Guide to SHARE APPLICATION MONEY & BORROWING POWERS FOR PRIVATE COMPANIES

Edition: 1st edn., 2016

ISBN: 978-93-5139-327-6

Pages: 208

Author: CA. KAMAL GARG

Chapter 1: SHARE APPLICATION MONEY UNDER COMPANIES ACT, 20131. Introduction2. Abuse of Private Placement under Companies Act, 1956 dealt in by the Supreme Court in Sahara’s case3. Enshrining the provisions for Private Placement under the Companies Act, 20134. Share Application Money to be received only through banking channels and the securities shall be allotted with prescribed time5. Share/security application money to the extent of allotment within 2 months is exempted to be classified as deposits under Companies (Acceptance of Deposits) Rules, 20146. Share application money accepted before the Companies Act, 2013 vis-a-vis Companies (Acceptance of Deposits) Rules, 20147. Punishment for contravention:8. Punishment for contravention of section 73 or section 76 [Section 76A]9. Share Application Money Pending Allotment – Disclosures under Schedule III of the Companies Act, 201310. Diluted Earnings Per Share and Share Application Money11. Accounting treatment of share application money pending for allotment invested by holding company in subsidiaries12. Net worth does not include non-refundable share application money pending allotment13. Power of Securities and Exchange Board to regulate issue and transfer of securities, etc.Chapter 2: SHARE APPLICATION MONEY UNDER FOREIGN EXCHANGE MANAGEMENT ACT, 19991. Mode of payment for shares issued to person resident outside India2. Share Application Money to be received only through banking channels and the securities shall be allotted with prescribed time — FEMA compliance at the command of Companies Act, 2013Chapter 3: SHARE APPLICATION MONEY VIS-À-VIS INCOME TAX ACT, 19611. Mode of taking or accepting certain loans, deposits and specified sum2. Mode of repayment of certain loans or deposits3. Section 14A/Rule 8D does not apply to share application money4. If the identity and other details of the share applicants are available, the share application money cannot be treated as undisclosed income in the hands of the Co. The addition, if at all, should be in the hands of the applicants if their creditworthiness cannot be provedChapter 4: INVITATION AND ACCEPTANCE OF DEPOSITS BY COMPANIES1. Acceptance of deposits2. Meaning of Depositor3. Meaning of eligible company4. Distinction between Loan and Deposit5. 'Deposit' – meaning thereof6. Amounts received by a company which are exempted and not included in the category of deposits7. Conditions for acceptance of deposits8. Acceptance of deposits from public by eligible companies9. Creation of security for secured deposits10. Appointment and Removal of deposit trustees11. Duties of deposit trustees12. Meeting of Depositors13. Application Form for deposits14. Declaration by the depositors that the amount deposited is not from the borrowed funds 15. Depositor may appoint nominees 16. Furnishing of deposit receipts to depositors17. Maintenance of liquid assets and creation of Deposit Repayment Reserve Account18. Registers of deposits19. Premature repayment of Deposits20. Return of deposits to be filed with the Registrar21. Penal rate of interest22. Power of Central Government to decide certain questions23. Applicability of sections 73, 74 and 75 to eligible companies24. Deposit accepted before the Companies Act, 201326. Punishment for contravention27. Damages for fraud28. Punishment for contravention of section 73 or section 76 [Section 76A]29. Disclosure of particulars of deposits in the Boards’ Report30. Provision to make online complaint to the MCA by the deposit holdersChapter 5: POWERS OF THE BOARDPOWERS OF BOARD1. Validity of acts of directors2. Board should act as a collective body3. Distribution of powers of the company4. General power of the Board of directors5. Manner in which the powers can be exercised by the Board6. Powers exercisable by the Board only if authorised by ArticlesChapter 6: RESTRICTIONS ON THE POWERS OF THE BOARD 1. Powers to be exercised by the Board only on the approval given by the members in general meeting by way of special resolution2. Meaning of Undertaking3. Meaning of Temporary Loans4. Powers to be exercised by the members in the general meeting by way of special resolution5. Powers to be exercised with the approval of the Tribunal6. Certain powers which can be exercised by the Board of directors only with the approval of the members and the Central Government7. Other major restrictions on the powers of the Board8. Prohibition on charitable contribution9. Prohibitions and restrictions regarding political contributions10. Powers to make contribution to national defence funds, etc.Chapter 7: DISCLOSURE OF INTEREST, RELATED PARTY TRANSACTIONS, OFFICE OR PLACE OF PROFIT AND REGISTERS THEREOFDISCLOSURE OF INTEREST BY DIRECTOR1. Object of disclosure of interest2. Requirement for disclosure of nature of interest whether direct or indirect3. Requirement for disclosure of interest is applicable to all companies4. Applicability for disclosure5. Requirement of disclosure if a director becomes concerned or interested after entering into contract by the Company6. Contracts without disclosure of interest by a director shall be voidable at the option of the company7. Non-applicability of section 1848. General guidelines for disclosure of the nature of interest9. Contract may be oral or written10. Burden of proof of non-disclosure of interest11. Interested directors shall not participate in such Board Meeting in which the relevant contract or arrangement is discussed12. Consequences and penalties for non disclosure of interest13. Status of contract, where a director has not disclosed his interest before the Board14. Contracts or arrangements not covered by section 184RELATED PARTY TRANSACTIONS15. Applicability16. Scope of section 18817. Approval of contracts by the Board18. Interested director is not entitled to present in the Board meeting while considering the contracts by the Board19. Requirement fo