ETHICS. COMPLIANCE. GOVERNANCE.

“PROFICIENCY TEST”
MOCK TO REAL TEST

SUNDHARESAN JAYAMOORTHI,
FCS, AASM, LLB, BGL, MIOD, CCEP- I (USA)
Thought Leader, Board Strategist & Compliance Guru

1
MEANING OF PROFICIENCY - 803
2. In the Companies (Accounts) Rules, 2014, in rule 8, in sub-rule (5),
after clause (iii), the following clause shall be inserted namely:—

“(iiia) a statement regarding opinion of the Board with regard to integrity,

expertise and experience (including the proficiency) of the independent
directors appointed during the year”.

Explanation.—For the purposes of this clause, the expression

“proficiency” means the proficiency of the independent director as
ascertained from the online proficiency self-assessment test conducted
by the institute notified under sub-section (1) of section 150.
PROCESS FOR REGISTRATION ON
IICA WEBSITE
1. Go to www.mca.gov.in (MCA SITE) and LOG IN through your username,
password and captcha code.

2. Go to 4th Column of MCA SERVICES and click on INDIVIDUAL

REGISTRATION under ID DATABANK SERVICES,

3. Validate your DIN/PAN/PASSPORT NUMBER Details,

4. Click on SEND OTP and ENTER OTP for mobile number,

5. A PASSWORD will be generated and sent on mobile number. Go to iica.nic.in

website and log in with your E-mail ID, password and captcha code.

6. FILL all the DETAILS on Personal Tab, Educational Tab, Professional Tab,
Positions Tab and Declarations Tab

7. REVIEW the details and SUBMIT it,

8. PAY THE PRESCRIBED FEES for a YEAR (INR 5,000+ 18%GST=INR
5,900)/ 5YEARS (INR 15,000+18%GST=INR 17,700/ LIFETIME (INR
25,000+18%GST=INR 29,500).

9. DOWNLOAD REGISTRATION CERTIFICATE and INVOICE for future reference.

ARE YOU READY TO TAKE THE TEST?

6
WARM UP QUESTIONS - 1

What is this test called? –

A. Proficiency

B. Efficiency Test

7
WARM UP QUESTIONS - 2

Which law requires you to pass the test?

A. Corporate Affairs Act, 2019

B. Companies Act, 2013

8
WARM UP QUESTIONS - 3

Who are exempt?

A. Persons with 10 years experience

B. Persons with 5 years experience

C. Persons with 3 years experience

D. Persons with 1 year experience

9
WARM UP QUESTIONS - 4

Which institution is conducting the Proficiency test?

A. MCA

B. IICA

C. IOD

D. DCA

10
WARM UP QUESTIONS - 5

Where is the test conducted?

A. Online

B. Noida

C. Delhi

11
WARM UP QUESTIONS - 6

Why is this test conducted?

A. To identify your Proficiency

B. To test your Company law skills

C. To give you a Qualification

12
WARM UP QUESTIONS - 7

How many attempts are available to pass?

A. Unlimited

B. Only 3 attempts

C. Maximum of 5 attempts

13
WARM UP QUESTIONS - 8

What is the pass percentage?

A. 60%

B. 50%

C. 70%

14
WARM ANSWERS
1. What is this test called? – Proficiency Test

2. Which law requires you to pass the test? – Companies Act, 2013

3. Who are exempt? – Persons with 3 years experience

4. Which institution is conducting the test? - IICA

5. Where is the test conducted? - Online

6. Why is this test conducted? – To identify your Proficiency

7. How many attempts are available to pass? - unlimited

8. What is the pass percentage? – 50%

15
ON BOARDING YOU

PLEASE FASTEN YOUR SEAT BELTS

16
THE EASY QUESTION

17
Independent Director means a director other than ……..

a) Managing Director

b) Whole Time Director

c) Nominee Director

d) All of the above

d) All the above
THE EASY BUT TRICKY ONE

20
DIN represents:

a) Director Indemnification Number

b) Director Identification Number

c) Director Identity Number

a) Directors Identification Number

21
b) Director Identification Number

22
MAYBE A TRAP

23
An independent Director is not entitled to:

a) Stock Options

b) Commission from profits

c) Sitting fees

d) Consulting fees

24
a) Stock options

25
CONFUSING

26
Every Company is required to disclose the remuneration policy and
the evaluation criteria in – Test Q

a) Boards' report

b) Quarterly report

c) Annual Report

d) Corporate Governance report

27
c) Annual Report

28
Every Company is required to disclose the remuneration policy in

a) Boards' report

b) Quarterly report

c) Annual Report

d) Corporate Governance report

29
a) Boards Report

30
Every Company is required to disclose the evaluation criteria in

a) Boards' report

b) Quarterly report

c) Annual Report

d) Corporate Governance report

31
d) Corporate Governance Report

32
TOUGH

33
A. Ltd. purchased lands in the name of the Director who held more than 75% of
all the shares of the Company. The Company virtually belongs to the Directors
and so the property is held in the name of the Director but bought and paid for
by the Company. One member objected to this. What is the legal mandate as
per the Companies Act 2013 on this issue? - Test Q

a) The Company can hold land property in the name of any other person without
restriction

b) The Company can hold all securities in the name of any personnel but not
land property

c) The Company can neither hold land properties nor securities in any other
personnel's names

d) The Company can hold all forms of properties in the names of its Directors
34
c) The Company can neither hold land properties nor securities in any other
personnel's names

35
ABOVE BOARD

TAKING OFF

36
ENTER - THINGS TO START WITH
• MCA –
• DIN –
• CIN
• ROC -
• DSC –
• LODR -
• SEBI -
• IICA -
• ICSI -
• ICAI –
• IBC –
• NCLT –
• NCLAT –
• SAT -
• ED –
• RBI -

37
 ENTER - THINGS TO START WITH
• MCA – Ministry of Corporate Affairs
• DIN – Director Identification Number
• CIN – Corporate Identity number
• ROC – Registrar of Companies
• DSC – Digital Signature Certificate
• LODR – Listing Obligations & Disclosure Regulation
• SEBI – Securities Exchange Board of India
• IICA – Indian Institute of Corporate Affairs
• ICSI – Institute of Company Secretaries
• ICAI – institute of Chartered Accountants of India
• IBC – Insolvency & Bankruptcy Act
• NCLT – National Company Law Tribunal
• NCLAT – National Company Law Appellate Tribunal
• SAT – Securities Appellate tribunal
• ED – Enforcement Directorate
• RBI – Reserve Bank of India

38
 Definitions

1. Director

Director means the director appointed to the Board of Directors of the Company

2. Board of Directors

• Collective body of the directors of a company is known as Board of Directors.

• Board is the apex body constituted by shareholders for overseeing the company’s
overall functioning.

• Board has to act collectively and not individually, unless delegated or assigned.

39
The Indian Institute of Corporate Affairs is an institute which is recognised
under:

a) The Companies Act, 2013

b) The Companies Act, 1956

c) The Indian Institute of Corporate Affairs Act, 2019

d) Department of Corporate Affairs

40
a) The Companies Act, 2013

41
Which of the following can be appointed as a Director?

A. Individual
B. Association
C. Body Corporate

a) A and B
b) Only A
c) Only C
d) A,B and C

42
B) only A

43
• DSC – DIGITAL SIGNATURE CERTIFICATE

44
Is a Digital Signature Certificate mandatory for procurement of
Director Identification Number?

a) No

b) Yes

c) Only for such Directors who are authorised to sign e-Forms

d) For all the Directors other than Independent Directors

45
b) Yes

46
Can a Director possess two DSCs?

a) No

b) Yes

c) Yes, upon payment of INR 10,000

d) Yes, if the Directors are appointed in multiple Companies

47
b) Yes

48
Under which law is DSC issued?

a) Companies Act, 2013

b) Information Technology Act, 2000

c) Data Protection Act, 2013

d) Digital Signature & Control Act, 2006

49
b) Information Technology Act, 2000

50
What is the immediate action you need to take if your DSC is stolen?

a) Procure another DSC

a) File a FIR with Police

c) Obtain a DUPLICATE

d) Inform the Board members of the loss

51
b) File a FIR with Police

52
• DIN – DIRECTOR IDENTIFICATION NUMBER

53
Which of the following is a mandatory requirement for a Director to be
appointed as such in a Company?

a) Director Identification Number

b) Digital Signature Certificate

c) 2% shares in the Company

d) All of the above

54
a) Director Identification Number

55
What is the form for application of a Director Identification Number?

a) E-Form DIR - 3

b) E-Form DIR – 3 KYC

c) E-Form DIR - 12

d) E-Form AOC - 4

56
a) E-Form DIR - 3

57
Can a Director possess two DINs?

a) No

b) Yes

c) Yes, upon payment of INR 10,000

d) Yes, if the Directors are appointed in 3 Companies

58
a) No

59
Where a Director possesses two DINs which one should be
surrendered?

a) The first DIN

b) Both the DIN to be surrendered and procure a new DIN

c) Neither DINs

d) The latest DIN

60
d) The latest DIN

61
What is the validity of an allotted DIN?

a) Lifetime

a) 15 years

c) 20 years

d) Until qualified otherwise

62
a) Lifetime

63
The Central Government may cancel or deactivate the DIN under
following situation:

a) the DIN is found to be duplicated

b) it was obtained in a wrongful manner or by fraudulent means

c) in case of death of the concerned individual

d) All the above

64
d) All the above

65
An attorney can review Companies' workman's compensation
liability, indemnification and conflict of interest policies and suggest
whether one should join the Board or not – Test Q

a) Yes, it is a right of the Director before joining the Board

b) No this is prohibited by law

c) No, but if the Company allows then it can be done

d) None of the above

66
a) Yes, it is a right of the Director before joining the Board

67
 QUALIFICATION

vQualification for a director

vDisqualification for a director

vVacation of Office by director

68
• RELAX WITH A QUESTION

69
THE BASIC QUALIFICATION OF A DIRECTOR IS

a) Possess Education

b) Possess DIN

c) Pass Proficiency Test

d) Possess Wealth

70
DISQUALIFICATION – 164 (1)
• (a) he is of unsound mind and stands so declared by a competent court;
(b) he is an undischarged insolvent;
(c) he has applied to be adjudicated as an insolvent and his application is pending;
• (d) he has been convicted by a court of any offence, whether involving moral turpitude or
otherwise, and sentenced in respect thereof to imprisonment for not less than six months
and a period of five years has not elapsed from the date of expiry of the sentence:
• Provided that if a person has been convicted of any offence and sentenced in respect
thereof to imprisonment for a period of seven years or more, he shall not be eligible to be
appointed as a director in any company;
• (e) an order disqualifying him for appointment as a director has been passed by a court or
Tribunal and the order is in force;
• (f) he has not paid any calls in respect of any shares of the company held by him, whether
alone or jointly with others, and six months have elapsed from the last day fixed for the
payment of the call;
• (g) he has been convicted of the offence dealing with related party transactions under
section 188 at any time during the last preceding five years; or
• (h) he has not complied with sub-section (3) of section 152 – Allotment of DIN. 71
DISQUALIFICATION – 164 (2)(a) & (b)

• Any person who is or has been a director of any company (not just public company)
which has

Ø not filed financial statements or annual Returns for 3 continuous financial

years; or

Ø defaulted in re-payment of deposits or interest thereon or debentures or any

dividend declared, and such failure continues for one year or more

• he shall not be eligible to be re-appointed as a director of that company or appointed

in other company for a period of 5 years from the date of such failure.

72
VACATION OF OFFICE - 167
• (a) - disqualification u/s 164
• (b) - absents himself from all board meetings
• (c ) - entering a contract and not disclosing
• (d) - not disclosing his interest – MBP 1
• (e) - disqualified by court order
• (f) - convicted by court moral turpitude
• (g) - he is removed u/s 169
• (h) – ceases to be in employment

73
Mr. Sameer, Director of Dwaraka Transport Limited absents himself from
attending all the Board meeting held during a period of 12 months. What
is the consequence?

a) Disqualification

b) Cannot attend the Board meeting

c) Vacation of office

d) None of the above

74
c) Vacation of office

75
A Director shall vacate his office, if he absents himself from all the
meetings of the Board held during a period of last ___ months

a) 12

b) 15

c) 6

d) 9

76
a) 12

77
 Types of Director

Non-Executive
Executive Director Managing Director
Director

Independent Small Shareholders

Residential Director
Director Director

Woman Director Additional Director Alternate Director

Nominee Director Shadow Director

78
 Woman Director

1. Every Listed Company

2. Public companies with

• Paid-up Share Capital ≥ Rs.100 crore
• Turnover ≥ Rs.300 crore

3. In case of intermittent Vacancy of Woman Director – not later than

immediate next BM or 3 months from the date of such vacancy
(whichever is later)

79
A person cannot hold office as a director, including any alternate
directorship, in more than ____ companies at the same time ?

a) 10

b) 15

c) 20

d) 12

80
c) 20

81
What is the minimum number of Directors in case of a private
Company?

a) 4

b) 2

c) 3

d) 5

82
b) 2

83
Mr. Uday proposed to be a Director of ABC Ltd, he should give
his consent to act a Director in the form

a) DIR-3

b) DIR-6

c) DIR-2

d) DIR-12

84
C) DIR 2

85
Can the maximum number of Directors be increased beyond the
maximum permissible limit?

a) No

b) Yes, By Ordinary Resolution

c) Yes, By Special Resolution

d) Yes, By Unanimous Resolution

86
c) Yes, By Special Resolution

87
The Board of Directors of a unlisted public Company shall have at
least ___ women Directors?

a) One-third of the total number of Directors

b) Half of the total number of Directors

c) One

d) Two

88
c) One

89
A woman director can hold office as a director, including any alternate
directorship, in more than ____ companies at the same time.

a) 10

b) 15

c) 20

d) 20 excluding alternate directorship

90
C) 20

91
Which of the following Directors need not retire by rotation?

a) Nominee Director

b) Independent Director

c) Director by Proportional Representation

d) None of the above

92
d) None of the above

93
A,B,C and D are four persons, the only members of a private
Company. All of them died in an accident. Does the private Company
exist? - Test Q

a) Yes

b) No

c) Can't say

94
a) Yes

95
Are independent Directors liable to retire by rotation? – Test Q

a) Yes

b) No

96
b) No

97
Board Committees

98
 Power of Audit Committee [Cos. Act / SEBI (LODR)]

Ø To call for comments of Auditors, about Internal Control systems, the scope of audit, including the
observations of the auditors, and review of financial statement before their submission to the Board.
Ø To discuss any related issues with the internal and statutory auditors, and mgt. of the co.
Ø To investigate into any matter in relation to the items referred to it by the Board.
Ø To obtain professional advice from external sources.
Ø To have full access to information contained in the records of the company.
Ø To investigate any activity within its terms of reference.
Ø To seek information from any employee
Ø To secure attendance of outsiders with relevant expertise, if it considers necessary

99
 Role of Audit Committee
Ø Recommendation for Appt., Remuneration and terms of Appt. of Auditors

Ø Approval of payment to Statutory Auditors

Ø Reviewing with the mgt., the quarterly fin. Statements, before submission to the board for approval;

Ø Reviewing with the mgt., the statement of uses / application of funds raised through an issue (public issue, rights
issue, preferential issue, etc.),

Ø Reviewing and monitoring the auditor's independence and performance, and effectiveness of audit process;

Ø Approval or any subsequent modification of transactions of the listed entity with related parties;

Ø Ensuring independence of Audit Process

Ø Reviewing, with the management,

§ the Annual Financial Statements &
§ Auditor's Report
before submission to the Board for approval.

100
 Role of Audit Committee

Ø Scrutiny of inter-corporate loans and investments;

Ø Valuation of undertakings or assets of the listed entity, wherever necessary;

Ø Evaluation of internal fin. controls and risk mgt. systems;

Ø Reviewing, with the mgt., performance of statutory and internal auditors, adequacy of the internal control systems;

Ø Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department,
staffing and seniority of the official heading the dept., reporting structure coverage and frequency of internal audit;

Ø Discussion with internal auditors of any significant findings and follow up there on;

Ø Reviewing the findings of any internal investigations by the internal auditors into matters of suspected fraud or
irregularity or a failure of internal control systems of a material nature, and reporting the matter to the board;

101
 Role of Audit Committee
Ø Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-
audit discussion to ascertain any area of concern;

Ø To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders
(in case of non-payment of declared dividends) and creditors;

Ø To review the functioning of the whistle blower mechanism;

Ø Approval of appointment of CFO

Ø Carrying out any other function as is mentioned in the terms of reference, of the audit committee;

Ø Reviewing the utilization of loans and/ or advances from/investment by the holding company in the subsidiary
exceeding rupees 100 crore or 10% of the asset size of the subsidiary, whichever is lower including existing loans /
advances / investments existing as on the date of coming into force of this provision.

102
 Mandatory Review by Audit Committee

The Audit Committee shall mandatorily review the following info:

Ø Mgt. discussion and analysis of fin condition and results of operations;

Ø statement of significant Related Party Transactions, submitted by mgt.;

Ø Mgt. Letters/ Letters of Internal Control weaknesses, issued by the Statutory Auditors;

Ø Internal Audit Reports, relating to internal control weaknesses; and

Ø Appt., removal and terms of remuneration of the Chief Internal Auditor, shall be subject to review by the audit
committee;

Ø Statement of deviations:
§ quarterly statement of deviation(s), including report of monitoring agency, if applicable,
§ annual statement of funds, utilized for purposes other than those stated in the offer document/prospectus/notice
in terms of Regulation 32(7).

103
 Role of Stakeholder Relationship Committee
For Listed Entities:
Ø Resolving the grievances of the security holders including complaints related to transfer/transmission of
shares, non-receipt of annual report, non- receipt of declared dividends, issue of new/duplicate
certificates, general meetings etc.
Ø Review of measures taken for effective exercise of voting rights by shareholders.
Ø Review of adherence to the service standards adopted in respect of various services being rendered by
the Registrar & Share Transfer Agent.
Ø Review of the various measures and initiatives taken for reducing the quantum of unclaimed dividends
and ensuring timely receipt of dividend warrants / annual reports / statutory notices by the shareholders.

Meeting
At least once in a year.

104
 Role of Nomination & Remuneration Committee
Ø Formulation of the criteria for determining qualifications, positive attributes and independence of a Director

Ø Recommend to the Board of Directors a policy relating to the remuneration of the Directors, KMP and other
employees;

Ø Formulation of criteria for evaluation of performance of IDs and the Board of Directors;

Ø Devising a policy on diversity of Board of Directors;

Ø Identifying persons who are qualified to become Directors and who may be appointed in Sr. Mgt. in accordance
with the criteria laid down, and recommend to the board of directors their appt. and removal.

Ø Whether to extend or continue the term of appt. of the ID, on the basis of the report of performance evaluation of
ID.

Ø Recommend to the board, all remuneration, in whatever form, payable to Sr. Mgt.
 Role of Risk Management Committee

Ø The Board of Directors shall define the role and responsibility of the Risk
Management Committee and

Ø may delegate monitoring and reviewing of the risk management plan to the
committee and such other functions as it may deem fit

[such function shall specifically cover Cyber Security].

106
A _______ is a small working group identified by the Board,
consisting of Board members, for the purpose of supporting the
board’s work.

a) Executive Committee

b) Working Committee

c) Board committee

d) Group Committee

107
• c) Board committee

108
FORMS TO NOTE

• DIR 2 - Consent
• DIR 3 – Application for DIN
• DIR 5 – Surrender of DIN
• DIR 6 – Change to DIN
• DIR 8 – I am not disqualified
• DIR 11 – Self filing of Resignation
• DIR 12 – Intimation for change in directorship

109
NUMBERS TO NOTE
• 149 – Appointment of ID
• 150 – Data Bank
• 153 – Application of DIN
• 152 - Appointment of directors - shareholders
• 161 – Appointment or other directors – Board
• 164 - Disqualification
• 167 – Vacation of Office

110
BOARD MEETINGS
• First BM within 30 days of incorporation
• At least 4 meetings every year with not more than 120 days gap
between two consecutive meetings
• Quorum for meeting – one third of total strength or two , whichever is
higher
• Interested directors not to be counted for quorum
• Notice, Agenda, Notes on Agenda, Minutes
• Video –conferencing / audio conferencing
• Circular resolutions
• Compliance with secretarial standards mandatory

111
INGREDIENTS

• Number of Meetings / Gap between meetings / Day, date, place, time

• Notice

• Agenda

• Chairman

• Quorum

• Minutes

• Types of meetings
112
NOTICE

• 173 (3) A meeting of the Board shall be called by giving not less than
seven days’ notice in writing to every director at his address
registered with the company and such notice shall be sent by hand
delivery or by post or by electronic means:
• Provided that a meeting of the Board may be called at shorter notice
to transact urgent business subject to the condition that at least one
independent director, if any, shall be present at the meeting:
• Provided further that in case of absence of independent directors
from such a meeting of the Board, decisions taken at such a meeting
shall be circulated to all the directors and shall be final only on
ratification thereof by at least one independent director, if any.
113
ELECTRONIC MODE

• Para 1.3.4: The Notice shall inform the Directors about the option available
to them to participate through Electronic Mode and provide them all the
necessary information. If a Director intends to participate through
Electronic Mode, he shall give sufficient prior intimation to the Chairman or
the Company Secretary to enable them to make suitable arrangements in
this behalf. The Director may intimate his intention of participation through
Electronic Mode at the beginning of the Calendar Year also, which shall be
valid for such Calendar Year.

114
NOTICE OF BOARD MEETING [SEC 173(3)]

Ø A meeting of the Board shall be called by giving not less than seven days’ notice in writing

to every director at his address registered with the company.

Ø Mode of sending notice [Sec 173(3)]

Such notice shall be sent by

• Hand delivery, or

• Post, or

• Electronic means.

115
 SECRETARIAL STANDARD 1
ØPara 1.3.6 -

ØNotice convening a Meeting shall be given at least seven days before

the date of the Meeting, unless the Articles prescribe a longer period.

116
MEETINGS HELD AT SHORTER NOTICE [PROVISO
TO SEC 173(3)]

ØA meeting of the Board may be called at shorter notice to transact urgent

business subject to the condition that at least one independent director, if any,
shall be present at the meeting.

ØIn case of absence of independent directors from such a meeting of the Board,
decision taken at such meeting shall be circulated to all the directors and shall be
final only on ratification by any one independent director, if any.

117
 TABLE F
• 67. (i) The Board of Directors may meet for the conduct of business,
adjourn and otherwise regulate its meetings, as it thinks fit.

• (ii) A director may, and the manager or secretary on the requisition of a

director shall, at any time, summon a meeting of the Board.

118
 SECRETARIAL STANDARD 1
• 1.1.1 Any Director of a company may, at any time, summon a
Meeting of the Board, and the Company Secretary or where there is
no Company Secretary, any person authorised by the Board in this
behalf, on the requisition of a Director, shall convene a Meeting of the
Board, in consultation with the Chairman or in his absence, the
Managing Director or in his absence, the Whole-time Director, where
there is any, unless otherwise provided in the Articles.

119
AGENDA AS PER SECRETARIAL STANDARD - 1

• Para 1.3.7 - The Agenda, setting out the business to be

transacted at the Meeting, and Notes on Agenda shall be
given to the Directors at least seven days before the
date of the Meeting, unless the Articles prescribe a longer
period.

• Proof of sending Agenda and Notes on Agenda and their

delivery shall be maintained for such period as decided by
the Board which shall not be less than 3 years from the date
of meeting.
120
QUORUM

• 173(2) The participation of directors in a meeting of the Board may be

either in person or through video conferencing or other audio visual
means, as may be prescribed, which are capable of recording and
recognising the participation of the directors and of recording and storing
the proceedings of such meetings along with date and time:

• Provided that the Central Government may, by notification, specify such

matters which shall not be dealt with in a meeting through video
conferencing or other audio visual means.

121
• 174. (1) The quorum for a meeting of the Board of Directors of a company
shall be one- third of its total strength or two directors, whichever is higher,
and the participation of the directors by video conferencing or by other
audio visual means shall also be counted for the purposes of quorum
under this sub-section.

122
What is the minimum number of board meeting that is required in
a year

a) 6

b) 4

c) 8

d) 2

123
b) 4

124
Where can a Board Meeting be held?

a) In India

b) Anywhere in the world

c) In the registered office only

d) In chairperson’s house

125
Where can a Board Meeting can be held?

b) Anywhere in the world

126
For a BM dealing with non-urgent matters notice of the BM shall be
given atleast before :

a) 7 days

b) 14 days

c) 21 days

d) 28 days

127
a) 7 days

128
When Directors participate through Audio Visual means what are its
pre requisites:

a) It should record the Directors’ participation

b) It should record and store the proceedings of the meeting

c) It should recognize the participant Director

d) All of these

129
d) All of these

130
What modes of attendance are available to a Director attending a
BM?

a) In person

b) Video Conference

c) Prescribed Audio Visual means

d) All of these

131
d) All of these

132
What shall be Quorum in case number of Directors is 12?

a) 3

b) 4

c) 9

d) 2

133
b) 4

134
 WHAT IS CSR?

Subset of corporate responsibilities that deals with company’s voluntary/discretionary

relationships with its societal and community stakeholders.

CSR includes, but is not limited to:

(i) Projects or prog relating to activities specified in Schedule VII to the Act; or

(ii) Projects or prog relating to activities undertaken by the board of directors of a company
(Board) in pursuance of recommendations of the CSR Committee of the Board as per
declared CSR Policy of the company, subject to the condition that such policy will cover
subjects enumerated in Schedule VII of the Act.

135
 APPLICABILITY OF CSR

The Act, mandates Corporate Social Responsibility on companies in following categories.

• ʻNet Worthʼ of Rupees Five hundred crore or more;
• ʻTurn Overʼ of Rupees One thousand crore or more or
• ʻNet Profitʼ of Rupees Five crore or more during any financial year,

• To constitute a CSR Committee to recommend a CSR policy and the amount of

expenditure to be incurred on various activities and monitor the implementation of
the policy.

• The Board of such a company has to ensure that it spends, in every financial year, at
least two per cent of the average net profits of the company made during the three
immediately preceding financial years.

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 Schedule VII, Companies Act 2013

i. Eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation including
contribution to the Swatch Bharat Kosh
ii. Promoting education, including special education and employment enhancing vocation skills especially
among children, women, elderly, and the differently abled and livelihood enhancement projects;
iii. Promoting gender equality, empowering women, setting up homes and hostels for women and orphans;
setting up old age homes, day care centers and such other facilities for senior citizens and measures for
reducing inequalities faced by socially and economically backward groups;
iv. Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare,
agroforestry, conservation of natural resources and maintaining quality of soil, air and water including
contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of River Ganga;
v. Protection of national heritage, art and culture including restoration of buildings and sites of historical
importance and works of art; setting up public libraries; promotion and development of traditional arts and
handicrafts;

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 Schedule VII, Companies Act 2013

vi. Measures for the benefit of armed forces veterans, war widows and their dependents;
vii. Training to promote rural sports, nationally recognized sports, Paralympics sports and Olympic sports;
viii. Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central
Government for socio-economic development and relief and welfare of the Scheduled Castes, the
Scheduled Tribes, other backward classes, minorities and women;

ix. Contributions or funds provided to technology incubators located within academic institutions which are
approved by the Central Government;
x. Rural development projects;
xi. Slum area development;

xii. Non compliance : Impact on company & officers in default;

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 CSR Policy

Ø Include a list of CSR projects / programmes / activities which a company plans to

undertake as well as modalities of their execution, the implementation schedule
and the monitoring mechanism.

Ø Prescribe CSR reporting mechanism.

Ø A format for the Annual Report on CSR activities to be included in the Board’s
Report (as per Annexure to the Rules.)

Ø The contents of the CSR Policy, as approved by the Board of Directors after taking
into account the recommendations of the CSR Committee (shall be disclosed in
the Report and displayed on the website of the co.)

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 Companies (CSR Policies) Rules, 2014

Ø Every company, which is mandated to undertake CSR activities, shall take them up as per its stated
CSR Policy.
Ø A company should undertake these activities as projects or programmes or activities (either new or
ongoing), excluding activities taken up in pursuance of its normal course of business.
Ø CSR activities can be undertaken through a registered trust or a registered society or a co. set up
under section 8 of the Companies Act, 2013, subject to certain conditions.
Ø A company may also collaborate with other companies for undertaking CSR projects, programmes or
activities.
Ø Projects etc. that benefit only the employees of the company or their families, shall not be considered
as CSR activities.
Ø Administrative expenditure shall not exceed 5% of the total CSR expenditure.
Ø Contribution to any political party, shall not be considered as CSR activity.

140
 Role of Boards in CSR

Ø Ensure that at least 2% of average net profit of last 3 preceding years is

spent on CSR Activities every year.

Ø 2% CSR Spending would be computed as 2% of the average net profits

made by the company during every block of three years.

Ø To approve the CSR Policy after considering recommendations of CSR

Committee.

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 Role of CSR Committee

Ø Formulate and recommend to the Board, CSR Policy of the company which
shall indicate the activities to be undertaken by the co. as specified in the
Act.

Ø Recommend the amount of expenditure to be incurred on the activities.

Ø Monitor the CSR Policy of the company from time to time.

Ø Prepare a transparent monitoring mechanism for ensuring implementation

of the projects, programmes and activities proposed to be undertaken by
the company.

142
Pursuant to Section 135 of the Companies Act, 2013, _____
number of Directors are required to constitute a CSR Committee

a. Two or more Directors

b. Two Directors

c. Three or more Directors

d. Three Directors

143
c. Three or more Directors

144
The activities to be undertaken by the Company while spending
CSR expenditure shall be in areas specified in:

a) Schedule V

b) Schedule VII

c) Schedule VI

d) Schedule III

145
b) Schedule VII

146
Corporate Social Responsibility committee shall:

a) recommend the Corporate Social Responsibility Policy to the Board

b) recommend the amount of expenditure to be incurred

c) monitor the Corporate Social Responsibility Policy

d) All of the above

147
d) All of the above

148
The amount of CSR can be spent on:

a) eradicating hunger, poverty and malnutrition

b) training to promote rural sports, nationally recognised sports

c) contribution to the prime minister's national relief fund

d) All of the above

149
• d) All of the above

150
CSR activities mentioned in Schedule VII of to the Companies Act
2013 includes contribution made to – Test Q

a) Recognised Political Parties in India

b) Activities undertaken outside India

c) Exclusively for state welfare activities

d) None of the above

151
d) None of the above

152
RESIGNATION OF DIRECTORS
• A director may resign from company by giving a notice to the company

• Resignation becomes effective when notice of resignation is received by the

company or date, if any, specified by the director in notice, whichever is later

• The company within 30 days of receipt of resignation from director shall send it
to ROC

• Notice along with detailed reasons of resignation to be sent to the registrar by

such director within 30 days of the resignation

• In case all directors resign or vacate their office under Section 167, the promoter
or in his absence CG shall appoint the requisite number of the directors till the
directors are appointed in the GM 153
RESIGNATION OF DIRECTORS
• Schedule V: Annual report
(C) Corporate Governance Report: The following disclosures
shall be made in the section on the corporate governance of
the annual report.

• (2) Board of Directors:

Insertion of a new sub-clause (h):
(h): Detailed reasons for resignation of independent directors
who resigns before the expiry of his tenure:
Provided that the director shall be required to confirm that
there are no other material reasons other than those provided,
the disclosure of which shall also be made by the listed entity.
154
REASON FOR RESIGNATION

• Clause 7 of Annexure I of SEBI circular No.

CIR/CFD/CMD/4/2015 dated Sep 9, 2015 may be amended as
under:
7.1A. Detailed reasons for the resignation of independent
directors as given by the said director;
Provided that the director shall be required to confirm that there
are no other material reasons other than those provided, the
disclosure of which shall also be made by the listed entity.

155
A Director can resign :

a) In Writing

b) Orally

c) By absenting from BM

d) Only a. and b.

156
a) In Writing

157
 Filings with ROC

• Annual filings – Annual return – MGT 7; Accounts – AOC 4, AOC

4(CFS), Auditors – ADT 1

• Event based – MGT 14 for special resolutions and certain Board

resolutions;

• PAS 3 for allotments,

• forms for incorporation, alteration of MOA and AOA, change in

directors, borrowings, etc.
158
 WHY ME ?

• 149 (12): Notwithstanding anything contained in this Act,—

i. an independent director;
ii. a non-executive director not being promoter or key managerial
personnel,
• shall be held liable, only in respect of such acts of omission or
commission by a company
• which had occurred with his knowledge, attributable through
Board processes, and with his consent or connivance or
where he had not acted diligently.

159
Liability includes: 1) an obligation arising from a past business event
2) an obligation arising from a future business event - Test Q

a) Only 1)

b) Only 2)

c) Both

d) None

160
c) Both

161
• MISCELLANEOUS

162
Satyam SCAM...

163
 sion Ramalinga Raju, chairman
nfes

“None of the board members, past or present, had any knowledge of the situation in
e co

which the company is placed.”

m th

He INFLATED (non existent) cash and bank balance of Rs 5,040 crore(as against
Rs 5,361 crore) reflected in the books.
Fro

AN accrued interest of Rs 376 crore is non-existent.

He has understated liability to the tune of Rs1,230 crore in accounts of funds

arranged by me.

He hasover-stated debtors position of Rs 490 crore (as against Rs 2,651 crore

reflected in the books.)

FOR sept 2008, we reported Rs2,700 crore revenue and operating margin of
Rs 649 crore against actual revenue of Rs2,112 crore and margin of Rs 61
crore.

164
165
166
167
Who revealed the Satyam scam

a) Auditors

b) Audit Committee

c) Promoter

d) Regulator

168
• C) Promoter

169
Satyam failed on account of Negligence of

a) Auditors

b) Audit Committee

c) Independent Directors

d) All of the above

170
• d) all of the above

171
Who was the auditors in Satyam Computer Services Ltd? – Test Q

a) Ernst & Young

b) PwC

c) Arthur Anderson
d) None of the above

172
b) PwC

173
Satyam was awarded the Golden Peacock Global Award for
Excellence in Corporate Governance in 2008-

a) No

b) Yes

c) None of the given options

d) It was only considered for this award

174
• b) Yes

175
Subtitle

176
Some highlights brought about when this scandal had been
exposed were:

1. $30 million of self dealings by the chief financial officer.

2. $700 million of net earnings disappeared.
3. $1.2 billion shareholders equity disappeared.
4. Over $4 billion in hidden liabilities.
5. Top Enron executives sold their company stock prior to the
company's downfall.
6. Whistlblower’s name was Sherron Watkins, Former Vice
President of Enron Corporation

177
The cause

• Removing Debts from Balance Sheet.

• Showing Increased Profits.
• Covering up of financial issues.
• Acquiring funding (Enron & Investment Banks).
• Lack of Whistle Blowing (Ms. Watkins).
• Executive and Spouses selling stock prior to downfall.
• Shareholders and Employees receiving small settlement.

178
The person behind Enron’s failure was

a) Auditors

b) CEO

c) CFO

d) All of the above

179
• d) all of the above

180
Fortune Magazine named Enron America’s most innovative
Company for ____ years in a row prior to the scandal.

a) 3

b) 5

c) 6

d) 8

181
 FORM NO PURPOSE

DIR – 3 Application for DIN

DIR – 12 Appointment/ Changes of Directorship

DIR – 11 Resignation of Director (by resigning director)

MGT – 14 Intimation of all special resolutions passed by the

company; and such matters as covered under Section
179(3)

MGT-7 Filing of Annual Return

MGT – 8 Certificate of Compliance
AOC -1 Statement of Subsidiary and associates

AOC – 2 RPT
AOC – 4 Annual Accounts
ADT -1 Appointment of Statutory Auditors
DE-BOARDING YOU

HAVE A SAFE LANDING

183
 MY EXPERIMENTS WITH TEST
• Book your slot in advance
• Log in and Be ready 5 minutes before
• Check your internet connections
• You are on camera
• Keep you mobile phones away

• Do not –
• Click on any popups
• Speak aloud on questions
• Have anybody standing behind you

• If you violate; the test is paused and there will be a chat box on your right corner and you
have to respond
• Take a deep Breath and Start your PROFICIENCY TEST – ALL THE BEST

184
 THANK YOU
For having me & for a patient listening

SUNDHARESAN JAYAMOORTHI,
The only ECG Specialist
Ethics. Compliance. Governance.

Author of BOARD ANATOMY, Bengaluru

Write to me:
sundharesan@jsundharesan.com

Speak to me on +91 98800 26296

Google for “JS SPEAKS” in you tube

Read Me on LinkedIn: Sundharesan Jayamoorthi

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