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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    It is the duty of the Company Secretary to attend all Board, Committee and General Meetings as mentioned in section 205 of the Companies Act, 2013 read with Rule 10 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Accordingly, Yes, it is mandatory for CS to attendRead more

    It is the duty of the Company Secretary to attend all Board, Committee and General Meetings as mentioned in section 205 of the Companies Act, 2013 read with Rule 10 of the Companies (Appointment and Remuneration of Managerial
    Personnel) Rules, 2014.

    Accordingly, Yes, it is mandatory for CS to attend all the board meetings.

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Ramesh Sharma
Enlightened
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  1. CA Vishnu Ram Enlightened

    Approval Requirement from Audit Committee for Related Party Transactions under Section 188 Section 188 of the Companies Act, 2013 governs Related Party Transactions (RPTs) and specifies when prior approval is required. Additionally, the Companies (Meetings of Board and its Powers) Rules, 2014 and SERead more

    Approval Requirement from Audit Committee for Related Party Transactions under Section 188

    Section 188 of the Companies Act, 2013 governs Related Party Transactions (RPTs) and specifies when prior approval is required. Additionally, the Companies (Meetings of Board and its Powers) Rules, 2014 and SEBI (LODR) Regulations, 2015 impose further compliance requirements.

    1. Applicability of Section 188

    Section 188 applies when a company enters into a transaction with a related party, including:
    ✅ Sale, purchase, or supply of goods/materials
    ✅ Selling or disposing of property
    ✅ Leasing of property
    ✅ Availing or rendering services
    ✅ Appointment of related party to office or place of profit
    ✅ Underwriting of securities

    If these transactions exceed the prescribed threshold limits, approval from the Board of Directors and in some cases, shareholders is required.

    2. Threshold Limits for Shareholder Approval under Section 188

    As per Rule 15(3) of the Companies (Meetings of Board and its Powers) Rules, 2014, shareholder approval via a special resolution is required if the transaction value exceeds the following limits:

    Nature of Transaction Threshold Limit (Exceeding)
    Sale, purchase, or supply of goods/materials 10% or more of turnover
    Selling or buying property 10% or more of net worth
    Leasing of property 10% or more of net worth or 10% of turnover
    Availing or rendering services 10% or more of turnover
    Appointment of a related party to an office of profit in the company, subsidiary, or associate company ₹2.5 Lakh per month
    Underwriting of securities or derivatives 1% of net worth

    Note: The limits are based on the last audited financial statements of the company.

    3. Role of the Audit Committee in Related Party Transactions (RPTs)

    • Section 177(4)(iv) of the Companies Act, 2013 mandates that the Audit Committee must approve all RPTs, including those covered under Section 188.
    • Even if a transaction does not exceed the monetary limits of Section 188, it still requires Audit Committee approval if the company is required to have an Audit Committee.
    • Listed companies and certain public companies must comply with SEBI (LODR) Regulations, 2015, which impose stricter approval requirements for RPTs.

    4. Exemptions Where Audit Committee Approval May Not Be Required

    Audit Committee approval is not required in the following cases:
    ❌ Transactions between holding and wholly-owned subsidiary (subject to disclosure requirements).
    ❌ Transactions entered in the ordinary course of business and at arm’s length price.

    However, even in these cases, proper documentation and disclosure are essential.

    5. Shareholder Approval for Certain Transactions

    In addition to Audit Committee and Board approvals, shareholder approval via special resolution is required if the transaction value exceeds the thresholds mentioned above.

    Final Answer

    ✅ Yes, Audit Committee approval is mandatory for all Related Party Transactions, including those under Section 188, unless they are exempted (ordinary course & arm’s length).
    ✅ If the transaction exceeds prescribed limits, Board and shareholder approval is also required.
    ✅ Listed companies must comply with SEBI (LODR) Regulations, 2015, which impose additional RPT approval requirements.

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Ramesh Sharma
Enlightened
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    A Director shall not be reckoned for Quorum in respect of an item in which he is interested and he shall not be present, whether physically or through Electronic Mode, during discussions on such item. For this purpose, a Director shall be interested in a contract or arrangement entered into or propoRead more

    A Director shall not be reckoned for Quorum in respect of an item in which he is interested and he shall not be present, whether physically or through Electronic Mode, during discussions on such item.
    For this purpose, a Director shall be interested in a contract or arrangement entered into or proposed to be entered into by the company:
    (a) with the Director himself or his relative; or 42 FAQ’s on the Companies Act, 2013
    (b) with any body corporate, if such Director, or such Director along with other Directors holds more than two percent of the paid-up share capital of that body corporate, or he is a promoter, or manager or chief executive officer of that body
    corporate; or
    (c) with a firm or other entity, if such director or his relative is a partner, owner or member, as the case may be, of that firm or other entity.

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    Under section u/s 184 (1) and (2) disclosure is required to be given by the directors. Section 184 (1) is a general disclosure requires to be given by all directors to disclose their concern or interest in any company (ies), bodies corporate, firms, or other association of individuals, along with shRead more

    Under section u/s 184 (1) and (2) disclosure is required to be given by the directors.

    Section 184 (1) is a general disclosure requires to be given by all directors to disclose their concern or interest in any company (ies), bodies corporate, firms, or other association of individuals, along with shareholding in the following situation:

    1. At the first Board Meeting in which he participates as a Director post appointment;
    2. At the first Board Meeting held in every financial year;
    3. At the first Board Meeting held after any change in the interest or concern in the disclosures already made earlier

    Disclosure u/s 184 (2) is a specific disclosure given by the director at the meeting of
    the Board in which a contract or arrangement is discussed and entered into/proposed to be entered into with any entity in which such director has an interest in the manner/ to the extent specified therein.

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    Can a Company Give a Corporate Guarantee or Offer Security for a Loan Taken by Its Subsidiary or an Interested Company? The ability of a company to give a corporate guarantee or offer security for a loan taken by its subsidiary, a company in which a director is interested, or a company with common mRead more

    Can a Company Give a Corporate Guarantee or Offer Security for a Loan Taken by Its Subsidiary or an Interested Company?

    The ability of a company to give a corporate guarantee or offer security for a loan taken by its subsidiary, a company in which a director is interested, or a company with common management is governed by multiple provisions under the Companies Act, 2013, SEBI Regulations, and RBI Guidelines (for NBFCs and Banks).

    1. Section 185 – Loans and Guarantees to Directors and Interested Companies

    Section 185 of the Companies Act, 2013 places restrictions on a company granting loans, guarantees, or securities to certain entities.

    🔴 Restricted Transactions: When Guarantees are NOT Allowed

    A company cannot give a loan, guarantee, or security to:
    ❌ Any director of the company or its holding company.
    ❌ Any relative of a director.
    ❌ Any firm in which a director or relative is a partner.

    🟢 Permitted Transactions: When Guarantees ARE Allowed

    A company can provide a guarantee or security if:
    ✅ It is for a wholly-owned subsidiary (WOS).
    ✅ It is for a subsidiary company, provided the funds are used for the principal business.
    ✅ It is in the ordinary course of business (e.g., NBFCs and banks providing guarantees).
    ✅ It is approved by a special resolution in the general meeting (if given to a company in which a director is interested).

    📌 Key Exemption: If the guarantee is given by a holding company for a loan taken by its wholly-owned subsidiary (WOS), no special resolution is required, but disclosure is necessary.

    2. Section 186 – Inter-Corporate Loans and Guarantees

    Under Section 186, a company can provide loans, guarantees, or security, but there are limits:

    🔹 The total amount of loans, investments, guarantees, or security should not exceed 60% of the company’s paid-up share capital, free reserves, and securities premium or 100% of free reserves and securities premium, whichever is higher.
    🔹 If the company exceeds this limit, it needs:
    ✔ Board approval 🏢
    ✔ Shareholder approval (by special resolution) 📜
    ✔ Disclosure in financial statements 📄

    📌 Important: Section 186 does not apply to banking companies, insurance companies, or NBFCs engaged in lending as part of their business.

    3. SEBI and RBI Regulations for Listed Companies and NBFCs

    If the company is listed, SEBI (LODR) Regulations, 2015 apply:
    ✔ Audit Committee approval required for related party transactions (RPTs).
    ✔ Disclosure in financial statements.
    ✔ Independent director approval in some cases.

    For NBFCs and companies regulated by RBI:
    ✔ RBI Guidelines impose additional disclosure and reporting requirements for guarantees.

    4. Special Considerations for Bank Loans

    When a bank asks for a corporate guarantee from the parent or sister company, the following must be ensured:
    ✅ The guarantee is compliant with Companies Act, 2013.
    ✅ The board has passed a resolution authorizing the guarantee.
    ✅ The company has sufficient net worth and reserves to issue the guarantee.
    ✅ The guarantee does not violate debt covenants or SEBI Listing Regulations.

    Final Answer

    ✔ A company can provide a corporate guarantee or security for a subsidiary’s loan, subject to Section 185 & 186 compliance.
    ✔ If the guarantee is for a company where a director is interested, special resolution approval is required.
    ✔ Listed companies and NBFCs must comply with SEBI and RBI regulations.
    ✔ Guarantees should not exceed permissible financial limits, and adequate disclosures must be made.

    📌 Recommendation: Before issuing a corporate guarantee, companies should seek legal and financial consultation to ensure compliance with all applicable laws.

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    Is a Director Required to Disclose His Interest in Companies Incorporated Outside India? Yes, under the Companies Act, 2013, a director is required to disclose his interest in any company, whether incorporated in India or outside India. The disclosure requirements are governed by Section 184 and RulRead more

    Is a Director Required to Disclose His Interest in Companies Incorporated Outside India?

    Yes, under the Companies Act, 2013, a director is required to disclose his interest in any company, whether incorporated in India or outside India. The disclosure requirements are governed by Section 184 and Rule 9 of the Companies (Meetings of Board and its Powers) Rules, 2014.

    1. Section 184 of the Companies Act, 2013 – Disclosure of Interest

    A director must disclose his interest in any company, body corporate, firm, or other association of individuals in which he holds:
    ✅ Directorship
    ✅ Shareholding
    ✅ Partnership interest
    ✅ Any other financial interest

    🔹 Frequency of Disclosure:

    • At the first Board meeting after becoming a director.
    • At the first meeting of every financial year.
    • Whenever there is a change in his interest during the year.

    🔹 Does it Apply to Foreign Companies?
    ✔ Yes, foreign companies are covered under the definition of “body corporate” as per Section 2(11) of the Companies Act, 2013.
    ✔ A director must disclose his interest in any foreign company where he holds directorship, shareholding, or any financial stake.

    📌 Format of Disclosure:
    Directors must provide disclosure using Form MBP-1 at the Board meeting.

    2. Section 189 – Register of Contracts & Arrangements in Which Directors are Interested

    🔹 Companies must maintain a Register of Contracts (MBP-4) where all disclosures of directors’ interests are recorded.
    🔹 This register is open for inspection by directors and auditors.

    3. SEBI & RBI Regulations for Listed and Foreign Companies

    ✔ If the company is listed, the director’s interest must be disclosed under SEBI (LODR) Regulations, 2015.
    ✔ RBI regulations also require Indian companies with foreign subsidiaries or investments to maintain disclosures of director interests.

    Final Answer

    ✔ Yes, a director must disclose his interest even in companies incorporated outside India.
    ✔ This applies to directorships, shareholding, partnerships, and financial interests.
    ✔ Disclosures must be made in Form MBP-1 and recorded in Register MBP-4.
    ✔ Compliance with SEBI and RBI regulations may also be required for listed or regulated entities.

    📌 Recommendation: Directors should ensure timely disclosure of foreign company interests to avoid non-compliance and penalties under the Companies Act, 2013.

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    Under Section 184(2) of the Companies Act, 2013, every director is required to disclose their interest in any company, body corporate, firm, or other entity in which they hold a stake. This is to ensure transparency and prevent conflicts of interest. When is the disclosure required? At the first BoaRead more

    Under Section 184(2) of the Companies Act, 2013, every director is required to disclose their interest in any company, body corporate, firm, or other entity in which they hold a stake. This is to ensure transparency and prevent conflicts of interest.

    When is the disclosure required?

    1. At the first Board Meeting after becoming a director.
    2. At the first Board Meeting of every financial year.
    3. Whenever there is any change in their interest or concern in an entity.

    What needs to be disclosed?

    A director must disclose their direct or indirect interest in:

    • Any other company or body corporate in which they hold shares exceeding 2% of the paid-up share capital.
    • Any firm, partnership, LLP, or entity where they are a partner, owner, or hold significant influence.
    • Any contract or arrangement the company enters into with such an entity.

    How should the disclosure be made?

    • The disclosure must be in Form MBP-1 and submitted to the company.
    • The company records it in the Register of Directors’ Interest.

    What happens if a director fails to disclose?

    If a director does not disclose their interest as required under Section 184(2), they may face:

    • A fine of up to ₹1,00,000, or
    • Imprisonment for up to 1 year, or both.

    Key Takeaway: If you are a director in a company, always ensure timely disclosure of your interests to avoid legal consequences and maintain corporate governance compliance.

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    As per Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014, a director has the right to participate in a Board Meeting via video conferencing (VC) or other audio-visual means (OAVM) unless specifically restricted by the Articles of Association (AoA) of the company. Is it MandatoryRead more

    As per Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014, a director has the right to participate in a Board Meeting via video conferencing (VC) or other audio-visual means (OAVM) unless specifically restricted by the Articles of Association (AoA) of the company.

    Is it Mandatory for the Company to Provide VC Facility?

    ✅ Yes, if a director requests it in advance

    • If a director intimates their intent to participate via video conferencing at least 3 days before the meeting, the company is obligated to provide the facility.
    • The company must ensure that the VC/OAVM setup allows directors to hear and communicate clearly.

    🚫 No, if the Articles of Association prohibit it

    • If the company’s AoA specifically restricts the use of video conferencing for Board Meetings, then the director cannot demand VC participation.

    Key Compliance Points:

    • The minutes of the meeting must record the names of directors attending via VC.
    • The company must ensure that VC participation does not hinder decision-making.
    • Certain critical decisions (e.g., approval of financial statements, mergers, takeovers) cannot be conducted solely via VC.

    Conclusion

    If a director requests participation through video conferencing in advance, the company is required to provide the facility—unless restricted by the AoA. This ensures corporate governance, inclusivity, and compliance with the law.
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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    Even if the video recording of a board meeting held via video conferencing is lost due to technical issues, the meeting can still be considered valid. The key is whether proper records and documentation of the meeting are maintained. Here’s what you need to know: 1. Validity of the Meeting Meeting MRead more

    Even if the video recording of a board meeting held via video conferencing is lost due to technical issues, the meeting can still be considered valid. The key is whether proper records and documentation of the meeting are maintained. Here’s what you need to know:

    1. Validity of the Meeting

    • Meeting Minutes & Attendance:
      The validity of the meeting primarily depends on the accurate and complete minutes of the meeting and the attendance register. If these documents are properly maintained and reflect that all required directors participated and resolutions were passed, the meeting remains valid.

    • Board Resolution Certification:
      A certificate from the Company Secretary or another authorized officer can be issued, stating that the meeting was duly held, even if the video recording is unavailable. This certificate serves as additional evidence that the meeting took place as per the legal requirements.

    2. Remedies for Lost Recording

    • Maintain Alternative Documentation:
      Ensure that all decisions, discussions, and resolutions are recorded in the meeting minutes. Supplement this with attendance records and any written communications exchanged during the meeting.

    • Issue a Certificate:
      The company may issue a formal certificate by the Company Secretary confirming that the meeting was conducted properly in accordance with the Companies Act, 2013, and the Companies (Meetings of Board and its Powers) Rules, 2014.

    • Backup Procedures:
      As a preventive measure, companies are encouraged to have robust IT systems and backup procedures in place to minimize the risk of losing the video recording in future meetings.

    Conclusion

    Even if technical issues prevent the retrieval of the video recording, the meeting remains valid if proper minutes and supporting documentation are maintained. The remedy lies in relying on these alternative records and, if necessary, obtaining a certificate from the Company Secretary attesting to the proper conduct of the meeting.

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CA Vishnu Ram
Enlightened
Asked: In:

  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    There isn’t a specific “list” of business items that are inherently restricted from being transacted via video conferencing in Indian law. Instead, whether a particular transaction can be fully conducted through video conferencing depends on the nature of the transaction and any statutory or regulatRead more

    There isn’t a specific “list” of business items that are inherently restricted from being transacted via video conferencing in Indian law. Instead, whether a particular transaction can be fully conducted through video conferencing depends on the nature of the transaction and any statutory or regulatory requirements that may mandate physical presence or original documentation. Here’s a breakdown:

    1. General Acceptance of Video Conferencing

    • Modern Legal Framework:
      Under the Information Technology Act, 2000, electronic records and digital signatures are legally recognized. This means that many business transactions—such as board meetings, contract negotiations, and even resolutions—can be effectively conducted via video conferencing if the necessary electronic safeguards (like digital signatures) are in place.

    • Corporate Meetings:
      The Companies Act, 2013 permits board and general meetings to be held by video conferencing or other audio-visual means, provided that the mode of participation is clearly defined and the quorum requirements are met.

    2. Situations Where Physical Interaction May Still Be Required

    While video conferencing is widely accepted, certain transactions or business items may not be fully completed remotely due to statutory or practical requirements, for example:

    • Original Documentation & Notarization:
      Transactions that require the submission of original documents (such as certain notarized agreements or deeds) may not be completely transacted via video conferencing.

    • Physical Verification:
      Transactions that necessitate on-site inspection (for example, the physical inspection of goods in a property transfer or manufacturing process) might require a physical presence.

    • Regulatory Requirements:
      Specific sectors (like certain banking or real estate transactions) may have guidelines or regulations that mandate physical verification or in-person interaction, despite the general acceptance of digital processes.

    3. Practical Considerations

    • Digital Signatures & Electronic Records:
      With the advent of digital signatures and secure electronic record systems, many formalities once tied to physical presence have been relaxed.

    • Sector-Specific Norms:
      Different regulatory bodies may impose their own requirements. For example, while corporate board meetings are fully acceptable over video conferencing, some government or regulatory approvals might still require a physical submission of documents or signatures.

    4. Conclusion

    There is no blanket restriction in Indian law that categorically excludes any “business item” from being transacted via video conferencing. Instead, the acceptability of using video conferencing depends on:

    • The statutory framework (e.g., Companies Act, 2013 and Information Technology Act, 2000),

    • Regulatory requirements of the specific sector, and

    • Practical necessities such as the need for original documentation or physical verification.

    In essence, if the transaction can be legally supported by electronic records and digital processes, video conferencing is generally acceptable. However, where the law mandates physical presence or original documents (for instance, certain notarizations or inspections), those specific items would still need to be handled in person.

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