Investment Valuation in India

Restrictions and legal requirements : No company shall enter into an arrangement by which- (a) a director of the company or its holding, subsidiary or associate company or a person connected with him acquires or is to acquire assets for consideration other than cash, from the company; or (b) the company acquires or is to acquire assets for consideration other than cash, from such a director or person so connected, unless prior approval for such arrangement is accorded by a resolution of the company in general meeting (GM) and if the director or connected person is a director of its holding company, approval shall also be required to be obtained by passing a resolution in GM of the holding company. Requirements of notice: The notice for approval of the resolution by the company or holding company in GM shall include the particulars of the arrangement along with the value of the assets involved in such arrangement duly calculated by a registered valuer. Effects of contravent...

Removal of auditor before expiry of his term [Section 140(1)] Resolution: Such removal requires a special resolution (SR) . Approval : Previous approval of Central Government (CG) must be obtained.                 Procedure for obtaining approval of CG and passing SR (Rule 7): Ø   An application shall be made to CG in Form ADT-2. The application shall be accompanied with the prescribed fees. Ø   The application shall be made to CG within 30 days of passing of the Board resolution (BR). Ø   The company shall hold the general meeting (GM) within 60 days of receipt of approval of CG for passing of the SR. Opportunity of being heard : Before taking any action for removal, the auditor shall be given a reasonable opportunity of being heard. Resignation by Auditor [Section 140(2) and 140(3)] When an auditor resigns, he is required to file a Statement in the prescribed form. ...

Eligibility for an individual An individual shall be eligible for appointment as an auditor of a company only if he is a chartered accountant (C.A). Eligibility for a firm *   A firm shall be eligible for appointment as an auditor of a company only if majority of its partners practicing in India are qualified for appointment i.e. they are C.A’s. *   Where a firm including a limited liability partnership (LLP) is appointed as an auditor of a company, only the partners who are C.A’s shall be authorized to act and sign on behalf of the firm. Disqualifications of Auditor [Section 141(3)] a) A body corporate other than a LLP. b) An officer or employee of the company.  c) A person who is partner or who in the employment, of an officer or employee of the company. d) A person who or his relative or partner *   is holding any security in the company or its subsidiary or of its holding or associate company or subsidiary of such holding company. I...

Applicability: Section 138 shall apply only to such class or classes of companies as may be prescribed. As per Rule 13 of The Companies (Accounts) Rules, 2014, following class of companies shall be covered under section 138: Every listed company Every unlisted public company having-  Paid up share capital of Rs. 50 crore or more during the preceding financial year; or Turnover of Rs. 200 crore or more during the preceding financial year; or Outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 100 crore or more at any point of time during the preceding financial year; or Outstanding deposits of Rs. 25 crore or more at any point of time during the preceding financial year. Every Private company having -  Turnover of Rs. 200 crore or more during the preceding financial year; or Outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 100 crore or more at any point of time during the p...

Section 202 of the Companies Act, 2013 deals with Compensation for loss of office of managing director (MD) or whole-time director (WTD) or manager Reasons for payment of compensation: (a) for loss of office; or (b) as consideration for retirement from office; or (c) in connection with such loss or retirement. Compensation can be paid only to : (a) MD; or (b) WTD; or (c) Manager. Amount of compensation: Permissible period: Lower of- Ø   The unexpired tenure of directorship; or Ø   3 years. Basis: ‘ Average remuneration’ actually earned during- Ø   3 years immediately preceding the date of cessation of office; or Ø   Such shorter period for which the director has held his office. Prohibition of compensation in certain cases: (a) reconstruction or amalgamation of company takes place. As a result of such reconstruction or amalgamation, the director resigns from the company, but is appointed as MD or manager or any oth...

The Lok Sabha, the lower house of the Parliament, has passed the Companies (Amendment) Bill, 2014, which will make it easier for corporates to do business and to ensure severe punishment for illegal money pooling activities, among other things. The amendments have been proposed in order to address some concerns raised by stakeholders. The major concerns raised by the stakeholders included protecting confidentiality of board resolutions, as well as the provision of auditors being required to report suspected frauds at the companies audited by them. Under the new norms, frauds beyond a certain threshold would need to be mandatorily reported by the auditors to the government, while cases below this threshold will be reported to the audit committee of the company’s board. Also, the corporates have been exempted from the need of obtaining approvals of shareholders in the case of related party transactions valued lower than Rs. 100 or 10 percent of net worth. As per the ...

The provisions related to rotation of auditor are applicable to those companies which are prescribed in Companies (Audit and Auditors) Rules, 2014, which prescribes the following classes of companies excluding one person companies and small companies , namely: (a) all unlisted public companies having paid up share capital of rupees ten crore or more ; (b) all private limited companies having paid up share capital of rupees twenty crore or more ; (c) all companies having paid up share capital of below threshold limit mentioned in (a) and (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more . As per section 139(2) of the Companies Act, 2013, no listed company or a company belonging to such class or classes of companies as mentioned above, shall appoint or re-appoint- (a) an individual as auditor for more than one term of 5 consecutive years; and (b ) an audit firm as auditor ...

According to Companies Act, 2013, no person including any director or key managerial personnel (KMP) of a company shall enter into insider trading.  However, as usual, n othing contained shall apply to any communication required in the ordinary course of business or profession or employment or under any law. Meaning of ‘insider trading’- a) An act of subscribing, buying, selling, dealing or agreeing to subscribe, buy, sell or deal in any securities by any director or KMP or any other officer of a company either as principal or agent if such director or KMP or any other officer of the company is reasonably expected to have access to any non-public price sensitive information in respect of securities of company, or b) An act of counselling about, procuring or communicating directly or indirectly any non-public price sensitive information to any person. Price Sensitive Information refers to  any information which relates, directly or indirectly, to a c...

When the two of the 10 richest people joined hands to start The Giving Pledge, they had a tough time convincing billionaires across the world to contribute most of their wealth for philanthropic causes. The Indian government took a leaf out of the concept and made it mandatory for specific class of companies to ensure they spend on Corporate Social Responsibility (CSR) through the new Companies Bill that has been passed in the Lok Sabha in November 2012. Although some European countries require companies to report their CSR information in their Annual Reports, India is arguably the only country in the world that has made CSR mandatory through an Act. What is CSR? CSR is a process with the aim to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members who may also be considered as stakeholders. A firm's implementation of CSR may go b...

Hi, Do read my article on Independent Directors as mentioned in the Companies Bill 2011 (passed in Lok Sabha as of Dec 2012) Accountants' Adda | Companies Bill 2011 - Independent Directors