India Day Series Deep Dive Into The Companies Act, 2013
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May 2014 India Day Series Deep Dive Into The Companies Act, 2013
Webinar Schedule:
10.00-10.05 Michael Guralnick, Global Sales Head, Treasury & Trade Slide 2
Solutions: Opening Remarks
10.05-10.25 Sai Venkateshwaran, Partner & Head Accounting Advisory Slide 3-14
Services, KPMG;
Nirav Patel, Director Accounting Advisory Services, KPMG:
Changes in Companies Act and Impact on Corporates
10.25-10.35 Ravikumar R, CFO, IBM India: Challenges of Doing Business in Slide 15
India
10.35-10.40 Divyesh Dalal, India Sales Head of Treasury & Trade Solutions: Slide 16
Closing Remarks
Opening Remarks
10.00-10.05 A.M. (NY Time)
Speaker
Michael Guralnick, Global Sales Head, Corporate & Public Sector, Treasury &
Trade Solutions, Citi
Mr. Guralnick’s principal activity is to lead and direct TTS’ global sales strategies for the bank’s
Corporate & Public Sector clients including: new sales origination, cross-sell, and ensuring client
satisfaction. Prior to his current role, Mr. Guralnick held senior management positions with Citi in Asia
Pacific, EMEA and North America. Mr. Guralnick is a member of the UK Association of Corporate
Treasurers, and the British American Business Inc and was named in Global Finance magazine’s
annual list of Who’s Who in Treasury & Cash Management in 2012 . Mr. Guralnick earned a Master’s
of Science in Foreign Service (MSFS) degree, from Georgetown University’s School of Foreign
Service, in Washington D.C., where he graduated with Academic Honors.
2
Changes in Companies Act and Impact
on Corporates
10.05-10.30 A.M. (NY Time)
Speaker
Sai Venkateshwaran, Partner & Head Accounting Advisory Services, KPMG
Sai leads KPMG’s Companies Act initiatives and regularly interacts with the MCA on matters
relating to the new corporate law. Sai has over 17 years of experience in public accounting and has
specialized in financial reporting advisory services since 2004. He is a member of the Institute of
Chartered Accountants of India. During the course of his career, Sai has advised a number of
Indian and multinational companies on various engagements involving assurance services,
accounting advisory services, forensic accounting services and due diligence reviews.
3
Roll Out Roadmap
Draft Rules released in Final Rules released for
phases in 2013 for most chapters. Several
public comments changes from the draft
rules.
Companies Act Draft Rules Vast majority NCLT, NFRA
receives released for Final Rules related
of Act
Presidential public released provisions to
assent comments effective 1
April 2014 be notified
Consent of both Houses 98 Sections made effective 12
Key sections and rules
received- Lok Sabha September 2013
still to be notified include
(December 2012 ; 184 sections made effective 1 those related to NCLT,
Rajya Sabha (Aug 2013) April 2014 NFRA, Registered
Valuers, IEPF/ Unpaid
Presidential Assent- Sep dividend
2013
As per latest MCA circular dated 04.04.14, provisions of the Companies Act, 2013 with regard to maintenance of books of
accounts and preparation/adoption/filing of financial statements, auditors report, Board's report and attachments to such
statements and reports- are effective from 1st April, 2014.
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated wi th KPMG International 4
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Companies Act 2013: Capitalising on the wisdom of 57 years
Focus on 1. Change in 'Reporting Framework'
2. Higher 'Auditor Accountability‘
3. Increased Responsibility' ‘of Board, Independent
Directors and Audit Committee
4. Push on 'Inclusive Agenda' (CSR)
5. Emphasis on 'Investor Protection‘
critical themes 6. ‘Ease in Restructuring’ of companies
Sweeping changes that raise the bar on the Governance Framework
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated wi th KPMG International 5
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Change in ‘Reporting Framework' Greater flexibility to depreciate assets over their ‘useful lives’ instead of standard minimum rates Change in definition of subsidiaries & associates – total share capital v. voting equity share capital; Total share capital also includes convertible preference capital Inter-corporate loans – requirements have undergone a change Directors report to also include “Internal Financial controls with respect to Financial statements” for listed and certain unlisted public companies-confusion for listed companies. Treatment of subsidiaries of a foreign company © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated wi th KPMG International 6 Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Higher ‘Auditor Accountability' Mandatory auditor firm rotation – ten years ; applicable retrospectively Prohibition on certain non-audit services – similar to Sarbanes- Oxley Auditor to report on internal controls on financial transactions, and financial transactions that have a material adverse effect Reporting of all frauds to the Central Government within 60 days; including immaterial frauds © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated wi th KPMG International 7 Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Change in requirements for Director appointments
Limits on number of Directors
15 >15
12 New Act Special Resolution
≥1
Director Minimum of Nomination
Resident 2 Audit and Women
Mandatory Appointment
in India Independent Committee remuneration Director
for 182 Directors committee
days
Listed *
Unlisted (All) - - - -
Public Companies with Share Capital ≥ INR
-
10cr (INR 100cr for Women Directors)
Public Companies with Turnover ≥ INR 100cr
-
(INR 300cr for Women Directors)
Public Companies with Loan/Debentures/
- -
Deposits ≥ INR 50cr
*1/3rd Directors to be independent in case of listed companies
Independent Directors also required Independent Directors liable to Whistle blower mechanism – all
for certain unlisted companies mandatory rotation- prospective listed and certain unlisted
application companies
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated wi th KPMG International 8
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.‘Increased Responsibility' of Board, Independent Directors and
Audit Committee
Independent No pecuniary relationships and stock options
Nominees of financial investors are not independent
Directors
Appointment and monitoring of auditors
Audit Committee Approval of all related party transactions
Monitoring of inter-company loans and investments
Responsibilities
Evaluation of internal controls over financial transactions
Compliance with all laws and regulations
Board Disclosure of related party transactions
Monitoring of inter-company loans and investments
Responsibilities
Evaluation of internal controls over financial transactions
Penalties for non-compliance
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated wi th KPMG International 9
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.Push on ‘Inclusive Agenda' (CSR)
CSR contribution - 2 percent of average net profit before tax for
last three financial years
Board to provide oversight on CSR activities and to appoint a
three-member CSR Committee
Spend or disclose approach – for now
Group-wide CSR and allocation approach
No clarity on tax deductability of CSR contribution
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated wi th KPMG International 10
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.Related Party: Section 2(76)
Restricted to company and
Distinct from the 2 its holding company only
'Related Party‘ Entity influencing in non-
definition per AS 18 Management Level professional capacity
1
Key Management
Directors Relative
Company Personnel
Level
Holding Fellow
Subsidiary Several/Joint Direct/Indirect Influence
Owns/'controls' Partner Firm
>20% share
capital
Director Private Company
Associate, Joint
Subsidiary Director or owner
Venture Company Public Company
>2% share capital
3
Relative Individual
Children and
Parents HUF Siblings Spouse
spouse
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated wi th KPMG International 11
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.Emphasis on ‘Investor Protection'
Transactions at ‘arms length’ in the ‘ordinary course of business’
– Audit committee approval will suffice
Transactions that do not meet the ‘arms length’ and ‘ordinary
course’ criteria – Board and shareholder approval required
Vigil mechanism, Whistleblower policy mandatorily required
Restriction on loans and guarantees to certain companies over
which the Directors have influence
Class action suits against the company, Directors and auditors
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated wi th KPMG International 12
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.Loans to directors and interested companies
No loans or guarantees to directors or ‘person in whom the
director is interested’ other than MD (in non-financial services
company) subject to conditions
Person in whom director is interested includes any body
corporate accustomed to act in accordance with the
directions of directors of lending company
Guarantee given or security provided by a holding company to
a bank or financial institution for the purpose of loan taken by
any subsidiary also exempt
Investment in a wholly owned subsidiary, loan / guarantee/
security provided to its wholly owned subsidiary company or a
JV, exempted from calculating the limits prescribed under
section 186
Financial penalty or imprisonment or both contained in the Act
for non-compliance
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated wi th KPMG International 13
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.‘Ease in Restructuring’ of companies
Rationalising multi-layered structures
Changes in the merger approval process
Simplifying procedures for restructuring- provision for minority
buyouts
Cross-border mergers, fast-track mergers, and capital reduction
Largely unoperationalised currently ; expected to be in force
once NCLT constituted
Buyback of shares-made more stringent
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated wi th KPMG International 14
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.Challenges of doing Business in India
10.30-10.40 A.M. (NY Time)
Speaker
R Ravikumar, CFO, IBM India
Ravi has been with IBM for 14 years, as the CFO of IBM India’s Domestic Business and the CFO of
IBMs Systems & Technology business for Asia Pacific. He has worked at IBM’s Asia Pacific
headquarters for over 5 years. Ravi is a Chartered Accountant with 25 years of experience in different
functions of finance. Currently, he is responsible the overall financial management of the Domestic
Business of IBM India, as well as Global Delivery. The portfolio includes Enterprise Risk Management,
Cash, Strategy execution support, Real Estate Management, Procurement function, Regulatory matters,
Audit & Controls and support to many Global Missions based in India that deliver service to IBM Internal
clients.
15Closing Remarks
10.40-10.45 A.M. (NY Time)
Speaker
Divyesh Dalal, Head of India Sales, Treasury and Trade Solutions, Citi India
Divyesh has been with Citi for over twelve years and has worked in diverse areas across Risk,
Finance and TTS. Prior to joining Citi, he worked with KPMG- Assurance Based Advisory Services
from 1997 to 2000. In Citi Divyesh has held roles including PRR Manager in the retail bank,
Receivables product manager, Receivables, Payables and Network Head in TTS Product, and the
TTS Regional Corporate Sales head, for West and East India. In his present role as the India Sales
head, Divyesh manages a portfolio of 1200+ clients in seven dispersed markets and leads various
strategic initiatives across Digital Marketplace, Pooling Solutions, Integrated Cash & Trade solutions
and Structured trade solutions for Citi, many of them being market firsts. Divyesh holds an MBA from
Indian School of Business, Hyderabad and is a Chartered Accountant
16Contact Us
Thanks for your participation, in case you have any
questions or clarifications about today’s session, please
write to us at saurabh.r.gupta@citi.com
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