W HAT DIRECTOR’S SHOULD KNOW ABOUT THEIR RESPONSIBILITIES UNDER COMPANIES ACT Practicing Company Secretary, Indore Central Council Member, The ICSI.

WHAT DIRECTOR’S SHOULD KNOW ABOUT

THEIR RESPONSIBILITIES

UNDER COMPANIES ACT

Practicing Company Secretary, Indore

Central Council Member, The ICSI

A paradigm shift for the corporate

Prominent Influencers to the New Company Law

The Influencers

IPO Scam

Satyam

Stock Market Scams Sahara

Speak Asia

Vanishing Company

“Governance Initiatives”

“NOWHERE”

Satyam Vada Dharmam Chara

- Taittariya Upanishad

“Forever speak the truth and follow the dharma”

Truth : Disclosure of Actual State of Affairs

(Transparency in operations and transactions)

Dharma: “ Dharma is for the stability of

society, the maintenance of social order

and the general well being and progress of

humankind.”

-Karan Parva of the Mahabharata. Verse -58 in Chapter 69

CAN I DESIGNATE NON BOARD MEMBER AS “DIRECTOR”

Section 2 (34) Definition of director is notified – exhaustive

"director" means a director appointed to the Board of a company

He has to be appointed as a Director Only directors who are appointed by the Board will be

directors No person other than appointed as such will hold

designation as irectors Whether such non Board members describing himself

as director will be guilty of the following; Fraud definition includes concealment of any

fact False statement means making any statement

by person knowing it is false

DUTIES OF DIRECTOR

The Director Shall

act in accordance with Articles good faith to promote objects of the Co for the benefit

of stakeholders exercise due & reasonable care & independent

judgment not involve in a situation which lead to conflict of

interest with the company not attempt to secure undue advantage or gain for

him or his related parties not assigned his office

If he contravenes above duties, he may be liable for fine between 1 lakh – 5 lakhs

DIRECTOR’S ID NO - DIN

DIN FORM

S

DIR 3Application for

obtaining DIN

DIR 5cancellation or

surrender of DIN

DIR 6changes

in particul

ars of DIN

APPLICATION FOR ALLOTMENT OF DIN – FORM DIR-3

Before appointment of DirectorApply electronically in Form DIR-3PAN is must for DIN Verification in the format of DIR 4 in

form of AffidavitDigital Signature Certificate(DSC)

INTIMATION OF CHANGES IN PARTICULARS OF DIN - DIR-6

Form DIR-6 - within 30 days of any change

Verification in the format of DIR 7 in form of Affidavit

Digitally signedIntimate the change(s) to Companies in

within fifteen days of such change.

CANCELLATION OR SURRENDER OF DIN - DIR 5

No provisions in CA – 1956 Application in DIR-5 – who has never been

appointed as director and his DIN has never been used

The Regional Director shall cancel or deactivate the DIN if –

It is found to be duplicated It was obtained by fraudulent means Death of the individual person of unsound mind adjudicated an insolvent

Notice for Double DIN

INCORPORATION RULES & FILING

• Application for reservation of NameFORM NO. INC.1

• Application for Incorporation of Company

FORM NO. INC.7

• Notice of situation or change of situation of registered office

FORM NO. INC.22

APPOINTMENT OF DIRECTORS & KMP

APPOINTMENT

Directors KMP

MD or

CEO or Manager

and in

their

absenc

e WTD

Company Secretary

CFO

APPOINTMENT

OF DIRECT

ORS/ KMP

Form -DIR-12

Filing- within 30

daysAttachmen

t- -consent in

DIR 2-Interest in

other entities

-Resolution

Form- MR-1

Filing- within 60

daysAttachmen

t- -Board

resolution-consent to act as KMP-certificate

by the Nominatio

n and Remunerati

on Committee,

if any

CESSATION OF DIRECTOR

CESSATION / RESIGNATION OF DIRECTOR

DIR-11 Notice of

Resignation of Director

DIR-12Cessation of Director &

KMP

FORM DIR-11

Filing- Filed by director Within 30days

from the date of

resignation by his own

DSC

NOTICE OF RESIGNATI

ON OF DIRECTOR

S

Attachment-

- Resignation Letter

- Proof of Dispatch

- Acknowledgement received

from company, if

any

FORM DIR-12

Filed by Company

30days from resignation

Mention the same with reason in Directors

Report

Place on the Website, if

any

Attachment-

1.Evidence of Cessation

2.Board Resolution

DISQUALIFICATION OF

DIRECTORS

Form DIR-8 before his appointment – Consent to Act as Director

fails to file the financial statements or annual returns, repay any deposit, interest, dividend, redeem its debentures – for 3 FY

The company shall immediately file Form DIR-9 to the Registrar - names and addresses of all the directors of the company during the relevant financial years

LIMIT ON NUMBER OF DIRECTORSHIPS

Maximum no of director

ship

Director including alternate director:

20 companie

sKMP :

1 Company except

its subsidia

ry as KMP

independent

director 7

companies

Maximum no of public companies (including private companies - holding or subsidiary of public company) in which person can be appointed as a director shall not exceed TEN.

whole time director of listed company can be independent director in not more than THREE listed companies.

A director shall not be a member in more than TEN committees or act as Chairman of more than FIVE committees across all companies in which he is a director.

‘U’ AS INDEPENDENT DIRECTOR

Declaration of Independence at 1st

BMAt least one separate

meeting in a yearAbide by the code of

conduct of Independent Director

CA 2013 Vs Listing Agreement

WOMEN DIRECTOR Section 149 read with Rule 3 of Companies

(appointment and qualifications) Rules 2014.

Applicability:-

Every Listed Company – within 6 months Every public Company – within 1 year

i. Paid up share capital Rs. 100 crore or more or

ii. Turnover of Rs. 300 crore or more Companies set up under New Act - within 6

months of Incorporation !!

DISCLOSURE OF INTEREST - MBP 1

Every director shall give disclosure of interest to a company, in writing in form MBP 1 in First BM of FY / after every changeList of public/private limited company(ies) / bodies corporate (includes a company incorporated outside india) of which I am a director / MD / WTD / Promoter / CEO / CFO / Manager / SecretaryList of private company(ies), in which I am a member

List of public companies in which I am, along with my relative holding more than 2% of paid up share capital

List of firms / LLPs / association of individuals / other entities in which I am a partner / sole proprietor / owner / member List of firms / LLPs in which any of my relatives (mention the relation) is a partner/sole proprietor

List of companies in which I am a member in the committee/sub committee of the board of directors

List of relatives

Details of securities held by me in the company, its holding company, subsidiaries, fellow subsidiaries or associate company

BOARD RESOLUTIONS PASSED U/S 179 (3)make calls in respect

of unpaid money

buy-back of securiti

es

Issue of securiti

es

grant loans

or give guarant

ee or provide securit

y

invest funds

borrow monies

approve

financial

statement &

Board’s report

diversify

business

approve

amalgamation, merger

or reconstruction

take over a compa

ny

ISSUE OF

SECURITIES

Bonus issue

Right issuePrivate

Placement

IPO

ALLOTMENT OF SECURITIES

PAS-3• Return of Allotment • Filing- 30 days

PAS-4• Private Placement Offer Letter • File LoO with ROC in Form GLN-2

PAS-5• Record of a private placement

offer

CHARGES & FILING

FORM CHG 1• creation,

modification of charge

• Filing- 30 days

FORM CHG 4• satisfaction

of charge• Filing- 30

days

FORM CHG 8 • Application

for extension of time for filing

• When creation, modification not filed within-300days

• satisfaction -30days

Annual Return

Board’s ReportAnnexure of MGT-9

Form MGT-7 & 8

Annual Filing

ADDITIONAL DISCLOSURES IN BOARD REPORT

Company’s policy on director appointment & remuneration including criteria for qualifications

Comments on adverse remarks in auditor’s report and secretarial audit

Particulars of loans, guarantees or investments

Particulars of contracts & arrangements - RPTs

Particulars of defaults in repayment of deposits or interest thereon

Statement on development and implementation of policies for risk management

policy developed and implemented by the company on corporate social responsibility CSR

formal evaluation of performance of the board, its committees and individual directors

Internal Financial Controls and Controls over compliance with all applicable laws

Statement on declaration by independent director

Ratio of the remuneration of each director to the median employee's remuneration

Establishment of vigil mechanism Change in the nature of business

BOARD COMMITTEE’S

Listed and prescribed companies are required to constitute the following Board committees –

Audit committee Nomination and Remuneration committee Corporate Social Responsibility committee Stakeholder Relationship committee

• Loan to DirectorsSection 185

• Loan and Investment by CompanySection 186

• Related Party TransactionsSection 188

Consult before doing

RELATED PARTY TRANSACTIONS

All Related Party Transactions (RPTs) which are at arm’s length and in the ordinary course of business shall require the approval of the audit committee. I

In case of listed companies, as per amended Clause 49 with effect from 1 October 2014, prior approval of audit committee required for all material RPTs.

In case of Private and Public Limited Companies, approval of Board and Shareholders require Section 188

stringent penalties, including imprisonment for directors of listed companies and any other employee of the company in case of violation.

“Jimbo, we have to be extremely careful in our relationship….

because of us our madams should not become related parties”

PENALTY PROVISIONS

FRAUD – SECTION 447

“fraud” in relation to affairs of a company or any body corporate, includes

any act, omission, concealment of any fact, abuse of position committed by any person or any other person with the connivance in any manner,

with intent to deceive to gain undue advantage from or to injure the interests of, the company or its

shareholders or its creditors or any other person whether or not there is any wrongful gain or wrongful

loss; (ii) “wrongful gain” means the gain by unlawful means of

property to which the person gaining is not legally entitled; (iii) “wrongful loss” means the loss by unlawful means of

property to which the person losing is legally entitled. Reporting of fraud to be done to CG

OFFENCES & PENALTIES UNDER THE ACT

Imprisonment of 6 months – 10 years & fine upto 3 times of amount involved is provided for offences like fraud, false statement, false evidence.

Wrongful withholding of property including cash: fine between 1 lacs – 5 lacs plus delivery or refund of property & all benefits derived from it.

General penalty provision: fine upto Rs 10,000 & continuing fine of Rs 1000 per day

Repeated defaults within 3 years: amount of fine will be doubled plus imprisonment if provided

Filing of forms & documents is to be done within 300 days with additional fees. There might be penalties & fines thereafter.

COGNIZABLE OFFENCES & BAIL

Following offences specified in S 212 (6) are cognizable & No bail can be granted unless the public prosecutor is given an opportunity to oppose:

Furnishing of false or incorrect particulars at the time of incorporation Mis-statement or omission in the prospectus Deliberate or reckless statement, promise or forecast with a view to

induce other person to acquire, dispose of or underwrite the securities of the company

Personation for acquisition of securities Issue of duplicate share certificate with the intention to defraud Wrongful transfer of shares by a depository with an intention to

defraud Concealment or mis-statement of debt by an officer in the matter of

reduction of capital Abetment to commission of fraud by Auditor Carrying the business of the company for a fraudulent or unlawful

purpose Furnishing false statement, mutilation and destruction of documents Fraudulent application for removal of name Fraud

PROSECUTION & PENALTIES – DIRECTORS &

OFFICERS Contravention of duties by director fine between 1 lakh

– 5 lakhs. (s 166) Offence relating to submission of false information in

respect of formation or after formation of the Company will be treated as fraud – S 7 (5) & (6)

Imprisonment and fine prescribed for offence of tampering of minutes of the meeting (S 118 (12) )

Non compliance of disclosure of interest & participation in meeting provisions imprisonment upto 1 year &/or Fine Rs 50 thousand to 1 lacs. (S 184(4) ). The office of director also stands vacated. (S 167(1) c & d)

If a Company contravenes the provisions relating to KMP - fine of Rs. 50,000/- and continuing contravention further fine which of Rs. 1,000/- for every day.

PROSECUTION & PENALTIES – DIRECTORS & OFFICERS

Every officer of the company which has not complied with the order of the tribunal under section 245 for class action - imprisonment for a term of 3 years and with fine which Rs. 25,000/- upto Rs. 1,00,000/-.

Failure to distribute Dividend – Director – Imprisonment upto 2 years, Mini Fine Rs 1000 per day. Co shall be liable to pay simple interest @18% pa

Non Transfer of Unpaid Dividend –Company Fine – 5 lacs – 25 lacs, Officer Fine – 1 lacs – 5 lacs. S 124 (7)

Issue of duplicate share certificate fraudulently – penalty to company upto 5 times of FV of shares - upto 10 times or Rs 10 Cr which ever is higher. S 46 (5)

AAA COMPLIANCE

Compliance in Letter

Compliance in Letter

& Spirit

Filing the Gap

JAI HIND