Investment Valuation in India

A bond carries a specific rate of interest which is also called the Coupon Rate. For example, if the Face Value of the bond is Rs 100 and the bond is issued at 8% coupon rate, the Interest would be calculated on the Face Value of the bond. That is, annual interest would be Rs 100 x 8% = Rs 8 per annum. Generally, the bonds may be issued or traded at a Par (Face Value), at a premium or at a discount to Face Value. Interest paid would be tax deductible for the issuer.

The Face Value of a Bond is the stated value on the face of the bond and is also known as Par Value. It represents the amount of borrowing by the firm which it specifies to repay after a specific period of time i.e. at the time of maturity. For example, if the Face Value of the bond is Rs 100 and the bond is issued at 8% coupon rate, the Interest would be calculated on the Face Value of the bond. That is, annual interest would be Rs 100 x 8% = Rs 8 per annum. Generally, the bonds may be issued or traded at a Par (Face Value), at a premium or at a discount to Face Value.

Finally India is all set to adapt to IFRS through its revised set of Accounting Standards (Ind AS) which are the converged accounting standards with IFRS starting next year. The Ministry of Corporate Affairs (MCA) has issued a notification dated 16 February 2015 announcing the Companies (Indian Accounting Standards) Rules, 2015 for the applicability of the IndAS in a phase wise manner. The applicability has been liked to the Net Worth and listing status of the companies. Starting 1-Apr-2016 all companies having a Net Worth of Rs 500 crore or more will be required to present the Financial Statements under Ind AS. This will also require comparative Ind AS information for the period of 1-Apr-15 to 31-Mar-16. [Net Worth: Net Worth will be determined based on the standalone accounts of the company as on 31-Mar-14 or the first audited period ending after that date. Net Worth calculation would be as per Sec 2(57) of Companies Act 2013 which means: Paid Share Capital...

Section 180 of the Companies Act, 2013 corresponds to section 293 of the companies Act, 1956 . Section 293 of the Companies Act, 1956 was applicable only to public companies i.e. private limited companies were exempted from this requirement and therefore they could borrow any sums of money up to any limit without the need of seeking any approval from the members of the company. Now, Section 180 is applicable to all companies i.e. public as well as private. So now onwards even private companies have to seek the approval of their members if they are intending to borrow monies in excess of their paid up share capital and free reserves.  According to section 180(1)(c) – The Board of directors of a company shall exercise the following power only with the consent of the company by a Special Resolution (SR): Borrowing of money if – Money already borrowed, together with moneys proposed to be borrowed will exceed the aggregate of paid-up share capital and free rese...

REPORTING OF FRAUD BY AN AUDITOR [Section 143(12) to (15) of the Companies Act, 2013] The Companies (Amendment) Bill 2014 was passed by Lok Sabha on December 17’14. According to the amendment, “the auditor would be required to report fraud to the Government above the mandated threshold limit. Any fraud below the threshold limit would have to be reported to the Audit Committee (AC) / Board .” Further, the amendment also provides for the companies whose auditors have reported frauds under this sub-section to the AC or the Board but not reported to the Central Government (CG), shall disclose the details about such frauds in the Board’s report . The threshold limit has not been defined. Time and manner of reporting The auditor shall immediately report the matter to CG within such time and in such manner as may be prescribed i.e. according to Rule 13. No liability of auditor An auditor shall not be deemed to be guilty for breach of any of his duties by reason of his...

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. ...