Sunday 31 May 2015

The powers of the board of Directors

The Companies Act 2013 confers a company’s' directorial board with several powers. The Board is entitled for exercising all those powers and also to indulge in acts that the company is authorised for as a whole. There also are a few restrictions imposed either under the Act or in the respective Memorandum or articles of the company and the Board is liable to abide by those under all circumstances.

The main highlights of the powers of the Board of Directors have been stated below.
  •  The power to authorise any required buy backs of securities
  •  To initiate or assist with the diversification of business
  •  Borrowing monies
  •  Making investments using the funds of the company for the best interest of the company
  •  The power to grant financial loans or to provide security or guarantee regarding the loans
  •  The power for approving reports
  •  Issuing securities as well as debentures within India as well as abroad
  •  The power for sending approvals related to mergers, reconstruction and amalgamation
  •  Acquiring a company or a substantial stake in another company

Apart from the above mentioned powers, the Board can also take crucial decisions for the company

as and when required.

Wednesday 27 May 2015

The duties of the directors

The Indian Companies Act of 2013 classifies the duties of the directors into a fiduciary category and  interest investment category. The first classification is all about ensuring that the directors of the companies maintain ethical practices and work towards the best interest of all their stakeholders. The second classification on the other hand, is to encourage the investment efforts that are made by the directors at several levels for providing elegant and swift resolutions as well as for making wise decisions to protect the company of unnecessary risks.
The specific duties that have been assigned for the directors include exercising of the responsibilities with utmost care and diligence. Also, the directors are not supposed to involve in a situation that may hamper the best interests of the company directly or indirectly. The duties of the directors also require them to:

  •  Act in accordance with the company's AOA
  •  Avoid any attempts to derive undue advantage from the company's profits
  •  Not assign his or her office to anyone else
  •  Abide by all the company policies and pre decided codes of conduct

A failure in the up keeping of the duties by a director can draw penalty charges up to five lakh
rupees and even more serious legal consequences depending on the gravity of the situation.

Sunday 24 May 2015

The compulsion of having women directors on board

Companies in India that are governed by the Companies Act 2013 are expected to follow the guidelines that have been set forth regarding the board of Directors and other aspects. Certain clauses of the Act have been especially designed for strengthening the contributions by women in the board room. The companies need to comply with the particular requirement that is stated by the Companies Act wherein it is compulsory to have at least one woman Director on the Board. The prescribed class of companies have been directed by the CA2013 to stipulate the appointment of women Directors as a compulsion so as to allow the corporates in reaping the benefits of people coming from diversified backgrounds and those carrying different viewpoints.Companies that need to comply with the above mentioned requirement of women Directors on board, can be described in the following ways. Public companies who possess at least one hundred crore rupees paid–up share capital or a minimum turnover of three hundred crore rupees. All the listed companies functioning within the first year from the commencement of second provision as stated elaborately in the Act. These new compulsions can prove to be a great way of encouraging gender diversity at the corporate level.

Wednesday 20 May 2015

Striking off a company

Once a company has been incorporated as per the Indian Companies Act 2013, it also gets a certificate issued by the government of India that states all the details like the dates and other important points. Once a company has been registered, its name cannot be removed unless there is an instance where it gets dissolved by law. However, this has another condition according to which it is compulsory for that particular company to start business within a span of one year. A failure to do so can lead to the company being considered as defunct. Once that happens, its name can be automatically struck out from the Register of Companies. Another situation that can lead to the striking out of a company arises when a registered company fails to fill its balance sheet for many years. The power of the ROC to strike off a company's name includes the scenarios where the company is either wound up or no liquidator is working in it or if any pending returns are not being submitted. However, the striking off of a company does not have a drastic effect on the creditors because they
have the ability to claim for any dues.

Sunday 17 May 2015

Share transfer procedure governed by the depositories system

In case a company wants to transfer shares through a depository, it should convey the allotment details about all aspects to the concerned depositories. Once the intention of making the transfer has been effectively communicated, the seller is expected to provide the Depository Participant 1 with the necessary instructions. The concerned securities are also expected to be given to the first clearing member's pool account with the DP1. After the transfer of securities, the Clearing Member 1 forwards the delivery to the Clearing Corporation and the related instructions are given to the DP1so that the latter can debit his or her pool account while crediting the clearing member 1 automatic transfers to the Clearing Member 2. The process of security transfer also gets repeated in this case. After that, the Clearing Member 2 provides deliver instructions to DP2 for debiting the respective pool account and also for updating the credit buying client account with DP2. Ultimately, the buyer would give a parallel receipt instruction to DP 2 so that the concerned account securities can be accepted in the desired account. The entire process of share transfer under the depositories system has to be carried out with utmost caution so that there are no problems at a later stage.

Wednesday 13 May 2015

Registering a company in India


Foreign companies can set up business in India in two main ways. The first way is where they can choose to register as an Indian company. This is possible if they commence operations in India through WOS or joint ventures. The equity and other aspects would vary as per the requirements and preference of the investors. The second option is to enter as an independent foreign company. This is possible by setting up either a branch office, liaison office or a project office. Such offices are allowed to undertake any permitted activities as required by the company. The most important thing here is to fill out the required forms that are available with the ROC so that an application for registration can be filed. The form also needs to be digitally signed by the authorised person from the applicant company. It is also mandatory for the company to obtain a DSC in order to complete the whole process. Once the medium of setting operations is finalised and all other formalities and legalities are cleared, the company should set up a distinct bank account in India itself and take care of other important aspects like recruitment, pay roll, office space and so on.

Sunday 10 May 2015

Partners and shareholders for private companies

The Indian Companies Act of 2013 sets out several regulations related to the partners and shareholders for private companies. The Act lends a democratic power to the shareholders for private firms under which shareholders and all the other stakeholders can make use of the possibilities related to class action suits. This would also make it possible for them to remain more aware and alert. The Act also limits the maximum number of partners that a certain company can have. This limit is up to a hundred and cannot exceed further. However, an exception to this limitation can be seen in case of certain association partnerships that will not be bound by this fixed limit. Some examples of such association partnerships will include CA's, lawyers, company secretaries and the like.


The maximum number of shareholders for a private company has been increased to 200 by the Act. The Act also vests the shareholders with powers to sanction several limits in case of required approvals related to important transactions at different levels. This supremacy of shareholders that is allowed by the Companies Act 2013 is a good way that has reduced the need for acquiring permissions related to managerial remuneration in case of private companies.

Thursday 7 May 2015

Obtaining status of Dormant company


Dormant companies are an excellent option for those promoters who want to hold an asset under their corporate umbrella to be used at a later stage. The provision for obtaining the status of a dormant company is a new and effective tool that can be of great advantage for foreign investors as well. In order to apply for obtaining the said status, there are certain conditions that need to be adhered to. Some of those conditions can include that the applicant company is free form any legal inspections or investigations in the past, the company does not have any outstanding public deposits as such nor is it under default for monetary payments. Apart from these, there are other conditions too that have been listed in detail under the CA2013. In order to obtain the status of a dormant company, there is a systematic procedure that needs to be followed which begins with a formal board meeting. A particular director would have to be authorised for applying as a dormant status with the ROC and the notice will have to be issued in the general meeting of the company. The procedure also requires the filling up of the forms that are available with the registrar and sending them for approval along with other relevant documents. Once the form is approved, a system generated certificate is sent to the company declaring its dormant status.

Sunday 3 May 2015

Managing intermediaries in a capital market system


There can be several classifications for the intermediaries in a capital market system and also on a crowd funding platform. According to the functions that they are assigned and the way in which they perform, these intermediaries could be either listing avenues or serve as mediums for project recommendation at several levels. There is no doubt that they are quite essential to a capital market system. As a matter of fact, under the concept of crowd funding, it requires special attention. As a company planning to start up a business in India, it is quite essential to be aware of the right ways of managing intermediaries in a capital market system. The initial goal should be to develop a complete understanding of crowd funding regulations and several innovative features that are associated with them. You could think about availing schemes related to licensing, record maintenance and so on. It is important to remember that intermediaries can serve different roles and that is why a funding portal or any related systems might need to be modified accordingly. In case of foreign projects in particular, jurisdictional matters should be fully understood and complied by so that any conflicts or issues can be avoided well in advance.