In a corporate democracy, the rule of majority prevails, period! Hence, in most jurisdictions, shareholders’ resolutions may be passed by a simple majority, or, where the decision may be critical to the operations or the future of a company, by a super/ special majority of at least, three-fourths. In this way, the decision of the majority binds all members/ shareholders.
Continue Reading Protection and Redressal of Minority Shareholder Rights
“Forewarned is forearmed” is the cardinal principle underlying company law jurisprudence around the world and the foundation of all disclosure requirements.
Section 129(1) of the Companies Act, 2013 (“Act”), provides that the financial statements (“FS”) shall give a ‘true and fair view’ of the state of affairs of the company, comply with the accounting standards notified under Section 133 of the Act, and also be in the form provided for different classes of companies in Schedule III of the Act.
Context
In an earlier article under the ‘Gatekeepers of Governance’ series, the authors had discussed how the regulatory architecture under the Companies Act, 2013 (“Act”), and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”), places ‘independent directors’ (“IDs”) at the forefront of India’s quest for better corporate governance. However, it is often forgotten that along with IDs, even non-executive non-independent directors (“NENIDs”) on the Board can play a pivotal role in acting as a ‘watchdog’, and safeguarding stakeholder interest.
Continue Reading Gatekeepers of Governance: Non-Executive Non-Independent Directors
The Ministry of Corporate Affairs (“MCA”) is entrusted with the responsibility of administering the Companies Act, 2013 (“2013 Act”). To this end, it has issued many a circulars to clarify the provisions of the 2013 Act and the rules made thereunder from time to time. On important matters like CSR, the ministry has issued detailed FAQs in the form of clarificatory circulars. Till date, the MCA has issued more than 210 clarificatory circulars under the 2013 Act.
Continue Reading Are Ministry of Corporate Affairs (MCA) Circulars constitutionally valid?
The Parliament took 16 years to implement the directions issued by the Supreme Court of India in 1997, in the landmark case of Visakha vs. State of Rajasthan[1] (“Visakha Guidelines”) to enact a law for the prevention of sexual harassment of women at the workplace. The enactment of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“Act”) and the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Rules, 2013 (“Rules”) was very late, but better so than never.
The regulatory architecture under the Companies Act, 2013 (“Act”), and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”), envisages a key role for the Nomination and Remuneration Committee of the Board of Directors (“NRC”) – in ensuring that the company attracts and retains the best talent – and there is transparency in the process of appointment/ re-appointment and payment of remuneration to directors, key managerial personnel (“KMPs”) and senior management[1].
Continue Reading Gatekeepers of Governance – Nomination and Remuneration Committee
The regulatory architecture under the Companies Act, 2013 (“Act”), and the SEBI (LODR) Regulations, 2015 (“LODR”), places independent directors (“IDs”) at the forefront of India’s quest for better corporate governance. Given that approximately 75% of listed companies in India are promoter-controlled, the MCA and SEBI have envisaged that the IDs will play a key role in safeguarding minority shareholders’ interest.
Continue Reading Gatekeepers of Governance – Independent Directors
Key Managerial Personnel (“KMP”) play an integral role in the management and functioning of a company. Earlier, the Companies Act, 1956 under Section 269, provided for the appointment of managing or whole-time director or manager in certain cases. However, the Dr. J.J. Irani Report[1], recognized that the board of directors (“Board”) typically look towards KMP for formulation and execution of policies and recognized their role in conducting the affairs of the company. The Committee highlighted the need to recognise the concept of KMP, govern such appointments and identify them as officers responsible for certain functions of the company, along with making them liable for any related non-compliances. Further, the Parliamentary Standing Committees on the Companies Bill in 2009 and 2011[2] also discussed the necessity for the concept of KMP to be included in the Companies Act, 2013 (“Companies Act”). Accordingly, the Companies Act, re-envisioned the importance of KMP and for the first time provided for a detailed definition of KMP along with the provisions governing their appointment.
Book-keeping requirements for companies in India have been tightened with the recent amendment[1] to the Companies (Accounts) Rules, 2014 (“Accounts Rules”). With this, Indian government authorities seek to always have access to books of accounts of Indian companies, even if such books are maintained in electronic form in servers located outside India.
In recent times, certain multi-national companies[2] have refused to provide government authorities access to financial data of Indian entities stored in servers outside India, which may have prompted the government to amend the Accounts Rules.
The Ministry of Corporate Affairs (“MCA”), vide notification dated August 18, 2022, notified the Companies (Incorporation) Third Amendment Rules, 2022, which further amended the Companies (Incorporation) Rules, 2014 (“Companies Incorporation Rules”), through the introduction of Rule 25B. This amendment sets out the process to be followed by the Registrar of Companies (“ROC”) to carry out physical verification of a registered office of a company.[1]