The Companies' Profits (Workers' Participation) Act, 1968

Last Updated: Tuesday April 17, 2007

ANNEXURE I

MODEL PROCEDURE FOR THE MAINTENANCE OF ACCOUNTS OF WORKERS’ PARTICIPATION FUND

[See illustration of the Methods of Computation – Annexure II]

Company’s Allocation

1. Company’s allocation to the Fund at two and a half per cent of annual profits before tax (computed on the same basis as for computing the Managing Agency Commission) shall be made as soon as audited accounts are available. The allocation shall, however, be deemed to have been made3 on the first day of the account year next succeeding the one to which such profits pertain.

Valuation of Units

2. Units out of the company’s allocation shall in the first year of the application of the scheme by valued at Rs. 10 each and in subsequent years at the net asset value defined in paragraph 3.

3. The net asset value of the Fund shall be computed as at the close of each year of account (after the first) in the following manner:---

(i) For listed securities, the last reported sale price on a stock exchange shall be used and for unlisted securities break-up value shall be sued.

(ii) Securities purchased and awaiting payment against delivery shall be included as assets of the Fund, and the cash account adjusted.

(iii) Securities sold but not delivered pending receipt of proceeds shall be executed and the amount adjusted.

(iv) Cash in hand and with banks is to be valued at face amount. However, company’s allocation out of the profits pertaining to such year of account shall not be included but worker’s voluntary contributions received during the year shall be included as if received on the last day of the account year.

(Please see Example C in Annexure II)

4. The valuation of units shall be obtained by dividing the net asset value of the fund as obtained in paragraph 3 by the number of units existing at the commencement of the year of account (without inclusion of number of units to be issued in respect of company’s allocation out of profits for that year or units to be issued in respect of workers voluntary contribution received during the course of the year.

(Please see Example D in Annexure II)

Allocation of Compulsory Units

5. Compulsory units to be allocated each year out of company’s allocation from profits shall be computed as on the last day of each year of account in the manner laid down in paragraph 6 and shall be deemed to exist from the first day of the year of account next succeeding such year.

6. The mode of allocation shall be to divide company’s allocation first into units at the current net asset value (Rupees Ten in the first year) and then distribution of the units thus becoming available amongst the workers in such a manner that each worker in the first wage-slab (drawing monthly wages not exceeding Rs. 300 p. m.) gets three units for each two units that the worker in the next higher wage-slab (drawing monthly wages not exceeding Rs. 600 p. m.) gets and for each one unit that the worker in the highest wage-slab (drawing monthly wages exceeding Rs. 600 p. m.) gets.

(Please see Example A in Annexure II)

Allocation of Contributory Units

7. In respect of voluntary contribution received during the course of a year, workers shall get credit for 1¼ units for each one unit of contribution but at the close of such year and such contributory units shall be deemed to exist only on the first day of the year next succeeding the one during which contribution was made.

8. Allocation of contributory units shall be made out of the total number of units available as a result of allocation from company’s profits for the year and amount received in contribution from worker prior to the allocation of compulsory units.

(Please see Example A in Annexure II)

Distribution of Income

9. Income of the Fund through interest, divided or realized capital gain during the course of a year shall be divided amongst all workers at the end of the year in proportion to the number of units they hold as the commencement of such year.

(Please see Example B in Annexure II)

Distribution of Principal out of the Fund

10. On retirement, leaving employment, death, disability, termination of employment etc. or at the end of the period prescribed in paragraph 5 of the scheme (please see Schedule to the Act), the net asset value of the units held by the workers as at the commencement of the year during which such event occurs shall, subject to forfeiture provisions of the Act, be paid out to the worker or his nominee, as the case may be.

(Please see Example E in Annexure II)

Annexure III

Special provisions for undertakings operating for a part of the year

The Companies’ Profits (Workers’ Participation) Act, 1968

The Schedule (Scheme) [See section 2(e)]

The Companies’ Profits (Workers’ Participation) Rules, 1971