Companies Act. 1956 - Circulars

---------- Forwarded message ----------
From: Parthiv Mehta <parthivtmehta@gmail.com>
Date: Wed, Feb 9, 2011 at 4:46 PM
Subject: {jalgaoncas} Companies Act. 1956 - Circulars
To: Mehul R <contact_mehul@yahoo.com>

 

Hi All,

Foll amendments have been made in the Companies Act, 1956: ( FYI pls)

 

1.    Schedul Xiii of the Companies Act 1956 Being Amended- Unlisted Companies Shall not Require Government Approval for Managerial Remuneration Where they have no Profits

2.    Directions Under Section 212 of the Companies Act 1956 Amended by Ministry of Corporate Affairs

3.    General Exemption Under Section 211 of the Companies Act 1956 Notified

Ministry of Corporate Affairs

 

Schedul Xiii of the Companies Act 1956 Being Amended- Unlisted Companies Shall not Require Government Approval for Managerial Remuneration Where they have no Profits

The Ministry of Corporate Affairs issued today a notification on Managerial Remuneration in unlisted companies having no profits/inadequate profits. The notification reads as under:

Managerial Remuneration in unlisted companies having no profits/ inadequate profits

Companies are divided into private limited and public limited companies. Public limited companies are of two types – listed companies (whose shares are listed on a stock exchange) and unlisted companies. Normally, the general public does not hold shares in unlisted companies. Private limited companies are not subject to any limits on managerial remuneration. Public limited companies (listed and unlisted) with no profits/ inadequate profits are currently required to approach the Ministry for approval in those cases where the remuneration of Directors/ equivalent managerial personnel exceeds certain limits.

2. The matter has been re-examined in the light of the evolving economic and regulatory environment. The primary purpose of regulations over managerial remuneration is to protect stakeholders, particularly shareholders and creditors. Unlisted companies are in several respects similar to private limited companies. A substantial number of the applications coming to the Ministry fall under this category and the Ministry's limited manpower is disproportionately involved in this exercise. In the case of unlisted companies so long as the conditions specified in Schedule XIII, including special resolution of shareholders and absence of default on payment to creditors, are fulfilled approval will not be needed hereafter.

3. Accordingly, Schedule XIII of the Companies Act 1956 is being amended to provide that unlisted companies (which are not subsidiaries of listed companies) shall not require Government approval for managerial remuneration in cases where they have no profits/ inadequate profits, provided they meet the other conditions stipulated in the Schedule.

 

Directions Under Section 212 of the Companies Act 1956 Amended by Ministry of Corporate Affairs

Direction under Section 212

 

 

Section 212 of the Companies Act, 1956 requires holding companies to attach with their balance sheet a copy of the balance sheet, profit and loss account etc of each of its subsidiaries.  In recent years, with the globalization of the Indian economy, there has been a large increase in the number of holding companies and subsidiaries. Accounting policies and practices have also evolved, and Accounting Standards have been issued regarding preparation of consolidated financial statements.

 

The Ministry has been receiving a large number of applications seeking permission not to attach the accounts of subsidiaries.  The Ministry has been granting such permission on case-by-case basis on the basis of certain conditions which are intended to protect the interests of investors. 

 

The matter has been carefully re-examined in the context of the emerging trends in the economy and regulatory and accounting practices.  It has been decided that the permission may be granted on a general basis wherever the Board of Directors of the holding company gives its consent and the conditions prescribed by the Ministry are complied with.  The Ministry has accordingly issued directions through a general circular no. 1/2011 for this purpose.  The conditions to be met by the companies are following:-

(i)            The Board of Directors of the Company has by resolution given consent for not attaching the balance sheet of the subsidiary concerned;

 

(ii)           The company shall present in the annual report, the consolidated financial statements of holding company and all subsidiaries duly audited by its statutory auditors;

 

(iii)          The consolidated financial statement shall be prepared in strict compliance with applicable Accounting Standards and, where applicable, Listing Agreement as prescribed by the Security and Exchange Board of India;

(iv)         The company shall disclose in the consolidated balance sheet the following information in aggregate for each subsidiary including subsidiaries of subsidiaries:- (a) capital (b) reserves (c) total assets (d) total liabilities (e) details of investment (except in case of investment in the subsidiaries) (f) turnover (g) profit before taxation (h) provision for taxation (i) profit after taxation (j) proposed dividend;

 

(v)          The holding company shall undertake in its annual report that annual accounts of the subsidiary companies and the related detailed information shall be made available to shareholders of the holding and subsidiary companies seeking such information at any point of time.  The annual accounts of the subsidiary companies shall also be kept for inspection by any shareholders in the head office of the holding company and of the subsidiary companies concerned and a note to the above effect will be included in the annual report of the holding company. The holding company shall furnish a hard copy of details of accounts of subsidiaries to any shareholder on demand;

 

(vi)         The holding as well as subsidiary companies in question shall regularly file such data to the various regulatory and Government authorities as may be required by them;

 

(vii)        The company shall give Indian rupee equivalent of the figures given in foreign currency appearing in the accounts of the subsidiary companies along with exchange rate as on closing day of the financial year.

 

 

General Exemption Under Section 211 of the Companies Act 1956 Notified

The Ministry of Corporate Affairs issued today a notification on General Exemption under Section 211 of the Companies Act 1956. The notification reads as under: General Exemption under Section 211 Section 211 of the Companies Act, 1956 requires that the balance sheet and profit and loss account of a company shall be in the form set out in Part I of Schedule VI or in such other form as may be approved by the Central Government either generally or in any particular case.  The Ministry has been regularly receiving requests for exemption from various classes of companies from the disclosure of certain quantitative details required under Schedule VI.  So far, these exemptions were being given on a case-by-case basis with certain conditions.  2.         These requirements date back to the era when there was industrial licensing etc., and there was a regulatory purpose in monitoring quantitative aspects of production etc.  Their relevance in the present economic and regulatory environment has been re-assessed.  Such disclosures are not required in other countries.  Indian companies have represented that such disclosure puts Indian companies at a competitive disadvantage where their details are known to foreign competitors, but they cannot get the details from the other side.  3.         Accordingly, the Central Government has, by notification, issued a general exemption whereby the categories of companies in column (2) of the Table below will be exempted from the disclosures given in column 3:-   SN Class of Companies Exemptions from para(s) of Part-II of Schedule VI. 1. Companies producing Defence Equipments including Space Research; para 3(i)(a), 3(ii(a), 3(ii)(d), 4-C, 4-D (a) to (e) except (d). 2. Export Oriented company (whose export is more than 20% of the turnover); para 3(i)(a) 3(ii)(a), 3(ii)(b), 3(ii)(d). 3. Shipping companies (Including Airlines); para 4-D (a) to (e) except (d).  4. Hotel companies (including Restaurants); para 3(i)(a) and 3(ii)(d) 5. Manufacturing companies/multi-product companies; para 3(i)(a) and 3(ii)(a). 6. Trading companies; para 3(i)(a) and 3(ii)(b).

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Regards,
Parthiv Mehta