CS Professional:Secretarial Audit Compliance Management and Due Diligence [Ch-4 Search & Status Report]

INTRODUCTION TO SEARCH & STATUS REPORT

loan requirements have to be met frequently and by a number of individuals which brought forward Pari-Passu ranking.

charge created when security on property conferred on another person. in a value transaction,both parties evidence an intention of making assets available as security. the co. act,2013 provides for such charge registration with ROC and ROC in turn issues a certificate which is conclusive proof that charge creating doc is properly registered.

a charge duly recorded in MCA,acts as a red herring for prospective property acquirers.

S&S report helps lenders to assess the company's exact position in terms of compliance/ loan service history/charges created on co. property/registration status with ROC and potential standing @ liquidation.

it is a report furnished based on info gathered by a search of specific records available for inspecting in a public office. it isn't merely verbatim but also supplemented by observations/comments by a person furnishing reports/professionals which help throw additional light on certain points.

"search" involving physical inspection and "status" consisting of info reporting acting as a "progress report" giving ready reference

generally,banks demand search reports as they provide master data and assurance of not being defaulters in earlier loans/borrowings.

PURPOSES/OBJECTIVES

• traces property history
• charged/mortgaged assets
• extent of borrowed funds
• making lending/investment decisions
• overview on control/mgmt
• helps to make informed decisions
• insight into co.
• credit history
• rationale for quantum/security sufficiency/nature
• past charges

SCOPE AND IMPORTANCE

depends upon requirements and helps to take conscious decisions regarding loan/credit facility ensuring credit-worthiness.

1. BANKS
• basic tools to know customer viability
• knowing the current position of pledged assets
• date of loan taken
• charge holders
• loan amount
• property charged/pledged
• T&C of loan
2. DIRECTORS
• present directors
• assets and liabilities
• complete history per ROC records
3. SHAREHOLDERS
• status of co.
• status of shares
• directors
• complete history per ROC records
4. GOVT. AUTHORITIES
5. CUSTOMERS/SUPPLIERS

CHARGES under co. act,2013

Section 77 forms

• CHG-1=other than debentures
• CHG-9=debentures 
• on fee payment within 30 days of creation or as prescribed in co.(registration offices/fees) rules, 2014
• CHG-2=registration certificate
• CHG-3=charge modification
• [77(3)] only registered charges considered by liquidators
• [82] give intimation to ROC of payment/satisfaction within 30/300 days with fee CHG-4
• CHG-7=register of charges

SEARCH REPORT UNDER CO. ACT 2013

1. EXAMINATION OF PUBLIC DOCS REGISTERED ON MCA-21 PORTAL
• viewed only within 7 days after payment confirmation
• available for only 3 hours after the user has started viewing
2. inspection/cross-verification of various docs

apart from above,it also requires:

• thorough study of particulars relating to charge and related T&C
• security analysis
• charge comparison
• exact details of particulars of docs creating charges/modifications/satisfactions
• forms under co. act,2013
• The amount secured is duly mentioned
• mention the properties offered as securities per sanction
• lender details clearly mentioned
• doc affecting modification
• search report prep/compilation
• some banks/FI insist that search reports be given in their own format and that hes to be obliged with.

SEARCH REPORT UNDER IPR LAWS

WIPO=world intellectual property org.,divides IP into:

1. Industrial property, which includes inventions (patents), trademarks, industrial designs, and geographic indications of source
2. Copyright, which includes literary, artistic, dramatic and musical works such as novels, poems, lyrics, plays, films, drawings, paintings, photographs, etc. Rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and those of broadcasters in their radio and television programs.

conduct due diligence as tremendous worth is associated with intangible assets and potentially related risks

PROCEDURE FOR SEARCH:

• Preparing a checklist:info required to understand co. business and existing protected/protectable IP rights
• segregating relevant IP assets
• analysing all docs carefully
• verifying facts and confirming info
• drafting status and search report

KEY AREAS TO ANALYSE:

1. domestic/foreign/pending patents
2. appropriate steps to protect IP
3. material exceptions from assignments
4. registered/common law trademarks and service
5. copyrighted products and materials used/controlled/owned
6. co. business depends on maintenance of trade secrets and preservation
7. company infringing on 3rd party IP or vice-versa
8. involvement in IP litigation/disputes/received offers to license/demand letters

PROPERTY TITLE SEARCH

retrieving property rights history from the original owner and determining relevant interests. mandatory for developers to annex this copy in "agreement to sell" as it tells about the following:

• ownership
• deed copy
• legal description
• chain docs
• possession
• right of way
• leases/mortgages
• tax payment/bankruptcy
• municipal service liens
• restrictions
• plot map
• property zoning
• civil court record
• power of attorney/special assessment
• spousal/child support lien search

DOC EXAMINATION FROM REGULATOR'S WEBSITE

REGULATORS=MCA 21,SEBI,RBI,STOCK EXCHANGES AND OTHERS

general process to do inspection of public docs as under:

1. access MCA portal and login
2. click on "my documents"
3. company names displayed for which users have already paid
4. click on "view link" under status field
5. docs grouped under 5 categories,arrange name/date wise

this enables viewing public docs on fee payment

Section 85 : INSPECTION OF CHARGE REGISTER

mandatorily required to keep a charges register CHG-7 at Regstd. office and required to keep a copy open for inspection during business hours:

1. member/creditor without fee payment
2. another person with fee payment as prescribed subject to reasonable restrictions

DOC VERIFICATION

per rule 3(4) of co. (charge registration) rules,2014,following docs:

1. instrument/deed relates to property outside india,copy verified by certificate issued under co. seal by director/CS/unauthorized officer/charge holder
2. instrument/deed in India
3. particulars
• registration date
• doc date/nature creating charge
• charge amount
• property particulars
• nama/address of a person in whose favor
• modification effect
• satisfaction date
4. charge index prepared

general format=ANNEXURE 1

table for verifying CHG-1,4,9

SEARCH REPORT UNDER SEBI,RBI,STOCK EXCHANGES

procedure:

key docs analysed while preparing a report in case of PUBLIC ISSUES/RIGHT ISSUES/DEBT

TAKEOVERS/MUTUAL FUNDS/BUYBACKS/InvIT issues: offer docs/offer letters/ memorandums

STOCK EXCHANGE SEARCH REPORT

NSE is india's leading and fourth largest in world by equity trading volume in 2015 according to World Federation of Exchanges (WFE).it began operations in 1994 and ranked at largest stock exchange in terms of total/average daily turnover.

BSE is the first and largest indian securities market and established in 1875 as Native Share and Stock Brokers' Association.

KEY DOCS:

1. corporate announcements/actions
2. financial results
3. Board/Shareholders' Meetings docs
4. voting results
5. results calendar
6. shareholding patterns
7. corporate governance
8. disclosures
9. offer docs
10. info memos
11. pledge data
12. sustainability reports
13. buyback/redemption
14. public notice-compulsory delisting

check out ICSI study material for ANNEXURE 1 and other examples!