DUE TO INCREASE IN FINANCIAL FRAUDS OR CYBER CRIME, RBI HAS INTRODUCED FAME (FINANCIAL AWARENESS MESSAGES) WHICH SHOULD BE FOLLOWED BY EVERY PERSON TO KEEP THEIR MONEY SAFE AND MAKE PEOPLE FINANCIAL LITERATE

Financial literacy

1.THERE IS NO FREE LUNCH! DON’T GET CHEATED

A. Don’t get cheated by emails, SMSes or phone calls promising you money in the name of   RBI/RBI governor/ or any other bank, including your own bank.

B. Do not fall prey to fake emails, offers of lottery winning or cheap funds offered in India or overseas in the name of RBI or any other bank or government organization.

C. Don’t send any money as initial deposits, commission or transfer fee to anyone to receive large sums of money from any kind of known or unknown organizations. You may be defraud.

D. RBI does not open savings account/current account/fixed deposit or any offer credit/debit card or do any transaction with any individual.

E. Don’t reveal your bank account details, internet banking user ID, password, credit/debit card number, CVV, ATM PIN or OTP to anyone.

F. Lodge a complaint with local police station or cyber crime division if you have received any fictitious offers of lottery winning or cheap funds from India or abroad.

2.KEEP IN MIND THE FOLLOWING TO HAVE A HASSLE FREE ATM EXPERIENCE

Financial literacy

A. You can withdraw money, transfer funds, check account balance, register for mobile banking, pay bills, link your Aadhaar number to bank account, etc at your ATM.

B. Do not share your ATM card details and PIN with anyone. Never leave the card in the ATM.

C. Ensure that there is no camera or other devices attached to the ATMs when you key in your pins or swipe your cards. As far as possible, cover the keypad with ine hand and use the other hand to key in your PIN. Never let anyone when it is being entered at the ATM.

D. Remember to count and check the notes dispensed.

E. Always register your mobile number with issuing bank to get the alerts on transaction execution.

F. Contact your bank immediately to block the card in case of lost or stolen or you feel it has been compromised.

G. If you have ATM related complaints, write to card issuing bank. Bank has to resolve your complaint within 7 days of receiving it, else pay compensation to you @ Rs-100 per day if the complaint was lodged within 30 days of the transaction.

H. Change your ATM card PIN regularly.

I. Look for suspicious activity or object in the ATM room or ATM machine before using the card.

Posted by LAWgicAL ARUSH
   
   Source: RBI

FUNDAMENTALS BEFORE APPEARING IN NATIONAL COMPANY LAW TRIBUNAL

In this speedy marathon about appearing before National Company Law Tribunal we will see some very effective and useful tips.

NCLT

Why need of National company law tribunal 

·        Registration of company  (illegal or falsely section 7(7)

·        Transfer of shares under section 58 and 59 of companies act 2013

·        Deposits (Class action suits)

·        Power to investigate

·        Freezing assets of company. (If company is under investigation)

·        Dealing with IBC matters

·        For Merger and amalgamation etc.

  Appearance And Presentation Skills

1)    Maintain an impeccable dressing at all time with proper attire prescribed for the forum

2)    Ensure a lively and intuitive body language

3)    Acclimatize (adopt Forum environment nature) with the catchwords and etiquette of the forum

4)    Keep the personal file with court file with proper pagination and flagged

5)    Compile a list of judgments with necessary copies thereof in adequate quantities

6)    Maintain the focus on relief time

7)    Get ready with the answers for all possible queries from the forum

8)    Take note of critical points argued by opposite parties and respond them   accordingly

9)    Avoid loosing sense of proportion

10) Avoid distraction by opposite parties

11) Ignore irrelevant submission of the opposite parties

12) Argue with a short written note,  both of the facts in the from of brief list and dates of law

Posted by LAWgicAL ARUSH

Ministry of Corporate affairs has came out with amendments in National Company Law Tribunal Rules 2020. By using it's power prescribed under section 469 of companies act 2013.read with section 230 of the Companies Act,2013, the Central Government hereby makes the following rules,

NCLT

WHAT WAS OLD SCENARIO

Earlier the provisions of Section 230(12) of Companies Act 2013 were not notified; simultaneously no rule was there in National Company Law Tribunal Rules 2016 to deal with this scenario.

However due to dynamic business environment and continuous changes in business practices Ministry has amended the provisions in relation to regulation of Takeover bid for listed Company in the process of Compromise and Arrangements

WHAT IS NEW SCENARIO

In the National Company Law Tribunal Rules, 2016 (hereinafter referred
to as the principal rules), after rule 80, the following rule shall be inserted,
Namely:-

Rule 80A- An application under sub Section (12) of section 230 may be made in Form NCLT-1 and shall be accompanied with such documents as are mentioned in Annexure B

S.NO 22A Inserted for FEES for Application of takeover bids for unlisted companies  shall Rs.5000

Annexure A got amended with rule 80A

Annexure B got amended with S.NO 12A, where list of documents to be attached with application are given

Following new documents Inserted in case of takeover offer of not listed company

1. Affidavit verifying the petition

2. Memorandum of appearance with copy of boards resolution or the executed vakalatnama, as the case may be

3. Documents in support of the grievance against the takeover

4. Any other relevant documents

Ministry of Corporate affairs has came out with amendments in Companies (Compromise, Arrangements and Amalgamation) Rule 2016. By using it's power prescribed under section 469 of companies act 2013.read with section 230 of the Companies Act,2013 (18 of 2013), the Central Government hereby makes the following rules,

Merger & Amalgamation

REFERENCE OF SECTION 230(11)OF COMPANIES ACT 2013.

Any compromise or arrangement may include takeover offer made in such manner as may be prescribed,

Provided that in case of listed companies, takeover offer shall be as per the regulations framed by the Securities and Exchange Board.

INTERPRETATION BY AUTHOR

The provisions for takeover has already been given during the process of compromise and Arrangements in the Companies  Act 2013, however it was not notified.

In the rule 3(4), It is mentioned that the Application made to the Tribunal for Compromise or Arrangement-Creditor’s Responsibility Statement Creditor’s Responsibility Statement to be included in the Scheme of CDR.

WHAT'S NEW IN THE AMENDMENT

In the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, (hereinafter referred to as the principal rules), in rule 3, after Sub-rule (4), the following sub-rules shall be inserted, namely:

5. SUB RULE AS AMENDED BY,

A member of the company shall make an application for, arrangement for the purpose of takeover offer in terms of sub-section (11) of section 230, when such member along with any other member holds not less than three-fourths of the shares in the company, and such application has been filed for acquiring any part of the remaining shares of the company.

Explanation- Nothing in this sub-rule shall apply to any transfer or transmission of shares through a contract, arrangement or succession, as the case may be, or any transfer made in pursuance of any statutory or regulatory requirement.

INTERPRETATION BY AUTHOR

# What holding is required to make Takeover offer in arrangement process ?

Ans.  A member holding at least 3/4 of shares either alone or with any other member carrying voting rights (Rights gained under section 47(2) is also considerable).

# Can a member's holding who is making offer be considered in 3/4 value along with other person?

Ans. No, strictly it is mentioned that a member can make such offer and his 3/4th shares value shall be considered along with any other member only.

If a member is holding equal to more than 3/4th shares value along with any company or body corporate, then it shall not be considered in 3/4th share value

# What is the meaning of remaining shares?

Ans. Other than those 3/4 shares, means offer can be made for remaining 1/4 shares

e.g. Suppose Mr. A is a member of company X LTD and he holds 75 shares in X LTD and further he is willing to acquire remaining 25 share. This 25 share is to be taken for reference of remaining shares.

Cases which are exempted from this subrule

# Any transfer or transmission executed by contract arrangements or succession

# Any transfer by statutory or regulatory requirement

6. SUB RULE AS AMENDED BY,

 An application of arrangement for takeover offer shall contain:_

(a) The report of a registered valuer disclosing the details of the valuation

of the shares proposed to be acquired by the member after taking into a account the following factors: -

(i) the highest price paid by any person or group of persons fore acquisition of shares during last twelve months;

(ii) the fair price of shares of the company to be determined by their registered valuer after taking into account valuation parameters including return on net worth, book value of shares, earning pers share price earning multiple vis-d-vis the industry average, and such other parameters as are customary for valuation of shares of such Companies.

(b) Details of a bank account, to be opened separately, by the member wherein a sum of amount not Iess than one-half of total consideration of the takeover offer is deposited.

NOTE: In the principal rules, in Schedule of Fees, for S.No. 1, fees for filling application is now 5000.

Posted by LawgicAL ARUSH

Inter-Corporate Loans and Investments.

In this speady marathon of section 186 of  Companies Act 2013, we will cover all the aspects of this section with different different interpretative prospective.

Loan and Invetments

Applicability Of Section 186

1. Without prejudice to the provisions contained in this Act, a company shall unless otherwise prescribed, make investment through not more than two layers of investment companies

Provided that provisions of this subsection shall not apply,

(a) Company from acquiring any other company incorporated in a country outside India if such other company has investment subsidiaries beyond two layers as per the laws of such country.

(b) A subsidiary company from having any investment subsidiary for the purposes of meeting the requirements under any law or under any rule or regulation framed under any law for the time being in force.

INTERPRETATION BY AUTHOR

# Here company shall not be allowed to make investment through more than two layers of it's subsidiary company, However it is possible if acquiring any company ( company include body corporate) outside India or subsidiary having investment subsidiary and that subsidiary making investment as per applicable law for time being in force.

e.g. Let's suppose if company A has 50 subsidiary companies and such company making investments in it's more than 2 subsidiaries, in that case this section shall not apply.

However if company A has company B as it's subsidiary and company B has its subsidiary C and company C has its subsidiary D, in that case maximum Company A can make investments through company B and C beyond that not allowed.

2. No company shall directly or indirectly —

(a) Give any loan to any person or other body corporate

(b) Give any guarantee or provide security in connection with a loan to any other body corporate or person; and

(c) Acquire by way of subscription, purchase or otherwise, the securities of any other body corporate

Limits Specified under subsection.

60% of (Paid up share capital + free reserve + securities premium)or, 

100% of (free reserve + securities premium)

Whichever is higher

Loan and Investments

INTERPRETATION BY AUTHOR

# Meaning of Person has not been defined in companies act 2013, however same has been defined in section 2(42) of General clauses act 1897 which includes company, association, body of individual whether incorporated or not.

# Security includes shares, debenture, unit of mutual fund.

# whether section 186 attract, if Company A bought units of mutual funds. 

Ans. No, because mutual fund is a trust not a body corporate, however if company has invested in UTI mutual fund then section shall get attracts because it is a body corporate.

# Whether loan given to individual comes under section 186.

 Ans. No, because this section doesn't deal with loan given to individual and even definition of Person not include individual.

# Whether loan given to employee consider under section 186.

 Ans. No, because employee also not included in the definition of Person.

3. Where the giving of any loan or guarantee or providing any security or the acquisition under sub-section (2) exceeds the limits specified in that sub-section, prior approval by means of a special resolution passed at a general meeting shall be necessary.

INTERPRETATION BY AUTHOR

# If Investment or guarantee or securities is under limit, pass Board Resolution with unanimous approval, if breach pass special resolution.

4. The company shall disclose to the members in the financial statement the full particulars of the loans given, investment made or guarantee given or security provided and

The purpose for which the loan or guarantee or security is proposed to be utilized by the

Recipient of the loan or guarantee or security

INTERPRETATION BY AUTHOR

# It is mandatory for company to disclose in it's Financial Statement all information related with loan, security, investment or guarantee provided by company along with purpose of that loan to be utilized.

5. No investment shall be made or loan or guarantee or security given by the company Unless the resolution sanctioning it is passed at a meeting of the Board with the consent of All the directors present at the meeting and the prior approval of the public financial institution Concerned where any term loan is subsisting is obtained:

Provided that prior approval of a public financial institution shall not be required where the aggregate of the loans and investments so far made, the amount for which guarantee or security so far provided to or in all other bodies corporate, along with the investments, loans, guarantee or security proposed to be made or given does not exceed the limit as specified in sub-section (2), and there is no default in repayment of loan installments or payment of interest thereon as per the terms and conditions of such loan to the public financial institution.

INTERPRETATION BY AUTHOR

# Before loan or security or guarantee or investment made by company, every time it is required to pass unanimous board resolution in the board meeting

# Prior approval of PFI is only required if subsisting term loan exist, otherwise not required.

# PFI approval is required only if loan or security or guarantee or investments, is made along with existing and it is above the limit as specified in subsection (2).

6. No company, which is registered under section 12 of the Securities and Exchange Board of India Act, 1992 and covered under such class or classes of companies as may be prescribed, shall take inter-corporate loan or deposits exceeding the prescribed limit and such company shall furnish in its financial statement the details of the loan or deposits.

7. No loan shall be given under this section at a rate of interest lower than the prevailing yield of one year, three year, five year or ten year Government Security closest to the tenor of the loan.

Loan and Investments

INTERPRETATION BY AUTHOR

# Loan can be given under this section at equal to or more than above prescribed rates.

What if Company has given loan at the end of 2 year, which rate should be considered 1st year or 3rd year?

Ans. If loan given between mid of two years in that case the highest prevailing rate shall be considered.

8. No company which is in default in the repayment of any deposits accepted before or after the commencement of this Act or in payment of interest thereon shall give any loan or give any guarantee or provide any security or make an acquisition till such default is subsisting.

9. Every company giving loan or giving a guarantee or providing security or making an acquisition under this section shall keep a register which shall contain such particulars and shall be maintained in such manner as may be prescribed.

INTERPRETATION BY AUTHOR

#Every company shall maintain register in NBP-2 and entry shall be made within 7 days the same is mentioned in the rules.

10. The register referred to in sub-section (9) shall be kept at the registered office of the company and —

(a) Shall be open to inspection at such office; and

(b) Extracts may be taken there from by any member, and copies thereof may be furnished to any member of the company on payment of such fees as may be

Prescribed.

INTERPRETATION BY AUTHOR

# Fees is payable maximum RS. 10 each copy and it is discretion of company whether to take or not.

11. Nothing contained in this section, except sub-section (1), shall apply—

(a) to a loan made, guarantee given or security provided by a banking company or an insurance company or a housing finance company in the ordinary course of its business or a company engaged in the business of financing of companies or of providing infrastructural facilities;

(b) To any acquisition—

(i) Made by a non-banking financial company registered under Chapter IIIB of the Reserve Bank of India Act, 1934 and whose principal business is acquisition of securities:

Provided that exemption to non-banking financial company shall be in respect of its investment and lending activities;

(ii) Made by a company whose principal business is the acquisition of securities;

(iii) Of shares allotted in pursuance of clause (a) of sub-section (1) of section 62.

INTERPRETATION BY AUTHOR

# Following companies are exempted from applicability of this section for loan, security or guarantee;

(a) Banking company

(b) Insurance Company

(c) Housing finance company

(d) Finance Company

(e) Company engeged in infrastructure business

# Following companies are exempted only for investments made by them;

(a) Non Banking financial Company ( Only if Investment is principal business)

12. CG may make rule as it deems fit.

13. Penalty;

Company : - Min Rs 25000  

                      - Max Rs up to 500000

Officer in default :-  Imprisonment up to 2 years 

                                   - and Min Rs 25000

                                   - Max Rs 100000

Posted by LAWgicAL ARUSH