Companies Act 2013

Winding up a company, often referred to as liquidation, comes into play when a company faces financial difficulties and is incapable of meeting its obligations to creditors. It entails a systematic process wherein the company’s assets are liquidated to generate funds for settling its outstanding debts. After all the debts have been satisfactorily settled, any surplus funds are distributed among the shareholders and this marks the formal dissolution of the private limited company registration, bringing an end to its existence. The winding-up of a company can be executed through two distinct avenues, either by the tribunal’s intervention or voluntarily initiated by the company itself. In this blog, we shall understand the winding up of a company by tribunal in India. What is Winding Up by Tribunal? Winding up by tribunal is a type of compulsory winding up that is initiated by an external entity, such as a creditor, and is usually done through a tribunal. The tribunal is a judicial body that has the power to order the winding up of a company on various grounds, such as: The company is unable to pay its debts. The company’s actions have been detrimental to public order, decency or morality, the security of the state, friendly relations with foreign states, and India’s sovereignty and integrity. The company has been conducting its affairs in a fraudulent or unlawful manner. The company has made a default in filing its financial statements or annual returns for five consecutive financial years. The company has been ordered to be wound up by a tribunal under any other law for the time being in force. The tribunal is of the opinion that it is just and equitable that the company should be wound up. The tribunal can also order the winding up of a company on the application of the Registrar of Companies, the Central Government, the State Government, or a person authorized by the Central Government. The tribunal can appoint a provisional liquidator or a company liquidator to take charge of the company’s affairs and assets, and to carry out the winding up process. The tribunal can also supervise the winding up process and give directions to the liquidator as it deems fit. The tribunal can also make orders for the dissolution of the company, the distribution of the assets, the settlement of claims, the audit of accounts, and the disposal of records. Reasons for Winding Up a Company by the Tribunal Non-Payment of Debts Exceeding Rs 1 Lakh- In situations where a company defaults on its debt payments, and the outstanding debt owed to a creditor surpasses Rs 1 lakh, and remains unpaid for a period of 21 days beyond the due date, or if an execution decree is issued in favor of the creditor, the tribunal is authorised to decree the winding up of the company. Special Resolution for Winding Up- A company may be subject to winding up by the tribunal if it has passed a special resolution authorising such action. Failure of Revival and Rehabilitation for Sick Companies- In the case of financially distressed or “sick” companies where revival and rehabilitation efforts prove unsuccessful, the tribunal has the authority to order the winding up of the company. Fraudulent Formation or Conduct of Business- Should it come to light that a company was established through fraudulent means or if there exists substantiated proof of fraudulent business practices, the tribunal is empowered to issue a directive for the winding up of the company. Unlawful Purpose or Misconduct by Management- Winding up by the tribunal can be necessary if the company was formed for an unlawful purpose, or if the company’s management is involved in misconduct or misfeasance. Tribunal’s Determination for the Good Faith of the Company- The tribunal has the authority to decree the winding up of a company if it determines that such action is essential for the overall health and integrity of the company. Who can be Petitioners for Winding Up of a Company? The right to file a petition for the winding up of a company is granted to various entities as stipulated under Section 272 of the Act. The following parties are eligible to present such a petition: The Company Itself: The company in question has the authority to file a winding-up petition. Shareholders or Contributors: Shareholders or contributors of the company who possess fully paid-up shares also have the authority to instigate the winding-up process by submitting a petition. Contingent or Prospective Creditors: Those creditors whose debts remain unpaid and are either contingent or prospective in nature have the right to file a winding-up petition. Registrar: The registrar responsible for company affairs is empowered to file a winding-up petition. Liquidators: Liquidators appointed for the winding up of a company may file a petition to initiate the process. What are the Related Laws under the Company Act, 2013? The Company Act, 2013 is the main law that governs the winding up of a company by tribunal in India. The Act provides for the following provisions related to the winding up of a company by tribunal: Section Provision 271 Specifies the circumstances under which the tribunal may order the winding up of a company 272 Specifies the persons who may file a petition for the winding up of a company by tribunal, and the form and manner of the petition 273 Specifies the powers of the tribunal to order the winding up of a company or to dismiss the petition or to make any other order as it thinks fit 274 Specifies the directions that the tribunal may give to the company or the creditors or any other person in relation to the winding up petition 275 Specifies the appointment and removal of the provisional liquidator by the tribunal 276 Specifies the effect of the appointment of the provisional liquidator on the powers of the board of directors and the status of the company 277 Specifies the powers and duties of the provisional liquidator 278 Specifies the appointment and removal of the company liquidator by the tribunal 279 Specifies the effect

Charge as per section 2(16) of Companies Act, 2013 refers to creation of interest or a right on a property or asset of a company or any of its undertaking as a security against loan provided to the company in respect of such interest. Charge is created by Companies who are in need of financial assistance for making their companies productive and in doing so creating any right or interest in assets of companies. Charge also includes mortgage. Charge is created so that the financial institutions such as banks have security for the loans provided by creation of charge on assets of company and having it registered with the Registrar. What is a Charge? As per Section 2(16) of Companies Act 2013, “charge” means an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage. According to Section 100 of the Transfer of Property Act, 1882, where an immovable property of one person is by act of parties or operation of law made security for the payment of money to another and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property, and all the provisions which apply to a simple mortgage shall, so far as may be, apply to such charge. How is it related to Pledge and Hypothecation? As per section 172 of the Indian Contract Act, 1872, “pledge” means the bailment of goods as security for payment of a debt or performance of a promise. As per Section 2 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, “hypothecation” means a charge in or upon any movable property, existing or future, created by a borrower in favour of a secured creditor without delivery of possession of the movable property to such creditor, as a security for financial assistance and includes floating charge and crystallisation of such charge into fixed charge on movable property. Charge is where immovable property of one person is made security for the payment of money to another. It refers to the security for securing the debt, by way of pledge, hypothecation and mortgage. In the pledge, the possession of the asset is transferred, but in the case of hypothecation, possession lies with the debtor only. Type of Charges Fixed Charges: Charge created on Fixed Assets of the company. Floating Charges: Charge created on Current Assets or the Stock of the company. Essential Features of the Charge There should be two parties to the transaction, the creator of the charge and the charge holder. The subject-matter of charge must be current or future assets and other properties of the borrower. Both the parties to the transaction must enter into a legal agreement specifying assets or properties kept as security for the repayment of money, interest rate charged etc. A charge may be fixed or floating depending upon its nature. What is Modification of Charges? The term ‘modification’ includes variation of any of the terms of the agreement including variation of rate of interest which may be by mutual agreement or by operation of law.Even if the rights of a chargeholder are assigned to a third party ,it will be regarded as a modification. The provisions applicable to the registration of a charge under Section 77 shall apply to modification of the charge. Time Limit for Registration of creation or modification of ChargesA company creating charge, shall register the particulars of the said charge with the Registrar of Companies (ROC) within 30 days of its creation. According to Companies (Registration of Charges) Rules, 2014 e-forms prescribed for the purpose of creating or modifying the charge are as follows: For other than debentures: Form No.CHG-1 For Debentures including any rectification: Form No.CHG-9 Who is liable to register Charge? As per Section 77 of the Companies Act, 2013 every company creating a charge shall register the particulars of charge signed by the company and its charge – holder together with the instruments creating.Any charge created within or outside India on property or assets or any of the company’s undertakings Whether tangible or otherwise, situated in or outside India shall be registered. Hence all types of charges are required under the Act to be registered whether created within or outside India. Certification of Registration of Charge When a charge is registered with the Registrar, Registrar shall issue a certificate of registration of charge in Form No.CHG-2 and for registration of modification of charge in Form No.CHG-3 to the company and to the person in whose favour the charge is created. The certificate issued by the Registrar shall be the conclusive evidence that the charge is registered. Delay in Registration of Charges If Charge is created before 02.11.2018: Within A period of 300 days from the creation of charge If charge is created after 02.11.2018: Within a period of sixty days of creation of charge. However, additional fees is applicable in this case Register of Charges to be kept by Registrar (ROC) The Registrar shall, in respect of every shall keep a register containing particulars of Charges registered, in such form and in such manner as may be prescribed Register shall be kept open for inspection by any person on payment of such fees as may be prescribed Duty of CompanyEvery company shall maintain at its registered office a Register of Charges in e-form CHG-7 which shall be open for inspection by: Any member and creditor Without any payment By any other person on payment of such fees as may be prescribed Provisions under Companies Act 2013 & Companies (Registration of Charges) Rules, 2014 Section 77 with Rule 3 & Rule 6Duty to Register Charges – Every company shall register the charge with Registrar of Companies (ROC) within 30 days of the date of creation or modification of charge along with the fee. Purpose Form Attachments Creation/Modification of charge other thanDebenture CHG-1 Particulars of chargeCopy of Instrument evidencingany creation or modification ofcharge Creation/Rectification of charge for Debenture CHG-9   The ROC on receipt of Application

The Director Identification Number (DIN) is a unique identification number assigned to individuals who wish to become directors of a company or designated partners in a Limited Liability Partnership (LLP) in India. The Registrar of Companies (ROC) is responsible for issuing DINs under the Companies Act 2013. However, certain circumstances allow for surrendering a DIN. In this article, we will discuss the legal provisions and the process of surrendering a DIN. Director Identification Number (DIN) can be surrendered due to different reasons, and the DIN can also be surrendered voluntarily for the purposes of cancellation or deactivation on certain conditions. Director Identification Number DIN is the Director Identification Number allotted to an individual by the Central Government who intends to appoints as a Director in the Company or a Partner in an LLP registered in India. The application for allotment of DIN shall be made in Form DIR-3/ Spice+ along with required fees and documents. The same DIN allotted to the Director shall not be allotted to any other person and such DIN is valid for lifetime. It is a unique 8-digit number written underneath the signature of the concerned director in returns, applications, forms, etc. Any change in details mentioned in Form DIR-3 or Spice+ shall be intimated through Form DIR-6 to the concerned authority along with supportive documents. Any individual shall not apply for another DIN when already possess the same otherwise it shall be considered as non-compliance of Section 155 and such director or the Company shall be liable to an imprisonment or fine. Legal Provisions According to Section 153 of the Companies Act 2013, individuals who wish to become directors or designated partners must obtain a DIN. Rule 11 of the Companies (Appointment and Qualification of Directors) Rules, 2014 outlines the grounds on which a DIN may be surrendered: Death of the DIN holder The unsound mind of the DIN holder Insolvency of the DIN holder Disqualification of the DIN holder Duplicate DIN Unused DIN Reasons for Surrender of DIN Multiple DIN– As per Section 153 of the Companies Act, 2013 if any Director holds more than one DIN, then he should make an application to Regional Director in Form DIR-5 along with notarized affidavit stating that such DIN has never been used in any kind of a document required to be submitted to ROC. Also, an application for compounding shall be filed in Form GNL-1. DIN obtained by fraud or wrongful manner- If a Director has obtained a DIN by furnishing false information or in a wrongful manner, then DIN is required to be surrendered by such concerned person/director or regulatory authorities shall deactivate such DIN after issuing show cause notice to the director. When Director declared as a person of unsound mind- As per Section 153 of the Companies Act, 2013 if the competent court has declared any person as of unsound mind, then DIN is required to be surrendered by filing Form DIR-5 along with the order of court as an attachment. When Director adjudicated as an insolvent- If the DIN holder adjudged as an insolvent, then he shall surrender his DIN by filing Form DIR-5 along with the order of court. Death of the Director- In case of death of director, his relative shall file Form DIR-5 and shall attach death certificate to it. Ways to surrender DIN On order of Central Government– Central Government shall order Director to surrender his DIN in certain cases such as: If Director has multiple DIN If Director has obtained the DIN by fraud or misrepresentation On Death of Director If Director has been declared insolvent If Director has been adjudged as an insolvent Voluntary by DIN holder– A DIN holder shall surrender his DIN on his own if the director has not been appointed in any company or body corporate while in possession of DIN and such DIN has not been used in any document which is used in communication to regulators. In such cases director can surrender his DIN voluntarily. Process of Surrendering a Director Identification Number (DIN) n order to surrender your Director Identification Number (DIN), you will need to file an online application in Form RC-1 with the Regional Director of the Ministry of Corporate Affairs. Along with this application, you must submit supporting documents. Additionally, you will need to fill out and sign a physical application called DIR-5, which is used specifically for the surrender of a DIN pursuant to Section 153 and Rule 11(f) of the Companies (Appointment and Qualification of Directors) Rules, 2014. Once you have completed and signed the DIR-5 application, it must be attached to the RD-1. Important Points RD-1 is an online application for Regional Director The RD-1 form must be signed by the DSC of the director DIR-5 is a physical application; the scan to be attached The government fee is Rs. 1000 for filing RD-1 An affidavit of non-use of DIN is also required DIN must have active DIN KYC filings FAQs What is DIN surrender? DIN surrender is the process by which a director can voluntarily deactivate their Director Identification Number. Why would someone surrender their DIN? Directors may choose to surrender their DIN if they no longer serve as a director in any company or if they wish to discontinue their directorship for any reason. How can I surrender my DIN? You can surrender your DIN by filing Form DIR-5 on the MCA (Ministry of Corporate Affairs) portal along with the necessary documents. Practice area’s of B K Goyal & Co LLP Income Tax Return Filing | Income Tax Appeal | Income Tax Notice | GST Registration | GST Return Filing | FSSAI Registration | Company Registration | Company Audit | Company Annual Compliance | Income Tax Audit | Nidhi Company Registration| LLP Registration | Accounting in India | NGO Registration | NGO Audit | ESG | BRSR | Private Security Agency | Udyam Registration | Trademark Registration | Copyright Registration | Patent Registration | Import Export Code | Forensic Accounting and Fraud Detection | Section 8 Company | Foreign Company | 80G and 12A Certificate

The Registrar of Companies (ROC) is an office under the Indian Ministry of Corporate Affairs that deals with administration of the Companies Act, 2013, The Limited Liability Partnership Act, 2008, The Company Secretaries Act, 1980 and The Chartered Accountants Act, 1949. These officers are from Indian Corporate Law Service cadre. ‘ICLS’ is an organised Group A service recruitment of which is done by UPSC through Civil Service Examination since 2009 along with other services like IRS, IAS & IPS etc.[1] There are currently 25 Registrars of Companies (ROC) operating from offices in all major states of India. Some states, such as Maharashtra and Tamil Nadu, have two ROCs each. Also in some places unified ROC offices manned by senior Group A ICLS officers are located in capital cities like Jammu and Srinagar. Section 609 of the Companies Act, 1956 tasks the ROCs with the primary duty of registering companies and LLPs floated in the respective states and the union territories under their administration. As per section 609 of the Companies Act, 1956, the ROCs are tasked with the principal duty of registering both the companies and LLPs across the states and the union territories. Currently, after the introduction of Companies Act, 2013, the same powers conferred under section 609 is provided under section 396 of the Companies Act, 2013 to the ROCs. The Registrar of Companies also certifies that LLPs (Limited Liability Partnerships) comply with the legal requirements contained in the Limited Liability Partnership Act, 2008. Registrar of Companies maintains a registry of records concerning companies which are registered with them and allows the general public to access this information on payment of a stipulated fee. The Central Government preserves administrative control over the Registrar of Companies with the help of Regional Directors. As of today, there are seven Regional Directors, supervising the operations of ROCs within their relevant regions. Jurisdiction of ROC The ROCs are located in different states/UTs and the companies must file registration applications with the ROCs under whose jurisdiction their principal place of business is located. All companies must subsequently file annual forms only with the ROC from where they have obtained company registration. You can find the details of all the ROCs here. Functions of ROC The ROC takes care of registration of a company (also referred to as incorporation of the company) in the country. It completes regulation and reporting of companies and their shareholders and directors and also administers government reporting of several matters which includes the annual filing of numerous documents. The Registrar of Companies plays an essential role in fostering and facilitating business culture. Every company in the country requires the approval of the ROC to come into existence. The ROC provides an incorporation certificate which is conclusive evidence of the existence of any company. A company, once incorporated, cannot cease unless the name of the company is struck off from the register of companies. Among other functions, it is worthy to note that the Registrar of Companies could also ask for supplementary information from any company. It could search its premises and seize the books of accounts with the prior approval of the court. Most importantly, the Registrar of Companies could also file a petition for winding up of a company. Company Registration by ROC No company can come into existence by itself. It requires a certificate of incorporation issued by the Registrar of Companies after the finalization of several statutory requirements. As part of the statutory process, the promoters need to submit several documents to the Registrar of Companies. The documents to be submitted to the ROC include Memorandum of Association (MoA), Articles of Association (AoA), the pre-incorporation agreement for appointing directors/ managing directors and the declaration by an authorized person confirming that requirements relating to registration have been adhered to. After authenticating the documents, the ROC inputs the company’s name in the register of companies and releases the certificate of incorporation. The Registrar together with the certificate of incorporation also issues a certificate of commencement of business. A public limited company is required to get this certificate prior to commencing business. ROC Refusal for Company Registration-ROC can refuse to register a company on various grounds. The Memorandum of Association (MOA) which is filled with the registrar comprises five clauses viz. name clause; objects clause; registered office clause; capital clause and liability clause. The registrar needs to ensure that no registration is allowed for companies having an objectionable name. The registrar could also decline to register any company which has unlawful objectives. Role of ROC After the Registration of a Company- There is no end to the association of the ROC and a company. For instance, a company might require changing its name, objectives or registered office. In every such instance, a company would have to intimate the ROC after completion of the formalities. Filing Resolutions With ROC- As per the provisions contained in section 117 of the Companies Act, 2013, every resolution is required to be filed with the ROC within 30 days of being passed. The Registrar of Companies needs to record all such resolutions. The Companies Act, 2013, has also laid down the penalty in case of failure to file the resolutions with the registrar within the stipulated time. In other words, a company is required to intimate the Registrar of Companies concerning all of its activities which includes appointing directors or managing directors, issuing prospectus, appointing sole-selling agents, or the resolution regarding voluntary winding up, etc. Filing Forms With ROC- The companies must file annual forms with the ROC as specified under the Companies Act and Rules. The compliance of the company after its establishment includes filing forms with the ROC within the specified due dates. They will have to pay a huge penalty when they do not file forms within the due dates. The annual forms to be filed with the ROC include filing the reconciliation of share capital audit report, return of deposits, submission of director KYC for DIN holders, annual company accounts, annual company returns, etc. ROC Filing Fees- The fees to file forms and various

Having a website and online presence strategy allows any business to flourish its market and expand its business. As the web has the fastest reach to advertise any form of Business. Website disclosures is the primary tool of better Corporate Governance. Thus, the companies having their website are required to adhere to certain provisions and compliances about website disclosures. It must be in accordance with the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and any changes to it must be updated within 2 working days. The information should be placed for a minimum period of 5 years. Website Disclosures The Companies Act 2013 mandates disclosing certain information on the company’s website. Information such as the name of the company, address of the registered office, the corporate identity number, telephone number, fax number, email ID, and name of the company’s representative in case of any grievances/queries. The company’s website address must be disclosed on the letterhead, business letters, billheads, letter papers, and official publications and notices. It is not mandatory for the companies to have a website as per the Companies Act 2013, in the case of a listed company, the Securities and Exchange Board of India (SEBI) has made it mandatory for companies to have an updated website since April 2011. Therefore, the mandatory disclosures on the website are governed by the following Acts: Companies Act 2013 SEBI Listing (Obligations and Disclosure Requirements) Regulations 2015 SEBI (Prohibition of Insider Training) Regulations 2015 The Disclosure requirements are specific to the type of company and the nature of business. MANDATORY WEBSITE DISCLOSURE REQUIREMENTS UNDER COMPANIES ACT, 2013: Website address on all its business letters, billheads, notices, and other official publications Notice of change of objects for which money is raised through the prospectus Details of Annual Return. The web-link of such annual return shall be disclosed in the Board’s report Details of establishment of Vigil Mechanism Nomination and Remuneration policy Company’s policy on director’s appointment and remuneration including criteria for determining qualifications. Corporate Social Responsibility policy of the Company Terms and Conditions of appointment of the Independent Director Closure of register of members or debenture holders or other security holders Notice of General Meeting of the company Notice of Voting through electronic means. Notice of Postal Ballot and the results of postal ballot shall be declared by placing it, along with the scrutinizer’s report. Any Special Notice. Circular inviting deposits from public. Details of transfer to the Unpaid Dividend Account. Details of striking off. MANDATORY WEBSITE DISCLOSURES UNDER SEBI LODR, 2015:- A listed company is mandatorily required to have a functional website with following details: Aspects of its business activities Terms and conditions of appointment of independent directors Composition of various committees of board of directors Code of Conduct of board of Directors and Senior Management Personnel Details of establishment of vigil mechanism/ Whistle Blower policy Criteria of making payments to non-executive directors. Policy on dealing with related party transactions Policy for determining ‘material’ subsidiaries The email address for grievance redressal and other relevant details Contact information of the designated officials of the listed entity who handle the investor grievances, etc. Shareholding Pattern Details of agreements entered into with the media companies and/or their associates, etc New Name and the old name of the listed entity for a continuous period of one year, from the date of the last name change notice of meeting of the board of directors where financial results shall be discussed financial results, on conclusion of the meeting of the board of directors where the financial results were approved complete copy of the annual report including balance sheet, profit and loss account, directors report, corporate governance report etc Details of familiarization programmes imparted to independent directors including the number of programmes attended, number of hours spent and other relevant details entities falling under promoter and promoter group shall be disclosed separately in the shareholding pattern dividend distribution policy for top five hundred listed entities based on market capitalization (calculated as on March 31 of every financial year) composition of various committees of board of directors all credit ratings obtained by the entity for all its outstanding instruments separate audited financial statements of each subsidiary All disclosures made to stock exchanges as per Regulation 30 Website Disclosures For Public Companies The notice of “Change of objects for which money is raised through prospectus” under Rule 32 of Chapter II – Companies (Incorporation) Rules 2014 must be published on the website. A copy of the circular inviting deposits from the public must be on the website of the company. Information about the closure of the register of members or debenture holders or other security holders. Notice of the postal ballot. Results of the postal ballot along with the scrutiniser’s report must be published. Details of the establishment of the Vigil Mechanism must also be disclosed on the website. Terms of Appointment of Independent Directors must also be published on the website. Website Disclosures For Listed Companies Particulars of the business activities. Terms of Appointment of Independent Directors must also be published on the website. Particulars of the structure of the various committees of the Board of Directors. Code of Conduct of Senior Management and Board of Directors. A policy with regards to related party transactions. Details of the establishment of the Vigil Mechanism and Whistle Blower Policy. Email of Grievance Redressal Mechanism and other relevant information. Shareholding Pattern. Designated Officials who can handle investor grievances. All other information about notices, taxes, agreements, and financial information. Consequences Of Non-compliance There are no penalties for non-compliance with the website disclosure requirements. But as per Section 450 of the Companies Act of 2013, the penalty for non-compliance by the company or any officer of the company who defaults to any of the Act’s provisions will be Rs 10,000. For continuing contravention, it will be a further fine of Rs 1,000 for every day of default. This will apply to the default of non-disclosure, a company must take care

Sub-section (1) of section 134 of the Act provides for approval and signing of financial statements (as defined in clause (40) of section 2) including consolidated financial statements, if any. Such approved financial statements will be signed on behalf of the company by the following: a. Chairperson of the company where he is authorized by the Board or by two directors out of which one shall be managing director and the Chief Executive Officer, if he is a director in the company b. the Chief Financial Officer, wherever appointed c. the Company Secretary of the company, wherever appointed. In this editorial, Author shall discuss about concept of Signing of Financial Statement of Company (OPC, Small, Private, Public, Listed etc). Further, author shall try to answer the following questions: 1. How Many directors must sign the financial statement? 2. Whether, Chairman of Meeting solely sign the Financial Statement? 3. Can an independent Director sign Financial Statement? 4. Do all the directors needs to sign Financial Statement? 5. Whether it is mandatory to get sign Financial Statement from the Company Secretary of the Company? 6. Can financial statement be signed digitally by Directors? What is Financial Statement? Section 2 (40) of the companies Act 2013 states that the financial statement includes the following items: Balance sheet; Profit and loss account, or in the case of a nonprofit organization, an income and expenditure account for the financial year Cash flow statement Statement of changes in equity, if any; and Annexure forming part of the Financial Statement APPROVAL OF FINANCIAL STATEMENT Sub-section (1) of section 134 of the Act provides for approval and signing of financial statements (as defined in clause (40) of section 2) including consolidated financial statements, if any. Such approval of financial statement needs to be given in a duly convened board meeting. Such meeting can be held through video conferencing or any other audio-visual means also as provided in rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014. How to Prepare Financial Statement? The financial statement of the company shall be prepared in accordance with Schedule III of section 129 of the Companies Act, 2013 and such Financial Statement laid before the shareholders at the Annual general meeting of the company. SIGNING OF FINANCIAL STATEMENT i. Chairperson of the company where he is authorized by the Board OR ii. by two directors out of which one shall be managing director AND iii. the Chief Financial Officer, wherever appointed c. the Company Secretary of the company, wherever appointed. PENALTY FOR THE CONTRAVENTION OF THE PROVISION Penalty is prescribed under Section 134(8) of the Companies Act, 2013, If a company is in default in complying with the provisions of this section, the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees. Is it mandatory to sign financial statement from the company secretary? As per Section 134(1), the company in which the Whole-time Company Secretary is appointed, then it is mandatory that the Financial Statement is signed from the Whole-time Company Secretary. Further if the company appointed Chief Executive Officer or Chief Financial Officer then the financial statement shall also be signed from them. Where the company does not have a CFO and CS then only chairman can sign the financial statement. Where the company does not have a chairperson or not authorized by the board, signing of financial statements by two directors one of which shall be managing director and the CFO, if he is a director. FAQs Who is responsible for signing the financial statements? The financial statements must be signed by the managing director, the whole-time director, the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), and two other directors of the company, one of whom shall be a non-executive director. Is it necessary for all directors to sign the financial statements? No, it is not necessary for all directors to sign. Only the specified directors mentioned in the Companies Act need to sign the financial statements. Can a director delegate the signing authority? No, the signing authority cannot be delegated to another person. Each signing director must sign the financial statements personally. 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The term ‘business’ usually refers to the regular occupation, profession or trade. For regulating the business or corporate industry, various rules and legislations as well as their amendments have been introduced in India from time to time. One such legislation is the Companies Act 2013, which mentions the definition, requirements, procedures, conditions and penalties for almost every aspect related to the incorporation, registration and functioning of a business/company in the country.  ‘Commencement of Business’ is a term which anyone owning a business is familiar with. This article mentions all that you need to know about the various procedures, requirements, forms which must be complied with for commencing a business. According to the Companies Act, 2023’s Section 11, the directors of a company having share capital must submit a declaration to the Registrar of Companies. This declaration must assert that the signatories or subscribers to the MoA of the company have fully paid up their share. This declaration must be filed within a period of 180 days from the company’s date of incorporation. This declaration is known as Commencement of Business. The provision of the commencement of business was adopted in the Companies Act 2013 under Section 11 from the erstwhile Companies Act of 1956. However, the same was left out in the Companies (Amendment) Act of 2015. However, Section 10A of the Companies (Amendment Ordinance), 2018 reinserted this provision to the Companies Act 2013 once again. The provision is very clear regarding its applicability with respect to the share capital. A company has to make a declaration within 180 days of its incorporation to be able to begin with its operations or exercise any other power. What is Certificate of Commencement of Business The certificate of commencement of business is the declaration filed by the company’s directors with the registrars. After the company is incorporated, it is provided with a sufficient one hundred and eighty days to file the proclamation in Form INC-20A. The Ministry of Corporate affairs launches Form 20 A Which companies are not required to file form 20A? The Companies Act does not require certain companies to file form 20A. These companies are mentioned below: Companies which have been incorporated before 2nd November, 2018 (before the start of the Companies (Amendment) Ordinance, 2018) Companies incorporated after 2nd November, 2018 which do not have share capital. Regulatory Framework for Commencement of Business Certificate. Section 10A of the Companies Act 2013. Rule 23A, The Companies (Incorporation) Rules, 2014 What is Form INC-20A? It is a declaration under section 10A by a director. Further as per rule 23A, The declaration under section 10A by a director shall be in Form No, INC-20A and shall be filed as provided in the Companies (Registration Offices and Fees) Rules, 2014 and the contents of the said form shall be verified by a company Secretary or a chartered Accountant or a cost Accountant in practice. Eligibility Criteria for Filing INC-20A:- 👉The company must be incorporated under the Companies Act, 2013. 👉The company must have a valid Certificate of Incorporation (COI). 👉The company must have a registered office address. (The same could be updated via a Form No. INC-22 or Form No. SPICe+ Part B ) 👉 The company must have a bank account, 👉DSC and Board resolution. Timelines for Filing INC-20A:- Companies are required to file INC-20A within 180 days from the date of incorporation. Documents Required for Filing INC-20A a.    Mandatory: ✔Photo:- Director whose DSC is affixed on the form,it should be his photo outside the office and it should show the company corporate board showing CIN,GST rgistered address like letter head.(outside the buidling) and a photo inside the office showing director or kmp).Then merge the both photos and create a pdf. b.    Optional: – ✔ Copy of the company’s bank statement, reflecting the paid-up share capital (optional attachment however highly recommendatory) ✔ A declaration by subscribers to Board -(optional) ✔ Sectoral Regulator approval letter if taken. Application Process for Commencement of Business Certificate To apply for the certificate of commencement of business, you must fill Form 20A using the steps mentioned below:  Visit the homepage of the official website of the Ministry of Corporate Affairs (MCA). Login in to the website using a valid ID and password. In the next step, opt for “MCA services” then choose the “E-filing” option available on the screen. Select “Company Forms Download” Now in the forms list, you must find a form titled Form No. INC-20A which is the declaration form for commencement of business Enter the information of your company asked in the form and optionally, search for CIN using the search option available. Select CIN from the drop down menu and then complete the form. You can save the webform as draft in case you want to make changes or add more details in it later. Now, submit the web form. After the submission, SRN or a serial request number will be generated. SRN can be used for correspondence with MCA in future. Attach the Digital Signature Certificate’s pdf form on MCA’s website. Now pay the required fees mentioned on the portal. Once the verification is finished and there are no errors, you will receive an acknowledgement email. Penalties and Consequences for non-compliance during Form Filing In case of non-compliance while filing Form 20A, the consequences can be severe. The penalties have been made harsh in order to reduce the number of shell companies. These penalties are mentioned below: Penalty of Rs 50,000: This penalty will be imposed on the firm if it fails to comply with the conditions for filing the form. Penalty of 1,000 per day: Each such officer who is in default will be liable to pay a penalty of Rs 1,000 per day for each day that the default persists. This penalty can be imposed to a maximum of Rs 100,000. Striking off of the Company: The registrar can remove the company’s name from the Register of Companies if he has reasonable grounds to believe that the firm is not carrying on

Any individual trained to review and verify accounting data and recognised as a Chartered Accountant (CA) under the Chartered Accountant Act, 1949 is deemed to be an auditor. Every company needs to appoint an auditor as per the provisions of the Companies Act, 2013. As per Companies Act, 2013 (hereinafter referred as “said act”), the appointment of an auditor is governed by Section 139. It says that various provisions for the appointment, reappointment, and removal of an auditor. The appointment of an auditor can be made by the company’s Board of Directors or by the company’s shareholders at the Annual General Meeting (AGM). An Auditor as per Companies Act, 2013 The first auditor of a company shall be appointed by the BOD within 30 Days from the date of Incorporation of the company and such auditor shall hold office till the conclusion of the 1ST AGM in the case of failure of the Board to appoint such auditor, it shall inform the members, who shall within 90 days at an EGM appoint such auditor. Every company in its 1st Annual General Meeting shall appoint an auditor (Individual or a Firm) who shall hold office from the conclusion of that meeting till the conclusion of 6thAGM and thereafter till the conclusion of every 6th AGM. Auditor is a person or can be a firm of C.A. who is appointed by a company to having an independent and objective to examine the financial statements of the Company. According to Companies Act, 2013, defines as an auditor “an individual or a firm, including a limited liability partnership (LLP), who is appointed by the company to conduct an audit of its financial statements, as required under the Companies Act.” The auditor’s duties under the said act include verifying and auditing the financial statements of the company to determine whether they provide a true and fair view of the financial position, performance, and cash flows of the company. The auditor is also responsible for ensuring that the company has maintained proper books of account and internal financial controls. Furthermore, the auditor is required to report any instances of fraud, non-compliance with laws and regulations, or other material weaknesses observed during the course of the audit to the company’s management and the Board of Directors. The auditor is also required to provide a report on the financial statements audited by them to the shareholders of the company at the Annual General Meeting. Manner of appointment of auditors Appointment by Board of Directors: The Board of Directors shall appoint the first auditor within 30 days of the registration of the company. Appointment by Members: The members of the company shall appoint the subsequent auditors at every AGM. Eligibility Criteria: The auditor appointed by the company must be a Chartered Accountant in practice. Intimation to Registrar of Companies (ROC): The company shall intimate the ROC about the appointment of the auditor within 15 days of the AGM. Removal of Auditor: The auditor can be removed from the office before the expiry of his term only by a special resolution of the company after obtaining the prior approval of the Central Government. Rotation of Auditors: The said act has also introduced the concept of rotation of auditors. As per this, an auditor can hold office for a maximum of 5 consecutive years in a company. After that, he has to be rotated with another auditor who is not associated with the same firm. Consent of Auditor Section 139(1) and Rule 4 the Companies (Audit and Auditors) Rules 2014 Before appointment the written consent of the Auditor and a certificate shall be obtained from the auditor. The Auditor shall submit a Certificate that- He is not disqualified for appointment under the Act, regulations made there under the appointments are as per the terms provided under the act. The appointment within the time; The proper list of proceedings against the auditors or audit firm pending, if any. The notice to the registrar for the appointment of the auditor shall be in form ADT-1 within 15 days from the date of the appointment. Appointment of First Auditor in case of a Company other than a Government Company Appointment of auditor in case of Govt. Company Section 139(5) The CAG of India shall appoint an auditor duly qualified to be appointed as an auditor of companies under this Act, within 180 days from the commencement of the financial year, who shall hold office till the conclusion of the annual general meeting. In accordance with section 139(6) of the said act, if a company other than a government company, if the Board of Directors fails to appoint the first auditor, then the members of the company shall appoint the first auditor within 90 days at an Extraordinary General Meeting (EGM). The following steps must be followed for the appointment of the first auditor in case of a company other than a government company: The Board of Directors shall propose the name of an auditor to be appointed as the first auditor of the company. The proposed auditor shall provide his consent and eligibility certificate as per the provisions of the Act. If the Board of Directors fails to appoint the first auditor, the company shall hold an EGM within 90 days of the incorporation of the company to appoint the first auditor. The members of the company shall pass an ordinary resolution to appoint the first auditor, and the appointed auditor shall hold office until the conclusion of the first AGM. The appointed auditor shall also provide his consent and eligibility certificate to the company. It is essential to appoint the first auditor of the company within the stipulated time to ensure the proper functioning and compliance of the company with the provisions of the Companies Act, 2013. The appointment of an auditor in the first AGM of the company is mandatory under the Act, and any delay in the appointment of the auditor may result in the company facing penalties and non-compliance issues. Appointment of 1ST Auditor Section 139(6) The first auditor of a company