The document discusses company law concepts like vigil mechanism, related party disclosures, annual return and requirements for board reports. It contains questions and answers related to these topics. Key details include requirements for establishing vigil mechanisms, related party disclosure requirements as per SEBI regulations, importance of annual returns and need to disclose post-financial year material events in board reports.
The document discusses company law concepts like vigil mechanism, related party disclosures, annual return and requirements for board reports. It contains questions and answers related to these topics. Key details include requirements for establishing vigil mechanisms, related party disclosure requirements as per SEBI regulations, importance of annual returns and need to disclose post-financial year material events in board reports.
The document discusses company law concepts like vigil mechanism, related party disclosures, annual return and requirements for board reports. It contains questions and answers related to these topics. Key details include requirements for establishing vigil mechanisms, related party disclosure requirements as per SEBI regulations, importance of annual returns and need to disclose post-financial year material events in board reports.
The document discusses company law concepts like vigil mechanism, related party disclosures, annual return and requirements for board reports. It contains questions and answers related to these topics. Key details include requirements for establishing vigil mechanisms, related party disclosure requirements as per SEBI regulations, importance of annual returns and need to disclose post-financial year material events in board reports.
CS EXECUTIVE COMPANY LAW Website- www.meplclasses.com Main Centre- 59 Jatindra Mohan Avenue Shobhabazar Kolkata-700005 (Time allowed: 45 minutes) (Marks: 25 marks)
Question 1: Comment: Every company is required to disclose the details of vigil mechanism in the Board Report. (5 marks)
Answer 1: According to Section 177(9) of Companies Act, 2013, read with Rule 7 of Companies (Meetings of Board and its Powers) Rules, 2014 the following companies are required to establish a vigil mechanism for their directors and employees to report their genuine concerns or grievances. (a) Every listed company; (b) The Companies which accept deposits from the public; (c) The Companies which have borrowed money from banks and public financial institutions in excess of fifty crore rupees. Further the sub-section (10) provides that the details of establishment of such mechanism shall be disclosed by the company on its website, if any, and in the Board's report.
Question 2: What are the 'related party disclosures' required to be made by listed entities as per SEBI Regulations? (5 marks)
Answer: According to SEBI (LODR) Regulations, 2015, the Annual Report shall make certain provisions of Related Party Disclosures. Further as per Regulation 27(2) of SEBI (LODR) Regulations, 2015 details of all material transactions with related parties shall be disclosed along with the quarterly compliance report on corporate governance in the format as prescribed by the Board from time to time to the recognized Stock Exchange(s) within fifteen days from end of the quarter.
(1) The listed entity shall make disclosures in compliance with the Accounting Standard on "Related Party Disclosures". (2) The disclosure requirements shall be given below: Disclosures of amounts at the year end and the maximum amount of loans/advances/ investments outstanding during the year, in the books of accounts of:
(i) Holding Company:
Loans and advances in the nature of loans to subsidiaries by name and amount. Loans and advances in the nature of loans to associates by name and amount. Loans and advances in the nature of loans to firms/companies in which directors are interested by name and amount. (ii) Subsidiary: - Same disclosures as applicable to the parent company in the accounts of subsidiary company. (iii) Holding Company: - Investments by the loanee in the shares of parent company and subsidiary company, when the company has made a loan or advance in the nature of loan. For the purpose of above disclosures directors' interest shall have the same meaning as given in Section 184 of the Companies Act, 2013. Disclosures of transactions of the listed entity with any person or entity belonging to the promoter/promoter group which holds 10% or more shareholding in the listed entity, in the format specified in the relevant accounting standards for annual results.
Question 3: Comment: Annual Return is a significant document in relation to the company. (5 marks) Answer: Annual Return is an important document in relation to the company Annual Return is an important document for the stakeholders of a company. as it provides a very exhaustively information about the different aspects of a company. It is perhaps the most significant document required to be filed by every company with the Registrar of Companies. Apart from the Financial Statements, this is the only document to be mandatory filed with the Registrar of Companies, every year irrespective of any events / happenings in the company. While the Financial Statements give information on the financial performance of a company, it is the Annual Return which gives substantial disclosure and greater insight into the non-financial matters of the company and the people entrusted with the management of the company. Under Section 92(1) of the Companies Act, 2013 Annual Return contains the following information:
1. its registered office, principal business activities, particulars of its holding,
subsidiary and associate companies; 2. its shares, debentures and other securities and shareholding pattern; 3. its indebtedness [omitted by the Companies (Amendment) Act, 2017)] 4. its members and debenture-holders along with changes therein since the close of the previous financial year; 5. its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year; 6. meetings of members or a class thereof, Board and its various committees along with attendance details: 7. remuneration of directors and key managerial personnel; 8. penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment; 9. matters relating to certification of compliances, disclosures as may be prescribed; 10. such other matters as may be prescribed. Question 4: Fabulous Ltd. is in the process of finalization of its annual return. It is a listed company with paid-up capital 1 crore. The company seeks your advice on the following: (1) Who will sign the return on behalf of the company? (2) What are the requirements of certification of annual return by a practicing Company Secretary. (5 marks)
Answer: 1. As per Section 92 of the Companies Act, 2013, every company shall prepare its annual return containing the required particulars as they stood on the close of the financial year and shall be signed by a director and the Company Secretary, or where there is no Company Secretary, by a Company Secretary in practice. Whereas in case of One Person Company and small company, the annual return shall be signed by the Company Secretary, or where there is no Company Secretary, by the director of the company. 2. Every listed company, or a company with paid up share capital of 10 crore or more or a company with turnover of 50 crore or more, shall be required to get a certificate by the Practicing Company Secretary (PCS) stating the facts that the requirements of the Companies Act, 2013 and rules thereto have been complied with and Annual Return discloses the facts correctly and adequately.
Question 5: Phosphate Ltd. has suffered a major loss of 100 crore in May, 2018 on the dealing of commodity exchange. The annual accounts and Board's report for the year 2017-18 are under finalization. The Chief Financial Officer (CFO) of the company does not want to disclose this loss in the Board's report for year 2017-18 because this loss does not pertain to said financial year. Is the view of CFO, correct? The Board of Directors seek your advice in this matter. (5 marks) Answer:
According to Section 134(3) (k) all material changes and commitments, if any, affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report should form part of the Board's Report. The Director's Report shall, therefore, contain material changes. pertaining to post-financial statement events impacting the operations and performance of the Company. Thus, in present case view of Chief Financial Officer is incorrect. Loss of 100 Crore incurred during May, 2018, i.e., post financial year, shall be included in the Board's Report for the year 2017-18.
