours during the business hours on any working day. Any other person can inspect Annual Return on payment of such fee as may be specified in the articles of association of the company but not exceeding fifty rupees for each inspection.


If company refuses any inspection or the making of any extract or copy of annual return, the company and every officer of the company who is in default shall be liable, for each such default, to a penalty of Rs. 1,000 for every day subject to maximum of Rs. 1,00,000 during which the refusal or default continues.


 The Annual return shall be preserved for for period of 8 years from the date of filing with roc