september, 2015 - icsi...september, 2015 5 nirc-icsi newsletter for approving the share transfer and...

September, 2015 3 NIRC-ICSI Newsletter

From the Chairman

NIRC has been regularly organising high qualityMSOP for our students to get the perfect finaltouch up before entering the profession.Continuing with its endeavour to innovate andtake new steps, your NIRC has very successfullyorganised its 1st Residential MSOP from 1stSeptember, 2015 - 15th September, 2015 atGateway Institute, Sonepat. I am feeling blessedto have destined to organize this much awaited1st Residential MSOP of NIRC and for the same,I wish to place my sincere thanks to all thefaculties for specially travelling to Sonepat,Gateway Institute for providing their premises,Sonepat Chapter for their seamless support, CSDhananjay Shukla, Chairman, MSOPCommittee and the staff of NIRO for making thisdream come true.

On 31st August, 2015 NIRC-ICSI organized aCampus Placement for 15 months ManagementTraining. Companies and Company Secretariesin Practice and approx. 100 students participatedin the campus placement. I wish to place onrecord my sincere thanks to the members andcompanies for participating in the CampusPlacement and look forward for their support infuture also in the various endeavors of NIRC.

It is a matter of great pride for all of us that thisyear 43rd National Convention of the Instituteis being held in Northern Region. The Conventionwill be held on December 17-18-19, 2015 atDelhi. All Members are requested to block thesedates. The details are being finalised and will behosted on the ICSI website in due course. I amsure all of us together will make the NationalConvention a grand success.

Friends, the membership of the CompanySecretaries Benevolent Fund (CSBF) is a noblecause. It's a corpus from which the Institute isproviding financial assistance to the nomineesof the deceased members of the fund. Larger thecorpus would be, greater would be benefits/assistance provided by the Institute. Through thismessage, I take this opportunity to appeal to allof you who are not the members of the CSBF tokindly become the members by paying a life time

membership fee of Rs. 7,500/-. The details ofthe same are published elsewhere in thenewsletter for your reference.

In order to provide an opportunity to membersto join Corporate Membership Scheme of NIRCwho could not join the scheme earlier, a halfyearly scheme for the period from 1.10.2015 to31.3.2016 is being launched. The Interestedmembers may join the half yearly CorporateMembership Scheme. The details of the schemeshall be posted on the portal of NIRC and shallalso be emailed to all the members.

On 19th September, 2015 NIRC-ICSI isorganizing a HP State Conference on the themeCS: NAVIGATING THE FUTURE at KasauliResort, Kasauli (HP). The details of theConference hosted on website.

NIRC-ICSI is organizing a Two-day RegionalConference on 25th & 26th September, 2015 atGurgaon. The details of all these programs arebeing hosted on website and also mentionedelsewhere in the Newsletter. I appeal to all ofyou to kindly attend all these programs in largenumbers and make them a grand success.

I request all of you to kindly give your suggestionson the specific theme & structure of theforthcoming programs organized by NIRC-ICSI.In addition thereto, members who are interestedin taking sessions in the programs to be organizedby NIRC, may kindly provide their details withthe topic/theme, to NIRO [email protected] and [email protected]. Let'sremain connected.

With warm regards,

Yours sincerely,

CS NPS Chawla

Chairman, NIRC-ICSI

Cell: 9958535300, [email protected]


TRANSFER AND TRANSMISSION OF SHARESOF COMPANIES UNDER COMPANIES ACT, 2013

– CS Ajay Goel, ACS*

Step 1 - Intimation

Transferor(s) and/or Transferee(s) need to intimateto the company of the intention to transfer shares

Step 2 - Execute Transfer Deed

Transferor(s) and/or Transferee(s) need to executethe instrument of transfer as per Rule 11 of theCompanies Act 2013 in "Form SH-4".

Step 3 - Stamp Duty

Transfer Deed should be duly stamped as per IndianStamp Act, 1899 with stamp duty (currently 0.25%)paid on market value or consideration amount,whichever is higher.

Note: In some states duty is payable in form offranking of transfer deed. For this transfer deed alongwith a letter addressed to the Additional Collector(Stamps) is to be submitted to General Stamp Office.A court fees of Rupees five is also to be paid

Stamp 4 - Submit the documents to company fortransfer

Executed Transfer Deed along with original sharecertificate must be lodged with the company, or if nosuch share certificate exists then a letter of allotmentmust be lodged with the company along with theinstrument of transfer.

Note: In case original share certificate has been lost,the shareholder needs to lodge FIR for the loss of sharecertificate. Such letter should contain all detailsavailable with the shareholder pertaining to hisshareholding and the respective share certificate. Acopy of such letter and FIR should be duly depositedwith the concerned company.

Step 5 - Board meeting and Resolution

On receipt of documents under step 5 the companyshall duly hold a board meeting as per Section 173

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*The views expressed are personal views of the author and it should not be taken as views of the NIRC-ICSI.

Applicable Laws/ Rules/ Circulars

1) Section 56 of the Companies Act, 2013

2) Companies (Share Capital and Debentures) Rules,2014

3) SEBI Circular CIR/MIRSD/10/2013 datedOctober, 28, 2013

4) NDSL/CDSL Bye Laws with respect to thetransfer and transmission of shares

Shares are like any other goods. A purchaser gets nobetter title than the seller. The capital of a companyis divided into a number of undividable units of apresent amount called 'shares

Transfer of shares is a transaction resulting in achange of share ownership. A shareholder, whetherin public or private company, has a property in hisshare which he has a right to dispose of, subject onlyto any express restriction which may be found in thearticles of the company

A company shall register a transfer of securities orinterest of members only when such a properinstrument of transfer; duly stamped, dated andexecuted by or on behalf of the transferor andtransferee and specifying the name, address andoccupation has been delivered to the company byeither party within a period of sixty days from dateof execution, along with the certificate of security orthe letter of allotment of securities. But where theinstrument of transfer has been lost or has not beendelivered, the company may register the transfer onan indemnity bond.[Section 56 of the CompaniesAct,2013]

Procedure for Transfer of Shares to Resident Indian

For transferring the fully paid up shares of acompany which are not held in electronic form,following steps needs to be taken


for approving the share transfer and passappropriate resolution to the said effect. TheCompany shall also be guided by its Articles as tothe requirement of holding a Board Meeting.

In case of a company, where a Share TransferCommittee/Committee of Directors (refer the Termsof Reference), has been duly constituted, the saidtransfer shall first be approved by the said committeeof the Board and thereafter sent for final approval tothe maim Board.

Step 6 - Rejection

By virtue of Section 58 of the Companies Act 2013and Articles of Association- Board has the power todecline the transfer of shares. The private companymay refuse to register the transfer in this case andsend notice to the Transferor/ Transferee/ persongiving intimation within 30 days from the date wheninstrument of transfer was delivered to the company,stating reasons for refusal

or Acceptance

If the company accepts and registers the transferthen it shall issue Share Certificate within one monthfrom the date of receipt of instrument of transfer inthe name of Transferee and shall make necessarychanges in the Register of Members.

Step 7 - Intimation to Registrar of Companies

No such Notice or intimation is required to be givento Registrar of Companies. The Share Transfer detailsshall be given to Registrar of Companies in AnnualReturn of the company in Form MGT-7

For transferring the partly paid up shares of acompany which are not held in electronic form,following steps needs to be taken

In case of partly paid up shares, the company has tofollow, one more step on receipt of the documents oftransfer by the transferor before the transfer of theshares after step 4 as mentioned above.

Additional Step: If only the Transferor has appliedfor the transfer of the shares which are partly paid

then, the company will send notice to the transfereein Form SH-5, and if the transferee gives no objectionwithin two weeks from the date of receipt of noticethen the Board shall proceed further.

Transmission of Shares

The word 'transmission' means transfer of title byoperation of law. It may be by succession or bytestamentary transfer. The survivors in case of jointholding can get the shares transmitted in their namesby production of the death certificate of the deceasedholder of shares.

There is no requirement of execution of share transferdeed, however for the purpose of transmission asimple application has to be forwarded to thecompany along with the under-mentioneddocuments:

1) Certified copy of death certificate;

2) Succession certificate;

3) Probate;

4) Specimen signature of the successor.

Since the transmission is by operation of law,payment of consideration or payment of stamp dutywould not be required on instruments fortransmission.

Procedure for Transmission of Shares held in PhysicalMode

Following steps shall be followed in order to giveeffect to the transmission of shares in physical mode

Step 1

A simple application with the Company withrelevant documents such as death certificate,succession certificate, probate, etc., depending uponvarious circumstances may be considered necessaryfor transmission by the Company. These are to besubmitted by the beneficiary to the company

Step 2

The company records the particulars of the deathcertificate and a reference number of recording entryis given to the shareholder so as to enable him to

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quote such number in all future correspondence withthe company.

Step 3 (If documents are in order)

The company shall then review and verify thedocuments submitted with the share transmissionrequest. In case all the documents are in order,company shall approve the transmission request andregister the shares in the name of the survivor orlegal heir as the case may be.

Step4 (If documents are not in order)In case documents submitted with transmissionrequest are not in order and it is a case of refusal, thecompany shall within thirty (30) days, from the dateon which the intimation of transmission is deliveredto the company, communicate refusal to theconcerned person

Note: The timeline for processing the transmissionrequests for securities held in physical mode shall be21 days after receipt of the prescribed documentsapplicable for listed companies

Procedure for Transmission of Shares held inDematerialized Mode

Following steps shall be followed in order to give

effect to the transmission of shares held in

dematerialized mode

Step 1

The legal heir(s) or legal representative(s) of the

deceased must request the Depository Participants

(hereinafter referred to as "DP") to transmit the

balances lying in the Shareholders /Client account

of the deceased to the account of the legal heir(s) or

legal representative(s). For this, the legal heir (s) or

the legal representative(s) of such securities must

submit an instruction called the transmission form

to the DP along with the prescribed documents

Prescribed Documents

1)A copy of the death certificate duly notarised 2) A

copy of the Succession certificate duly notarised or

an order of a court of competent jurisdiction where

the deceased has not left a Will; or 3) A copy of the

Probate or Letter of Administration duly notarised.

However, if the legal heir(s) or the legal

representative(s) express inability to produce either

of the documents mentioned under (2) and (3) above,

and the market value of the securities held in each

account of the deceased as on the date of application

for transmission does not exceed Rs. five lakh, then

the DP will process the transmission request on the

basis of the following documents:

a) Transmission form;

b) Copy of the death certificate duly notarised;

c) Letter of Indemnity duly supported by a guarantee

of an independent Surety acceptable to the DP,

made on appropriate non judicial stamp paper;

d) An Affidavit made on appropriate non judicial

stamp paper; and

e) No Objection Certificate(s) from all the legal

heir(s) who do not object to such transmission

Step 2

The DP will ensure that the documents submitted by

the legal heir(s) or the legal representative(s) are in order

and will then effect a transfer of the balances to the Client

account of the legal heir(s) or the legal representative(s).

Note: The timeline for processing the transmission

requests for securities held in dematerialized mode

shall be 7 days after receipt of the prescribed

documents.

Step3

After effecting the transmission, the DP will close

the account of the deceased.

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GREECE ECONOMIC CRISIS: STORY SO FAR– CS Roopali Shekhawat*

This further aggravated the already tumultuous stateof Greek economy pushing it towards the edge of theprecipice to a state of bankruptcy.

In order to salvage the situation, InternationalMonetary Fund, European Central Bank and theEuropean Commission agreed to issue a bailoutpackage to Greece but, simultaneously, imposingstringent austerity conditions on it such as reductionin public spending, increase in tax rates, makingGreece more corporate friendly, curbing tax evasionand streamlining government. Some of thesemeasures had the potential to entail catastrophicimplications for the Greek population. Although,the bailout package led to a reprieve from itsimmediate woes, the relief was short-lived. Theamount which was to be utilized for revamping theeconomy primarily was channelized towards loanrepayments and the austerity measures were alsonot implemented well. This caused the Greekeconomy to remain in the shackles of plummetinggrowth rates, soaring unemployment levels andpoverty, piling debt burden and shrinking economy.

Knee-deep in financial plight, the Greek Governmentcame to the negotiating table once again with itscreditors on July 13, 2015 in Brussels. Greece agreedto receive a bailout program worth nearly $100 billionand accepted to implement further austeritymeasures and structural reforms. Bolstered by thisagreement, global financial institutions have agreedto grant additional loan facilities, over a period offew years, to Greece to bring its staggering economyback on track. Amidst wide-ranging protests frompeople over the austerity measures which the dealsbrings along, Greek Prime Minister Alexis Tsipras isjostling to get parliament nod for the deal brokeredby him with the struggling nation's Euro Zonecreditors.

Studies report that Greece is not expected to haveample resources to crawl out of its monetarydifficulties till the year 2023. But, a more fine-tunedGovernment policy concerning taxation, investments,business and industries, budget spending and manymore sectors is the need of the hour for getting thelimping Greek economy back on its two feet. In thisglobalized scenario, when almost all the economiesof the world are intertwined, a well-functioning andburgeoning Greek Economy augurs well for the wholeworld.

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Over the decades, the World has been rocked bynumerous financial mayhems, often referred to as'Depressions' by the economic think-tank. Be it thedreaded year of 1929, when the US Wall Street marketcollapsed paving way for the 'Great Depression' orthe Asian crisis of 1997 when the ripples of turmoilin the economy of Thailand scattered all over Asia orthe bursting of the dot-com bubble in the years 1997-2000, the world has witnessed great economiccollapses. Many fortunes have been floundered andmany economies have been bankrupted in suchmassive crashes. The latest name added in the list ofsuch disasters is that of Greece, one of the 19 countrieswhich together form the powerful financialcongregation called 'the Euro zone'.

Today, the economy of Greece, laden by an enormousamount of debt, is in the shambles as the growth rateof the peninsular nation has shrunk by 25% sincemid 2008. The growth rate figures display a dismalrecord with -5.4% in 2010, -8.9% in 2011, -6.6% in2012, -3.3% in 2013 and 0.8% in 2014. Theunemployment rate of the Country was recorded at25.6 % till March 2015 and adding to the woes of theinvestors, the Greek stock market has plummeted by83.9% since 2008. The Greek industrial sector hasalso been hit hard with one in every four small andmedium sized enterprises shutting down as per thedata released by a Greek confederate organization.Such is the extent of the financial troubles of Greecethat it was almost at the threshold of an exit from theEuro zone.

What factors led to Greece slipping into such an acutestate of financial crisis? To get an answer to thisimportant question, it is essential to take a few stepsback in time. The outbreak of the financial turmoil ofGreece can be traced back to 2008 when the entireEurope was hit by a debt crisis in the aftermath ofthe US Wall Street collapse. Almost all the Europeancountries were reeling under immense financialstrain. In October 2009, Greece sent the shock wavesthroughout the world by proclaiming that it had beenunderstating its deficit figures since years. When thealarming figures of the debt Greece was encumberedwith surfaced, it was confronted by a virtual boycottfrom the world financial markets. Owing to Greece'sever falling credibility, global financial institutionsbegan to refrain from lending more monetaryassistance to Greece fearing their loans going bad.


ROLE OF COMPANY SECRETARIES IN BUILDING RESPONSIBLE BUSINESSES– Dr. S. K. Gupta, FCS*

Secretary to rapidly expand their understanding ofemerging business and governance scenarios andacquire requisite skills to provide exacting solutionson business issues with efficient service deliverables.Not only the businesses, the Company Secretary -Governance professional as we are popularlyknown, are also required to meet the progressivelygrowing expectations of the stakeholders.

The Companies Act, 2013 has considerablyenhanced the role and responsibilities of companysecretaries both in employment and in practice andhas identified Company secretary as a keymanagerial person in a company. However, definingthe profession has become even tougher due to theway in which the challenges of enhancedstakeholders expectations, business structures andintensely dynamic scenarios, have unfoldedaffording an opportunity and challenge for theCompany Secretary to take on and juggle a numberof responsibilities that were never a part of theiroriginal jobs.

Following are the key tenets and levers for buildinga responsible business and the Company Secretaryis expected to play a pivotal role in bringing aboutthe desired responsible business culture in thecorporate world.

Risk management

Risk management has always been regarded as aninherent or integral feature of sound businessmanagement. The board of a company is responsiblefor the management of risk. The board must have aclear understanding of the risks facing the company;it must ensure that the organization has effective riskmanagement and control processes; and it must beprovided with assurance that the processes and keyrisks are being effectively managed. The companysecretary has a pivotal role to play in the provisionof appropriate guidance/advice to the boardregarding its duties and responsibilities pertainingto risk management.

As per Section134(3)(n) of the Companies Act, 2013the Directors Report shall include a statementindicating development and implementation of a riskmanagement policy for the company includingidentification therein of elements of risk, if any,

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In the wake of rapid changes and emerging dynamicscenario in the business world in recent yearsstakeholders of companies are increasinglyconcerned with the conduct of the affairs of thecompany with focus on disclosure, transparency,accountability, Stakeholders engagement andInternal Controls.

The most important right we have isthe right to be responsible.

- Gerald Amos

Responsible Business practice is about successfullyintegrating responsible business issues into the corestrategy and the day to day operations of thecompany, including inter-alia aspects relating toCorporate Governance, Corporate SocialResponsibility, Risk Management, Code of Conductand Ethics, Sustainability Reporting, and AnnualBusiness Responsibility Reporting. Responsiblebusiness is the responsibility of the enterprises forthe impact of their operations on variousstakeholders. It aims at maximizing the creation ofshared value for all stakeholders. Businesses shouldactively integrate responsible business practices intheir decision making and core business strategy andpromote that thinking across the whole of theirbusiness and further through to their entire valuechain for engaging actively with wider society withfocus on Triple Bottom Line i.e People, Profits andPlanet , in the pursuit of building a sustainable andresponsible business.

In recent years, the role of the Company Secretaryhas expanded and greater responsibility than ever isbeing placed on the Secretarial function. The role hasbecome multi-faceted and global, with CompanySecretaries adding value through commercialsolutions designed to protect boards and maximizeshareholder engagement. The growing clamour foreffective responsible business has increased focus onthe role of the company secretary. Company Secretaryis aptly christened as the Corporate GovernanceOfficer (CGO).

The growth of Indian businesses, new regulatoryprescriptions, intense antagonism and emergence ofmultifaceted business models expect the Company


which in the opinion of the Board may threaten theexistence of the company;

Section 177(4) stipulates:

Every Audit Committee shall act in accordance withthe terms of reference specified in writing by theBoard which shall, inter alia, include evaluation ofinternal financial controls and risk managementsystems

As a top level officer and board confidante, aCompany Secretary can pay a vital role in ensuringthat a sound Enterprise wide Risk Management[ERM] which is effective throughout the company isin place. As a key managerial personnel responsiblefor coordination and communication of processesand mechanisms for effective corporate functioningand governance, a Company Secretary should ensurethat there is an Integrated Framework on which astrong system of internal control is built. Such aFramework will become a model for assessing andevaluating risk management efforts in theorganization. Risk and control consciousness shouldspread throughout the organization. CompanySecretary should ensure that this happens so thatthe risk factors are duly considered at every stage offormulation of business strategy. It will also createawareness about inter-relationships of risks acrossbusiness units and at every level in the organization.Company Secretary can ensure that Riskidentification, assessment, mitigation and control areeffectively addressed at the board level.

Company Secretaries, need to interact with all thecompany's business divisions so they can explainthe risks in a unit far away that the board may not befamiliar with. 'You need to translate it into why it'simportant for me as a director. When speaking withmanagers of individual business units about risksthey're confronting, Company Secretaries need to beon alert for any filtering out of negative information.'Think of yourself as a deputized auditor, People inthe departments may not want to tell you aboutsomething because they haven't figured out how tohandle it yet.' Company Secretaries should take aninventory of all the events over the past year thatimpacted the company and assess whether or notthe management team was prepared for each event.The company secretary has a pivotal role to play inthe provision of appropriate guidance and advice tothe board regarding its duties and responsibilitiespertaining to Risk Management.

Reporting of frauds

If during the course of their professional duties, apracticing professional has reason to believe that anoffence involving fraud is being or has beencommitted by a company, it is his duty to report thefraud.

Section 143 (12) of the Companies Act, 2013 providesthat notwithstanding anything contained in thissection, if an auditor of a company, in the course ofthe performance of his duties as auditor, has reasonto believe that an offence involving fraud is being orhas been committed against the company by officersor employees of the company, he shall immediatelyreport the matter to the Central Government withinsuch time and in such manner as may be prescribed.As per section 143 (14), the provision of section 143shall mutatis mutandis apply to a company secretaryin practice conducting secretarial audit undersection 204. The Company Secretary must be vigilantand if something abnormal comes to his knowledgethen he must discharge his duty and comply withthe reporting requirements prescribed under theCompanies Act, 2013

Corporate Social Responsibility

"The price of greatness is responsibility", WinstonChurchill often used to say. There is no reason whyit should be any different for companies as well.

A new initiative that has been put in place underSection 135 of the Companies Act, 2013 relates tocorporate social responsibility (CSR) of companies.Regulations are supposed to modify behavior ofthose covered by the provisions and ensure that theybehave in a socially desirable way. But whether theregulations will act a nudge or a shove dependsupon how the regulated entities respond to.

Company Secretary can play a key and instrumentalrole in formulation and implementation of CSRstrategy. For this first of all a Company Secretarymust have a feeling, a desire from the bottom of theheart to do something good for the society, toparticipate in the welfare of the underprivilegedsection of the society. Then only one can leveragesuch attitude and effectively encourage and driveothers for CSR actions. A Company Secretary shouldinfluence CSR activities within the organizationsince they have direct nexus to the Board of Directors.Once CSR is initiated and directed from the top levelof the pyramid it will be automatically be followed

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down the l ine in the hierarchy across theorganization.

Corporate Social Responsibility is a niche area ofCorporate Behavior and Governance that needs toget aggressively addressed and implementedstrategically in the organizations. The CompanySecretary can, right from conceptualization, decidingthe legal form, structure of CSR program,identification of CSR projects, budgeting andallocation of funds, monitoring progress of CSRprojects, and conducting Post CSR projectcompletion audit can contribute a lot to ensuringeffective assimilation of CSR philosophy into theDNA of the Organization.

Business Ethics

Today, the corporate world as a whole is in theprocess of acquiring a moral conscience. The newand emerging concepts in management like corporategovernance, business ethics and corporatesustainability are some of the expressions throughwhich this emerging ethical instinct in the corporateworld is trying to express or embody itself in thecorporate life.

Business ethics comprises the principles andstandards that guide behavior in the conduct ofbusiness. Businesses must balance their desire tomaximize profits against the needs of thestakeholders. Companies must be run ethically in amanner such that all stakeholders-creditors,distributors, customers, employees, competitors, thesociety at large and governments-are dealt with in afair and equitable manner. A code of ethics shouldreflect top managements' desire for compliance withthe values, rules, and policies that support an ethicalclimate.

Clause 49 of the Listing Agreement requires that-

(i) The Board shall lay down a code of conduct forall Board members and senior management of thecompany. The code of conduct shall be posted onthe website of the company.

(ii) All Board members and senior managementpersonnel shall affirm compliance with the code onan annual basis. The Annual Report of the companyshall contain a declaration to this effect signed bythe CEO

A major step in developing an effective ethicalculture in the organization is constituting an Ethics

Committee of the Board and implementing aneducation program and communication system tobring about the desired awareness amongst theemployees about the firm's ethical standards and theCompany Secretary has a key role to play in thisregard.

Corporate sustainability

Corporate sustainability indicates a new businessphilosophy as an alternative to the traditionalgrowth and profit maximization model under whichsustainable development comprising environmentalprotection, social justice and equity, and economicdevelopment are given more significant focus whilerecognizing simultaneous corporate growth andprofitability. It is a business approach that createslong-term shareholder value by embracingopportunities and managing risks emanating fromeconomic, environmental and social developments.

Corporate sustainability describes businesspractices built around social and environmentalconsiderations. Corporate sustainabilityencompasses strategies and practices that aim tomeet the needs of the stakeholders today whileseeking to protect, support and enhance the humanand natural resources that will be needed in thefuture.

Many companies have started preparing andreleasing Sustainability Reports which report oneconomic, environmental, and social impacts ofbusiness. Sustainability reporting is a practice tomeasure, disclose, and be accountable to internaland external stakeholders for organizational,environmental, social and economic performance.Company Secretaries should guide and enlighten themanagement and encourage them to compileSustainability Report which has today become a keydistinguishing factor in corporate branding.

Business Responsibility Reporting

Realizing that adoption of responsible businesspractices in the interest of the social set-up and theenvironment are as vital as their financial andoperational performance, Securities and ExchangeBoard of India (SEBI) vide circular CIR/CFD/DIL/8/2012 dated August 13, 2012 inserted a new Clause55 in the Listing Agreement by mandating inclusionof Business Responsibility Reports ("BR reports") aspart of the Annual Report for listed entities. As astarting phase, Business Responsibility Report aspart of the Annual Report shall be mandatory for

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top 100 listed entities based on market capitalizationat BSE and NSE. Other listed entities may voluntarilydisclose BR Reports as part of their Annual Report.

A Business Responsibility Report contains astandardized format for companies to report theactions undertaken by them towards adoption ofresponsible business practices. BusinessResponsibility Report has been designed to providebasic information about the company, informationrelated to its performance and processes, andinformation on principles and core elements of theBusiness Responsibility Reporting.

Further, Business Responsibility Report has beendesigned as a tool to help companies understandthe principles and core elements of responsiblebusiness practices and start implementing social andenvironmental improvement mechanisms in the coreprocesses of the structure which company adopts toundertake its business. Company Secretaries mustcompile and present the ABRR in true spirit byproviding necessary thrust and direction within theorganization for compliance and reporting on themandated social, economic and environmentalparameters.

Vigil Mechanism

A very famous quote by Edward Thurlow (1731-1806):

"Did you ever expect a corporation to have aconscience, when it has no soul to be damned, andno body to be kicked?"

The above quote describes that corporations haveneither bodies to be punished nor souls to becondemned, they therefore do as they like. Whistleblowing mechanism plays a critical role inimplementing Corporate Governance Practices. Theeffective implementation of Vigil mechanism not onlyreduces the fraudulent activities but also sends asignal to both internal and external agencies thatorganization exercises good corporate governance.

According to Section 177(9) of the Companies Act,2013, every listed company or such class or classesof companies, as may be prescribed, shall establisha vigil mechanism for directors and employees toreport genuine concerns in such manner as may beprescribed. The vigil mechanism under sub-section(9) shall provide for adequate safeguards againstvictimization of persons who use such mechanismand make provision for direct access to the

chairperson of the Audit Committee in appropriateor exceptional cases: Provided that the details ofestablishment of such mechanism shall be disclosedby the company on its website, if any, and in theBoard's report.

The Whistle Blower Policy should includemechanism to encourage employees, vendors, toreport evidence of fraudulent activities. It shouldproperly address the processes that the employeesshould follow in filing their representation allegingsuspected impropriety.

A very famous quote by Napoleon:

"The World suffers a lot not because of the violenceof bad people but because of the silence of goodpeople."

Company Secretary can be instrumental inimplementing whistle blowing as an internalregulator. As he is a part of Board decision makingprocess and recipient of all important informationflowing in the organization, he should sense outsuspected improper activities/unethical practicesadopted by individuals / groups within theorganization. He can also support the ombudsmanfunction with the Board by establishing a symbioticrelationship between the governance andcompliance.

Company Secretary as a key recipient of vigilsensitive information can face reprisal, sometimesat the hands of the organization or group, which heaccused, sometimes under law. There is often a fearof straining their relationship at work or outsidework. If this tool of Corporate Governance is used intrue letter and spirit, it can be savior for protectingthe stakeholders and the larger public interest andCompany Secretary has a vital role to play in makingWhistle Blowing an effective tool for safeguardingthe interests of the organization.

Disclosure and reporting

In recent years there has been increased emphasison the quality of corporate reporting and calls forincreased transparency. The company secretary hasthe responsibility for drafting the governance sectionof the company's annual report and must ensure thatall the requisite information is communicatedthrough this vital document for building the desiredtrust with the stakeholders. The disclosurerequirements under the Companies Act, 2013 withregard to Board of Director Report, Annual Return,Prospectus, notices of meetings and the requirement

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of hosting the specific information on the website ofthe company must be duly complied with by theCompany Secretary. While these additionaldisclosures will increase accountability of the board,it also will provide more information to shareholdersand enable informed decision making.

Communication with stakeholders

The company secretary occupies a position whichentails a unique opportunity of interface betweenthe Board, management and stakeholders and assuch they act as an important link between the Boardand the business. Through effective co-ordinationand communication they can provide to themanagement an opportunity to understand theexpectations of the stakeholders. Company Secretarymust advise and implement an effectivecommunication system for ensuring appropriatelevel of engagement with the stakeholders of thecompany. Regular updation of information on thewebsite of the company, periodic release ofnewsletter and periodically organizing stakeholdersmeet could help an organization in establishing aneffective interface with the stakeholders.

Corporate Governance

As per The Institute of Company Secretaries of India(ICSI), Corporate Governance is defined as "Theapplication of best management practices,compliances of law in letter and spirit and adherenceto ethical standards for effective management anddistribution of wealth and discharge of socialresponsibility for sustainable development of allstakeholders." Driven by Clause 49 of the ListingAgreement, Indian companies have gradually scaledup their corporate governance practices over theyears. Provisions of the Companies Act, 2013 havefurther attempted to mandate and shore up goodgovernance in companies.

It is important that robust governance arrangementsare in place, are clearly documented andcommunicated within the organization. The positionof the company secretary enables them to have aholistic view of the governance framework and as aresult they are generally tasked with theresponsibility of ensuring that this framework andany supporting policies and procedures are dulystructured, implemented and explicitly documented.The company secretary plays a leading role in goodgovernance by helping the Board and its committees

function effectively and in accordance with theirterms of reference and best practices.

The main objective of Corporate Governance policiesand practices should be wealth creation, wealthmanagement and wealth sharing. Adherence to lawsand regulations, f inancial goals andcommunications with stakeholders are major factorsthat make up the way in which corporations isgoverned.

The top five mechanisms, which are vital forimplementing an effective Corporate Governance inany organization are : Independence andappropriate composition of the Board, Role ofAuditors (Internal and Statutory) and AuditCommittee, Whistle Blowing, Shareholderengagement, Transparency, trust, and accountabilitytowards stakeholders . Regulations on corporategovernance can only provide the framework orstructure to ensure that companies are governed inthe best interest of stakeholders at large but itseffective assimilation and implementation is to beensured by the Company Secretaries by activeparticipation in Strategic Planning process, RiskManagement process, Internal Control process, MIS,Corporate Communications, Succession Planning,CSR, Board performance evaluation process. Thiswill ensure high level corporate administration inaccordance with best governance practices whichresults would result in well governed andsustainable business for the benefit of itsstakeholders at large. The Company Secretaries havean important role to play in helping businessesimprove their credibility through responsiblebusiness practices.

Company secretaries can add real value to their roleand increase their impact by bringing commercialacumen, strategic understanding and softer peopleskills in addition to their already much sought afterlegal and governance knowledge. With increasingfocus in recent years on responsible business, therole of the Company Secretary has grown inimportance. In many ways, the secretary is now seenas the guardian and conscience keeper of thecompany's reputation, sustainability andcredibility. Company Secretaries must provide valueadded services to the company and play a proactiverole in creating structure and processes whichfacilitate building a responsible business.

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SOCIETIES REGISTRATION ACT, 1860-A SCOPE FOR PRACTICING COMPANY SECRETARIES

– CS Anju Yadav ACS*

• Promotion of science, literature, fine arts,instructions or diffusion of usefulknowledge,diffusion of political education,foundation or maintenance of libraries, publicmuseum and galleries of paintings, works of art,collection of natural history, mechanical andphilosophical inventions, instruments , designs.

PROCEDURE FOR REGISTRTAION OF SOCIETY

* Signing of Memorandum of Association: Minimumthree members of Governing Body of the Societyshould sign each page of the Memorandum and thesignature should be witnessed by an OathCommissioner, Notary Public, Gazette Officer,Advocate, Chartered Accountant, Magistrate FirstClass with their rubber/official stamp and completeaddress.

* Procedure for the registration of Societies at Statelevel and at national level is same except for fulfilling

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INTRODUCTION

This Article contains a description of formation of aSociety under the Society Registration Act, 1860. It isan attempt to highlight the procedural formalities,important provisions of the Act and variousdifficulties faced by the professionals, while forminga Society in India. A society can perform a very vitalrole in well being of public at large and is also asignificant area of practice for Practicing CompanySecretaries to venture in.

STATUS AND LEGISLATION

Societies are registered under the SocietiesRegistration Act, 1860 (here in after referred as "TheAct"). The main instrument of any Society under theAct is the Memorandum of Association and Rulesand Regulations, wherein the aims, objectives andmode of management (of the Society) should beenshrined. A registered Society is a legal entity whichbinds the members to a certain extent. The Societyenjoys a legal status separate from its members andcan acquire and hold property and can sue or be sued.

According to Sec 3(2) of the Act, a Society which isseeking registration should not have a nameidentical to that of another Society which has beenpreviously registered and whose registration issubsisting on such date.

An unregistered Society does not enjoy any legalstatus under the prevailing laws.

PURPOSE

A Society can be formed for the promotion ofliterature, science orfine arts or the diffusion of usefulknowledge/political education or for charitablepurposes. Section 20 of the Act specifies the followingpurpose for which the society may be registered:

• Grant of charitable assistance

• Creation of military orphan funds

• Societies established at the general presidenciesof India


the criteria of having minimum number of Membersas provided at step 1 above.

DOCUMENTS REQUIRED:

* Unlike the trust deed, the Memorandum ofAssociation and Rules and Regulations need not beexecuted on stamp paper.

*All the papers need to be self attested as well asnotarize.

IN THE ABSENCE OF REGISTRATION, all themembers in charge of the fund have alone a legalstatus and the society has no legal status, and,therefore, it cannot sue or be sued. A non-registeredSociety may exist in fact but not in law. It isimmaterial under the Act whether the Society isregistered or not but where the benefit is claimed,the registration of Society under the Act is requiredbecause an unregistered Society cannot claimbenefits under the Income-Tax Act 1961.

POST REGISTRATION WORK AND ANNUALCOMPLIANCE

Conclusion:

The device of "Society" is a method to fulfill the need ofan institution of non-commercial nature for promotionof numerous charitable activities as enumerated underSection 20 of the Societies Registration Act 1860. Beinga legal entity, it can own, possess and manage the fundsand assets for achievement of charitable or promotionalobjects. Practicing Company Secretaries can play a majorrole in providing their professional services to thedesiring people in the field of Society Registration, postregistration work and regular compliances as applicableto the Societies registered under the Act.

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INVITATION FOR CONTRIBUTION OF ARTICLES

NIRC of ICSI invites Articles from Members for publication in the NIRCNewsletter. Members may send the soft copy of their article, profile and passportsize colour photograph to NIRC by email to [email protected], for consideration bythe Editorial Board.

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ONE PERSON COMPANY: CORPORATISATION OFPROPRIETORSHIP FORM OF BUSINESS

– Dr. Rajeev Babel, FCS*

respect of registration. Rule 3 of Companies(Incorporation) Rules, 2014, prescribes the pointsrelating to the incorporation of the OPC.

2.1. From the provisions of the Act and Rules relatingto the OPC, the following characteristics may beenumerated:

• Only a natural person who is an Indian citizenand resident in India: (a) shall be eligible toincorporate a One Person Company; (b) shall bea nominee for the sole member of a One PersonCompany. The term "resident in India" means aperson who has stayed in India for a period ofnot less than 182 days during the immediatelypreceding one calendar year.

• No person shall be eligible to incorporate morethan a OPC or become nominee in more than onesuch company.

• Where a natural person, being member in OPC inaccordance with this rule becomes a member inanother such Company by virtue of his being anominee in that One Person Company, suchperson shall meet the eligibility criteria specifiedin sub rule (2) within a period of one hundredand eighty days.

• No minor shall become member or nominee ofthe OPC or can hold share with beneficial interest.

• Such Company cannot be incorporated orconverted into a company under section 8 of theAct.

• Such Company cannot carry out Non-BankingFinancial Investment activities includinginvestment in securities of any body corporate.

• No such company can convert voluntarily intoany kind of company unless two years haveexpired from the date of incorporation of OPC,except threshold limit (paid up share capital) isincreased beyond Rs. 50 lakh rupees or itsaverage annual turnover during the relevantperiod exceeds Rs. 2 crore rupees.

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1. Introduction:

The concept of One Person Company (OPC) has beenintroduced for the first time in the Companies Act,2013. Though it is a new concept in India but the it isalready in existence in other countries like UK, USA,Singapore, China, Turkey, UAE, and Pakistan. TheOPC form of business organization has been givenlegal status in the Companies Act, 2013, on therecommendations of an expert committee set up bythe Ministry of Corporate Affairs, in Dec 2004 underthe Chairmanship of Dr. Jamshed J. Irani, (called as JJ Irani Committee). The Committee gave its report on31st May 2005. The Committee after deliberationswith the several experts in various disciplines, andin the context of changes required in light of economicand business environment, suggested necessarychanges in the Companies Act, 1956. Among otherrecommendations, one of the suggestion was to bringthe OPC concept in the Indian Corporate Culture.While recommending it was narrated that with theincreasing use of information technology andcomputers, emergence of the service sector, it is timethat the entrepreneurial capabilities of the people aregiven an outlet for participation in economic activity.Such economic activity may take place through thecreation of an economic person in the form of acompany. To facilitate this the law should recognizethe formation of a single person economic entity inthe form of 'One Person Company'. Such an entitymay be provided with a simpler regime throughexemptions so that the single entrepreneur is notcompelled to fritter away his time, energy andresources on procedural matters.

2. Provisions under the Companies Act, 2013:

Section 2(62) defines, "One Person Company" meansa company which has only one person as a Member.Section 3 (1) (c) provides that a company may beformed for any lawful purpose by one person, wherethe company to be formed is to be One PersonCompany that is to say, a private company, bysubscribing his name to a memorandum andcomplying with the requirements of this Act in


• OPC can be formed either by way of a companylimited by share; or a company limited byguarantee; or an unlimited company.

• The minimum authorized share capital of thecompany should be Rs 1 lacs.

• OPC needs to have minimum 1 director andmaximum of 15 , which can also be increased bypassing of a special resolution.

2.2. Types of OPCs: Section 3(2) of the CA, 2013 providesthat OPC formed under section 3(1) may be either (a) acompany limited by shares; or (b) a company limited byguarantee; or (c) an unlimited company.

2.3. Various form prescribed under the Act relevant toOPC: The forms prescribed relating to theincorporation/ for other matters of OPC are:

2.4. Step for incorporation of OPC:

• Obtain Digital Signature Certificate (DSC) for theproposed Director(s).

• Obtain Director Identification Number (DIN) forthe proposed director(s).

• Decide suitable name of the Company to beincorporated and file an application in Form INC-1, for name availability with the MCA along withthe fee as provided in the Companies(Registration offices and fees) Rules, 2014. Everyapplication to the Registrar of Companies filedby any person for reservation of name under sub-section (4) of section 4 of the Companies Act, 2013shall be accompanied with the fee of Rs. 1,000.

• After name approval, form INC-2 shall be filedfor incorporation of the OPC within 60 days offiling form INC-1.

• The relevant portion of the fee prescribed isappended below:

• Drafting of the Memorandum and Articles ofAssociation (MoA / AoA)

• Sign and file various documents including MoA& AoA with the Registrar of Companieselectronically.

• The Memorandum of a company shall be inrespective forms specified in Tables A, B, C, D,and E in Schedule I as may be applicable to thecompany.

• The model articles as prescribed in Table F, G, H,I and J of Schedule I may be adopted by a companyas may be applicable to the case of the company,either in totality or otherwise.

• Payment of Requisite fee to Ministry of CorporateAffairs and also Stamp Duty.

• Scrutiny of documents at Registrar of Companies[ROC].

• Receipt of Certificate of Registration/Incorporation from ROC.

3. Pros and Cons about OPC: The following parasdiscusses about the pros and cons about the OPC:

3.1. Pros:

• It enjoys the status of Separate legal entity.

• It enables the small time businessman to enterthe 'corporate sector' by incorporating OPC.

• Liability of the sole member would be restrictedto the amount unpaid on the shares held by him.

• Micro and small enterprises ( in manufacturing/in service sector) comes under the priority sectorlending and the OPC may take leverage benefitsof it.

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• Mandatory rotation of the auditor after expiry ofmaximum term is not applicable.

• A lot of exemptions have been provided to theOPC which the public limited companies are notenjoying.

• OPC will aid individuals who are in the lessorganized and unorganized sectors (small andmedium sized traders, weavers, artisans,mechanics, carpenters, designers and other skilldependent professions and vocations.

• OPC need not prepare Cash Flow Statement aspart of its Financial Statements under proviso tosection 2(40).

• OPC may be converted to other type of legal formby making amendment in the MOA.

3.2. Cons:

• The act prohibits any foreign participation

• From taxation perspective, the concept of PC maynot appeal to smaller proprietors ( to convertthemselves in OPCs) since the base rate of tax of acompany is quite high ( 30% approx) and mayresult in a higher incidence of taxation for them.

• OPC may also be used by unscrupulousindividual entrepreneurs to siphon off funds andevade tax liability.

• From the lender's perspective, financialinstitutions and banks- would they treat them asnormal company.

• The Act has not granted any relief to OPC fromthe provisions of accounts and audit.

• If an OPC declares divided it will have to paydividend distribution tax @16.995% ( 15% +10%surchage+3% cess) apart from income [email protected]%.

• OPC have to file Financial Statements, BalanceSheet and P&L account duly adopted by the itsmember within 180 days from the close of the FYas per proviso 137(1).

• Where the sole proprietor makes any drawings,the same is not treated as deemed dividend, butin OPC when a director takes a loan and theOPC have distributable income, the loan availedby the director is treated as deemed dividend to

the extent of accumulated profits by a closely heldcompany u/s 2(22)(e) of I.T.Act, 1961.

• There is a cap on the capital / turnover. Wherethe paid up share capital of an OPC exceeds Rs50 lacs or average turnover during the relevantperiod exceeds Rs 2 crores, it shall cease to beentitled to continue as OPC.

• Section 26 of the Company Secretaries Act, 1980stipulates that 'companies not to engage inCompany Secretaryship and no company,whether incorporated in India or elsewhere, shallpractice a Company Secretaries'.

4. Progress towards Registration of company asOPCs: Up to 31.12.2014, a total of 1403, OPC wereregistered with collective authorized capital of R31.13 crore. Just after two months, the figure wentup and up to 28th February, 2015, a total number of1,953 One Person Companies (OPC) were registeredwith collective authorized capital of Rs. 44.83 crore.

The details of sector specific data of OPCsregistered are as under:

(Source: Annual Report 2014-15 and MonthlyInformation Bulletin, Feb 2015 issued by MCA)

5. Summing up: To overcome the shortcomings/hazard of the Proprietorship form of business, theconcept of Corporatisation of Proprietorship form ofBusiness has been evolved. The newly introducedconcept of OPC is better option for those businessmenwho do not want to involve other persons in theirbusiness and yet want to expand the horizons, butwith a separate legal entity. By forming and doingthe business under the umbrella of OPC and titledwith label of Pvt. Ltd. may enhance the valueenrichment in their business.

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Annual Regional Conference of NIRC


NIRC ACTIVITIES

News From NIRC


"How come you consider Paramjeet Singh as the most accomplished Company

Secretary in this Corporate World?"

"It is because of his qualities."

"What are his qualities?"

"He is capable of justifying all the decisions of the Chairman even without any facts and

figures."

***************

"In our Group Of Company Secretaries Friends,how come you are getting the

maximum salary?"

"Because the job which I do is very important and difficult to perform."

"What is your job?"

"It is to propagate that our Chairman is a genius and the most caring person in the

Corporate World."

—CS PARAMJEET SINGH, [email protected]

Members may send their contribution for this column at e-mail [email protected] for publication in theNIRC Newsletter-Insight. Decision of the Editorial Board of Newsletter in this regard will be final.

LIGHTER SIDE OF THE PROFESSION

CAREER AWARENESS PROGRAMS

NIRC has organised 38 Career Awareness Programs during the month of August,

2015 in various schools & colleges located in Delhi and surrounding areas. The

students were apprised about the mode of registration in the course, syllabus,

structure of the course and also the avenues available after completion of the

Company Secretaryship Course both in employment and in practice.

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Lighter Side of the Profession


CSBF

COMPANY SECRETARIES BENEVOLENT FUNDMEMBERS ENROLLED FROM NORTHERN REGION AS LIFE MEMBERS OF THE COMPANYSECRETARIES BENEVOLENT FUND DURING THE PERIOD 21/07/2015 TO 20/08/2015

S.No. Name Mem. No.

1. CS GAGNISH ARORA ACS-14821

2. CS VIKAS AGGARWAL ACS-30989

3. CS KHYATI BANSAL ACS-26234

4. CS DIVYA ACS-32513

5. CS BUNNY SEHGAL ACS-39598

6. CS SHIVAM MAHESHWARI ACS-38467

7. CS MEENAKSHI ACS-32267

8. CS SUNIL SHARMA FCS-6351

9. CS DEV MANI SHARMA ACS-27544

10. CS BHANU PRAKASH PANT ACS-32809

CHAPTERS OF NIRC-ICSI

Agra, Ajmer, Allahabad, Alwar, Amritsar, Bareilly, Bhilwara, Bikaner, Chandigarh,

Dehradun, Faridabad, Ghaziabad, Gurgaon, Jaipur, Jalandhar, Jammu, Jodhpur,

Kanpur, Karnal-Panipat, Kota, Lucknow, Ludhiana, Meerut, Modinagar, Noida,

Shimla, Sonepat, Srinagar, Udaipur, Varanasi & Yamuna Nagar.

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The changed profess iona l address o fCS Ranjeet Pandey, Council Member, ICSI isas under:RANJEET PANDEY & ASSOCIATESCompany SecretariesA-308, Basement, Defence ColonyNew Delhi - 110024Tel: 011-46074119,Cell: +91-9810558049

CHANGE IN PROFESSIONAL ADDRESSThe changed profess iona l address o fCS Avtaar Singh, Regional Council Member,NIRC-ICSI is as under:AVP Legal & Corporate Affairs,Panchavaktra Holdings Pvt Ltd.Level -18, One Horizon Centre,Golf Course Road,DLF Phase -5, Sector -43Gurgaon-122002Email :[email protected]: 9999789891

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ICSI National Awards for Excellence in Corporate Governance