Company Law

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Draft Format of Director’s Report for Small Private Limited Company

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To the Members of [Your Company Name],

In compliance with Section 134 of the Companies Act, 2013, the Directors are pleased to present the Annual Report along with the Audited Financial Statements for the financial year ended 31st March [Year].

1. Financial Summary or Highlights/Performance of the Company
The financial performance of the Company for the year end is summarized below:

ParticularsCurrent Year (₹)Previous Year (₹)
Total Revenue
Profit Before Tax
Provision for Tax
Profit After Tax
Dividend

2. State of the Company’s Affairs
Discuss the state of affairs of the company in detail. Mention any significant changes in the business operations during the year.

3. Change in the Nature of Business, if any
In case there has been any change in the nature of business, it should be reported in this section.

4. Dividend
If the board proposes to distribute a dividend, provide details about the rate of dividend and the total amount to be distributed.

5. Reserves
State the total amount proposed to be carried to reserves.

6. Brief description of the Company’s working during the year/Status of Affairs
Present an overview of the business and operations during the year, including any expansion, diversification, or contraction of activities.

7. Directors

  • A declaration by the Independent Directors under sub-section (6) of Section 149 of the Act.
  • In case of the appointment of a director or resignation of a director, the details should be mentioned.

8. Board Meetings
A detailed account of the number of Board Meetings conducted during the year.

9. Directors’ Responsibility Statement
A statement by the Directors’ on their responsibility regarding the preparation of annual statements, applying appropriate accounting standards, and maintaining adequate accounting records.

10. Details in respect of frauds reported by auditors under sub-section (12) of section 143 other than those which are reportable to the Central Government.

11. Conservation of energy, technology absorption and foreign exchange earnings and outgo
Details according to the provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts) Rules, 2014.

12. Subsidiaries, Joint Ventures and Associate Companies
Provide a report on the performance and financial position of each subsidiary, associate, and joint venture included in the consolidated financial statement.

13. Deposits
Detail the amount, if any, which it has accepted exceeding the prescribed limit.

14. Particulars of Loans, Guarantees or Investments
Details as per the provisions of section 186 of the Companies Act, 2013.

15. Corporate Social Responsibility (CSR)
If applicable, a brief outline of the company’s CSR policy, including an overview of projects or programs to be undertaken pursuant to the CSR Policy.

16. Risk Management Policy
Elaborate on steps taken to mitigate the risks encountered by the business.

17. Internal Control Systems
Discussion of the effectiveness of the internal control systems and their adequacy.

18. Material changes and commitments, if any, affecting the financial position of the company

19. Details relating to Depository Participants
Mention any changes in the arrangements with the depository participants, if applicable.

This report intends to present a transparent view of the company’s business operations to our stakeholders. Your Directors acknowledge with gratitude the encouragement and support extended by our valued shareholders, bankers, suppliers, and customers.

The Directors also take this opportunity to express their appreciation for the hard work and dedication shown by the employees of the company and look forward to their continued contribution in the years ahead.

For and on behalf of the Board of Directors,
[Director’s Name]
[Director’s Signature]
[Date] & [Place]

Note: The details provided above are for illustrative purposes only and should be tailored to reflect the actual data and affairs of the specific company for which the report is being prepared. Furthermore, it is important to stay updated with legal requirements as they are subject to change.

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How to Conduct and Document Board Meetings Effectively as per Companies Act 2013 and Secretarial Standards

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Board Meeting as per Companies Act 2013

In this article we will discuss about Board Meeting as per Companies Act 2013, Board meetings are critical for the governance of a company. They are a platform for discussion and decision-making by the company’s board of directors. To ensure these meetings are conducted and documented effectively, one must adhere to the provisions of the Companies Act, 2013, and the Secretarial Standards set by the Institute of Company Secretaries of India (ICSI). Here’s how to do it step by step.

Board Meeting as per Companies Act 2013

Step 1: Convene the Meeting

Issuing Notice:

  • Draft a notice of the meeting according to Secretarial Standard-1 (SS-1).
  • Include the meeting agenda, date, time, and location.
  • Send the notice at least 7 days before the meeting to all directors, by hand, post, or electronic means.

Agenda:

  • The agenda should be clear and comprehensive. Every item for discussion should be stated, including items specifically required by law.

Additional Documentation:

  • Provide any necessary notes or supporting documents to the directors along with the notice.

Step 2: Ensure Quorum of the Board Meeting as per Companies Act 2013

Quorum Requirements:

  • Quorum should be present throughout the meeting. As per the Companies Act 2013, the minimum quorum is 1/3rd of the total strength of the board or 2 directors, whichever is higher.

Leave of Absence:

  • If a director cannot attend, they should notify in advance, and the board may grant a leave of absence if deemed fit.

Step 3: Conducting the Board Meeting as per Companies Act 2013

Chairing the Meeting:

  • The Chairperson, as per the Articles of Association, presides over the meeting.
  • In absence of the Chairperson, the directors present may elect one amongst themselves to chair the meeting.

Discussion:

  • Follow the agenda strictly for discussions.
  • Encourage open discussion and note any dissenting opinions.

Voting:

  • Decisions are generally taken by a majority of votes. Each director has one vote. In case of a tie, the Chairperson has a casting vote.

Step 4: Documenting the Meeting (Minutes) as per companies Act 2013

Recording Minutes:

  • As per Secretarial Standard-1 (SS-1), minutes should contain a fair and correct summary of the proceedings of the meeting.
  • They should be entered in the minutes book within 30 days of the meeting.

Contents of Minutes:

  • Include details like the date, time, place of the meeting, list of attendees, issues discussed, decisions taken, and the final resolutions passed.

Signing of Minutes:

  • The minutes should be signed by the Chairperson of the meeting or the Chairperson of the next meeting.
  • Once signed, the minutes are conclusive evidence of the proceedings.

Distribution:

  • Copies of the signed minutes should be circulated to all directors within 15 days after these are signed.

Step 5: Compliance and Filing

Filing Resolutions with Registrar:

  • Certain resolutions need to be filed with the Registrar of Companies within 30 days of the meeting.
  • File using the prescribed forms and ensure that all statutory registers are updated accordingly.

Maintain Statutory Records:

  • Safeguard the minutes and ensure they are accessible for inspections as required by law.

Step 6: Disclosure and Dissemination

Disclosure to Shareholders:

  • Share relevant excerpts of the minutes with shareholders if required by law or demanded by shareholders’ agreements.

Website Publication:

  • If applicable, publish the proceedings of the meeting on the company’s website as per the regulatory requirements.

By following these six steps, you can ensure that your company’s board meetings are not only effectively conducted but also meticulously documented in compliance with the Companies Act, 2013, and the Secretarial Standards issued by the ICSI.

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Convertible Notes: A Deep Dive into a Popular Startup Funding Instrument

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Convertible notes are a form of short-term debt that converts into equity, typically associated with the financing of early-stage startups. In this deep dive, we will explore the nuances of this popular funding instrument, guiding you through its benefits, risks, and overall mechanics.

Understanding Convertible Notes

What Are Convertible Notes?

A convertible note is a type of financing instrument that startups often use in their seed rounds. It starts as a loan and then converts into shares of preferred stock during a future financing round, usually at a discount.

Why Use Convertible Notes?

Convertible notes are quick and easier to structure than equity rounds. They defer the valuation negotiation until a later stage when the company has grown and valuation is clearer.

How Do Convertible Notes Work?

Step 1: Issuance

The startup issues a convertible note to an investor in exchange for capital. The note outlines the terms of the agreement, including interest rate, maturity date, discount rate, and valuation cap.

Step 2: Accruing Interest

Unlike traditional loans, the interest on a convertible note typically doesn’t get paid out in cash. Instead, it accrues and converts into equity along with the principal amount at the next funding round.

Step 3: Conversion Triggers

Conversion triggers are predefined events that prompt the conversion of debt to equity. The most common trigger is a subsequent equity financing round.

Step 4: Conversion Mechanics

Upon a trigger event, the note will convert into equity. The discount rate applies to give the note holders a lower price per share than new investors.

Step 5: Conversion at Maturity

If the note reaches maturity without a conversion event, startups might repay the debt, renegotiate the note, or convert the debt into equity at a predefined ratio.

Key Terms of Convertible Notes

  • Valuation Cap: A maximum valuation at which the note can convert into equity to protect investors from dilution.
  • Discount Rate: A percentage reduction from the per-share price of the next investment round.
  • Interest Rate: The rate at which the loan accrues interest until conversion.
  • Maturity Date: The due date for the loan to be repaid or converted if no equity financing has occurred.
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Advantages and Disadvantages

Advantages

  • Provides flexibility for the startup.
  • Simplifies the fundraising process.
  • Incentivizes early investors with a lower price.

Disadvantages

  • Can be costly for founders in the case of high valuation caps.
  • Could lead to ownership and control dilution.
  • Complexities and legal risks if not structured properly.

Best Practices for Startups

  • Establish favorable terms to both parties.
  • Set a reasonable valuation cap and interest rate.
  • Prepare for different scenarios at the maturity date.
  • Engage with knowledgeable legal advisors.

Conclusion

Convertible notes offer a vital lifeline for startups looking to finance their growth without immediate valuation. By understanding how convertible notes work and their associated terms and conditions, founders and investors can facilitate a smoother and more efficient investment process.

Remember, the key to navigating convertible notes is a clear understanding of the instrument, sound legal advice, and well-negotiated terms that are fair to all parties involved.

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How to Declare and Pay Dividends in Accordance with Companies Act 2013

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In this blog post we will discuss on process for declaration of Dividend and payment of Dividend in Accordance with Companies Act, 2013, Declaring and paying dividends is a significant aspect of a company’s interaction with its shareholders. In India, the procedure of dividend declaration and payment is governed by the Companies Act, 2013. Below is a step-by-step guide on how to declare and payment dividends for companies operating under this act.

Step 1: Ascertain Profit Availability

Before declaring any dividend, the board of directors must ensure that there are sufficient profits. As per the Companies Act, dividends can be paid out of:

  • Current financial year’s profits
  • Profits from previous financial years after providing for depreciation
  • Money provided by the government for dividend payment in government companies

Ensure that adequate provisions are made for all unpaid dues, depreciation, and contingencies.

Step 2: Hold Board Meeting in Process for Declaration of payment of Dividend

A meeting of the Board of Directors should be convened by giving notice to all the directors of the company as per Section 173 of the Act. In this meeting, the board should:

  • Consider the profit and loss accounts
  • Decide the quantum of dividends
  • Fix the date for Annual General Meeting (AGM)

Record the minutes of the meeting as per Section 118 of the Act.

Step 3: Declare Dividend at AGM

The shareholders of the company must approve the dividend at the Annual General Meeting:

Process for Declaration of Dividend
  • The board’s recommended dividend is put forward to the members in the AGM
  • The declaration is subject to the approval of shareholders
  • The dividend declared should not exceed the amount recommended by the Board

Step 4: Deposit Dividend Amount

Within 5 days of the declaration, the company must deposit the total amount of dividend in a separate bank account as per Section 123 of the Act.

Step 5: Dividend Payment

  • The company should pay or dispatch the dividends within 30 days from the declaration date to the entitled shareholders
  • Electronic modes of payment are preferred
  • Ensure proper documentation and record-keeping of the payment

Step 6: Transfer to Unpaid Dividend Account

In the process for Declaration of Dividend , Any dividend amount that remains unpaid or unclaimed after 30 days of its declaration should be transferred to the ‘Unpaid Dividend Account’ as per Section 124 of the Act. The company should also inform the shareholders about this transfer.

Step 7: Transfer to Investor Education and Protection Fund (IEPF)

If any amount in the ‘Unpaid Dividend Account’ remains unclaimed or unpaid for a period of 7 years, the company shall transfer it to the Investor Education and Protection Fund established under Section 125 of the Companies Act.

Step 8: Maintain Statutory Registers and Records

The company must maintain the prescribed registers and records, including:

  • The register of dividends (Form SH-7)
  • Any documentation related to unpaid dividends

Step 9: Compliance and Reporting

  • File the necessary forms with the Registrar of Companies (RoC) within the prescribed timelines.
  • Ensure compliance with tax laws regarding dividend distribution tax (DDT), as applicable.

Step 10: Address Discrepancies and Grievances

The company should setup a mechanism to address any discrepancies and grievances that shareholders might have regarding dividend payments.

Following these steps in accordance with the Companies Act of 2013 helps ensure legal compliance and good corporate governance practices. It protects the interests of the shareholders and maintains the company’s reputation in the corporate ecosystem.

For additional information for in the process for declaration of dividend and payment compliance, always refer to the latest version of the Companies Act and consult with legal professionals.

Note: As of the writing of this article, the Corporate Laws in India are subject to changes, and as such, the process outlined above might have been updated. Please ensure to check the latest provisions in the Companies Act, 2013, and amendments thereafter.

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Guide to Depreciation on Fixed Assets and Deferred Tax Calculation

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Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life. In this tutorial, we’ll explore how to calculate depreciation under the Companies Act and the Income Tax Act. We’ll also discuss the procedure for calculating deferred tax related to fixed assets.

Depreciation Under Companies Act

The depreciation under the Companies Act is calculated based on the useful life of the assets, as stated in Schedule II of the Companies Act, 2013.

Here’s a simplified step-by-step process:

  1. Identify the Asset: Determine the fixed asset that you will depreciate.
  2. Determine the Cost: Ascertain the historical cost of the asset, including purchase price, import duties, transportation, and installation.
  3. Assess the Useful Life: Refer to Schedule II for the prescribed useful life of the asset class.
  4. Select the Method: Choose a depreciation method (Straight line method or Written down value method) as per your company policy.
  5. Calculate Depreciation: Apply the method to the cost of the asset over its useful life.

Example Table of Rates and Useful Life as per Companies Act:

Asset TypeUseful Life (Years)Depreciation Rate (SLM)Depreciation Rate (WDV)
Buildings303.34%5.28%
Furniture109.50%18.10%
Machinery156.33%13.91%
Computers331.67%63.16%

Note: SLM stands for Straight Line Method, and WDV stands for Written Down Value Method.

Depreciation Under Income Tax Act

The Income Tax Act allows businesses to claim depreciation on their assets to reduce their taxable income using the Written Down Value (WDV) method.

Steps for calculation under Income Tax Act:

  1. Categorize the Asset: Identify the block of asset as per Income Tax rules.
  2. Determine the WDV: Find out the Written Down Value at the beginning of the year.
  3. Apply the Rates: Use the rates provided by the Income Tax Act for different asset types.
  4. Compute Depreciation: Calculate the depreciation for the year based on the applicable rate.

Example Table of Rates as per Income Tax Act:

Asset BlockDepreciation Rate
Building10%
Furniture and Fittings10%
Machinery and Plant (General)15%
Computers and Software40%

Calculating Deferred Tax

Deferred tax is calculated on temporary differences between the book value of assets as per accounting records and their value for tax purposes.

Here’s how to calculate deferred tax:

  1. Identify Temporary Differences: Determine the temporary differences that arise due to differences in depreciation methods or rates as per accounting standards and tax laws.
  2. Calculate Timing Differences: Assess the timing difference for the period by subtracting the tax base of the asset from its carrying amount.
  3. Apply the Tax Rate: Apply the current tax rate to the timing difference to find the deferred tax.
  4. Deferred Tax Asset or Liability: If the carrying amount is greater than the tax base, it results in a deferred tax asset. Conversely, if the tax base is greater, it leads to a deferred tax liability.

Example Calculation:

ParticularsCarrying AmountTax BaseTemporary DifferenceTax RateDeferred Tax
Machinery (as per books)100,00080,00020,00030%6,000

In this example, a deferred tax liability of Rs. 6,000 will be recognized on the balance sheet because the carrying amount is more than the tax base.

Remember that rules and rates are subject to change, and different types of assets may have specific requirements. It’s important to refer to the latest schedules and rates provided under the Companies Act and Income Tax Act respectively, and to consult with a tax professional for accurate depreciation and deferred tax calculations.

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Statutory Audit in Private Limited Company

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A statutory audit is a legally required audit of the financial statements of a company by an external auditor. It is conducted to ensure that the financial statements are in compliance with applicable accounting standards and other legal requirements. The statutory audit of a private limited company is conducted to ensure that the financial statements presented by the company to its shareholders are true, fair and accurate. The statutory audit of a private limited company is conducted by an independent Chartered Accountant (CA) or an audit firm registered with the Institute of Chartered Accountants of India (ICAI). The auditor is required to check and verify the accuracy of the financial statements, the reliability of the accounting records, the internal controls, and compliance with applicable laws and regulations. The auditor is also required to provide an opinion as to whether the financial statements give a true and fair view of the company’s financial position and operations. The statutory audit is conducted in accordance with the applicable accounting standards and other legal requirements. The auditor is required to review the financial statements in detail and provide an independent opinion as to whether the financial statements are prepared in accordance with the applicable accounting standards and other legal requirements. The auditor is also required to review the internal controls and ensure that the company’s financial records are accurate and reliable. The statutory audit report is issued by the auditor to the shareholders at the end of the audit process. The audit report contains the opinion of the auditor as to whether the financial statements give a true and fair view of the company’s financial position and operations. The audit report is important because it provides the shareholders with assurance that the financial statements are accurate and reliable. The statutory audit of a private limited company is an important process that helps to ensure the accuracy and reliability of the financial statements. It is also important for shareholders to receive assurance that the financial statements are in compliance with applicable accounting standards and other legal requirements.

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Paid up Capital and Turnover Criteria Revised for Small Companies

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The government has revised the Paid up Capital and Turnover Criteria Revised for Small Companies to Four crore as paid up capital and 40 crore as turnover.

Small Companies under Companies act enjoy less compliance burden as compared to normal Companies.

The major benefit are available for Small Company

  • No need to prepare Cash Flow Statement
  • No Annual Return Signing from Company Secretary
  • No Certification on E forms by Professionals
  • Less Disclosure in Director Report
  • Abridged Annual Return in form MGT7A
  • No internal Financial Control reporting in Auditor Report by Auditor
  • Holding of Two Board Meetings etc

Please note that following Companies are not included in the definition of Small Company

  • Public Company
  • Holding company or a subsidiary company
  • Section 8 Company
  • Company or body corporate governed by special act (LIC) (SBI)

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National Company Law Tribunal (Procedure for reduction of share capital of Company) Rules, 2016

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MINISTRY OF CORPORATE AFFAIRS
NOTIFICATION
New Delhi, the 15th December, 2016
G.S.R. 1147(E).-In exercise of the powers conferred by sub-section (1) and (2) of section 469 read with section 66 of the Companies Act, 2013 (18 of 2013) the Central Government hereby makes the following rules namely:-

1. Short title and Commencement.-

(1) These rules may be called the National Company Law Tribunal (Procedure for reduction of share capital of Company) Rules, 2016.


(2) They shall come into force on the date of their publication in the Official Gazette.


(3) The words and expressions used in these rules but not defined and defined in the Companies Act, 2013 (hereinafter referred to as the Act) or in the Companies (Specification of Definitions Details) Rules, 2014 or the National Company Law Tribunal Rules, 2016 shall have the meanings respectively assigned to them in the Act or the said rules.




2. Form of application or petition for Reduction of share capital under section 66.-

(1) An application to the Tribunal to confirm a reduction of share capital of a company shall be in Form No. RSC-1 and fee shall be, as prescribed in the Schedule of fee to these rules.


(2) An application to confirm a reduction of share capital of a company shall be accompanied with ─
(a) the list of creditors duly certified by the Managing Director, or in his absence, by two directors, as true and correct, which is made as on a date not earlier than fifteen days prior to the date of filing of an application showing the details of the creditors of the company, class-wise, indicating their names, addresses and amounts owed to them;
(b) a certificate from the auditor of the company to the effect that the list of creditors referred to in clause (a) is correct as per the records of the company verified by the auditor;
(c) a certificate by the auditor and declaration by a director of the company that the company is not, as on the date of filing of the application, in arrears in the repayment of the deposits or the interest thereon; and
(d) a certificate by the company’s auditor to the effect that the accounting treatment proposed by the company for the reduction of share capital is in conformity with the accounting standards specified in section 133 or any other provisions of Act.


(3) Copies of the list of creditors shall be kept at the registered office of the company and any person desirous of inspecting the same may, at any time during the ordinary hours of business, inspect and take extracts from the same on payment of the sum of rupees fifty for inspection and for taking extracts on payment of the sum of rupees ten per page to the company.



3. Issue of notice and directions by the National Company Law Tribunal.─

(1) The Tribunal shall, within fifteen days of submission of the application under rule 2, give notice, or direct that notice be given to ─
(i) the Central Government, Registrar of Companies, in all cases, in Form No. RSC-2;
(ii) the Securities and Exchange Board of India, in the case of listed companies in Form No. RSC-2;
(iii) the creditors of the company, in all cases in Form No. RSC-3; seeking their representations and objections, if any.


(2) The notice under clause (iii) of sub-rule (1) shall be sent, within seven days of the direction given under that sub-rule or such other period as may be directed by the Tribunal, to each creditor whose name is entered in the list of creditors submitted by the company about the presentation of the application and of the said list, stating the amount of the proposed reduction of share capital and the amount or estimated value of the debt or the contingent debt or claim or both for which such creditor’s name is entered in the said list, and the time within which the creditor may send his representations and objections.


(3) The Tribunal shall along with directions under sub-rule (1) give directions for the notice to be published, in Form No. RSC-4 within seven days from the date on which the directions are given, in English language in a leading English newspaper and in a leading vernacular language newspaper, both having wide circulation in the State in which the registered office of the company is situated, or such newspapers as may be directed by the Tribunal and for uploading on the website of the company (if any) seeking objections from the creditors and intimating about the date of hearing.


(4) The notice under sub-rule (3) shall state the amount of the proposed reduction of share capital, and the places, where the aforesaid list of creditors may be inspected, and the time as fixed by the Tribunal within which creditors of the company may send their objections:
Provided that the objections, if any, shall be filed in the Tribunal within three months from the date of publication of the notice with a copy served on the company.


(5) The company or the person who was directed to issue notices and the publication in the newspaper under this rule shall, as soon as may be, but not later than seven days from the date of issue of such notices, file an affidavit in Form No. RSC- 5 confirming the despatch and publication of the notice.


(6) Where the Tribunal is satisfied that the debt or claim of every creditor has been discharged or determined or has been secured or his consent is obtained, it may dispense with the requirement of giving of notice to creditors or publication of notice under this rule or both.



4. Representation by Central Government, Registrar etc. under sub-section (2) of section 66.-

If the authorities or the creditors of the company referred to in clause (i), clause (ii) and clause (iii) of sub-rule (1) of rule 3 desire to make any representation under sub-section (2) of section 66, the same shall be sent to the Tribunal within a period of three months from the date of receipt of notice and copy of such representation shall simultaneously be sent to the company and in case no representation has been received within the said period by the Tribunal it shall be presumed that they have no objection to the reduction.



5. Procedure with regard to representations and objections received.-

(1) The company shall submit to the Tribunal, within seven days of expiry of period upto which representations or objections were sought, the representations or objections so received along with the responses of the company thereto.


(2) The Tribunal may give such directions as it may think fit with respect to holding of any enquiry or adjudication of claims or for hearing the objection or otherwise.


(3) At the hearing of the application, the Tribunal may, if it thinks fit, give such directions as may deem proper with reference to securing the debts or claims of creditors who do not consent to the proposed reduction, and the further hearing of the petition may be adjourned to enable the company to comply with such directions.



6. Order on application and Minute thereof.-

(1) Where the Tribunal makes an order confirming a reduction, the order confirming the reduction and approving the minute may include such directions or terms and conditions as the Tribunal deems fit .


(2) The order confirming the reduction of share capital and approving the minute shall be in Form No. RSC – 6 on such terms and conditions as may be deemed fit.


(3) The Certificate issued by the Registrar under sub-section (5) of section 66 shall be in Form No. RSC -7.



[F. No. 1/30/2013/CL. V]
AMARDEEP SINGH BHATIA, Jt. Secy.

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What are the Powers of Board of Directors of Company

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Board of Directors of the Company plays a main important role in functioning operation of the company, Section 179 of Companies Act 2013 provides powers of Board of Directors of Company

Powers of Board Of Directors

Following are the Powers of Board of Directors


(1) The Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do:
Provided that in exercising such power or doing such act or thing, the Board shall be subject to the provisions contained in that behalf in this Act, or in the memorandum or articles, or in any regulations not inconsistent therewith and duly made thereunder, including regulations made by the company in general meeting:
Provided further that the Board shall not exercise any power or do any act or thing which is directed or required, whether under this Act or by the memorandum or articles of the company or otherwise, to be exercised or done by the company in general meeting.


(2) No regulation made by the company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made.


(3) The Board of Directors of a company shall exercise the following powers on behalf of the company by means of resolutions passed at meetings of the Board, namely:-
(a) to make calls on shareholders in respect of money unpaid on their shares;
(b) to authorise buy-back of securities under section 68;
(c) to issue securities, including debentures, whether in or outside India;
(d) to borrow monies;
(e) to invest the funds of the company;
(f) to grant loans or give guarantee or provide security in respect of loans;
(g) to approve financial statement and the Board’s report;
(h) to diversify the business of the company;
(i) to approve amalgamation, merger or reconstruction;
(j) to take over a company or acquire a controlling or substantial stake in another company;
(k) any other matter which may be prescribed:
Provided that the Board may, by a resolution passed at a meeting, delegate to any committee of directors, the managing director, the manager or any other principal officer of the company or in the case of a branch office of the company, the principal officer of the branch office, the powers specified in clauses (d) to (f) on such conditions as it may specify:
Provided further that the acceptance by a banking company in the ordinary course of its business of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise, or the placing of monies on deposit by a banking company with another banking company on such conditions as the Board may prescribe , shall not be deemed to be a borrowing of monies or, as the case may be, a making of loans by a banking company within the meaning of this section.
Explanation I.-Nothing in clause (d) shall apply to borrowings by a banking company from other banking companies or from the Reserve Bank of India, the State Bank of India or any other banks established by or under any Act.
Explanation II.-In respect of dealings between a company and its bankers, the exercise by the company of the power specified in clause (d) shall mean the arrangement made by the company with its bankers for the borrowing of money by way of overdraft or cash credit or otherwise and not the actual day-to-day operation on overdraft, cash credit or other accounts by means of which the arrangement so made is actually availed of.


(4) Nothing in this section shall be deemed to affect the right of the company in general meeting to impose restrictions and conditions on the exercise by the Board of any of the powers specified in this section.

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Appointment of Resident Director in India

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Section 149 (3) of the Companies Act, 2013 has provided for the residence of a director in India (Resident Director in India) as a compulsory i.e. every company shall have at least one director who has stayed in India for a total period of not less than 182 days in the previous calendar year.

So if you are Incorporating a new company that has all the Directors who is not Indian Residents, you need to hire one Indian Resident Director.

Resident Director in India

Duties and Responsibilities of Resident Director in India

  • Resident Director will be fully responsible as Normal Director of the Company,
  • Resident Director will not be involved in operational control of the company.
  • Resident Director will be appointment to fulfill the statutory requirements.
  • Directorship will be covered under the officers and liability insurance.
  • Resident Director will participate in Board Meetings of the Company, wherever required
  • Circular or other Resolutions will be approved or disapproved as par Individual Understanding.
  • Resident Director will be from our team only.