Management of Financial and Non-Financial Resources
Financial resources
Companies can raise equity, preference capital, debentures, loans and deposits. A rights issue under section 62 is offered to existing shareholders. A private placement under section 42 is made to a selected group, with a maximum of 200 persons in a financial year, a valuation report, a special resolution, offer letters in PAS-4, records in PAS-5 and allotment within 60 days; the money must pass through a separate bank account. Deposits are governed by section 73 and the Acceptance of Deposits Rules, 2014. Charges must be registered with the Registrar within 30 days under section 77.
Non-financial resources
Human capital, intellectual property, brand and processes are managed alongside finance. CSR under section 135 applies when a company has net worth of at least 500 crore, turnover of at least 1,000 crore or net profit of at least 5 crore. The obligation is 2% of the average net profit of the preceding three financial years. A CSR committee is required, and unspent amounts must be dealt with as the Act requires.
Worked example
A company has net profits of 80 crore, 100 crore and 120 crore in the preceding three years. Average net profit is 100 crore, so 2% is 2 crore. Because net profit exceeds 5 crore, the CSR obligation is triggered. The company must constitute a CSR committee and spend or account for the amount in accordance with section 135.
Traps that cost marks
The private-placement limit counts persons, not shares. The 60-day allotment rule is strict. CSR uses the average of three preceding years, not the current year. A charge is not effective against the liquidator and creditors unless registered. Do not confuse deposits with private placement.