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Time flies so fast, we have already crossed more than a month in this year. 2017 is being a busy year for everyone. The Union budget is already out and we have many topics to discuss and understand. Due to page constraints, we provide a glimpse of the budget and discuss in detail about the Secretarial Standard-1 along with our usual Legal terms and News Bites related to notifications by MCA, SEBI, RBI and IT Department.

Saranya Deivasigamani,
CEO

Secretarial Standard-1 (SS-1)

Secretarial Standard-1 (SS-1) issued by ICSI is approved by the Central Government to be the standardized form for “Meetings of the Board of Directors”. As per provisions of Sec.118 (10) of the Companies Act-2013, “Every company shall observe secretarial standards w.r.t. General and Board Meetings specified by the Institute of Companies Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980, and approved as such by the Central Government”. Till now there are two Secretarial Standards i.e. SS-1, SS-2 have been issued by the ICSI so far and further approved by the Central Government. In this article we will discuss various compliances enunciated by SS-1, regarding Board of Directors Meetings and other related provisions in this regard. The Board of Directors play an imperative role in the functioning, governing, progression of an organization. Therefore, it is required that it shall function in such a manner, it can satisfy the requisite of various stakeholders.

As per section 118(10) of the Companies Act, 2013, every company has to follow Secretarial Standards issued by the ICSI.

Company Secretary either in employment or in practice has to ensure that the Company or their clients has complied with the Secretarial Standards provisions.

Therefore, we can say that massive responsibility is imparted on the Company Secretaries.

Applicability: All meeting of the Board of Directors of the Companies and committees of the Board thereof held on or after 1st day of July, 2015.

Non Applicability: One Person Company (OPC) and Section 8 Company

Illustrative list of items of business which shall not be passed by circulation and shall be placed before the Board at its Meeting :

General Business Items

Noting Minutes of Meetings of Audit Committee and other Committees.
Approving financial statements and the Board’s Report.
Considering the Compliance Certificate .
Specifying list of laws applicable specifically to the company.
Appointment of Secretarial Auditors and Internal Auditors.

Specific Items

Borrowing money otherwise than by issue of debentures.
Investing the funds of the company.
Granting loans or giving guarantee or providing security in respect of loans.
Making political contributions.
Making calls on shareholders on unpaid money on their shares.
Approving Remuneration of Managing Director, Whole-time Director and Manager.
Appointment or Removal of Key Managerial Personnel.
Appointment of a person as a Managing Director / Manager in more than one company.
According sanction for related party transactions which are not in the ordinary course of business or which are not on arm’s length basis.
Purchase and Sale of subsidiaries/assets which are not in the normal course of business.
Approve Payment to Director for loss of office.
Items arising out of separate meeting of the Independent Directors

Corporate Actions

Authorise Buy Back of securities.
Issue of securities, including debentures, in or outside India.
Approving amalgamation, merger or reconstruction.
Diversify the business.
Takeover another company or acquiring controlling or substantial stake in another company. Additional list of items in case of listed companies.
Approving Annual operating plans and budgets.
Capital budgets and any updates.
Information on remuneration of KMP.
Show cause, demand, prosecution notices and penalty notices which are materially important.
Fatal or serious accidents, dangerous occurrences, any material effluent or pollution problems.
Any material default in financial obligations to and by the company, or substantial non-payment for goods sold by the company.
Any issue, which involves possible public or product liability claims of substantial nature.
Details of any joint venture or collaboration agreement.
Transactions that involve substantial payment towards goodwill, brand equity, or intellectual property.
Significant labour problems and their proposed solutions. Any significant development in Human Resources/ Industrial Relations front like signing of wage agreement, implementation of Voluntary Retirement Scheme etc.
Quarterly details of foreign exchange exposures and the steps taken by management to limit the risks of adverse exchange rate movement, if material.
Non-compliance of any regulatory, statutory or listing requirements and shareholder services such as non-payment of dividend, delay in share transfer etc.

Illustrative list of items of business for the Agenda for the First Board Meeting:

To appoint the Chairman of the Meeting.
To note the Certificate of Incorporation of the company, issued by the Registrar of Companies.
To take note of the Memorandum and Articles of Association of the company, as registered.
To note the situation of the Registered Office of the company and ratify the registered document of the title of the premises of the registered office in the name of the company or a Notarised copy of lease / rent agreement in the name of the company.
To note the first Directors of the company.
To read and record the Notices of disclosure of interest given by the Directors.
To consider appointment of Additional Directors.
To consider appointment of the Chairman of the Board.
To consider appointment of the first Auditors.
To adopt the Common Seal of the company.
To appoint Bankers and to open bank accounts of the company.
To authorise printing of share certificates and correspondence with the depositories, if any.
To authorise the issue of share certificates to the subscribers to the Memorandum and Articles of Association of the company.
To approve and ratify preliminary expenses and preliminary agreements.
To approve the appointment of the Key Managerial Personnel, if applicable and other senior officers.
To authorise Director(s) of the company to file a declaration with the ROC for commencement of business.

Budget Highlights

Scope of domestic transfer pricing restricted to only if one of the entities in related party transaction enjoys specified profit-linked deduction.
Threshold limit for audit of business entities who opt for presumptive income scheme increased to .2 crores.
FPI Category I & II exempted from indirect transfer provision.
Commission payable to individual insurance agents exempt from the requirement of TDS .
Under scheme for presumptive taxation for professionals with receipt upto .50 lakhs p.a. advance tax can be paid in one instalment instead of four.
Time period for revising a tax return is being reduced to 12 months from completion of financial year. Also the time for completion of scrutiny assessments is being compressed further to 18 months for AY 2018-19 and further to 12 months for AY 2019-20 and thereafter.

Legal Term

Caveat Emptor

(n) the principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made.

MCA Updates

Notification dt. 25 Jan. 2017 to amend Form No. INC-11 (Incorporation Certificate by CRC along with PAN allotted by Income Tax Department) and INC-32 (SPICe), applicable w.e.f. 30 Jan. 2017.

SEBI Updates

Mandate the requirement of submission of Business Responsibility Report (‘BRR’) for top 500 listed entities under Regulation 34(2)(f) of (“SEBI LODR”).

RBI Updates

Master Circular – Basel III Capital Regulations

Income Tax Updates

Income-tax (2nd Amendment) Rules, 2017 amending IT Rule 114(1) and Rule 114A(1) applicable w.e.f. 9 Feb. 2017.

Month: February 2017

Secretarial Standard – 1 and Budget Highlights