CORPORATE AFFAIRS 

Introduction

The Ministry of Corporate Affairs exists to implement the Companies Act 2013 and other statutes related to corporates.

There are 14 lakh companies in India with almost 10.5 lakh being active. The analysis of industrial units revealed that 90% are proprietorships, 2-3% partnerships and 2% as companies. Being a proprietorship puts a unit at a disadvantage making assessment of credit worthiness at difficult.

Hence the limited liability model was proposed which was a combination of limiting liability of the entrepreneur to only the entity assets and not personal assets. LLP’s can hold assets in his own name and enter into contracts.

National Company Law Tribunal
It shall have judicial as well as technical members as judges for adjudicating disputes.

The decisions shall be given in three months. Appeals shall be heard by National Company law appellate tribunal.

It shall handle class action suits, disputes regarding mergers and acquisitions, when company fails to comply with norms, matters of arbitration or compromise, turning from public limited to private limited company.

Cases shall be handled by self, or lawyer of Chartered Accountant or Company secretary.

Investor Education and Protection fund
Objective of the fund is to have new initiatives for increasing investor education and awareness. Also to take steps for protection of their interests.

Unclaimed dividends or interest payments go into this fund which is controlled by Secretary of Corporate Affairs ministry.

Serious Fraud Investigation Office

To investigate corporate frauds of a serious and complex nature. It takes up probes that involve complex , multi disciplinary nature that are of substantial amount and affect a sizable number of people. It also handles cases where the investigation could lead to future improvement in services. This body has police powers and has a statutory recognition under this act.

Competition Commission of India
Objective was to ensure freedom to trade in India, prohibit practices that inhibit competition, protect interest of consumers, approve mergers and acquisitions, promote and sustain competition and prevent monopoly.

CCI can impose penalties if found evidence of malpractice.

Competition appellate tribunal too has been setup to adjudicate disputes out of decisions of CCI.
Corporate Social responsibility

Companies with Rs. 1000 crore turnover or Rs. 500 crore net worth or Rs. 5 crore net profit should spend 2% of the profit of last 3 years on Corporate social responsibility.

Though it isn’t obligatory to spend but Board of Directors are mandated to report the spending or reasons for not spending to the Ministry of Corporate Affairs.

Companies integrate social, environmental concerns in their operations.
Companies Act, 2013 – Provisions regarding Board of Directors
Maximum directors can be 15 but may be extended by Annual general Meeting.

1 person can be director of maximum 20 companies.

1 director must be Indian resident and 1 director should be women.

Independent directors can’t be nominated by the Managing director or be employees or promoters or persons having pecuniary interest in company.

Public companies should have 1/3 rd directors independent. Each with term of 5 years and can be reappointed once. But after this a 3 year cooling off period needed.

One person cannot be an independent director of more than 7 companies.

There have to be 4 Board meetings in a year and maximum interval between them should be 120 days.

Quorum needed for a Board meeting is 1/3rd strength or 2 directors.

Capital required for a 1 Person company is 50 lakhs.

90% companies are of type Private limited.Companies Act, 2013 – Provisions regarding the Independent Directors.
Independent Directors are required to have appropriate skills, experience and knowledge related to sales, management, technology, business or any field related to the companies business.As per SEBI norms, companies which don’t have a non executive chairman atleast 50% of the directors should be independent. A person who is a whole time director in a listed company can’t serve as an independent director in more than 3 companies.

Main role:

Protect minority shareholder interests

Improve corporate governance

Mediate in conflict between management and shareholders interest.

They should meet without the presence of the non independent members of the board to evaluate the work of the chairman and the company.
Problems of Current System:

Independent directors with no qualification for the job were appointed in PSU’s based on political criteria.

Typically independent directors take up the job for monetary considerations.

Quiz

Score more than 80% marks and move ahead else stay back and read again!

Q1:limited liability model proposed has the benefits like
LLP’s can hold assets in his own name and enter into contracts.
limiting liability of the entrepreneur to only the entity assets and not personal assets.
both
neither

Q2:Investor Education and Protection fund is for
to have new initiatives for increasing investor education and awareness.
to take steps for protection of their interests.
Unclaimed dividends or interest payments go into this fund which is controlled by Secretary of Corporate Affairs ministry.
All

Q3:Serious Fraud Investigation Office is for
To investigate corporate frauds of a serious and complex nature.
It takes up probes that involve complex , multi disciplinary nature that are of substantial amount and affect a sizable number of people.
both
none

Q4:Competition Commission of India Objective was to
ensure freedom to trade in India, prohibit practices that inhibit competition, protect interest of consumers, approve mergers and acquisitions, promote and sustain competition and prevent monopoly.
CCI can impose penalties if found evidence of malpractice.
both
none

Q5:Which is true
The Ministry of Corporate Affairs exists to implement the Companies Act 2013 and other statutes related to corporates.
There are 14 lakh companies in India with almost 10.5 lakh being active.
The analysis of industrial units revealed that 90% are proprietorships, 2-3% partnerships and 2% as companies. Being a proprietorship puts a unit at a disadvantage making assessment of credit worthiness at difficult.
All true