ALL ABOUT MEMORANDUM OF ASSOCIATION

1. The memorandum of every company shall state:
· The name of the company with Limited (for a Public limited company) and with Private Limited (for a Private Limited company) as the last word   .
· The state in which the registered office of the company is to be situated.
· The main objects of the company and the incidental or ancillary objects.
· Other objects of the company.
· In the case of companies, with objects not confined to one state, the state to whose territories the objects extend.
· The memorandum of a company limited by shares or by guarantee shall also state that the liability of its members is limited.
· The memorandum shall also state the amount of share capital with which the company is to be registered and the division there of into shares of a fixed amount.  No subscriber of the memorandum shall take less than one share and each subscriber of the memorandum shall write opposite to his name the number of shares he takes.

2.The memorandum shall be printed, be divided into paragraphs and be signed by each subscriber with his address, description and occupation in the presence of atleast one witness.

3. A company may by special resolution alter the provisions of its memorandum so as to change the place of its registered office from one state to another or with respect to the objects of the company. Alteration of memorandum relating to change of place of registered office from one state to another shall be confirmed by the Central Government. The special resolution passed by the company shall be filed with the registrar of companies, within one month from the date of such resolution. The certified copy of the order from the Central Government confirming the alteration shall be filed before the registrar within three months from the date of the order along with the altered memorandum. Registrar shall within one month certify the registration of the alteration.

4. For a company to change the place of its registered office from one place to another within a state, such change has to be confirmed by Regional Director. Once the change is confirmed by the Regional Director, the company shall file a certified copy of the confirmation given by the Regional Director together with a printed copy of altered memorandum before the registrar of the company. Thereafter the registrar of company shall register the said change.    

RULES PERTAINING TO HOLIDAYS

The Karnataka Industrial Establishments (National & Festivals Holidays) Act, 1963 and the rules there under provide for holidays for shops, commercial establishments, factories, plantations etc in Karnataka.

As per this Act, every employee shall be given a holiday on 26th January, 15th August and 2nd October. Apart from this, the employees are entitled for seven other holidays for other festivals, a list of which are mentioned in the Schedule attached to the Act. In addition all the establishments shall give holidays to their employees on 1st May and 1st November.
However this rule is not applicable to undertakings owned or controlled by the Government of India.  In addition to this every employee whose name is included in the electoral roll of the constituency, where an election to the Legislative Assembly is held, shall be allowed a day’s paid holiday to enable him to exercise his franchise.
Every employer shall display a list of national and festival holidays entitled to his employees in the form of a statement in a conspicuous place in the establishment.  In addition to this every establishment shall remain closed for one day of the week which is available to the employee as a weekly holiday.

RULES PERTAINING TO EMPLOYMENT OF WOMEN AND CHILDREN:

As per the Karnataka Shops and Establishment Act, 1961 and the rules there under, there are certain prohibitions and restrictions in employing children, young persons and women in Shops and Establishments in Karnataka. As per this Act, a child is defined as a person who has not completed his 14th year. Similarly a young person is defined as a person who has completed his 14th year but not yet completed 18th year.
The Act prohibits the employment of children in any establishment. If anyone contravenes this provision, he shall be punishable with imprisonment for a term which shall not be less than three months and which may extend to six months or with a fine which shall not be less than Rs. 10,000/- but which may extend to Rs.20,000/- or with both.
The Act also prohibits the employment of women or young persons during nights. If anybody contravenes this provision they are liable to punishment similar to punishment for child labor as mentioned above. State Government is empowered to exempt establishments of IT and ITES from the provisions relating to employment of women during night. The Government may impose conditions that such establishments which employ women during night time shall provide the facilities of transportation and security to such women employees. For the purpose of this act, night means a period of at least twelve consecutive hours, which shall include an interval between 8 pm to 6 am.
Every employer who intends to seek exemption to engage women employees during night shift shall make an application to the Commissioner for Labor or the Deputy Labor Commissioner having jurisdiction, with the list of women employees willing to work in night shifts. There shall be at least five women employees in one night shift.    

RULES PERTAINING TO LEAVE OF EMPLOYEES

Every employee in shops and establishments in Karnataka is entitled for annual leave with wages, calculated at the rate of one day for every twenty days work performed by him. 

In addition to this, every employee shall, during the first twelve months of continuous service and during every subsequent twelve months of such service, also be entitled to leave with wages for a maximum period of twelve days. This leave can be availed on the ground of any sickness incurred or accident sustained by the employee or for any other reasonable cause. 

The annual leave with wages for which an employee is entitled may be carried forward to the next year in case he has not utilized it during a year. However, the total number of leave days carried forward shall not exceed a maximum of thirty days.  

An employee can at any time apply in writing to the manager of the establishment to avail the annual leave. However he shall apply minimum ten days prior the date on which he wishes his leave to begin. However this minimum period of ten days is not applicable in case of medical leaves. 

For the leave allowed to an employee, he shall be paid wages at a rate equal to the daily average of his total full time earnings for the day on which he worked, during the month immediately preceding his leave. The number of times, a leave may be taken by an employee during an year shall not exceed three.            

WORKING HOURS FOR EMPLOYEES

There is enough confusion prevailing among employers and employees regarding the working hours of employees in shops, offices and establishments in the state of Karnataka. Often this confusion leads to frustrations and in turn to labor unrest. Let us see what the law of the land prescribes in this regard.

Normally an employee can be made to work only for a maximum of nine hours on any day and 48 hours in any week. Including overtime, an employee can be made to work for a maximum of 10 hours in a day, the exemption being days of stock taking and account preparations. However the total number of overtime hours worked by an employee shall not exceed fifty in a period of three continuous months.

When an employee works in any establishment for more than nine hours in any day or for more than forty eight hours in any week, he shall in respect of such overtime work be entitled to wages at twice the rate of normal wages.

The period of work for an employee shall not exceed five hours at a stretch. After five hours of continuous work the employee shall have at least one hour of rest. Further, the period of work (inclusive of interval for rest) shall not spread over more than twelve hours in any day.

LATEST SUPREME COURT GUIDELINES ON RAGGING

Following the death of 19-year-old medical student Aman Kachroo at Dr. Rajendra Prasad Medical College in Himachal Pradesh, a Supreme Court Bench comprising of Justice Arijit Pasayat and Justice A.K. Ganguly has recently issued strict guidelines to prevent the menace of ragging in colleges and educational institutions. The Supreme Court was also hearing another case in Bapatla Agriculture Engineering College in Andhra Pradesh where a 20-year-old girl, attempted suicide due to ragging. The apex court had earlier appointed a committee headed by former CBI director R K Raghvan to look into the mater. Most of the recommendations of the said committee find a place in the guidelines. The salient features of the guidelines include:
a. The head of the educational institution and the jurisdictional police chief will be held responsible, if any ragging case is reported in their area.
b. A national level committee will be formed to suggest remedial measures in the school curriculum.
c. Immediate suspension of the senior students indulged in ragging.
d. Departmental action against all heads of institutions where ragging takes place.
e. High level security in all hostel premises and a strict vigil to be maintained.
f. Freshers to be divided into small groups and will be affiliated to individual teachers.
g. All colleges should hire psychiatrists to sensitize senior students, freshers and staff against ragging.
h. Panels must be set up to check the increasing incidents of ragging and rampant alcoholism in universities and colleges.
i. Students who indulge in ragging under the influence of alcohol must be sent to de-addiction centers.
j. Each state should have an anti-ragging committee, and anyone indulging in ragging must be given psychological treatment.

The apex court has also directed all state governments to give an undertaking about the steps taken by them to eradicate ragging.

THE KARNATAKA PROHIBITION OF CHARGING EXORBITANT INTEREST ACT 2004

This is an interesting piece of legislation about which the general public does not have much awareness. The Act has a noble intention of prohibiting the charging of exorbitant interest by financiers and money lenders. An exorbitant interest is an interest at a rate more than what is fixed under section 28 of the Karnataka money lenders Act 1961. This amount to 15 % in case of secured loans and 18% in case of unsecured loans. Hence anybody charging interest more than the above rate is said to charging exorbitant interest.

As per the Act whoever charges exorbitant interest on any loan advanced by him shall be punishable with imprisonment for a term of which may extend to 3 years and also with a fine which may extend to Rupees 30,000/- .
A debtor may deposit the money due in respect of a loan received by him  from any person together with interest thereon into the court along with the petition to record that amount deposited is in full or part satisfaction of the loan including the interest thereon. The Court may after inquiry, pass order recording the satisfaction of the loan and interest therefore in full or in part as the case may be. The Court may, on a petition filed by the debtor for settlement of loan including the interest therefor, pass an order for the adjustment of the interest, if any, paid by the debtor, over and above the rate of interest fixed by the State Government towards the loan.

Where a debtor or any member of his family commits suicide and if it is shown that immediately prior to such suicide the debtor or any member of his family was subjected to molestation by any person, the person who has advanced loan shall, unless the contrary is proved, be deemed to have abetted the commission of such suicide

Karnataka Money Lending Act 1961 and Rules

The Karnataka Money Lender’s Act, 1961 & Rules, 1965 prescribes fair rules of business for money lenders. According to this Act, no person shall carryon the business of money lending in Karnataka except by holding a license and by payment of a security deposit made under the said Act.Every Money lender shall file an application for license to the Assistant Registrar of the area. Along with the application, the money lender need to pay the license fee which may come to about Rs 5,000/- and Rs 250/- for each of the other places where the business will be carried on. The Assistant registrar will forward the application to the Registrar of the area, who will after necessary enquiry grant the license. A license is valid for a term of 5 years.

The money lenders are also required to pay a security deposit which may range from Rs 5000/- to Rs 50,000/-, at the time of applying for the license. The Registrar is entitled to forfeit the above said security deposit if (a)the money lender carries on the business in contravention of any provisions of the  act or the rules (b) is convicted of an offence under the Act, (c) maintains false accounts. If a money lenders does not hold a valid license at the time of advancing a loan, he is no entitled for a decree from a civil court in his favor. Every money lender shall keep and maintain a cash book and ledger in Kannada or in English. Further every money lender shall deliver to the debtor within 30 days from the date on which the loan is made a statement showing the details of the loan. If the money lender has given a pass book to the debtor, then it is not necessary to furnish the above statement.

Every money lender is supposed to deliver every year to each of his debtors a legible statement of such debtor’s accounts, signed by the money lender of any amount that may be outstanding against such debtor. No such statement is required to be delivered to a debtor, if he is supplied by the money lender, with a passbook which shall be in the prescribed form, and shall contain an up to date account of the transactions with the debtor. The money lender shall deliver a copy of the statement to the Assistant registrar.No court will order a decree, on account of the interest of a loan, for a sum more than the principal of the said loan. Even if there is an agreement between the money lender and the debtor, the decree for interest can never be more than the principal amount of the loan.

Every money lender shall exhibit his name with the word money lender, over his shop or place of business. Further no money lender shall take any promissory note, acknowledgement, bond or other writing which does not state the actual amount of the loan. No money lender shall execute any instrument in which blanks are left to be filled after execution. Whoever molests or harass or troubles a debtor for the recovery of a debt due by him to a creditor shall on conviction be punished with imprisonment which may extend to six months or fine which may extend to five thousand rupees or with both.

All about NBFCs

With many fly by night finance companies raking in moolah, at the cost of innocent investors offering them dream interest rates for their deposits, it is ideal to see what are the legal requirements for an NBFC.

NBFC stands for Non Banking Financial Company.

Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by Government or local authority or other securities, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property.

 An RNBC (Residuary Non-banking Company) is a non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner and not being an Investment, Asset Financing, Loan Company.

 An NBFC cannot operate without obtaining a certificate of registration from the Reserve bank Of India. The said company shall have a net owned fund of Rs 2,00,00,000/-. 

NBFCs registered with RBI have been reclassified as
(i) Asset Finance Company (AFC)
(ii) Investment Company (IC)
(iii) Loan Company  (LC).

All NBFCs are not entitled to accept public deposits. Only those NBFCs holding a valid Certificate of Registration with authorization to accept Public Deposits can accept/hold public deposits. Further there is a ceiling on acceptance of Public Deposits.

The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand. The deposits with NBFCs are neither insured nor their repayment guaranteed by RBI.

Presently, the maximum rate of interest an NBFC can offer is 12.5%. The interest may be paid or compounded at rests not shorter than monthly rests.

If an NBFC defaults in repayment of deposit, the depositor can approach Company Law Board or Consumer Forum or file a civil suit in a court of law to recover the deposits. However there is no Ombudsman for hearing complaints against NBFCs

Housing Finance Companies, Merchant Banking Companies, Stock Exchanges, Companies engaged in the business of stock-broking/sub-broking, Venture Capital Fund Companies, Nidhi Companies, Insurance companies and Chit Fund Companies are NBFCs but they have been exempted from the requirement of registration with RBI.

Any person who is an individual or a firm or unincorporated association of individuals cannot accept deposits except by way of loan from relatives, if his/its business wholly or partly includes loan, investment, hire-purchase or leasing activity or principal business is that of receiving of deposits under any scheme or arrangement or in any manner or lending in any manner.

Changes in Stamp Duty

The Government of Karnataka in its 2007-08 budget has introduced several changes in the stamp duty levied on various instruments .These are effective from 1-04-09.Some of them are discussed below:
1. Stamp duty on sale transaction of all immovable properties has been reduced form 7.5% to 6%.The cess on stamp duty will be 10% and surcharge for properties situated within corporation limits will be 2% and within village Panchayaths will be 3%.
2. Sale agreements not involving possession of property. Presently the stamp duty varies from Rs 10 to Rs 200/-.Now the same is increased to .25% of the value of the agreement.
3.  Joint Development Agreements: 1% of the value involved.
4. GPA for Joint development: 1% of the value involved.
5. Other GPAs: Rs 200/-(Presently Rs 100/-)
5. Lease
a. Up to 5 years: 1% on the value of security deposit and average annual rent
b. Above 5 years and  up to 10 years: 2% on the value of security deposit and average annual rent
c. Above 10 years and up to 30 years: 4% on the value of security deposit and average annual rent
d. For a period above 30 years : 6% of the market value.
5. For duplicate registration: Rs 500/-(Instead of Rs 50/-)
6. Release: 6% instead of present 2.5% and 3.75%