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Statutory Requirements

Indian companies are now governed by Companies Act 2013 and company has to comply with various statutory provisions as per different sections of Companies Act 2013. Services offered by us include:

Incorporation of company
Filing of documents, with Registrar of Companies
Conducting Statutory Audit at the end of the year
Assistance in drafting Director's Report covering statutory points to be covered.
Assistance covering Annual General Meeting and statutory compliance thereof.
Statutory provisions relating to various meetings like Board Meetings, Statutory Meetings, their due dates and documents to be fled with Registrar of Companies.
Consultancy for other different provisions as applicable to company.

Company Law

Forms of Commercial Organization

In the dynamic world of business, choosing the right commercial organization structure is essential for legal compliance, operational efficiency, and growth. Our expert team specializes in guiding businesses through the complexities of company law, offering tailored advice on forming, managing, and restructuring commercial entities. From sole proprietorships and partnerships to limited liability partnership (LLPs) and corporations, we ensure your business is set up for success, legally sound, and aligned with your strategic goals.

Further, the companies act, 2013 has newly introduced the concept of One Person Company (OPC) that is to say, a private company in which a natural person who is an Indian citizen and resident in India shall be eligible to be the sole member.

Compliance of Dormant Company [New Concept under 2013 Act

The Companies Act, 2013 introduced the concept of a "Dormant Company" to accommodate entities that are legally incorporated but currently inactive or not carrying out significant transactions. Maintaining compliance for a dormant company is crucial to preserving its legal status and avoiding penalties. Our dedicated team assists in meeting all statutory requirements, including filing necessary returns, maintaining financial records, and ensuring periodic compliance, so your dormant company remains in good standing while being prepared for future reactivation.

A company which has not filled the financial statement or annual returns for last 2 FYs consecutively will be classified as Dormant Company by the ROC.
Board Meeting is required to be held at least once in each half of a calendar year and the gap between the 2 meetings is not less than 90 days.
A dormant company will have such number of directors, file such documents and pay such annual fees as may be prescribed.

Minimum paid-up capital

The Companies Act, 2013, has removed the mandatory requirement of minimum paid-up capital for incorporating private and public companies. However, companies must still comply with the authorized capital requirements and maintain adequate capital to meet business needs and regulatory obligations. Our team provides expert guidance on determining the optimal capital structure for your business, ensuring compliance while balancing operational efficiency and financial planning.

Two kinds of share capital

The Share capital is the foundation of a company's financial structure, representing the funds raised through issuing shares. There are two primary types of share capital:

1. Equity Share Capital: Represents ownership in the company, providing voting rights and a share in profits through dividends. Equity shareholders bear higher risk but potentially enjoy greater returns.

2. Preference Share Capital: Offers preferential rights over equity shares regarding dividend payments and capital repayment during liquidation. Preference shareholders generally do not have voting rights. The Preference share capital itself can be categorized into several types, each offering distinct features and benefits:

Cumulative Preference Shares: Accumulate unpaid dividends for future payout.
Non-Cumulative Preference Shares: Dividends lapse if not declared.
Convertible Preference Shares: Can be converted into equity shares after a specified period.
Non-Convertible Preference Shares: Cannot be converted into equity shares.
Redeemable Preference Shares: Repurchased by the company after a set time.
Irredeemable Preference Shares: Cannot be repurchased during the company's lifetime.
Participating Preference Shares: Entitle holders to additional dividends i
Non-Participating Preference Shares: Limited to fixed dividends only.

Our team of experts provides comprehensive guidance on choosing the appropriate share capital structure tailored to your business needs, ensuring legal compliance and optimal financial planning.

New issues of equity share capital with different voting rights

Under the Companies Act, 2013, companies in India can issue equity shares with differential voting rights (DVR), allowing them to raise capital while retaining control. These shares may carry fewer voting rights compared to regular equity shares but often come with additional financial benefits such as higher dividends.

Key Features:

Voting Rights Variation: DVR shares may have limited, or no voting power compared to standard equity shares.
Enhanced Dividend Rights: In many cases, DVR shares offer higher dividends as compensation for reduced voting power.
Control Retention: Companies can issue DVR shares to raise funds without diluting control.
Investor Appeal: Attractive to investors looking for stable returns rather than voting influence.

Our team assists businesses in structuring DVR equity issues, ensuring compliance with legal requirements, and balancing ownership and financial objectives.

Shifting of registered office

The registered office of a company is its official address, where all communications and legal notices are sent. Under the Companies Act, 2013, companies may shift their registered office within the same city, from one city to another within the same state, or from one state to another. Each shift requires compliance with specific legal procedures and approvals.

Types of Shifting:

Within the Same City/Town/Village: Requires passing a Board Resolution and notifying the Registrar of Companies (ROC).
Within the Same State but Different City: Requires a Special Resolution and approval from the ROC.
From One State to Another: Involves altering the Memorandum of Association (MoA), obtaining approvals from the Regional Director (RD), and completing other formalities.

Our expert team assists in the seamless shifting of the registered office by managing documentation, filing necessary forms, and ensuring full compliance with the legal framework.

Buy back of securities

The buy-back of securities is a financial strategy wherein a company repurchases its own shares or other specified securities from existing shareholders. Governed by the Companies Act, 2013, buy-back is undertaken to optimize the capital structure, enhance shareholder value, or utilize surplus funds efficiently.

Key Objectives of Buy-Back:

Capital Restructuring: Reducing the number of outstanding shares to improve financial ratios.
Boosting Shareholder Value: Increasing the value of the remaining shares by reducing supply.
Utilizing Surplus Funds: Efficient use of excess cash reserves.
Preventing Hostile Takeovers: Reducing the number of shares available in the market.

Modes of Buy-Back:

From Open Market: Through stock exchanges.
From Existing Shareholders: On a proportionate basis.
From Employees: Utilizing employee stock options (ESOPs).

Our team provides expert guidance on the legal, financial, and procedural aspects of the buy-back process, ensuring compliance and strategic benefits for your company.

Directors

a. Every public company is required to have at least three directors and every private company to have at least two directors, subject to a maximum of 12 directors. However, One Person Company may have minimum one director.

A listed public company in India is required to comply with the corporate governance requirements. Accordingly, such a company is mandatorily required to have not less than 50% of the total strength of the board of directors comprising non-executive directors. Depending on whether or not the Chairman is executive or non-executive, the total number of independent directors that it shall appoint will vary between half or one third respectively. Independent directors have been defined to mean directors, who apart from receiving director's remuneration, do not have any other material pecuniary relationship or transaction with the company, its promoters, its management or its subsidiaries which in the judgment of the board, may affect the independence of judgment of the director Listed public companies covered under the prescribed class should have at least one-third of the total number of its directors as independent directors. In the Directors' Appointment Rules, minimum number of directors for non-listed public companies meeting prescribed criteria has been changed to 2, irrespective of the board size.Also, the criteria for appointment of independent directors have changed in the Directors' Appointment Rules.

b. No person can hold office of director in more than 20 companies at a time. 2013 Act restricts the number of directorship for an individual to 20. Out of total 20 companies, number of public companies in which a person can be appointed as a director cannot exceed 10.

Independent Director

Every company having:

Net worth of INR 5 billion or more, or
Turnover of INR 10 billion or more, or
Net profit of INR 50 million or more,

Shall appoint an independent director who is a director (other than managing director or whole-time director or nominee director), who is a person of integrity and has no pecuniary relationship with the company or its holding/ subsidiary/ associate company. Further, he shall not hold (together with his relative) two percent or more of the total voting power of the company.

Tenure

The initial term shall be five years, following which further appointment would require a special resolution of shareholders. However, total tenure shall not exceed two consecutive terms, without a break of three years

Role in the company

The role is broadly set out in Schedule IV of 2013 Act. An Independent director acts as "watchdog" for the company's shareholders. He may also be viewed as a strategic advisor who can provide their expertise and experience on business matters to the firm's management or controlling shareholders.

Mandatory Requirements as Directors

One Resident Director

At least one director must be resident in India, that is to say, he must have stayed in India for at least 182 days in previous calendar year

Board Meeting

Director must be present in at least one board meeting held during the period of 12 months with or without leave of absence, otherwise, he shall be considered to vacate the office. However, board meeting of OPC is required to be held at least once in each half of a calendar year and the gap between the 2 meetings is not less than 90 days.

Declaration

An individual before being appointed as director shall be required to furnish a declaration that he/ she is not disqualified for being appointed as director.

Consent filing

Every director has to give his consent for an appointment as such to be filed with Registrar of Companies

Resignation filing

There is a mandatory requirement for the person to file his resignation with Registrar as director within 30 days. Resignation shall be effective from the date of receipt by company, not w.e.f. date of resignation

Limit on Directorship

Directorship in Private company, One Person Company, and LLP(Limited Liability Partnerships) to be counted in total number of directorships (i.e, twenty), allowable for a person being a director[s 165(1)].

Transition period to comply with the limit on Directorship - 1 year from the commencement of 2013 Act

Quorum

One-third of the total directors or two, whichever is higher shall form the quorum for the board meeting wherein no proxy shall be counted. However, such provisions shall not apply to One Person Company.

Loan to directors

No company shall directly or indirectly advance any loan (including loan represented by a book debt) or give guarantee or provide security in connection with such loan to any director / related persons.

*An exception to the above rule is made for MD or a whole time director (WTD) if such loan is in accordance with the terms of services extended to all employees or is approved by shareholders by special resolution

Key Managerial Personnel

Company having a paid-up share capital of fifty million rupees or more shall have whole-time key managerial personnel. It shall include:

a) Managing Director/ Chief Executive Officer/ Manager/ Whole-time Director, and,

b) Company Secretary, and

c) Chief Financial Officer Each of these classes of KMP is independent and mandatory. Such whole-time KMP shall not hold office in more than one company, except in its subsidiary at the same Transition period of 6 months is allowed from commencement of this Act

c) Now, directors have to annually report in the Directors' Responsibility Statement, on the existence and effective operations of systems on compliance with all applicable laws.

d) As per 2013 Act, the board of directors is required to meet at least four times in a calendar year. No such meetings need be held compulsorily in India and can be held anywhere in the world.

Maximum gap between two board meetings should not be more than 120 days.
Electronic voting for Board and shareholders' meetings has been introduced.
Approval of related party transactions by Board of Directors at Board meeting made mandatory.
At least 7 days' notice to every director shall be given for the board meeting
As till now the foreign directors faced location constraints in attending the board meetings in India, now participation of directors through video-conferencing and other electronic means for board meetings has been permitted and considered equivalent to being in- person, provided such participation is capable of recording and recognizing. [s173(2)]

Appointment of Statutory Auditor

A statutory auditor is an independent professional appointed to audit a company's financial statements and ensure compliance with legal requirements. Under the Companies Act, 2013, the appointment of a statutory auditor is mandatory for every company to maintain transparency and accountability in financial reporting.

Key Points of Appointment:

Who Appoints: The statutory auditor is appointed by the Board of Directors or by shareholders at the Annual General Meeting (AGM).
Tenure: Generally appointed for a term of 5 years, with ratification required at every AGM.
Eligibility and Qualifications: Must be a Chartered Accountant or a firm of Chartered Accountants.
Filing Requirements: The appointment must be intimated to the Registrar of Companies (ROC) in Form ADT-1 within 15 days of the meeting.
Removal/Resignation: Requires special resolution and approval from the Central Government, if applicable.

Our expert team ensures a smooth appointment process, including documentation, compliance with statutory requirements, and filing with the ROC, so your company remains in good legal standing.