All posts by Kamini Goyal

Annual General Meeting under Companies Act, 2013

Annual General meeting bridges the gap between the investors and the management. It’s the right of the investors to be provided and the duty of the management to provide transparency and good governance to all the stakeholders of the Company.

To facilitate the above mentioned and to safeguard the interest and investments of the shareholders necessary provisions has been specified under The Companies Act, 2013 for convening of an Annual General Meeting.

In the light of the above, the provisions for convening the Annual General Meeting are enumerated below:



Due Date

In case of First AGM Subsequent AGM
It shall be held within a period of nine months from the date of closing of the first Financial Year of the Company. Within a period of six months from the date of closing of the Financial Year. Not more than fifteen months shall elapse between two subsequent AGMs.



Notice of AGM

When to Send Contents of Notice Whom to Send How to Send
A 21 clear days’ notice is required to be given. The meeting can be conveyed even on a shorted notice, provided that consent of 95% of the member entitled to vote has already been obtained. I. Notice shall specify the Place, Day, Date & Time of the meeting.

II. Business to be transacted thereat.

III. Explanatory Statement for all Special Business.

I. Every Member, Debenture Trustees, Legal Representative or Assignee of an insolvent member.

II. The Secretarial Auditors of the Company.

III. Every Director and Auditor of the Company.

I. By Hand

II. By ordinary or speed post

III. By Courier

IV. By Fax

V. By E-Mail or any other electronic means


When & Where to hold the AGM

Time Venue Day
Meeting shall be called during business hours i.e., between 9 A.M. and 6 P.M. AGM shall be held either at the Registered Office of the Company or at some other place within the city, town or village where Registered Office of the Company is situated.


In case of Unlisted Companies, the AGM may be held at any place in India, if consent is given in writing or by electronic mode by all members in advance.


In case of Government Companies, the AGM shall be held:

I. either at the Registered Office of the Company or

II. At such other place within the city, town or village in which the registered office of the company is situated or

III. At such other place as the Central Government may approve in this behalf.

Day should not be a National Holiday.


Thus, AGM can be held even on Sunday’s under Companies Act, 2013.



Particulars of explanatory Statement A Statement setting out the material facts concerning each item of special business, such as: –


a.                   Nature of concern or interest, financial or otherwise, if any, in respect of each items of-

I. Every director and the manager, if any;

II. Every other KMP; and

III. Relatives of the persons mentioned in sub- clauses (I) and (II);


  1. Any other information and facts that may enable members to understand the meaning, scope and implications of the items of the business and to take decisions thereon.




Public Company Private Company
Total number of members Quorum: Members to be personally present  

Two members personally present

Not more than 1000 5 Members
More than 1000 but up to 5000 15 Members
Exceeds 5000 30 Members


Preparation of Financial Statements (Schedule III) Documents to be attached with Financial Statements-


I. Auditors’ Report

II. Board Report

III. Extract of Annual Return (MGT-9) to be included in Board Report

Companies having subsidiaries or associate Section 129 (3) of Companies Act, 2013, where a company has one or more subsidiaries or associate Company, it shall also prepare consolidated financial statements of itself and of all the subsidiaries.



Start-up India: Important Benefits and Some Concerns

The Government of India has taken various measures to improve the ease of doing business. On 16th January 2016, Prime Minister Narendra Modi announced bunch of benefits and schemes to promote start up ecosystem in India and is also building an exciting and enabling environment for these Startups, with the launch of the “Startup India” movement.

Start up initiative launched by the government is a significant step. The Government of India (GoI) is significantly taking steps in easing the norms and is working towards implementing the “Start up Plan of Action.”

Start-up India Hub:

An all-India hub has been created as a single contact point for start -up foundations in India, helping entrepreneurs to exchange knowledge and access financial aid. The hub has been able to resolve various queries received from Startups through telephone, email and Twitter.

For contact details of startup India, please visit: Startup India Connect

Important Benefits:

 The action plan is largely optimistic since it shows a very positive intent by the government. Some of the highlights of the plan are: –

S. No Benefits Governing Provision             Explanation
1. Tax Exemptions for start ups Finance Act, 2016
  • The Finance Act, 2016 has made provision for start ups to get income tax exemption for three years in a block of five years, if they are incorporated between 1st April 2016 and 31st March 2019.


To avail these benefits one must get a Certificate of eligibility from the Inter-Ministerial Board of DIPP.

  • Tax exemption on investments above Fair Market Value has been introduced for investments made in Startups.

For more information, please read Notification related to Tax Exemption on Investments above Fair Market Value

2. Self Certification of various compliances Self Certification of Various labour and environmental laws Regulatory formalities requiring compliance with various labour and environmental laws are time consuming and difficult in nature.


Accordingly, the process of conducting inspections has been made more meaningful and simple.  

  1. Start ups shall be allowed to self-certify compliance with 9 labour and environmental laws.
  2. In case of labour laws, no inspections will be conducted for a period of three years.
  3. In case of environmental laws, Start-ups which fall under the ‘white category’ (as defined by the Central Pollution Control Board) would be able to self certify compliance and only random checks would be carried out in such cases.

Some Concern :

There are a few unexplained points under the plan, for example, the government seems to have given only one, narrow definition for start-ups. This needs to be changed because it excludes many innovative businesses. For definition of Start-up, please visit Start-up Action Plan. Some major concerns have been summarised herein below:

S. No Particulars Relevant Provision Remarks
1. Issue of sweat equity shares Section 54 and Rule 8(4) of Companies (Share Capital and Debentures) Rules, 2014


MCA notification dated 19th July, 2016. Please read,

Companies (Share Capital and Debentures) Third Amendment Rules, 2016

MCA vide its notification dated 19th July, 2016 has allowed a start-up Company to issue sweat equity shares not exceeding 50% of its paid up capital upto 5 years from the date of incorporation, as against. 25% in other cases.


Therefore it turns out to be advantageous for the start ups which are now able to raise their capital beyond this ceiling by the way of issue of sweat equity shares to its directors, promoters upto 50% of its Paid up share capital etc.

2. Issue of ESOP to promoters Rule 12 of Companies (Share Capital and Debentures) Rules, 2014

MCA notification dated 19th July, 2016. Please read,

Companies (Share Capital and Debentures) Third Amendment Rules, 2016

The mentioned rule restricts the issue of ESOPs to promoters or promoter directors even if they are employees of the Company.

However, in order to promote start ups, an amendment rule vide insertion of Proviso to the clause (c) of the sub-rule (1) of Rule 12 provides that the above mentioned category of persons would also be eligible for ESOPs upto 5 years from the date of incorporation or registration of such start-ups.

3. Acceptance of deposits by Private Companies from its members Section 73 and Notification dated 5th June, 2015 Amount shall not exceed: –

100% of their (Paid up capital and Free reserves).

Since acceptance of deposits from members enables the start ups to raise the funds without any additional compliance costs, the limitation detailed above hinders the smooth raising of funds.

Sweat Equity Shares under Companies Act, 2013

Definition of Sweat Equity Share [Section 2(88)]: –

  • Equity Shares which are issued to directors or employees;
  • Issued at a discount or for consideration, other than cash;
  • For providing their know-how or making available rights in the nature of IPR or value additions.

Applicable Provisions: –

  • Section 54 of the Companies Act 2013
  • Rule 8 of the Companies (Share Capital and Debentures) Rules, 2014


Section 54


Section 54(1) Issue of shares Only a class of shares already issued.
Section 54 (1) (a) Shareholders’ Approval By Special Resolution.

Note: – SR shall be valid for a period of not more than 12 months from the date of passing of SR [Rule 8(3)]

Section 54 (1) (b) Contents of SR
  • Number of shares
  • Current Market Price
  • Consideration, if any
  • Class of Directors or employees covered.
Section 54 (1) (c) Time Limit Can be issued only after one year from the date of commencement of business
Section 54 (1) (d) Listed shares SEBI regulations to be followed.


Rule 8 of Companies (Share Capital and Debentures) Rules, 2014

Employee means: –


A Employee Permanent employee of the Company, working in India or outside, for at least one year.
B Director Whether a WTD or not
C Employee or a Director as defined in (A) or (B) Of a subsidiary, in India or outside India, or of a holding company of the Company


Value Addition: –

 Benefit derived or to be derived from an expert or professional for providing: –

  • Know-how or;
  • Making rights available in the nature of IPR

Consideration: –

  • Is not paid or;
  • Included in the normal remuneration payable under the contract of employment.

Disclosures in Explanatory Statement [Rule 8(2)]: –

  • Date of Board Meeting;
  • Justification for the issue;
  • Class of shares/total no. of shares to be issued;
  • Class of Directors or employees and their names along with their relationship with the promoter or/and KMP;
  • Principal T&C, basis of valuation of shares;
  • Time period of association of such person with Company;
  • Proposed price;
  • Consideration, if any, to be received;
  • The ceiling on managerial remuneration, if any, be breached by issuance of such sweat equity and how it is proposed to be dealt with;
  • Statement to the effect that the Company shall conform to the applicable AS;
  • Diluted EPS calculated in accordance with AS.


[Rule 8(4)] Limit on Sweat equity shares


Issue of sweat equity shares in a year shall not exceed: –

  • 15% of the existing PSC or
  • Shares of issue value of Rs. 5 crores, whoever is higher.

Provided that Issue of sweat equity shares should not exceed 25% of the paid up equity capital of the Company at any time.

[Rule 8(5)] Lock in Period Lock in period/ Non transferable period- three years from the date of allotment.

The fact that the share certificates are under lock-in and the period of expiry of lock in shall be mentioned in prominent manner on share certificate.

[Rule 8(6)] Valuation of sweat equity shares Price to be determined by Registered Valuer as the fair price.
[Rule 8(7) & 8] Valuation of IPR/Know-how/Value Addition Shall be carried out by Registered Valuer.

He shall provide a report to Directors with justification.

Copy of gist to be send to the shareholders.

Rule 8(9) Issued for non cash consideration
  • Valuation report to be obtained from registered valuer,
  • If it is depreciable or amortizable asset, it shall be carried to the balance sheet; or
  • If above point is not applicable, it shall be expended as provided in accounting standard.
 [Rule 8(10)] Amount of sweat equity shares shall be treated as part of managerial remuneration for the purpose of section197 and 198, if following conditions are fulfilled: –
  • If issued to any director or manager and
  • If issued for consideration other than cash, it does not take the form of an asset which can be carried to the B/sheet in accordance with applicable AS.
Rule 8(12) Issued pursuant to acquisition of asset
  • Value to be determined by valuer.
Rule 8(13) Disclosure in Directors Report Particulars like class of director or employee, class of shares, number of sweat equity shares, percentage of sweat equity shares in total post issued and paid up share capital, diluted Earnings Per Share, consideration received.
Rule 8(14)  Register of Sweat Equity Shares
  • Details of sweat shares shall be maintained in a Register (Form No. SH.3).
  • Shall be maintained at Registered Office or such other place as the Board may decide.
  • Entries shall be authenticated by CS of the Company or by any other person authorized by Board.




Employee Stock Option Plan under Companies Act, 2013 for Unlisted Companies

It is an option to buy the shares of the Company at a future date and at a pre-determined price.

These plans are aimed at: –

  • Improving the performance of the company;
  • Increasing the value of the shares by involving stock holders, who are also the employees, in the working of the Company;
  • ESOPs help in minimizing problems related to incentives. 

Eligibility for ESOP (Section 2(37)): – 

Applicable Provisions: –

Section 62 (1)(b) and Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014
Approval of shareholders: – Private Companies: To offer ESOP, approval of shareholders by way of ORDINARY RESOLUTION* is required. (*Notification dated 5th June, 2015).
Other than the Private Companies:Approval of shareholders by way of SPECIAL RESOLUTION is required. 
 Important provisions: –

Disclosures in the Explanatory Statement (Rule 12(2)): 

  • Total number of stock options to be granted;x
  • Identification/ Appraisal process for determining the eligibility of employees;
  • Requirements of vesting and vesting period and the maximum period within which the option shall be vested;
  • Exercise Price/Pricing Formula/Exercise Period/Method of valuation;
  • Lock in period, if any;
  • Maximum no. of ESOPs to be granted per employee and in aggregate;

Method of valuation and a statement that the Company shall comply with the applicable AS.

Disclosure in Board’s Report (Rule 12(9)): 

  • Options granted/vested/exercised/lapsed.
  • Total number of shares arising as a result of exercise of options;
  • Exercise Price;
  • Variation of terms of options;
  • Money realized by exercise of options;
  • Total no. of options in force
  • Employee wise details of options granted to:

KMPs;Any employee who receives 5% or more of options granted during that year;Employees who were granted options of more than 1% of total issued capital during any one year.  
Register to be maintained in Form SH-6 (Rule 12(10)): 

  • Company shall maintain a register of Employee Stock Options in Form SH-6
  • Register shall be maintained at the Registered Office or such other place as the Board may decide.
  • Entries shall be authorized by CS or the person authorized by Board.

Listed CompaniesWhere the equity Shares of the Company are listed, the ESOP shall be issued as per the SEBI Regulations.  
Accounting & Valuation of ESOP 

  • Accounting should be done in accordance with “Notification No. 94/2009/ F.No.142/25/2009-S O (TPL), dated 18-12-2009″.
  • Valuation: –

At the time of grant of option valuation of fair value of shares shall be done by registered valuer. At the time of exercise of option valuation shall be done by Merchant banker.

  • Valuation of ESOP in case of Unlisted Companies:-

Fair value of shares at the time of “grant of Option” and “exercise of option” shall be done by registered valuer as per “Guidance note on accounting for employee share-based payment” (issued 2005).
Income Tax Act, 1961 does not specify any method for computation of FMV of shares but Section 17 and Rule3(8) of the Act  provides that for the purpose of perquisite valuation the FMV of ESOP shall be such value as determined by a merchant banker on the specified date.
Specified Date” means.-the date of exercising of the option; orany date earlier than the date of the exercising of the option, not being a date which is more than 180 days earlier than the date of the exercising.



The Issuing Company can claim ESOP cost as deduction.
Income Tax Appellate Tribunal in an order by (Dy. Commissioner of Income-tax (LTU), Bangalore Vs M/s. Biocon Limited) held that “discounts under the ESOP are an employee cost and should be allowed as a deduction over the vesting period, in the hands of the issuing company.”In an ESOP, the shares are issued to the employees at a future date (after vesting period) at price lower than fair market value (FMV) of the share.
Hence ESOP discount, is nothing but the reward for services, is a taxable perquisite to the employee at the time of exercise of option, and its valuation is to be done by considering the fair market value of the shares on the date on which the option is exercised.




Applicable provision Concerned Person Applicable provision Concerned Person
Section 2(34) Director Section 149(9) Independent Directors
Section 2(59) Officers Section 2(69) Promoter
Not defined under Companies Act, 2013 Employees Director who either himself or through his relative or through any body corporate, directly or indirectly holds more than 10% of the outstanding equity shares of the Company.
Directors, officers or employees of the holding or the subsidiary company.
Applicable Provision, if any Particulars Explanation
Grant Means the issue of options to Eligible Employees (explained above).
Vest Means the process by which the right to apply for Shares accrues to Eligible Employees against the Options Granted to them.
Exercise Means making of an application by an employee to the Company for issue of shares against vested options.
Rule 12 (3) Freedom to determine Exercise Price Companies granting options to employees can freely determine exercise price in conformity with the applicable accounting policies, if any.
Rule 12(4) Separate Resolution Required in two cases: -i.        For granting options to employees of holding or subsidiary company; or

ii.      For grant of option to identified employees, during one yearequal to or exceeding 1% of the issued capital at the time of grant of options.


Rule 12(5)(a), (b) Variation of the terms of the scheme ·         Special Resolution required

·         Variation should not be prejudicial to the interests of the option holders


·         Notice for passing SR shall disclose the particulars of variation and rationale thereof.


Rule 12(6)(b) Lock in Period The Company has the freedom to specify the lock in period for issued shares.
Rule 12(6)(c) Dividend/Voting Rights The Employees will not enjoy the rights similar to members till the time shares are issued on exercise of option.
The options granted shall ü  Not be transferableü  Not be pledged, hypothecated, mortgaged or otherwise encumbered

ü  Be exercised only by the employee to whom the option is granted.

Death of employee If employee dies while in employment, all the options granted to him till date shall vest in the legal heirs or nominees of deceased employee.
Permanent Incapacity If employee suffers permanent incapacity while in employment, all the options granted to him as on date shall vest in him on that day.
Resignation or termination of employment All options not vested shall expire.

Employee can exercise the vested option subject to the terms of the scheme.

Resolution by Circulation

Section 175 of Companies Act, 2013 and Rule 5 of Companies (Meeting of Board and its Powers) Rules, 2014 provides for passing of Resolution by Circulation.

In case of urgency, it may not be possible to wait for the approval or implementation of an item or proposal till the next meeting of Board or its Committee. In such case, it is permissible to pass a Resolution by Circulation under Section 175 of Companies Act, 2013.


S. No Particulars Provisions



Circulation Resolution to be circulated in draft with all the necessary papers, if any.



Whom to send? To all the Directors or members of the committee, as the case may be.



Where to send? At their addresses registered with the Company in India.



Mode By hand delivery or by post or by courier or through other E-means [E-mail or fax].



Approval Has to be approved by a majority of the directors or members, who are entitled to vote on the resolution.



When Resolution is required to be passed at Meeting? Where not less than 1/3rd of the total number of Directors require that RBC must be decided at a Meeting.*



Noting at Board Meeting To be noted at the subsequent Meeting of the Board or the committee thereof, and made part of the minutes of such meeting.


*At a Meeting includes meeting through Video Conferencing. For more info on Board Meeting through VC, please visit… Board Meeting through Video Conferencing or other Audio Visual Means


Matters not to be passed through Circular Resolution: –

Since the Act requires certain matters to be approved only at the Meeting of the Board.


 [Section 179(3) and Rule 8 of Companies (Meeting of Board and its Powers) Rules, 2014] Section 179(3) of Companies Act, 2013

  •   To make calls on shareholders in respect of money unpaid on their shares;
  •   To authorize buy-back of securities under section 68;
  •   To issue securities, including debentures, whether in or outside India;
  •   To borrow monies;
  •   To invest the funds of the company;
  •   To grant loans or give guarantee or provide security in respect of loans;
  •   To approve financial statement and the Board Report;
  •   To diversify the business of the company;
  •   To approve amalgamation, merger or reconstruction;
  •   To take over a company or acquire a controlling or substantial stake in another company;
  •   Any other matter as may be prescribed.

Rule 8 of Companies (Meeting of Board and its Powers) Rules, 2014

  •   To make political contribution;
  •   To appoint or remove KMP;
  •   To appoint internal auditors and secretarial auditor.


Also, Rule 4 of Companies (Meeting of Board and its Powers), 2014 provides for the certain matters not to be dealt through video conferencing or other audio visual means. For more info on Board Meeting through VC, please visit… Board Meeting through Video Conferencing or other Audio Visual Means


Online filing of FDI Forms/ Discontinuation of Physical filing/ Step towards ease of doing Business

With a view to promote the ease of reporting of transactions related to Foreign Direct Investment (FDI),the Reserve Bank of India has issued Circular on 1st February, 2016 in respect of: –

  • “Foreign Direct Investment –Reporting under FDI Scheme,
  • Mandatory filing of form ARF, FCGPR and FCTRS on e-Biz platform and;
  • Discontinuation of physical filing from February 8, 2016.  These forms are:


S. No Forms Purpose


Advance Remittance Form (ARF) The form is used by the Companies to report the FDI inflows to RBI.





A company submits this Form to RBI for reporting the issue of eligible instruments to the overseas investor against the above mentioned FDI inflow



FCTRS Form It is submitted to RBI for transfer of securities between resident and person outside India.


Present Scenario: –

At present both the options, i.e. online filing and physical filing of above mentioned forms, are available to the users. Now, it has been decided that from February 8, 2016 the physical Filing of the above mentioned Form will be discontinued and Forms submitted in online mode only through e-Biz portal will be accepted.


For Notification, please refer



Company Incorporation/Formation in India

 1.      Can a Non- Resident incorporate a Company in India?

Yes, a non-resident can incorporate a Company in India. But every Company shall have at least one Resident Director.

Resident Director means a director who has stayed in India for a total period of not less than 182 days in the previous calendar year.

2.      What are the basic requirements to incorporate a Private Company by Non-Resident?

  1. Directors Minimum two(One Resident)
  2. Shareholders Minimum two(Both can be NR)
  3. Monetary Capital Nil
  4. Registered Office Every Indian Company which is registered in India must have a registered office in India for all the communication purposes.

3.      What are the First Information / initial documents required for incorporating a Company?

  1. Directors:
    • A person is required to apply for Director Identification Number (DIN). DIN is a unique identification number for Director for which application can be made at the time of incorporation.
    • Requirement of Digital Signature Certificate: – It is an electronic document that is required for filing of e-forms.
    • Details of Directors such as director name, their date of birth, nationality and E-mail ID.


  2. For Digital Signature and DIN :
    • Personal details, occupational details and educational qualifications.
    • Photo Id Proof and Address Proof (e.g. Passport, Driving License, PAN, Voters ID card etc).


  3. Name Availability:
    • Proposed name and the object details of the proposed Company to be incorporated.


  4. Incorporation:
    • Residential Proof-Bank/ Electricity Bill/ Telephone Bill/ Mobile Bill.
    • Principal Documents of the Company, like MoA and AoA.
    • For Registered Office
      • The registered document of the title of the premises of the registered office in the name of the Company;
      • Copy of lease/rent agreement in the name of Company, in case the premises are occupied on basis of lease/rental agreement.
      • The proof of evidence like telephone, gas, electricity bill depicting the address of the premises in the name of the owner or document, as the case may be.
    • Foreign Identity Proof, address proof and other documents of foreign origin of Director.

Note: The above documents are required to be notarized or apostilled in case of Non Residents.

4.      What is the procedure for incorporating a Company?

 Incorporation in India involves the following steps:

  • Applying for DIN by the Directors.
  • Name Availability for the proposed Company. Maximum six names can be proposed under this process.
  • Drafting of Memorandum and Articles of Association. These are the charter documents of a Company.

Memorandum of Association:-It is a document that regulates the Company’s external activities and contains the Company’s Name, Objects, Registered Office address, Liability, Capital and details of the subscribers.

Articles of Association set out the rules for internal running and deals with the internal matters of the Company.

  •  Filing of Incorporation documents.


5.      Is there any easier and faster procedure for incorporating a company in India?

Recently, Government of India came up with an innovative way to make the incorporation procedure easier. It has introduced new Form INC-29 (Application for Incorporation) which has substituted five different forms. Thus incorporation has become a lot simpler and easier. Application for DIN of Directors can be made through the same Form. Thus, a Company can be incorporated only in one step:-

  • Filing Form INC-29

Final Certificate of Incorporation shall be granted then.

Appointment of Non-Resident/ Foreign Citizen/ Foreign National as a Director

Can a Non-Resident/ Foreign National/ Foreign Citizen become Director of an Indian Company?

 Yes,  a foreign nationals or foreign citizen or Non-Resident Indians residing abroad can be appointed as a Director on the Board of Indian companies whether public listed or unlisted or private. He may be appointed as Whole Time Director (Executive director) or Non – Whole Time Director (Non – Executive Director).

Pre-requisites to become a Director for NR 

1. Digital Signature Certificate (DSC) and Director Identification Number (DIN)

To become a Director, an individual is required to obtain Digital Signature Certificate (DSC) and Director Identification Number (DIN).

2. Passport

For applying DIN and DSC,   Passport Number is mandatory for Non-residents. Foreign nationals shall select the nationality as declared in the passport. The above documents are required to be certified by the Indian Embassy or apostil led by notary in the home country of the applicant.


Permanent Account Number (PAN) from the Indian Income Tax department is not compulsory required from Non-Residents.

Resident Director under Companies Act 2013: –

Section 149(3) of Companies Act 2013 provides that every Company shall have at least one Director who has stayed in India for a total period of not less than 182 days in the previous calendar year.

Even a Non- Resident can act as Resident Director of the Company provided he has stayed in India for more than 182 days in the previous calendar year.

Attending Board Meeting by Non-Residents: –

Companies Act 2013 does not prohibit holding of Board meetings abroad.

Also, according to Section 173(2), there is a provision for conducting Board meetings through video –conference, thereby making it simple for Non-Residents.

For more info on BM through Video Conference, please click


Voting by Postal Ballot

Postal Ballot under Companies Act, 2013

Section 110 of Companies Act, 2013 and Rule 22 of Companies (Management and Administration) Rules, 2014 provides for voting by Postal Ballot.

POSTAL BALLOT means voting by post or through electronic means within a period of thirty days from the date of dispatch of the notice to the shareholders. The assent or dissent received after 30 days from the date of issue of notice shall be treated as if reply from the member has not been received.

Companies which are not required to transact any business through Postal Ballot: –

  1. OPC
  2. Companies having members up to 200.

Items which shall be transacted by means of Postal Ballot only: –

  1. Alteration of the objects clause of MOA.
  2. Alteration of AOA in order to constitute it a Private Company.
  3. Change in place of Registered Office outside the local limits of any city, town or village.
  4. Change in Objects for which a Company has raised money from public through prospectus and still has any unutilized amount so raised.
  5. Issue of shares with differential rights as to voting or dividend or otherwise.
  6. Variation in the rights attached to a class of shares or debentures or other securities;
  7. Buy back of shares by a Company;
  8. Election of Small Shareholders’ Director.
  9. Sale of the whole or substantially the whole of the undertaking [Section 180(1)(a)].
  10. Giving loans or extending guarantee or providing security in excess of the limits specified under Section 186(3).

Items which cannot be transacted by means of Postal Ballot: –

  1. Ordinary Business Items
  2. Any business in respect of which directors or auditors have a right to be heard at the Meeting.

Procedure to be followed for conducting business through Postal Ballot: –

  1. Send a notice to all the shareholders, along with a draft resolution and requesting them to send their assent or dissent in writing on a Postal Ballot.
  1. Mode of sending Notice: –
  • By Registered Post or speed post, or
  • Through e-means like registered e-mail id or
  • Through courier services
  1. Advertisement:-
  • To be published in a vernacular newspaper and at least once in an English newspaper.
  • Particulars of advertisement :


Statements a)      The  business is to be transacted by postal ballot which includes e-voting;

b)      the members, who have not received postal ballot forms may apply to the company for obtaining a duplicate thereof;

c)      Contact details of the person responsible to address the grievances.

d)      any postal ballot received from the members beyond the said date will not be valid;

Dates a)      Date of completion of dispatch of notice

b)      date of commencement of voting

c)      date of end of voting


  1. Website

The Notice shall be placed on the website of the Company, after it has been sent to the members of the company till the last date of receipt of postal ballot from the members.

  1. Appointment of Scrutinizer

The Board of Directors shall appoint one scrutinizer, who is not in the employment of the Company and who, in the opinion of the Board can conduct the postal ballot voting process in a fair and transparent manner.

He shall be willing to be appointed and available for the purpose of ascertaining the requisite majority.

  1. Safe custody

Postal Ballot received back from the shareholders shall be kept in the safe custody of the scrutinizer till the chairman considers, approves and signs the minutes.

  1. Scrutinizer Report

The scrutinizer shall submit his report as soon as possible after the last date of receipt of postal ballots but not later than seven days thereof;

  1. Maintenance of Register

To record the assent or dissent received, mentioning the particulars of name, address, folio number or client ID of the shareholder, number of shares held by them, nominal value of such shares, whether the shares have differential voting rights.

  1. Result

Results along with the scrutinizer’s report shall be placed on the website of the company.


Annual Return of Companies Act, 2013

Annual means yearly, return means statement. Thus, Annual Return means a Yearly statement which gives essential information about a Company’s composition, activities, and financial position, and which must be filed by every Company whether having share capital or not.

Contents of Annual Return: –

Every Company shall prepare Annual Return in Form MGT- 7 containing the particulars as stood on the close of the Financial Year. Some of the details required to be filed under new Act are as following: –

  • Its registered office, principal business activities, particulars of holding, subsidiary and associate companies;
  • Its shares, debentures and other securities and shareholding pattern;
  • Its promoters, directors, KMP along with the changes therein since the close of the previous financial year;
  • Remuneration of Directors and KMP;
  • Its indebtedness;
  • Penalty or punishment imposed on the Company, its directors or officers;
  • Such other matters as may be prescribed.

Important provisions: –  

Sl No. Particulars Details
1. Details to be provided as on which date
  • The details to be provided as on Financial Year.
  • The details to be given from last financial year end till this financial year end.
2. Form of Annual Return . MGT-7
3. Signing Requirement
  • OPC and Small Company- By CS or Director
  • Listed Companies and other Companies having PSC of 10 cr or more or having turnover 50 cr or more- By Director and CS and certified by PCS
  • PCS has to certify by way of separate certificate in form MGT-8.
  • Other than above Companies- By Director and CS, if no CS then PCS.
4. Certification by PCS in Form-MGT-8

Certification by PCS, in case of the above mentioned companies, stating that the Annual Return discloses the fact correctly and adequately and the Company has complied with all the provisions of the Act.

5. Extract of Annual Return

It shall form part of Board’s Report. To be provided in Form MGT-9.

6. Time period for filing Annual Return

Within sixty days from the date of AGM/Due date of AGM. If there is a delay beyond 60 days in filing of Annual Return, then per day additional fees of Rs 100 shall be levied by the Ministry of Corporate affairs.

7. Preservation of Annual Return

Copies of all annual returns and copies of all certificates and documents required to be annexed thereto shall be preserved for a period of 8 years from the date of filing with the Registrar.

 Penalty for Non Compliance of Section 92: –

Penalty has been substantially increased by Companies Act, 2013. Company Secretary and Company Secretary in Practice has been brought under penal jurisdiction. Thus there is a huge responsibility not only on the Company’s Directors and Secretary of the Company but also on the professional who signs the Annual Return.

1. Company

The Company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.

2. Officers in default

Every Officer in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.

3. Company Secretary in Practice

If a PCS certifies the Annual Return not in conformity with the Act, he shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.

 Penalty under Section 447 and 448: –

Section 448 provides that if in any return, report, certificate, financial statement, prospectus, statement or other document, any person makes a statement,-

  • Which is false in any material particulars, knowing it to be false,
  • Which omits any material fact, knowing it to be material,

he shall be liable under Section 447 and the same provides for the punishment for fraud.

Thus if there is any sort of discrepancy in Annual Return, any person who is found guilty of any fraud or misstatement, he shall be liable not only under Section 92 but also under the penal provisions of Section 447.

Major Changes vis-à-vis the old Act: –

Companies Act, 2013 has brought about a wide range of difference with the older act in respect of dealing with the concept of Annual Return, and hence, there always remains an urgent need to understand the difference which has been simplified below: –

Sl No. Particulars Comparison
1. Date

Particulars as mentioned under Section 92 are to be filed as on closing of the financial year not as on date of Annual General Meeting.

2. Information Provided is enlarged

Matters in respect of which information has to be provided is enlarged under the Companies Act, 2013. The following are new requirements: –

  • Meetings of members or a class thereof, Board and its various committees along with attendance details.
  • Remuneration of Directors and KMP.
  • Penalties or punishments imposed on directors/officers or on company, steps taken for compounding or appeals made against alleged offence.
  • Details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors indicating their names, addresses, countries of incorporation, registration and percentage of shareholding held by them.
3. OPC and Small Company

With the introduction of OPC and Small Companies, Annual Return is required to be furnished for the same.

4. Extract of Annual Return

An extract of the annual return in Form No. MGT.9 shall be annexed to the Directors Report [Section 134(3)(a)].

5. Declaration from PCS

Companies whose paid-up share capital of `Ten crore or more or turnover of `Fifty crore or more is required to obtain a certificate in Form MGT.8 from Company Secretary in Practice.

6. Penalty

Penalty has been substantially increased. Company Secretary and Company Secretary in Practice brought under penal jurisdiction. (Details explained above).

Inspection of Annual Return: –

Every company has to make arrangements to make Annual returns available for inspection by any member or debenture holder without payment of fee and to others on payment of prescribed fee during business hours of the Company. This information is put on public record, so that the lenders and other entities dealing with the firm can get a ‘true and fair view’ of the state of its financial affairs.

Loan to Directors

Section 185 of Companies Act, 2013

Unless otherwise provided, no company shall directly or indirectly;

  • advance any loan to any of its directors or;
  • give any guarantee or provide any security to any person in whom director is interested


a.     Giving of any loan to a MD or WTD-

  • As a part of the conditions of service
  • Pursuant to any scheme approved by the members by SR.

b.     A company which provides loans or give guarantees or securities in the ordinary course of its business at a rate not less than the bank rate declared by RBI.

The expression “to any other person in whom director is interested” means-

    • INDIVIDUAL:  Director of  lending co., or holding co. or any partner or relative of any such director;
    • FIRM: in which any such director or relative is a partner;
    • Private Limited Company: of which  such director is a director or member;
    • BODY CORPORATE: at a general meeting of which at least 25 % of  voting power may be exercised  or “controlled” by such director, or by two or more such directors, together;
    • BODY CORPORATE: Board, Managing Director or manager, whereof is accustomed to act in accordance with the directions or instructions of Board, or of any director or directors, of lending company.


  • Company: Fine shall not be less than Rs. 5 lakh but which may extend to 25 lakh rupees.
  • Director or the other person: Imprisonment which may extend to 6 months or with fine which shall not be less than 5 lakh rupees but extend to 25 lakh rupees or both.


Maintenance of Statutory Records in Electronic format

Companies Act, 2013 provides for the maintenance of records in electronic format:-

Chapter VII i.e., Companies (Management and Administration) Rules, 2014 provides the manner in which the records shall be maintained in electronic form. Rules are summarized below:

Rule 27 of the Companies (Management and Administration) Rules, 2014, requires following Companies to maintain its records in electronic format:

  • Every listed Company
  • Co’s having not < 1000 security holders

Other Companies can choose to maintain their registers in e-form, and thus are required to follow the prescribed guidelines and rules prescribed below:


Maintenance of Registers in E-form
  • To be maintained in same formats.
  • readily available for future reference
  • capable of being readable, retrievable and reproducible in printed form;
  • once dated & signed digitally, shall not be capable of being altered or edited
  • capable of being updated and that date shall be capable of being recorded on every updating

Rule 28 of Companies (Management and Administration) Rules, 2014 provides for security of registers maintained in e-form:

Persons responsible: – MD, CS or any other director or officer as the Board may decide shall provide for:



Security of registers
  • Protection against unauthorized access, alteration or tampering
  • Provision in case of loss of the record or failure of the media
  • Records should be kept in a non-rewriteable and non-erasable format like pdf. version or some other version which can not be altered.
  • Reproduction of non-electrical records in electronic form is complete, authenticate, true and legible



Back up
  • atleast one back up to be taken at a periodicity of not exceeding one day.
  • back up should be authenticated and dated
  • backups should be securely kept at such places as the Board may decide






Key changes in Statutory registers

Key changes introduced by the Companies Act, 2013 with respect to maintenance of Statutory Registers are as follows:


Register of Members  Companies Act,1956 requires companies to maintain register and index of members, register and index of debenture holders. Companies Act 2013 requires companies to maintain register and index of other security holders also.
More details are required to be furnished under new Act:-1.     E-mail Id of member.

2.     CIN/UIN/PAN of member.

3.     In case of member is a minor- Name of guardian and date of birth of minor.

4.     Record of lien on shares

5.     Particulars of dividend mandates, power of attorney.


In Companies Act, 1956 section 150, 151, 152, 152A, 157 &158 deals with the Register of member & related provisions.But in Companies Act, 2013 all these sections are combined together in one Section namely – 88.



Register of Directors and KMP with their shareholding  Under Companies Act, 1956 two registers were required to be maintained.

1.     Register of Directors, Managers & Secretary- Sec 303

2.     Register of Directors’ shareholding- Sec 307

Companies Act, 2013 combines the above registers into one. Single register is required to be maintained.


More information is required to be furnished under the new Act:-

1.     Income tax PAN (Mandatory for KMP not having DIN)

2.     Membership no. of ICSI in case of CS.

3.     Details of securities held in the Company itself, its holding company, subsidiary company, subsidiary of holding company or associate company




Register of investments not held in its own name by the Company  New columns that are required to be added under Companies Act, 2013

1.     Address and E-mail Id of Person/ Depository in whose name investment is held.

2.     Client ID/ DP No.

3.     Paid up value of securities

4.     Balance securities left, if any

5.     Remarks, if any




Register of contracts or arrangements in which directors are interested  New columns that are required to be entered under Companies Act, 2013.

1.     Relation with Director / Company/ Nature of concern or interest.

2.     Principal terms and conditions.

3.     Whether the transaction is at arm’s length basis.

4.     Amount of contract or arrangement.

5.     Date of shareholders’ approval, if any.

6.     Signature

7.     Remarks, if any.