Celebrating 1st Birthday of Companies Act, 2013

On the April fool’s day of 2014, the Companies Act, 2013 (‘Act’) was ‘born’ and since then Govt. and professionals across India are trying to nurture the ‘new born baby’. For quite a few months, the Act was referred as ‘New Act’ in various professional journals, TV shows, interviews, various seminars and conferences. Now, it’s high time that we consider that the Act is no more ‘new’, and shall be referred to as ‘Companies Act, 2013’ only.

Frankly speaking (to which most the professionals will agree), the journey has not been very smooth for the Act and probably will not be smooth for next 2-3 years. Top – 10 most debatable issues (can be 50+ also, but restricting myself) discussed in 2013 – 2014 were:

1. Deposits – Whether to file Form DPT with RoC? / Whether to refund or not?
2. RPTs – What is ‘arms length’ & ‘ordinary course of business’?
3. CSR – Whether the provision is valid & whether the provision is mandatory?
4. Loans to Directors – No need to even explain the way it has affected the corporates.
5. Auditors Liability to report ‘fraud’
6. ‘Independence’ of Director
7. ‘Other services’ by Statutory Auditor
8. Scope of Secretarial Audit
9. Status of ‘holding company’ / ‘subsidiary company’
10. New wild animals like MGT – 14 & MBP – 1.

Based on this background, the Govt. introduced Cos. Amendment Bill, 2014 which had trivial issues like: common seal not being mandatory, minimum paid share capital threshold eliminated, ‘special resolution’ replacing ‘ordinary resolution’ for RPT compliance etc. – with an objective to ‘ease of doing business in India’.

If the govt. actually intended ‘ease of doing business, then they should have introduced some more amendments, with a broader perspective and long term vision. Govt. has lost a golden opportunity in amending the Act and let’s hope that they understand (within these 4 years) that the business has definitely not eased.

It will now be a herculean task for the Govt. to bring another amendment bill, getting it approved by the cabinet and then passing in LS & RS. Presently, the Companies Amendment Bill, 2014 has been passed in LS only and not in RS.

During the 12 months journey, there were numerous circulars / notifications / clarifications / MOST AWAITED - draft notification / Removal of Difficulty orders etc. were issued – but all these have not resolved core issues faced by professionals and India Inc. The draft notification is / was the only ray of hope for private companies.

To add more to the instability and uncertainty in Cos. Act, 2013 – the validity of NCLT matter is before Supreme Court’s Constitution Bench and there is very high possibility that it will be struck down (Based on the recent judgments, which struck down NTT or IPAB’s constitution). This is definitely going to be time consuming process.

Considering the industry expectation for ‘doing business easily’ and the govt. offering unwarranted ‘ease’, there is still a long way to go for the Companies Act, 2013 to settle down. The professionals need to refer both Acts for few more years as switching completely to Companies Act, 2013 will take time. The professionals need to be in their student-rooms for some more time.

On a lighter note, Companies Act, 2013 needs Batman (~ Gotham needs Batman).

MCA Order issued to multiply the difficulty & not remove it!!

On February 13, 2015 (a day before Valentines Day) – Ministry of Corporate Affairs – ‘proposed’ to introduce the first Removal of Difficulty Order (‘RoD Order’) of 2015 to give some relief to the corporates.

The RoD Order may have provided ‘relief’ but has definitely raised a fundamental question – Can the MCA interfere in the wordings of Companies Act? Or broadly speaking, can any Ministry / Dept. amend the law without the same being placed & passed by the Parliament? This is a very crucial question that needs to be answered / studied by all - because, we would soon celebrate 1 year birthday of Companies Act, 2013 – and many more RoD Orders, Circulars and Notifications will be issued, which are just creating confusion.

Vide RoD Order dated February 13, 2015, MCA has introduced two amendments: (1) It has clarified the definition of small company, by replacing the word ‘or’ with ‘and’ i.e. to ensure that company is a ‘small company’ and satisfies both conditions – prescribed paid share capital AND turnover (earlier, any one condition was required to be satisfied). Even, before the issue of this RoD Order, some senior professionals were of the firm opinion that both conditions were required to be satisfied. (2) It has introduced an exception to Section 186 of Companies Act, 2013 (relating to ‘Loans and Investments by Co.’). Not just one word is replaced, but a whole sentence is introduced, whereby some companies will be excluded from compliance of Section 186 w.r.t shares acquisition in ordinary course of business.

If the RoD Order (‘amendment introduced’) is read along with Section 186(11), then Section 186(11)(b)(iv) is: “Nothing contained in this section, except sub-section (1), shall apply to any acquisition made by a banking company or an insurance company or a housing finance company, making acquisition of securities in the ordinary course of its business.”

The RoD Order relating to Section 186 ought to have been drafted in following way: “Nothing contained in this section, except sub-section (1), shall apply to any acquisition of securities in the ordinary course of business by a banking company or an insurance company or a housing finance company.”

Firmly believe that removal of difficulty order needs to be renamed as “Multiplying the Difficulty Order”. 

The way things are going for Companies Act, 2013 – I really feel terrible for all the three professions – CS, CA, CWA. Were we all destined for so much confusion and ambiguity after years effort on Companies Act?? It’s really distressing to see professionals fighting on issues like applicability / implementation / procedural / interpretation. Also, we, as professional are not worried about the documentation involved in compliance; but we are worried about the ambiguity in complying in law due to absurd drafting. To top it all, the Amendment Bill, 2014 has virtually done nothing for the corporates at large. Let’s find procedure to bring back Companies Act, 1956. We don’t want small co. / CSR / Independent Directors / onerous Directors Responsibility Statement (which is actually an ‘affidavit’) / class action suits etc. We were happy before!

Emotional Blog, and the first one!

With loads of emotions and thoughts process, I finally make my debut in the world of Blog! Over a period of time, have gone through quite a few blogs and have observed that people write a lot about social / political / civic and health issues in India & abroad..

This blog is not at all about any social issue, but its a compilation of my thoughts about one of my professional assignments (Teaching) and my experience in it, till now. Please note that this blog is straight through the heart without intention to criticize any person / organisation. Also, please note that through this communication, I have no intention to blow my own trumpet. Here it goes....

It all started in Feb. 2013, when I was working with a Chartered Accountant Firm in Pune. One fine afternoon, got a call from CA Pratik Neve and he asked if I can teach one student few subjects of Company Secretary ('CS') Course - Executive Level [Company Law & Securities Laws]. With no second thought, decided to go ahead with the proposal. Had no absolute idea about syllabus content / required teaching hours or day / whether portion will be completed within time or not etc. And most importantly, was experimenting and testing myself - whether i have got requisite skills to teach / explain any concept in Companies Act. Since working, i decided to teach early morning and then leave for office.

After teaching one student for approximately two months, believe it or not, had decided to quit my job and start teaching and explore the untapped area of 'Academics'. In the next batch - there were 3 students for CS Executive Syllabus [Company Law & Securities Laws]. Taught this batch, when i was serving my notice period. Quite a few times, had to visit Mumbai for work and the next day, had to take a batch early morning. Travel time was utilised for revising and being thorough with syllabus. CS Executive Exam was in first week of June 2013 and with students co-operation, was able to complete portion by May 15, 2013.

Later, decided to venture into teaching CS Professional Course along with CS Executive Course. It was really amazing feeling to get a good response of students / get their feed backs. The number of students increased manifold and from 4 students in June 2013 attempt, i had (with CA Pratik's grace) 35 students for CS Executive & Professional Course for December 2013 attempt. Was really blessed by such development and student's response. Also got an opportunity to teach CS Executive and Professional students for June 2014 and December 2014 attempt. Probably, the total student count has gone beyond 150.

Have always ensured that students refer Module / Study material provided by ICSI. Even when i prepared notes (for the satisfaction of students), ensured that the information / content is in alignment with study material provided by ICSI. Always feel that, this is the best source to learn from. Ironically,in Pune at least, ICSI study material is the most discouraged material. Really feel hurt by weird comments by professionals / professors / teachers on study material. Have always said that study material is prepared by referring 5/8 professional / reference books and ICSI has done commendable job in compiling the same and presenting before students. Some professionals / professors / teachers term the Study material as "raddhi". My only concern is, when students are undergoing 15 months Training / Internship - are not acquainted with full / adequate information - which that professionals / professors / teachers has omitted at the time of preparing notes. Also, the "Notes" are extremely exam oriented with no detailed explanation and all relevant case laws case being omitted. By this, the knowledge of CS Student is very exam-oriented, and probably the student will not grow as "Professional" as expected since, he has not develop the skill of reading the right material at the right time. For ensuring that ICSI study materials are referred by students, some awareness and efforts are required by ICSI, whereby implementation shall be Members of ICSI.

Also, I have observed that teaching, in Pune, atleast has become more of 'business' rather than 'profession' (which ought to be 'noble'). General observation (nothing specific), the professionals / professors / teachers are just involved in 'marketing techniques' to develop a student base rather than focusing on content to be taught. Probably, there could be cheap marketing techniques that are developed to lure / attract students. I am not against the concept of marketing; but I am against the concept of 'cheap marketing'. Also, there is a thin line difference between the two and the best judge to know the difference are respective professionals / professors / teachers. Due to these techniques and strategies, I think that concerned professional / professor / teacher may lose basic essence of teaching i.e. passion to gain knowledge and share the same. Therefore, it's necessary to keep a balance of teaching & marketing. Most importantly, marketing is taken care by providing best teaching services to your students and having some patience to this element.

Teaching is a continuous learning process whereby, the concerned professor is not just required to read / refer the text but he / she is required explain the students practical implication of it by quoting some relevant / known examples. For knowing these examples, the professor / teacher should acquire knowledge by reading related material / newspaper. If this action is not taken, then after teaching two batches, the whole activity of teaching becomes "popat-panchi". The professors / teachers ought to provide adequate information other than study material. You may not believe, but in most of my training sessions - i taught students on subject like - how to read business newspapers, discussed on relevance of corporate news with CS syllabus, discussed relevant provisions in law, discussed and read Notice, Directors Report, Corporate Governance Report etc.

Also, students are not dumb to know the knowledge level of the professor / teacher. They know much better as they have attended sessions of 3 / 4 other professors. What i mean is, never under estimate your student or try to play games with them. "students apne 'baap' hote hain"..!!

As always said, I request every student to be part of ICSI either as part of active participation / volunteering in ICSI activities because, first, we are first the students / members / torch bearers of ICSI and then of any other class / academy.

Through this blog, would like to mention that due to some other professional commitments, have decided to take a break from teaching for 3-4 months. Will definitely miss drawing flow charts, explaining the concepts and practical implication of the same. Also, will miss "drafting resolutions" in the class, whereby students (actually) recite resolutions after understanding the knack of drafting it.

Its really heartening for me to even think and write that I wont be able to teach for such time. In the last 2 years, this teaching profession has given me a lot of proud moments - e.g. when students convey their CS results, knowing that your student has scored 70 out of 100 in theory / mundane subject, knowing that students have become qualified CS, understanding that student is now your friend, discussing various provisions Companies Act with students - who are now CS, celebrating Guru Pournima and Teachers day and many more....... Dear Students, it gives me immense pleasure in updating the contact list from "Students" to "Professionals".

Would like to thank CA Pratik Neve, my childhood friend, for introducing me to this profession and maintaining it as profession. Would also like to thank all my students for their continued support and keeping the faith. Ensuring to keep all my students professionally updated.

Adios guys..!

Will be back soon!!

CS Gaurav Pingle.

(acsgauravpingle@gmail.com)