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    CONDUCTING BOARD MEETINGS THROUGH VIDEO CONFERENCE – PROCEDURE-PROCESS

     

    Section 173of the Companies Act, 2013, provides for the participation of directors in a Board meeting, either in person or through video conferencing or other audio visual means, 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.

     

    As per the rules framed under the Act, the following are the compliances for holding/attending meetings through Video Conference.

     

    "Video Conferencing Or Other Audio Visual Means" means “audio-visual electronic communication facility employed which enables all the persons participating in a meeting to communicate concurrently with each other without an intermediary and to participate effectively in the meeting”.

     

    From the above definition, it is clearly evident that holding of a Board meeting through Video Conferencing or through Audio Video means, is not simply conducting a meeting through skype or a third party video conferencing facility/means.

     

    For the time being, the Companies Act, 2013, restricts for the following matters/decisions of the Board to be dealt by a meeting held through video conferencing or other audio visual means:

     

    • Approval of the annual financial statements; (ii) Approval of the Board’s report;

    (iii) Approval of the prospectus;

     

    (iv) Audit Committee Meetings for consideration of financial statement including consolidated financial statement if any, to be approved by the board under sub-section (1) of section 134 of the Act; and

     

    (v) Approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.

     

    NOTE: The Companies Amendment Bill, 2016 (Bill No.73 of 2016), proposes to amend Section 173, by inserting a second proviso to sub-section (2) of Section 173, that, where there is quorum in a meeting through physical presence of directors, any other director may participate through video conferencing or other audio visual means in such meeting on any matter, including the restricted matters.

     

    Process/Procedure for conducting of Meeting through Video Conference and Compliance is as below:

     

    1. Notice of Board Meeting:

     

    A meeting of the Board shall be called by giving not less than 7 days 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.

    The notice of the meeting shall inform the directors regarding the option available to them to participate through video conferencing mode or other audio visual means, and shall provide all the necessary information to enable the directors to participate through video conferencing mode or other audio visual means.

     

    The Notice of the Meeting, wherein the facility of participation through video conferencing mode or other audio visual means, shall clearly mention a venue, whether registered office or otherwise, to be the venue of the Meeting and it shall be the place where all the recordings of the proceedings at the Meeting would be made.

     

    Requirements to participate/attend a meeting through Video Conference:

     

    A director intending to participate through video conferencing or audio visual means shall communicate his intention to the Chairperson or the Company Secretary of the company, if any.

     

    If the director intends to participate through video conferencing or other audio visual means, he shall give prior intimation to that effect sufficiently in advance so that company is able to make suitable arrangements in this behalf.

     

    The director, who desire, to participate may intimate his intention of participation through the electronic mode at the beginning of the calendar year and such declaration shall be valid for one calendar year.

     

    In the absence of any intimation from the Director, it shall be assumed that the director shall attend the meeting in person.

     

    1. Arrangements and requirements for/at the Meeting:

     

    The Company shall make necessary arrangements to avoid failure of video or audio visual connection.

     

    The Chairperson of the meeting and the company secretary, if any, shall take due and reasonable care:

     

    • to safeguard the integrity of the meeting by ensuring sufficient security and identification procedures;

     

    • to ensure availability of proper video conferencing or other audio visual equipment or facilities for providing transmission of the communications for effective participation of the directors and other authorised participants at the Board meeting;

     

    • to record proceedings and prepare the minutes of the meeting;

     

    to store for safekeeping and marking the tape recording(s) or other electronic recording mechanism as part of the records of the company at least before the time of completion of audit of that particular year.

    • to ensure that no person other than the concerned director are attending or have access to the proceedings of the meeting through video conferencing mode or other audio visual means; and

     

    • to ensure that participants attending the meeting through audio visual means are able to hear and see the other participants clearly during the course of the meeting; Provided that the persons, who are differently abled, may make request to the Board to allow a person to accompany him.

     

    1. Roll Call at the Commencement of the Meeting, Invitees and Quorum:

     

    At the commencement of the meeting, a roll call shall be taken by the Chairperson when every director participating through video conferencing or other audio visual means shall state, for the record, the following namely:-

     

    • name;
    • the location from where he is participating;
    • that he has received the agenda and all the relevant material for the meeting; and

     

    • that no one other than the concerned director is attending or having access to the proceedings of the meeting at the location mentioned in clause (b);

     

    Information as to any Invitees for the Board meeting:

     

    After the roll call, the Chairperson or the Company Secretary shall inform the Board about the names of persons other than the directors who are present for the said meeting at the request or with the permission of the Chairperson.

     

    From the commencement of the meeting and until the conclusion of such meeting, no person other than the Chairperson, Directors, Company Secretary, if any, and any other person whose presence is required by the Board shall be allowed access to the place where any director is attending the meeting either physically or through video conferencing without the permission of the Board.

     

    Quorum:

     

    The quorum for a meeting of the Board of Directors of a company shall be1/3rd of its total strength or 2 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. The Articles of Association of the Company to be verified for any requirement, for having a higher quorum

     

    Participation through video Conferencing shall be counted for the purpose of Quorum is the quorum unless he is to be excluded for any items of business under the provisions of the Act, as detailed above i.e., matters not to be dealt through Video Conference.

     

    The Chairperson shall ensure that the required quorum is present throughout the meeting.

    1. Venue of the Meeting and placing of the Statutory Registers:

     

    In respect of every meeting conducted through video conferencing or other audio visual means, the scheduled venue of the meeting as set forth in the notice convening the meeting, shall be deemed to be the place of the said meeting and all recordings of the proceedings at the meeting shall be deemed to be made at such place.

     

    The statutory registers which are required to be placed in the Board meeting as per the provisions of the Act shall be placed at the scheduled venue of the meeting and where such registers are required to be signed by the directors, the same shall be deemed to have been signed by the directors participating through electronic mode, if they have given their consent to this effect and it is so recorded in the minutes of the meeting.

     

    1. Proceedings at the meetings, manner of transacting an item at the meeting, Recording of Minutes: Director to Identify himself:

     

    Every Director shall identify himself for the record before speaking on any item of business on the agenda.

     

    If a statement of a director in the meeting through video conferencing or other audio visual means is interrupted or garbled, the Chairperson or Company Secretary shall request for a repeat or reiteration by the Director.

     

    Voting:

     

    If a motion is objected to and there is a need to put it to vote, the Chairperson shall call the roll and note the vote of each director who shall identify himself while casting his vote.

     

    Summarisation of decisions taken:

     

    At the end of discussion on each agenda item, the Chairperson of the meeting shall announce the summary of the decision taken on such item along with names of the directors, if any, who dissented from the decision taken by majority.

     

    Recording of Minutes:

     

    The minutes shall disclose the particulars of the directors who attended the meeting physically and through video conferencing or other audio visual means.

     

    The draft minutes of the meeting shall be circulated among all the directors within 15 days of the meeting either in writing or in electronic mode as may be decided by the Board.

    Every director who attended the meeting, whether personally or through video conferencing or other audio visual means, shall confirm or give his comments in writing, about the accuracy of recording of the proceedings of that particular meeting in the draft minutes, within seven days or some reasonable time as decided by the Board, after receipt of the draft minutes failing which his approval shall be presumed.

     

    The minutes shall be entered in the minute Book and signed by the Chairperson.

     

    The recordings of the proceedings of the meeting along with date and time, shall be kept in the safe custody of the Chairperson or any Director of the Company.

     

    From the above, it can be clearly seen that the facility of conducting Board Meetings through Video conference enable ease of operations and enhances the ability of the Board of Directors to take decisions in the interest of the Organisation.

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    Section 11of the Income-tax Act, 1961 (“Act”) provides for exemption of income derived from property held under a trust or legal obligation wholly for charitable purposes to the extent of income applied for such purposes in India. Such trust or legal obligation can accumulate or set apart not exceeding 15% of the income from such property subject to exceptions provided in subsection 2 of section 11.

     

    Section 2(15) defines “Charitable Purposes”. It includes relief of poor, education, medical relief, Yoga 1, preservation of environment2 including watersheds, forests and wildlife and preservation of monuments or places or object of artistic or historic interest and advancement of any other object of general public utility.

     

    Section 11(1)(d) provides that income in the form of voluntary contributions made with a specific direction that they shall form part of corpus of the trust or institution are not subject to application. In nutshell corpus donations are not income of the trust or institution.

     

    Explanation to Section 11(2) provides that the amount credited or paid out of accumulated income to any trust or institution registered U/S 12AA or any fund or institution or other educational institution or any hospital or other medical institution referred to in (iv)/(v)/ (vi)/(via) of Section 10(23C)shall not be treated as application of income for charitable purpose either during the period of accumulation or thereafter.

     

    By reading the provisions of section 11(1)(d) and explanation to section 11(2) together one may conclude that it is allowed for a trust or institute to donate out of current year income to another trust or institution registered U/S 12AA/10(23C) and claim it as application of income.

     

    The above view was supported by Gujrat HC Judgement3 where the Court held that the provisions of section 11(1)(a) can be said to have been met out where a donor -trust, which is charitable and religious trust, donates its income to another charitable and religious trust even though such contribution is towards corpus of donee- trust or institution. Further the Court held that instruction no. 1132 issued by the CBDT on 05-01-1978 squarely covers the facts of the present case.

     

    New Proposal by Finance Bill 2017: -

     

    A new explanation (Explanation 2) inserted to the section 11(1) w.e.f 01-04-2018. It provides that any amount credited or paid out of income referred to in Section 11(1) (a) or (b) to any other trust or institution registered U/ S 12AA, being contribution with specific direction that they shall form part of corpus of the trust or institution shall not be treated as application of income for charitable or religious purpose.

    The reason behind the amendment is avoid the double benefit being that in the hands of donor trust it is treated as application of income and in the hands of donee such receipt is not income for the purpose of application.

     

    However, donations with no specific directions to the recipient continue to be eligible as application of income.

     

    The new proposal in Finance Bill 2017 is prospective in nature. To support this view reliance can be place on Supreme Court Judgement4 and ITAT JAIPUR5 where in it was held that “of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation.” The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. One principle of law is known as lexprospicit non respicit: law looks forward not backward.

     

    Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect;

     

    While interpreting whether amendment to be applied retrospectively or prospectively one has to consider the notes on clauses appended to the Finance Bill.

     

    The Memorandum to Finance Bill 2017 provided that new explanation to section 11 will take effect from 1st April 2018 and apply in relation to the assessment year 2018-19 and subsequent years.

     

    Therefore, the proposed amendment brought by Finance Bill 2017 by insertion of new explanation to section 11(1) will apply prospectively.

     

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    In view of the NRI Inflows into India, playing pivotal role for India’s Foreign Exchange, an attempt is made to provide brief introduction about the MTSS Scheme through which such remittances are being received into the India.

     

    What is MTSS?

     

    Money Transfer Service Scheme (MTSS) is a quick and easy way of transferring personal remittances from abroad to beneficiaries in India. Under MTSS the remitters and the beneficiaries are individuals only. The MTSS is having statutory recognition under Payment and Settlement Systems Act, 2007 and rules made thereunder

     

    Permitted nature of remittances

     

    Only inward personal remittances into India such as remittances towards family maintenance and remittances favouring foreign tourists visiting India are permissible. No outward remittance from India is permissible under MTSS

     

    Donations/ contributions to charitable institutions/trusts, trade related remittances, remittance towards purchase of property, investments or credit to NRE Accounts shall not be made through this arrangement.

     

    Nature of Players Involved in the MTSS

     

    The system envisages a tie-up between reputed money transfer companies abroad known as Overseas Principals and agents in India known as Indian Agents who would disburse funds to beneficiaries in India at ongoing exchange rates. The Indian Agents can in turn also appoint sub-agents to expand their network.

     

    Prominent Overseas Principals under this scheme areWestern Union Financial Services Incorporated, USA (“Western Union or WU”), Wall Street Exchange Centre LLC, UAE (“Instant Cash”), UAE Exchange Centre LLC, UAE (“Xpress Money”), Royal Exchange (USA) Inc., USA, and MoneyGram Payment Systems Inc, USA(“MoneyGram or MoneyGram International”) etc. Many Indian Agents have tied up with these players for quick remittances of Foreign Currency into India.

     

    Entry Norms for Indian Agents

     

    The applicant, in order to become an Indian Agent, should be an Authorised Dealer Category-I bank or an Authorised Dealer Category-II or a Full Fledged Money Changer (FFMC), or a Scheduled Commercial Bank or the Department of Posts and should have minimum Net Owned Funds of Rs.50 lakh.

    Guidelines for Overseas Principals

     

    Indian Agents entering into arrangements with Overseas Principals, need to have adequate volume of business, track record and outreach etc.

     

    Applicant Indian Agents should submit the following documents/ comply with the following requirements, in respect of their Overseas Principals:

     

    1. The Overseas Principal should obtain necessary authorisation from the Department of Payment and Settlement Systems, Reserve Bank of India under the provisions of the Payment and Settlement Systems Act (PSS Act), 2007 to commence/ operate a payment system. Prior to such authorization, the RBI will verify the background and antecedents of the Overseas Principal with the help of Govt. of India,

     

    1. The Overseas Principal should be a registered entity, licenced by the Central Bank / Government or financial regulatory authority of the country concerned for carrying on Money Transfer Activities. The country of registration of the Overseas Principal should be AML compliant.

     

    1. The minimum net-worth of Overseas Principals should be at least USD 1 million as per the latest audited balance sheet, which should be maintained at all times. However, the Reserve Bank may consider relaxing the minimum Net Worth criterion in case of Overseas Principals incorporated in FATF member countries and are supervised by the concerned Central Bank/ Government or financial regulatory authority.

     

    1. The Overseas Principal should be well established in the money transfer business with a track record of operations in well regulated markets.

     

    1. The arrangement with Overseas Principal should result in considerably increasing access to formal money transfer facilities at both ends.

     

    1. The Overseas Principal should be registered with the overseas trade / Industry bodies.

     

    1. The Overseas Principal should have a good rating from one of the international credit rating agencies.

     

    1. The Overseas Principal should submit confidential reports from at least two of its bankers.

     

    1. The Overseas Principal should submit a report certified by independent Chartered Accountants, regarding steps taken to comply with anti-money laundering norms in the home/ host country.
    2. The Overseas Principals will be fully responsible for the activities of their Agents and Sub Agents in India.

     

    1. Proper records of remitters as also beneficiaries pertaining to all pay-outs in India are to be maintained by the Overseas Principals. All records must be made accessible on demand to the Reserve Bank or other agencies of the Government of India, viz., Ministry of Finance, Ministry of Home Affairs, FIU-IND, etc. Full details of the remitters and the beneficiaries should be provided by the Overseas Principals, if called for.

     

    Receipt of Cross Border Remittances by Indian Residents/ foreign tourists

     

    A cap of USD 2500 has been placed on individual remittance under the scheme. Amounts up to Rs.50,000/- may be paid in cash to a beneficiary in India. Any amount exceeding this limit shall be paid by means of account payee cheque/ demand draft/ payment order, etc., or credited directly to the beneficiary's bank account only.

    However, in exceptional circumstances, where the beneficiary is a foreign tourist, higher amounts may be disbursed in cash. Full details of such transactions should be kept on record for scrutiny by the auditors/ inspectors.

     

    Only 30 remittances can be received by a single individual beneficiary under the scheme during a calendar year.

     

    To facilitate receipt of foreign inward remittances directly into bank account of the beneficiary, the foreign inward remittances received under MTSS can be transferred to the KYC compliant beneficiary bank account through electronic mode, such as NEFT, IMPS etc.

     

    Foreign inward remittances received by the bank acting as Indian Agent under MTSS, may also be electronically credited directly to the account of the beneficiary, held with a bank other than the Indian Agent Bank

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    MAR 2017 INTERNS DIGEST

    Key Topics Covered:

    • AUDIT
    • INDIRECT TAXES
    • INSOLVENCY AND BANKRUPTCY CODE, 2016

    Updates

    • COMPANIES ACT, 2013
    • FEMA

    This article is contributed by Partners of SBS and Company LLP - Chartered Accountant Company. You can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

    March – 2017 (Volume 32)

    Key Topics Covered:

    • INTERNATIONAL TAXATION
    • FEMA
    • AUDIT
    • INDIRECT TAX AND DIRECT TAX
    • THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013
    • GST

    This article is contributed by Partners of SBS and Company LLP - Chartered Accountant Company. You can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

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