Company Secretarial Practise 13 November

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COMPANY SECRETARIAL PRACTISE

AFTERSCHO☺OL – DEVELOPING CHANGE MAKERS

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COMPANY SECRETARIAL PRACTISE

Dr. T.K. Jain.

AFTERSCHO☺OLCentre for social entrepreneurship

Bikaner M: 9414430763

[email protected]

www.afterschool.tk, www.afterschoool.tk


FORM 1A

• Name of the proposed company is to be submitted in form 1a.


Form 29

• Consent to act as director


FORM 18

• Notice of situation of the office of the company


Form 32

• Particulars of the directors


How do you get registration under section 25?

• -non – profit objective• Submit 3 printed copies of Memorandum of

association & articles. • 3 copies of list of names, descriptions,

addresses etc. of directors• 3 copes of p&l, balance sheet, audit report,

annual report etc. (if already working). • Assets andliabilities statement • Statement regarding future work, expected

income, objectives etc.• Fees.


Prepare a specimen form No. 1A

• To• The Registrar of Companies,• Sir,• Subject: Availability of Names - Information - Furnishing

of• We, the following applicants, are desirous of forming a

company to be megistered under the Companies Act, 1 956, in the State of Rajasthan.

• Name and full address of the person(s) applying for the availability of the name (in block capitals).: Sudha Soni

• Proposed name of the company.: Swarna Pvt. Ltd.


continued

• State whether public or private. : Private • In case the proposed name mentioned in item (2) is not

available, 3 names to be considered in the order of preference. 1. Abhushan Ltd. 2. Creative Ltd. 3. Ornaments Ltd.

• Main object of the proposed company : 1. to make jewellery 2. 3.

• Names and addresses of the prospective directors or promoters, etc. 1. Sudha Soni 2. Goti 3. Kap 4. double

• Particulars of the names and situation of registered offices of other companies in the same group or under the same management. : There is no company


continued

• Proposed authorised capital. : 100 Crores

• Please furnish particulars and results of any application moved to this or any other Registrar previously for availability of name. : No

• Particulars of remittance of fee (Draft/I PD).: DD No. .. Date ..


Prepare the consent of our directors..

• Under Sections 264 (2)/266(1)(a) and 266(1)(b) (iii)]• SWARNA PVT. LTD.• Presented by : goti • To• The Registrar of Companies• I, the undersigned, hereby testify my consent to act as

director of the Limited pursuant to Section 264(2)/266(1)(a) of the Cohipanies Act, 1956 and certify that I have not been disqualified to act as a director under Sections 267 and/or 274 of the Companies Act, 1956.


Continued …• I, the undersigned, having consented to act as director of the

Limited, also hereby undertake to take from the said company and pay for shares of Rs 10000 each, being the number/value of the shares prescribed as tho qualification shares for the office of the director of the said company.

• Name and Surname in full and Address: goutam buchha• Occupation: CEO• Date of appointment : 1.1. 9• Nationality : indian • Signature• Father’s name• Dated the day of 20• Signature• Designation


Continued …• I, the undersigned, having consented to act as director of the Limited, also hereby

undertake to take from the said company and pay for shares of Rs each, being the number/value of the shares prescribed as tho qualification shares for the office of the director of the said company.

• Name and• Surname• in full and• Address• Occupation• Date of• Nationality• Signature• Father’s name• birth• 1 2 3 4 5 6• Dated the day of 20• Signature• Designation


Solve the following…• On 1st January, the Managing Director of Goti Ideas Ltd. wishes to

know the amount of working capital that will be required during the year. From the following information prepare the working capital requirements forecast. Production during the previous year was 60,000 unIts, It is planned that this level of activity would be maintained during the present year. The expected ratios of the cost to selling prices are Raw materials 60%, Direct wages 10% and Overheads 20%. Raw materials are expected to remain in store for an average of 2 months before issue to production. Each unit is expected to be in process for one month, the raw materials being fed into the pipeline immediately and the labour and overhead costs accruing evenly during the month. Finished goods will stay in the warehouse awaiting dispatch to customers for approximately 3 months. Credit allowed by creditors is 2 months from the date of delivery of raw material. Credit allowed to debtors is 3 months from the date of dispatch Selling price is $ 5 per unit. There is a regular production and sales cycle. Wages and overheads are paid on the 1st of each month for the previous month. The company normally keeps cash in hand to the extent of $.20,000.


Solution ….• Total sales (in $) 60000*5 = 300000• Purchase of raw material = 60% of 3 lakhs = 1,80,000• Stock of raw material = 180000*2/12 = 30000• Work in progress • Raw material = (1 month) = 15000• Labour & overhead (.5 month)= 3lakh*30/100*.5/12=3750 • Debtors = 3 lakh*3/12 =75000• Stock of finished goods (cost) : 3 lakh*3/12*90/100 =

67500• Outstanding wages & overheads: 3

lakhs*30/100*1/12=7500• Creditors: 180000*2/12* = 30000• Cash = 20000• 20000+ 30000+18750+67500+75000- 30000-7500= 173750.


Solve the following • The following annual figures relate to Goti Dental Care Ltd. .,• Rs. Sales (at two months’ credit) 36,00,000• Materiais consumed (suppliers extend two months’ credit)

9,00,000• Wages paid (monthly in arrear) 7,20,000• Manufacturing expenses outstanding at the end of the year

80,000• (Cash expenses are paid one month in arrear) -• Total administrative expenses, paid as above 2,40,000• Sales promotion expenses, paid quarterly in advance 1,20,000• The company sells its products on gross profit of 25% counting

depreciation as part of the cost of production. It keeps one months’ stock each of raw materials and finished goods, and a cash balance of Rs.1,00,000.

• Assuming a 20% safety margin, work out the working capital requirements of the company on cash cost basis. Ignore work-in-process.


Solution

• Raw material Stock = 9*1/12 = 75000• Finished goods stock = 25,80,000*1/12• =215000• Debtors =(25,80,000+240000+120000)*2/12 = 4,90,000• Sales promotion 120000*3/12 = 30000• Wages = 7,20,000*1/12 = 60,000 • Mfg. exp = 80,000• Creditors = 9*2/12 = 1,50,000 • Outstanding admn. Exp 240000*1/12 = 20000• Cash = 100000• Working capital (100+75+215+490+30 -60-80-20-

150)=6,00,000 answer.


Calculation of cost of production

• Material 900000

• Wages 720000

• Mfg. exp 80000*12 = 960000

• Total = 25,80,000


What is working capital ?

• The money required for day to day conduct of business is called working capital.

• There are two types of working capital:

• Gross working capital: total current assets

• Net working capital: Current assets – current liabilities.


Policies regarding working capital..


Conservative policy

• Here we keep a lot of working capital. Working capital also finances long term capital requirements. Thus level of working capital is very high.


Aggressive policy

• Here we keep very low level of working capital. We keep minimum inventory. (Just in time) and we keep minimum cash balances with us. We have a policy of cash sales and discourage credit sale


Quantum of working capital requirements?

• The requirements of working capital keeps fluctuating. During peak season (like Diwali in India and New Year in the USA), the requirements of working capital may be very high (due to high inventory, high cash requirements etc.).


Working capital requirements…


Analysis

• As we can see in the previous graph, the working capital requirements keep changing. Sometimes, it is very high, sometimes it is very low. When we require more working capital, we borrow additional money.

• We should finance a part of permanent working capital from term loan (WCTL).


What is working capital cycle?

• When we have cash, we buy raw material, we hire labour, get the goods manufactured, and send the goods to dealers. When goods are sold out, we are able to collect cash from this and thus working capital cycle is complete. (from cash to cash).


WC Cycle

Raw material

Labour, overhead etc.

Finished goods

Debtors

Cash


Operating cycle

• Working capital cycle is also called operating cycle:

• R+W+F +D-C• R = Raw material storage period (20 days)• W= work in progress period ( 30 days)• F = Finished goods storage period (10 days)• D = Debtors collection period (30 days)• C = Creditors collection period (30 days)• = total = 60 days operating cycle.


How much working capital is enough?

• Low working capital means risk of insolvency, lack of opportunity advantages etc.

• High working capital – means higher cost of funds, higher interest burden, lower return on investments.

• Therefore, keep proper level of working capital. (2:1 or 3:1).


Current assets?

• Debtors

• Cash

• Bank

• Inventory

• Accrued income.

• Prepaid expenses

• Bills receivable


Current liabilities

• CC account (cash credit loan) • Bank outstanding / overdraft• Creditors• Outstanding expenses• Bills payable. • Short term loans• Short term instruments • LC / Packing credit.


Kap & Goti UnLtd. Have Set up Amritneeram Trust,what is their

working capital ? • Advance payments to creditors : 10 days• Raw material stock : 15 days. • Work in progress time: 2 months• Finished stock stock time: 1 month• Debtors collection period: 1 month.Annual sales : 12 lakhs (all credit)• Annual purchase: 6 lakh. Other expenses:

3 lakhs Avg. Cash: .5 lakhs.


Solution

• Total operating cycle: 4 months and 25 days• Total current assets: • Debtors = 1 lakhs• Raw material stock = .25 lakhs• Stock = Finished stock : 9*1/12 = .75 lakhs• Cash = .5 lakhs• Advance payments to creditors: 16666• Work in progress: 9 * 2/12 = 1.5 lakhs• Total working capital requirements = 416666


Find the working capital • Goti Unimited is commencing a new project for manufacture of a plastic

component. The following cost information has been ascertained for annual production of 12,000 units which is the full capacity:

• Costs per unit (Rs.)• Materials 40 Direct labour and variable expenses 20• Fixed manufacturing expenses 6 Depreciation 10• Fixed administration expenses 80• The selling price per unit is expected to be Rs.96 and the selling expenses Rs.5

per unit. 80% of which is variable.• In the first two years of operations, production and sales are expected to be as

follows:• Year Production Sales• (No. of units) (No. of units)• 1 6,000 5,000• 2. 9,000 8,500• Stock = 2.25 month, WIP = Nil, Debtors : 1month,Cash 10000,Creditors 1 month

Creditors for exp. : 1 month.


Solution • Current assets: • Raw material stock : • (*6000*40*2.25/12) = 45000• Debtors = 5000*96*1/12= 40000• Stock of finished goods:(240+120+72+120+48) *1/6 = 1,00,000• Cash = 10000• Current liabilities : • Creditors 6000*40*1/12=20000• Admn. Exp. 12000*4*1/12=4000• Selling exp. 5000*4*1/12 = 1666• Fixed selling exp. 12000/12 = 1000• Labour 20*6000*1/12 = 10000• Manufacturing exp. 6*12000*1/12 = 6000• Working capital =(45000+40000+100000+10000)-

(20000+4000+1666+1000+10000+6000)• = 152334 answer.


Selling expenses

• 5*12000 = 60000

• 80% variable = 48000

• Fixed = 12000

• Rate of variable = 48000/12000 = 4 per unit.


Solve it • Goti International has been operating its manufacturing facilities till 31 .3.2006 on a single shift working with the following cost structure:• Per Unit• Rs.• Cost of Materials 6.00• Wages (out of which 40% fixed)• Overheads (out of which 80% fixed)• Profit• Selling Price• Sales during 2005-06 — Rs.4,32,000. As at 31 .3.2006 the company held:• Rs.• Stock of raw materials (at cost) 36,000• Work-in-progress (valued at prime cost)• Finished goods (valued at total cost)• Sundry debtors 1,08,000• In view of increased market demand, it is proposed to double production by working an extra shift. it is expected that a 10% discount will

be available from suppliers of raw materials in view of increased volume of business. Selling price will remain the same. The credit period allowed to customers will remain unaltered. ‘Credit availed of from suppliers will continue to remain at the present level i.e., 2 months. Lag in payment of wages and expenses will continue to remain half a month.

• You are required to assess the additional working capital requirements, if the policy to• increase output is implemented.• 5.00• 5.00• 2.00• 18.00• 22,000• 72,000


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Company Secretarial Practise 13 November

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Transcript of Company Secretarial Practise 13 November