The provisions of the Companies Act, 2013 and the relevant Rules thereunder relating to corporate social responsibility (CSR) have come into effect from April 1, 2014. Since this concept is novel in India from a regulatory standpoint, several difficulties are bound to rise in its implementation. Matters are compounded further because the nature of the Act and Rules are extremely prescriptive in...
Guest Post: MCA notification on Audit Committee
[The following post is co-authored by Yogesh Chande and Manendra Singh. Yogesh is an Associate Partner and Manendra is an Associate with ELP. Views of the authors are personal.] In terms of section 177(1) of the Companies Act, 2013 (Act) read with rule 6 of the Companies (Meetings of Board and its Powers) Rules, 2014 (Rules), following companies are required to constitute an audit committee:...
Guest Post: Identifying KMPs under Companies Act, 2013
[The following post is contributed by Shampita Das, who is an Associate at Vinod Kothari & Company. She can be contacted at [email protected]]...
Director Liability Under the New Regime
Types of Liability Being fiduciaries, directors are exposed to liabilities as a consequence of a breach of their duties. While liabilities may arise under various statutes, the focus here is on liabilities arising under company law. The first set of liabilities is statutory in nature, being specifically set forth in the Companies Act, 2013 (the 2013 Act). These could be either civil liability...
MCA Clarification on Independent Directors
Based on a request made by various stakeholders, the Ministry of Corporate Affairs (MCA) has issued a clarification explaining some of the provisions of the Companies Act, 2013 relating to independent directors. Some of the aspects clarified include the following: – For the purposes of the definition of an independent director, the concept of “pecuniary relationship” will not include...
Guest Post: Deposits – Issues Under the Companies Act, 2013 – Part 2
[The following post is contributed by Madhusudan Bose, who is a lawyer and company secretary by profession, at PRA Law Offices, New Delhi This is the continuation of the previous post on the topic] 3. Amounts Received by a Company from Another Company Excluded from Scope of “Deposits” 3.1 Like in the Old Rules...
Guest Post: Deposits – Issues Under the Companies Act, 2013 – Part 1
[The following post is contributed by Madhusudan Bose, who is a lawyer and company secretary by profession, at PRA Law Offices, New Delhi] 1. Introduction 1.1 The company law in India prescribes stringent conditions for acceptance of deposits by any company. In the interests of the ordinary depositor, “deposits”...
Directors’ Actions: For Whose Benefit?
It is clear that directors ought to act in good faith for the benefit of the company. Since the company is a separate legal personality, there is often the question as to who represents the interests of the company. Generally, the interests of the company are said to equate with the interests of the shareholders, while in the case of an insolvent company (or one that is in the zone of insolvency)...
Financing Domestic M&A
A Times of India report indicates that the Finance Ministry is considering a proposal to allow banks to finance domestic M&A, i.e. acquisitions of local targets by local acquirers. If this proposal goes through (although significant doubts have been raised regarding that), it will mark a sea-change in the funding of domestic M&A that is currently deprived of bank funding. At present...
Codification of Directors’ Duties: Is Common Law Excluded?
Background Hitherto, directors had negligible guidance under company law as regards their duties and liabilities. The preexisting Companies Act, 1956 (the 1956 Act) did not explicitly stipulate directors’ duties, which made it necessary to fall back on common law principles (to be articulated by courts while delivering specific decisions). The statutory uncertainty was compounded by the absence...
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