Maintaining the e-documents of your company

The Companies Act 2013 prescribes all the listed companies to convert all their records and documents into an electronic mode. The aspect of an e-governance has also been introduced so that the statutory records of the company can be maintained and inspected in a better way. Digital signatures and placement of the company's financial statements on its official website are some other processes that have been suggested by the Act. Apart from all the listed companies in general, those with less than a thousand share or debenture holders and other security holders will be expected to maintain these electronic records. In addition to that, the existing companies are also expected to convert the physical records to electronic form within a period of six months of being notified for the same. The maintenance of the e-documents of the company would be carried out as per the decision of the Board of Directors and in accordance with the stated rules. The e-documents should be retrievable and reproducible in the printed form. However, it is important to keep in mind that the e-documents should not be editable in any format. You should make sure that the e-documents of your company can be updated as and when required and also, you should be able to save the updates with ease. Cyber security for your documents is extremely essential and you must take care of these aspects.

Loans, finances and funding portals: A comprehensive overview

According to the Companies Act 2013, all the listed or categorised companies in India are allowed to make investments only through two layers of investment. The Act also imposes several onerous conditions for inter-corporate loans. Under the Companies Act 2013, no company shall give out any loans directly or indirectly to the directors. This also applies to any individuals who might be favoured or shown an interest in by any of the directors. The companies are not even allowed to guarantee anything in connection with the loans to the afore mentioned people. Detailed descriptions have been stated by the Act in relation with inter corporate loans, layered investments and the various types of funding portals that are permitted for the companies that are functioning both in the public sector or the private sector. In case of funding options or any investment plans, the discussion and a unanimous approval of the Board of Directors is mandatory. In case of certain necessary loans, a special resolution is required to be passed which also requires the involvement of shareholders and their majority opinion. The CA2013 also provides prescriptions related to enhanced loan requirements, securities and even guarantees at several levels that make the regulations quite clear for the companies.

Investments and related party transactions

The term “Related Party” refers to any external parties that may be related to a particular company. Related parties could be promoters, holdings, subsidiaries, group companies and so on. Investments and related party transactions are not generally seen in the good light by investors and shareholders because these investments are usually carried forth by the decision of the board of directors. In other words, public share holders also have the fear of incurring losses because of these deals. However, the Companies Act 2013 does not place any restrictions on such investments except for a few rules that must be followed.

As per the guidelines of the CA2013, related party transactions and investments should be done at arm's length and can only happen once they have been certified by the authorised auditors. An adherence to market prices is another mandatory aspect that needs to be kept in mind. In order to make such investments or to enter into deals with related parties, the company also needs to receive the consent of the Board of Directors which can happen after a resolution that is passed at a meeting. The amendment rules about the same are elaborately stated under the formal document of the Act. 

Independent directors and a prescribed code of conduct

SEBI has mandated some salient requirements in the CA2013 which have made it necessary for all the listed public companies to have at least one third of the total Directors as independent. The prescribed code of conduct for Independent Directors requires the board to also evaluate certain attributes but does not provide any kind of training for the ones being appointed on the same position.  The code for Independent Directors broadly covers the areas of professional conduct, their roles and functions, manner of appointment and even the duties. Reappointment of the Independent Director, his or her removal or resignation, evaluation mechanism and holding of separate meetings are some other factors that are covered under the Companies Act 2013. There seems to be a mandatory element with the code but there can also be a few concerns regarding its aspects. One major aspect that is open to interpretation is the statement where Independent Directors are expected to uphold ethical standards of integrity and probity. There can be conflicting views in this area as the definition of ethical standards or ethical behaviour has not been specified in any way. Also, regarding the aspect where companies are expected to assess the attributes of the directors is quite ambiguous.

What foreign investors need to know about insider trading

Foreign investors should begin to be careful regarding the new provision that has been introduced by the Companies Act 2013. This fresh provision relates to the concept of insider training. This concept used to be dealt under a different regulation run by the Securities and Exchange Board of India. As per the rules laid down under the domain of the 2013 Act, the fresh provision prohibits any director or personnel of a certain company from indulging in any kind of insider trading at any level. The broad terminology comprises of several activities like sales-purchase, subscription or deals in securities. In addition to that, there is also a prohibition on procuring or communicating price sensitive information which is of a non public nature. The CA2013 provision prescribes communication of unpublished price sensitive information in a carved out manner. In other words, the details are described in a very systematic way related to the communication aspect. The term “insider trading” has been defined quite differently from those in a specific regulation. Also, unlike the previous regulations, the provision extends to public unlisted companies as well. Understanding these concepts in detail would surely act as the best way
of understanding the related clauses of the Act.

Forming a WOS company in India by an overseas company

Forming a WOS or a wholly owned subsidiary company in India can be possible by investing in an Indian company to an extent that the parent company is able to gain full possession of all the shares of that particular subsidiary. The Foreign Direct Investment policy of India needs to be understood before you decide to buy the 100% shares of a company in this country. Once all those things are taken care of, the other stages can be discussed and the plan can be taken forward.

There are several steps involved in the process of finally forming a WOS company in India along with a minimum capital of Rs. 1,00,000. The steps begin with applying for the DIN or Director Identification Number. In addition to that there is also a requirement of a DSC or Digital Signature Certificate so that your digital messages and documents can be easily authorized. Once you are able to acquire all the necessary documents and are also able to clear all legal things, you can apply for the name of your company through the forms collected from the registrar. Once your name is approved, you can apply for a certification for your WOS company.

What the ICA2013 states about managerial personnel

The Indian Companies Act 2013 mentions significant guidelines for the appointment as well as the remuneration of managerial personnel. These guidelines include separate provisions regarding appointments for the manager, managing director, whole time director and so on.  Regarding the payments made to the managerial personnel, the usual ceiling remains at 11-12% of the financial year's profit earned by the company on an average. The categorised list of companies in this regard comprise of those which possess a paid-up share capital of a minimum five crore INR in both public and private sectors. The Companies Act 2013 clarifies certain points according to which one individual cannot be appointed as the Managing Director, CEO and chairperson of a company at the same time. Exceptions to this rule can be seen in case a company has particular norms that govern such a decision and also if the company is not into multiple businesses. The upper and lower age limits for the managerial personnel at different levels, overall remuneration in detail, appointment and qualification related causes are some of the other factors that have been stated extensively in the Indian Companies Act 2013. Most of these details have been incorporated in the section 196 of the Act.