Notification on Companies (Accounts) Amendment Rules, 2018

MINISTRY OF CORPORATE AFFAIRS

NOTIFICATION

New Delhi, the 27 February, 2018

G.S.R. (E).—In exercise of the powers conferred by sub-sections (1) and (3) of section 128, sub section (3) of section 129, section 133, section 134, sub section (1) of 136 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Accounts) Rules, 2014, namely:-

1. (1) These rules may be called the Companies (Accounts) Amendment Rules, 2018.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Accounts) Rules, 2014 (hereinafter referred to as the principal rules), in rule 10, the following proviso shall be inserted, namely:-

“Provided that the Companies which are required to comply with Companies (Indian Accounting Standards) Rules, 2015 shall forward their statement in Form AOC-3A.”.

3. In the principal rules, in the Annexure, after Form AOC-3, the following Form shall be inserted, namely:-

“FORM AOC-3A

Statement containing salient features of the financial statements

(Division II- Schedule III to the Companies Act, 2013)

(Pursuant to first proviso to sub-section (1) of section 136 of the Act and proviso to rule 10 of the Companies (Accounts) Rules, 2014)

Form of Abridged Financial Statements

Part I

Part II

Abridged Statement of Profit and Loss for the period ended ……

Part III

Abridged Cash Flow Statement

Notes to the Abridged Financial Statements

1. Complete Balance Sheet, Statement of Changes in Equity, Statement of Profit and Loss Statement of Cash Flows (wherever applicable) and other statements and notes thereto prepared as per the requirements of Division II to the Schedule III to the Act are available at the Company’s website at link Copy of financial statement is also available for inspection at the registered office of the company during working hours for a period of 21 days before the date of AGM.

2. The amounts to be shown here should be the same as shown in the corresponding aggregated heads in the financial statements as per Schedule III.

3. Amount, if material, by which any item shown in the financial statements are affected by any change in the accounting policy, should be disclosed separately.

4. The amount of contingent liabilities and that of commitments (to the extent not provided for) should be disclosed separately, as per Division II, Schedule III.

5. All notes forming part of the financial statements as per Schedule III to which specific attention has been drawn by the auditors or which form a subject matter of qualification by the auditor should be reproduced.

6. Any item which constitutes 20% or more of the total income or expenditure (including provisions) should be shown separately.

7. Notes shall include the notes, if any, contained in the financial statements pertaining to the following:

a Period and amount of defaults on the balance sheet date in repayment of borrowings (other than Trade Payables) and interest thereon.

b Business combination like Amalgamations, acquisitions, restructurings, and demergers during the Reporting period.

c Material events affecting the going concern assumption,

d Investigation and inspection conducted or ordered under the provisions of Companies Act, 2013.

e Non-compliance with any law during the Reporting period and the penalties imposed/compounding fees paid.

f Any other note considered significant by the management.

8. Disclosure of Related Party Transaction shall be made in terms of the requirements of Ind AS- 24.

9. Details of cash and cash equivalents shall be disclosed as follows:

a Balances with banks;

b Cheques, drafts on hand;

 c Cash in hand;

d Others( specify nature)

(Separate disclosure should be made for cash and cash equivalents earmarked for specific purposes).

10. Segment Reporting shall be in the same format/details as reported in audited financial statements.

The above stated salient features of the abridged financial statements should be authenticated in the same manner as the main financial statements.

DIRECTOR’S REPORT

Salient features of Director’s Report shall be disclosed.

Salient features shall include the following.

a) State of affairs of the company.

b) Details of Dividend declared.

c) Details of frauds, if any, reported.

d) Details of auditor’s qualifications and reply thereon.

e) Highlights of the company’s performances. These highlights shall be separately given for the companies material subsidiaries

CONSOLIDATED FINANCIAL STATEMENTS

Where a company is required to prepare Consolidated Financial Statements, i.e. consolidated balance sheet and consolidated statement of profit and loss, the company shall mutatis mutandis follow the requirements of Division II to the Schedule III of the Act, as applicable to a company in the preparation of balance sheet and statement of profit and loss. In addition, the consolidated financial statements shall disclose the information as per the requirements specified in the applicable Indian Accounting Standards (Ind AS) including the items specified at Serial numbers (1) and (2) under the heading “general instructions for the preparation of consolidated financial statements” contained in the said Schedule. The company should follow the above requirements mutatis mutandis while presenting the abridged consolidated financial statements.

AUDITOR’S REPORT

The Auditor’s report on unabridged financial statements shall also be attached along with this Abridged financial statements.

Note : To be certified in the same manner in which the Balance Sheet is to be certified.”.

[F. No. 1/19/2013-CL-V-Part]

K.V.R. Murty, Joint Secretary

Shell Companies: Option Available to Directors for Removal of Disqualification

As we all are aware that in September, 2017 the government of India steps up its fight against the black money. The Government of India with the help of Ministry of Finance, pushes ahead with the efforts to weed out shell companies (a term used for entities that have not been carrying out business for long and are allegedly used as conduit for illegal fund flows) has taken strict action against the shell Companies.

• The first action was against those Companies that prima facie appears to be non-functional (also called “Shell Companies”). On 5th September, 2017 around 208,800 Companies were struck off from the data base of the Registrar of Companies (RoC);

• The Ministry of Finance directed the branches of all the banks of those companies to restrict/stop the operation of the bank accounts of all such companies by their directors and authorized representatives;

• Third step involves action against the defaulting Directors of those all Companies that did not filed their Annual returns or financial statements for the past three years. After MCA direction around 3,09,614 directors has been barred to continue on the board of Directors of any company in which they are Directors for the next five years. After this action the Digital signatures of all the disqualified directors can’t be used in filing of any document like annual reports and Balance sheet documents will not to be accepted by concerned RoC with which Company is registered.

In this Article we will try to discuss on the option which are available to  an Individual Director (i.e. directors who has been barred to continue on the board of Directors of any company for the next five years) to remove his disqualification.

First of all let us understand the relevant provision of Section 164 (2) (a) of the Companies Act, 2013, which dealt with the ground of Disqualifications.

“A company in which the Director is a part of the Board has not filed financial statements or annual returns for any continuous period of three financial years.”

The Section provides for disqualification of directors if the company has not filed financial statements or annual returns for a continuous period of three financial years (non-compliance ground). Disqualification under Section 164(2)(a) results in automatic vacation of the office of the disqualified director, under Section 167.

Let us understand the options to come out from the disqualification available in all the above three situations:-

SITUATION NO-1:

WHERE THE AGRIEVED PERSON IS A DIRECTOR IN ONLY ONE COMPANY AND THE STATUS OF THE SAME IS “STRIKED OFF” AS PER MCA DATABASE;

Some people are having an opinion that disqualification of Directors can be removed by filing of application in DIR-10 with Central Government. However, the fact is that such application in DIR-10 can be file only at the end of the tenure of five years post his disqualification.’

Therefore, Filing of DIR-10 before completion of 5 year is not a way out  for removal of disqualification of director or to get rid from the status of disqualified Director.

Considering the situation it can be conclude at present, since there seems to be  no remedy available as per the Companies Act, 2013, a Writ Petition can be made by the aggrieved director under Article 226 of the Constitution of India in the absence of any alternate remedy available.

On 21.09.2017, the Madras High Court has passed an interim order staying the RoC Chennai’s order of disqualification of Bhagavan Das Dhananjaya Das as   the director of Birdies and Eagles Sports Technology, a Private Company.

SITUATION NO-2:

WHERE AGRIEVED PERSON IS A DIRECTOR IN A COMPANY AND THE STATUS OF SAME IS STILL ACTIVE AS PER MCA DATABASE;

To opt “The Condonation of Delay Scheme, 2018” announced by the Ministry of Corporate Affairs and which is active from 1st January 2018 to 31st March 2018.

All the Directors who were recently disqualified for failure to file MCA annual return can file MCA eCODS form 2018 to regularize compliance and avoid permanent disqualification for a period of 5 years.

Once all the overdue annual returns have been filed, form eCODS must be filed  by the Director before 31st March 2018. Important Note: Form eCODS will not be available for download on the MCA Portal until 20th February 2018. 

However, the Directors will be allowed to file the overdue MCA annual return from 1st January 2018. Hence, all overdue compliance can be completed before the release of eCODS form by the MCA. Once form is made available, the Directors would have to file eCODS form with the details of all overdue MCA annual returns filed along with a payment of Rs.30,000/-

SITUATION NO-3:

WHERE AGRIEVED PERSON IS A DIRECTOR IN MORE THAN ONE COMPANY AND THE STATUS OF ONE COMPANY IS ACTIVE AND OTHER IS STRIKED OFF AS PER MCA DATABASE;

Considering the situation it can be conclude at present, since there seems to be no remedy available as per the Companies Act, 2013, a Writ Petition can be made by the aggrieved director under Article 226 of the Constitution of India in the absence of any alternate remedy available.

Notification of Companies (Registered Valuers & Valuation) Amendment Rules, 2018

[TO BE REPUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY’ PART II’ SECTION 3, SUB-SECTION (i)l]

Government of India

Ministry of Corporate Affairs

Notification

New Delhi, the 9th February, 2018

G.S.R…….(E).- In exercise of the powers conferred by section 247 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules to amend the Companies (Registered Valuers and Valuation) Rules, 2017, namely:-

1.   (1) These rules may be called the Companies (Registered Valuers and Valuation) Amendment Rules, 2018.

(2)   They shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Registered Valuers and Valuation) Rules, 2017, in rule 11, for the figures, letters and word “31st March, 2018”, occurring at both the places, the figures, letters and word “30th September, 2018” shall be substituted.

[F.No.1/ 27/2013-CL-V Part)]

(K.V.R. Murty)

Joint Secretary to the Government of India

Companies (Share Capital and Debentures) 4th Amendment Rules,2016

MINISTRY OF CORPORATE AFFAIRS 

NOTIFICATION 

New Delhi, 12th August, 2016

G.S.R. 791(E).—In exercise of the powers conferred by sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Share Capital and Debentures) Rules, 2014, namely:—

1. (1) These rules may be called the Companies (Share Capital and Debentures) Fourth Amendment Rules, 2016.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Share Capital and Debentures) Rules, 2014, in rule 18, after Sub-rule (10), the following sub-rule shall be inserted, namely:-

“(11) Nothing contained in this rule shall apply to rupee denominated bonds issued exclusively to overseas investors in terms of A.P. (DIR Series) Circular No. 17 dated September 29, 2015 of the Reserve Bank of India.”.


[F. No. 01/04/2013-CL-V- Part-II]

AMARDEEP SINGH BHATIA, Jt. Secy


Note : The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, sub-section (i) vide number G.S.R. 265(E), dated 31st March, 2014 and subsequently amended vide notifications as detailed below:

Sl. No.	Notification number	Date
1.	G.S.R. 413 (E)	18.06.2014
2.	G.S.R. 210 (E)	18.03.2015
3.	G.S.R. 439 (E)	29.05.2015
4.	G.S.R. 841 (E)	06.11.2015
5.	G.S.R. 290 (E)	10.03.2016
6.	G.S.R. 358 (E)	29.03.2016
7.	G.S.R. 704 (E)	19.07.2016

Companies (Accounts) Second Amendment Rules, 2015

The Ministry of Corporate Affairs has issued rules dated 4th September, 2015 of the Companies (Accounts) Second Amendment Rules, 2015 to bring out necessary amendments in the interest of the stakeholders.

Please click on the below link to access the amendment rules.

Companies (Accounts) Second Amendment Rules, 2015

#Guidelines on #Investment in #Exchange Traded Funds with G Sec

Ref: IRDA/F&I/CIR/INV/156/08/2015                                                                         Date:28-08-2015

CIRCULAR

The CEOs of all lnsurers,

Sub: Guidelines on Investment in Exchange Traded Funds with G Sec Underlying (GILT-ETF)

Insurers are permitted to invest in the exhaustive asset classes under the provisions of Insurance Act, 1938, IRDA (Investment) Regulations, 2000, and guidelines issued there under.

GILT-ETF launched in India, has been after due consideration, permitted for Insurers to invest as a part of “Approved Investments”.

In line with investments in Mutual Funds under Gilt/G Sec./Liquid categories, subject to conditions prescribed by Cir: INV/GLN/003/2008-09, GILT-ETFs shall fulfil the following additional conditions:

The GILT-ETFs shall be issued and managed by the Mutual Funds registered under SEBI (Mutual Funds) Regulations, 1996, as amended from time to time. 

The object of the GILT-ETFs shall be to invest in a basket of Govt. Securities Actively Traded in the market or constituents’ of a publicly available index. 

The minimum investment by the Insurer shall not be less than Creation Unit size and shall not be reduced at any time below Creation Unit Size and value of Creation Unit Size, at the time of investment, shall not be more than Rs.50 lakhs. 

The Overall Expense Ratio shall be less than 0.50% of the daily net assets of the scheme. 

The Insurers to comply with the provisions of Sec 27E of the Insurance Act, 1938 shall ensure that the GILT-ETFs invest only in Domestic Govt. Securities.

The GILT-ETFs shall be treated at par with GILT/G SEC Mutual funds and shall adhere to exposure norms applicable to “Investment in Mutual Funds (MFs) by Insurance Companies“, as per Circular no. INV/CIR/08/2008-09 dated 22nd August, 2008, Circular No.INV/CIR/020/2008-09 dt.11th November, 2008 and Circular No. IRDA/F&I/INV/CIR/213/10/2013 dt. 30th October, 2013.

The Investments in GILT-ETFs shall be listed under Category Code “EGMF” for preparation of IRDAI Periodical Investment Returns. 

S N Jayasimhan

Joint Director (Investments)

National Company Law Tribunal #NCLT Constitution may get delayed

The government is likely to get delayed in notifying the provisions concerning the National Company Law Tribunal (NCLT) and its appellate body (NCLAT).

Till date, around 60 per cent of the Companies Act, 2013 — which has a total of 470 sections and seven schedules — has been notified and enforced. Most of the remaining provisions of the Act are related to NCLT, a body which would replace the existing Company Law Board (CLB), the Board for Industrial and Financial Reconstruction (BIFR) and assume the high court’s power on clearing mergers and acquisition (M&As) and amalgamation.

On May 14, the Supreme Court, in a case filed by the Madras Bar Association, upheld the constitutional validity of NCLT and NCLAT under the Companies Act, 2013. However, the court deemed the selection process of the members of NCLT and NCLAT under the applicable provisions of the new Companies Act as unconstitutional. As a result, the government will need to align the Companies Act, 2013, with the decision of the Supreme Court.

The government requires parliamentary approval to make necessary amendments or it can do the same by exercising the powers vested in it under Section 470 of passing the Removal of Difficulty Orders as per the process laid down therein.

In view of the above procedure, the actual constitution of NCLT, NCLAT may get delayed.

Explanation on charging depreciation for extra shift under CA 2013

There are  various views are possible for determining remaining useful life on transition from Schedule XIV to Schedule II if an asset has been used on double/ triple shift basis in past years.

For example, in the case of plant above, one view is that the asset has remaining Schedule II life of 12 years, i.e., 15 years – 3 years. The second view is that remaining Schedule II life of the plant is 9 years, i.e., 15 years –6 years (considering the plant was used on a triple shift basis on all days in the previous three years).

The third view is that remaining Schedule II life of the plant is 6 years, i.e., 15 years – 9 years (considering the plant was used on a triple shift basis on all days in previous three years and each shift is considered to depreciate the asset equally).”

The above extract say before charging depreciation on triple shift, the life of Assets should be reduced to half in second and third view. Argues are there whether to consider the same from the beginning of uselife of assets or for remaining uselife.

However, Note 5 to SCHEDULE II of Companies Act, 2013 says –

The useful lives of assets working on shift basis have been specified in the Schedule based on their single shift working. Except for assets in respect of which no extra shift depreciation is permitted (indicated by NESD in Part C above), if an asset is used for any time during the year for double shift, the depreciation will increase by 50% for that period and in case of the triple shift the depreciation shall be calculated on the basis of 100% for that period.

Cabinet Approved Amendments to the Companies Law

To improve the ease of doing business, the Cabinet approved amendments to the companies law that do away with a mandatory declaration by a firm before commencing business.

The changes have also been cleared to fast-track the approval process for draft notifications aimed at granting exemptions from various provisions of the Companies Act.

The amendments were approved at a meeting of Union Cabinet, chaired by Prime Minister Narendra Modi this morning, and are now part of the Companies (Amendment) Bill,2014.

The amendments include “doing away with the requirement for filing a declaration by a company before commencement of business or exercising its borrowing powers”.

Besides, they will rationalise “the procedure for laying draft notifications granting exemptions to various classes of companies or modifying provisions of the Act in Parliament, in order to ensure speedier issue of final notifications,”

Circular of Ministry of Corporate Affairs reg. Amounts Received by the Pvt. Companies

The Ministry of Corporate Affairs has issued a General Circular No. 5/2015 dated 30th March, 2015 to provide clarification on the amounts received by the private companies before the commencement of the Act which is as follows:

1.Stakeholders have sought clarifications as to whether amounts received by private companies from their members, directors or their relatives prior to 1st April, 2014 shall be considered as deposits under the Companies Act, 2013 as such amounts were not treated as ‘deposits’ under section 58A of the Companies Act, 1956 and rules made there under.

2.The matter has been examined in consultation with RBI and it is clarified that such amounts received by private companies prior to 1st April, 2014 shall not be treated as ‘deposits’ under the Companies Act, 2013 and Companies (Acceptance of Deposits) Rules, 2014 subject to the condition that relevant private company shall disclose, in the notes to its financial statement for the financial year commencing on or after 1st April, 2014 the figure of such amounts and the accounting head in which such amounts have been shown in the financial statement.

3. Any renewal or acceptance of fresh deposits on or after 1st April, 2014 shall, however, be in accordance with the provisions of Companies Act, 2013 and rules made there under.

Listed Companies mandatory to have Women Directors by 31st March 2015

The Securities and Exchange Board of India vide its circular dated 17th April, 2014 has made it mandatory for all the listed companies to appoint atleast one Woman Director on their Board of Directors by 31stMarch, 2015 in alignment with the requirement of Section 149 of the Companies Act, 2013, under corporate governance norms.

With just 10 days left to meet the deadline, SEBI is very serious on the compliance to these norms and has proactively sought the action initiated to ensure compliance with the aforesaid requirement for the companies that are yet to appoint a Woman Director on their board.

On behest of the SEBI, I request all my professional colleagues to apprise their Board of Directors to appoint atleast one Woman Director on their Board by 31st March, 2015, if not yet appointed, to comply with the aforesaid compulsory requirement of SEBI.

Clarification under Section 185/186 of the CA 2013 w.r.t Advancing Loans to Employees

The Ministry of Corporate Affairs has issued a general circular no 04/ 2015 dated 10th March,  2015 to provide clarification with respect to advancing loans to employees would attract Section 185 or 186 or not.

1.Ministry has received a number of references seeking clarification on the applicability of provisions of section 186 of the Companies Act, 2013 relating to grant of loans and advances by Companies to their employees.

2. The issue has been examined and it is hereby clarified that loans and/or advances made by the companies to thelr employees, other than the managing or whole time directors (which is governed by section 185) are not governed by the requirements of section 186 of the Companies Act, 2013. This clarification will, however, be applicable if such loans/advances to employees are in accordance with the conditions of service applicable to employees and are also in accordance with the remuneration policy, in cases where such policy is required to be formulated.

Availability of new e-Forms at MCA portal w.e.f 11th March, 2015

The Ministry of Corporate affairs has issued a General Notice to inform all the stakeholders regarding the availability of the certain new e-Forms on the MCA portal with effect from 11th March, 2015.

The following e-Forms shall be available:

Form MGT-3 : Notice of situation or change of situation or discontinuation of situation, of place where foreign register shall be kept {Section 88(4)}

Form MGT-15 : Filing of Report on Annual General Meeting to ROC. {Section 121(2)}

Form PAS-6 : Filing of private placement offer letter. {Section 42}

Form DPT-3 : Return of deposits to be filed with the Registrar.

{Section 74(1)}

in order to provide ease to the stakeholders the following forms can be downloaded under the forms tab on the MCA portal and are requested to plan according for the same.

Companies (Amendment) Bill, 2014 placed in the Parliament

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi approved the introduction of Companies (Amendment )Bill, 2014 in the Parliament to make certain amendments in the Companies Act, 2013.

The Companies Act, 2013(Act) was notified on 28.08.2013 and of the 470 sections in the Act, 283 sections and 22 set of rules corresponding to such sections have so far been brought into force. In order to address some issues raised by the stakeholders such as Chartered Accountants and professionals , following amendments in the Act have been proposed:

1. Omitting requirement for minimum paid up share capital, and consequential changes. (For ease of doing business)

2. Making common seal optional, and consequential changes for authorization for execution of doing business (For ease of doing business)

3. Prescribing specific punishment for deposits accepted under the new Act. This was left out in the Act inadvertently. (To remove an omission)

4. Prohibiting public inspection of Board Resolutions filed in the Registry. (to meet corporate demand)

5. Including provision for writing off past losses/depreciation before declaring dividend for the year. This was missed in the Act but included in the rules.

6. Rectifying the requirement of transferring equity shares for which unclaimed/unpaid dividend has been transferred to the IEPF even though subsequent dividend has been claimed.

7. Enabling provisions to prescribe thresholds beyond which fraud shall be reported to the Central Government (below the threshold it will be reported to the Audit Committee). Disclosures for the latter category also to be made in the Board’s Report.

8. Exemption u/s 185 (Loans to Directors) provided for loans to wholly owned subsidiaries and guarantees/securities on loans taken from banks bu subsidiaries.(This was provided under the Rules but being included in the Act as a matter of abundant caution)

9. Empowering the Audit Committee to give omnibus approvals for related party transactions on Annual Basis.(Align with SEBI Policy and increase ease of doing business)

10. Replacing ‘special resolution’ with ‘ordinary resolution’ for approval of related party transactions by non-related shareholders. (Meet problems faced by the large stakeholders who are related parties)

11. Exempt related party transactions between holding companies and wholly owned subsidiaries from the requirement of approval of non-related shareholders.

12. Bail restrictions to apply only for offence relating to fraud u/s 447. (Though earlier provision is mitigated, concession is made to Law Ministry &  Enforcement Directorate)

13. Winding up cases to be heard by 2-member bench instead of 3-member bench . (Removal of inadvertent error)

14. Special Courts to try only offences carrying imprisonment of two years or more.(To let magistrate try only minor violations)

Exemptions for Private Companies under Companies Act, 2013

The Ministry of Corporate Affairs has issued a draft notification which is being placed before both the Houses of Parliament to provide privileges and exemptions to Private Companies and to receive public comments till 1st July, 2014 in exercise of the powers conferred by subsection (2) of section 462 of the Companies Act, 2013, namely:

1. Chapter IV : Section 43 and 47 dealing with kinds of share capital and voting rights respectively.

2. Chapter IV : Clause (a) of sub-section (1) of Section 62 which deals with the time period for the Rights Issue and sub-section (2) of Section 62 which deals with the Employee Stock Options.

Words ‘not being less than fifteen days and not exceeding thirty days’ shall be substituted with ‘not being less than seven days and not exceeding fifteen days’

3. Chapter IV, clause (b) of sub-section (1) of section 62 Shall apply except that instead of special resolution, ordinary resolution would be required, which means that for Rights issue now ordinary resolution will suffice.

4. Chapter V, sub-section (2) of section 73 which deals with Prohibition on acceptance of Deposits shall not apply to private companies having 50 or less number of members if they accept monies from their members not exceeding twenty five per cent of aggregate of the paid up capital and free reserves or one hundred per cent of the paid up capital, whichever is more, and which inform the details of such monies to the Registrar in the prescribed manner.

5. Chapter VII, sections 101 to 107 dealing with the provision with respect to the General meetings and section 109, demand for poll shall apply unless

- otherwise specified in respective sections or

- unless articles of the private

company otherwise provide.

6. Chapter X, Clause (g) of sub-section (3) of section 141 Shall not apply in respect of

appointment of auditors by private companies.

7. Chapter XI, section 160 dealing with the rights of persons other than directors to satnd for directorships shall not apply.

8. Chapter XI, section 162 which deals with the Appointment of Directors to be voted individually shall not apply.

9. Chapter XII, Section 180 dealing with the restrictions on the powers of Board shall not apply to private companies having 50 or less number of members.

10. Chapter XII, section 185 dealing with the Loans to Directors shall not apply to Private

companies -

(a) which have borrowings from banks or financial institutions or any bodies corporate not more than twice of their paid up share capital or Rs. 50 crore,

whichever is lower; and

(b) in whose share capital no other body corporate has

invested any money”.

11. Chapter XII, section 188 dealing with Related Party Transactions shall not apply.

12. Chapter XIII, section 196, sub-section (4) and sub- section (5) which requires that the appointment of Managing Director, Whole time director or manager shall be subject to the approval of the members in the General Meeting shall not apply.

13. Chapter XIII, sub-section (3), section 203 which says that a Whole time Key Managerial Personnel shall not hold office in more than one company except in its subsidiary shall not apply.

The notification containing the above details can be accessed at the link given below.

Download

Circular for Applicability of PAN requirement for Foreign Nationals

General Circular No. 12 / 2014

F.No.1/12/2013 CL-V

Government of India

Ministry of Corporate Affairs

‘A’ Wing, 5th Floor, Shastri Bhawan,

Dr. Rajendra Prasad Road, New Delhi-110001

Dated: 22nd May, 2014

To

AlI Regional Directors,

All Registrar of Companies, All Stakeholders.

Sub: Applicability of PAN requirement for Foreign Nationals.

Sir,

Attention of Ministry has been drawn to difficulties being faced by Foreign Nationals while filing Incorporation form (INC-7) due to mandatory requirement of submission of PAN details of intending Directors at the time of filing the application for incorporation.

1. It is hereby clarified that PAN details are mandatory only for those foreign nationals who are required to possess “PAN” in terms of provisions of the Income Tax Act, 1961 on the date of application for incorporation. Where the intending Director who is a Foreign National is not required to compulsorily possess PAN, it will be sufficient for such a person to furnish his/her passport number, alongwith undertaking stating that provisions of mandatory applicability of PAN are not applicable to the person concerned. The form of Declaration is required to be made in the proforma enclosed.

2. This issues with the approval of Competent Authority.

Yours faithfully,

(KMS Narayanan)

Assistant Director Tel: 23387263

Encl. As Above

Copy to:

PSO to Secretary

PPS to Additional Secretary

PS to JS(M)/JS(B)/JS(SP)

DIR(AK)/DIR(AB)/DIR(NC)/DIR(PS)

Undertaking

I           (name) ________ , son of ______ (father’s name)                    citizen of

(nationality)_____ having passport No.____ (passport Number)                     declare as

under:

(i)                That I am not required under the provisions of Income Tax Act, 1961 to

obtain Income Tax Permanent Account Number (PAN);

(ii)             That in view of the above I have not been issued any PAN; and

(iii)           That I undertake to furnish to the Registrar of Companies (mention jurisdiction) details of my PAN as soon as a Permanent Account Number is issued to me.

Date:                                                                                                                                                     (Signature)

Rules under Companies Act 2013 Notified for 10 Chapters

The Rules under Companies Act 2013 have been notified and are available for quick download at the links below:

The list of notified rules is given below:

Chapter I-Companies (Specification of definition details) Rules 2014

Chapter II- Companies (Incorporation) Rules 2014

Chapter III- Companies (Prospectus and allotment of securities) Rules 2014

Chapter IV- Companies (Share Capital and Debentures) Rules 2014

Chapter VI -Companies (Registration of Charges) Rules 2014

Chapter VII- Companies (Management and Administration) Rules 2014

Chapter VIII- Companies (Declaration and Payment of Dividend) Rules 2014

Chapter IX- Companies (Accounts) Rules 2014

Chapter XI-Companies (Appointment and Qualification of Directors) Rules 2014

Chapter XII- Companies (Meetings of Board and its Powers) Rules 2014

Download

One time opportunity for extension of Period of Reservation of Name

General Circular No. 11/2014

MCA21/ 72/2014-e-gov.Cell

Government of India

Ministry of Corporate Affairs

“A” Wing, 5th Floor, Shastri Bhawan

Dr. R.P Road, New Delhi-110001

Date 12th May, 2014

To

All Regional Directors,

All Registrar of Companies, All Stakeholders.

Sub: – One time opportunity for extension of Period of Reservation of Name.

Sir,

Services for incorporation of companies were not available on the MCA21 portal to stakeholders from 1st April, 2014 to 28th April, 2014 because of the deployment requirements for new E-forms. Many stakeholders had reserved names for the purpose of Company incorporation with 60 days prescribed validity expiring during the above mentioned period. They could not avail of the 60 days prescribed period for using the name to complete the corresponding incorporation requirements due to the non-availability of services.

2. In view of this, the validity of reservation of all such names with due date of expiry

between 1st April, 2014 to 28th April, 2014 is hereby extended upto 31st May, 2014. All applicants whose cases fall in the above mentioned category may be advised to file relevant E-forms for incorporating companies under the Companies Act, 2013 well before the extended validity period. Yours faithfully,

(K S Narayanan)

Assistant Director Te1-23387263

1. PPS to Secretary

2. PPS to Additional Secretary

3. PPS to JS(R) I JS(B)/JS(M)/ DII(UCN)/D11(BNH)

4. PS to DIR(AB) & PS to DIR(NC) & DIR(PS).

Revised Exposure Drafts of Secretarial Standards With Respect To General and Board Meetings

REVISED EXPOSURE DRAFTS OF SECRETARIAL STANDARDS WITH RESPECT TO GENERAL AND BOARD MEETINGS FOR PUBLIC COMMENTS

(Last Date for comments: May 21, 2014)

Section 118(10) of the Companies Act, 2013 provides that every company shall observe Secretarial Standards with respect to General and Board Meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 and approved, as such by the Central Government. In the light of this, existing Secretarial Standards with respect to General and Board Meetings issued by the Council of the Institute are being revised as per the applicable laws.

Accordingly, the Secretarial Standards Board (SSB) of the Institute of Company Secretaries of India had revised its Secretarial Standard on Meetings of the Board of Directors (SS-1) and Secretarial Standard on General Meetings (SS-2) as per the new Act and Rules thereunder and hosted the Exposure Drafts thereon for public comments in the second week of April 2014.

Based on the public comments received and suggestions received from various quarters, SSB has now brought out Revised Exposure Drafts of the two Secretarial Standards namely Secretarial Standard on Meetings of the Board of Directors (SS-1) and Secretarial Standard on General Meetings (SS-2), comprehensively covering all aspects of the respective meetings viz. Physical Meetings of the Board of Directors, Meetings through Electronic Mode, Passing of Resolutions by Circulation, Conduct of Meetings, E-Voting, Passing of Resolutions by Postal Ballot and Minutes.

Based on the public comments received, these two Standards would be finalised and sent to the Central Government for their consideration and subsequent notification u/s 118(10).

The principal objective of the Secretarial Standards is integration, harmonisation and standardisation of diverse secretarial practices prevalent in the corporate sector. Further, Secretarial Standards seek to create template of highest order for corporates to follow, which addresses multiple grey areas in the law and incorporates Best Practices being followed by the corporates in the country, while simultaneously facilitating the professionals and benefitting the industry. Secretarial Standards do not substitute or supplant any existing laws or the rules and regulations framed thereunder but, in fact, supplement such laws, rules and regulations. In addition to the Secretarial Standards, requirements laid down under any other applicable law and rules and regulations needs to be complied with. In case of variations in any provision of the applicable laws and these Secretarial Standards, the stricter provisions need to be complied with.

In the light of the above, your specific comments or suggestions on the Exposure Drafts of on Secretarial Standard on Meetings of the Board of Directors (SS-1) and Secretarial Standard Secretarial Standards on General Meetings (SS-2) are solicited under following categories:

1. Drafting Errors or Improvements

Under this, we are concerned with deviations from the standard use of English as understood by a company. If you feel that the communication at any place is not effective or the standard is not clear and concise and can be improved kindly suggest the manner in which it should be expressed.

2. Areas not covered in law suggested to be covered in the Standard

Under this, we are concerned with situations where neither the Act nor the rules make provision to cover a given situation or the rules have not provided to make an exception where it is otherwise warranted.

3. Contradictions with the Act, Rules or Forms

Under this, you may point out any aspect of the standard which is not consistent with or contradicts any of the provisions of the Companies Act or Rules or Forms thereunder.

4. Contradictions with any other law

Under this, you may point out any aspect of the standard which is not consistent with or contradicts any of the provisions of any other Act or Regulations or Rules.

5. Multiple or diverse Interpretations of any part of the standard

The attempt of the standard is to have only one interpretation ie. the endeavour is to make the standard unambiguous. Kindly point out in this section, if you find any part of the standard which is capable of multiple or diverse interpretations or ambiguity.

6. Conflict with Judicial Pronouncements

Under this, you may point out if any part of the standard differs from or contradicts or is conflicting with any judgement of either the Supreme Court or High Court or any clarification by a regulatory authority like MCA, SEBI, stock exchange, etc.

7. Best Secretarial/ Industry Practices

Under this, you can share any good practices being followed by your organisation or industry, in respect of any of the areas which the standard seeks to cover, which removes the barriers that might have been hindering industry from complying with any of the provisions of the Act or Rules and/or facilitates better corporate governance.

8. Typical Situations/Scenarios not addressed in the Standard

Under this, you can list any critical issues or special circumstances encountered by you, which you consider are not addressed in the standard and which could be added.

9. Any other Suggestions not covered above

If you have any other suggestions or if you feel that the standard is not accurate or complete, you may respond under this. Otherwise, please confine your suggestions under the points enumerated above.

How to Issue of Bonus Shares as per Companies Act ?

There was no specific section under the Companies Act, 1956 dealing with Bonus Shares. Companies were following the norms prescribed by the Controller of Capital issues. Once SEBI came into existence and controller of Capital issues were abolished, unlisted Private Limited Companies and Public Limited Companies were free to issue Bonus Shares if there were sufficient reserves to match the issue of Bonus Shares. To bring in sanctity to the Issue of Bonus Shares, The Companies Act, 2013 has introduced Section 63 to deal exclusively with Bonus Shares . Unlike Issue of Sweat equity Shares, MCA has not specified any rules to comply with. Section 63 deals with five aspects.

i.       The source out which a Company could issue Bonus Shares,

ii.      The source out of which a Company cannot utilize for such issue,

iii.      The Secretarial formalities to be complied with and

iv.      The Companies who are not eligible to issue Bonus Shares

v.      Bonus Issue once issued cannot be withdrawn

i. THE SOURCE OUT OF WHICH BONUS SHARES SHALL BE ISSUED

The Company shall issue fully paid Bonus Shares out of any one of the following source:

a.   Free Reserves of the Company

b.   The Securities Premium Account

c.   The Capital redemption reserve Account

ii. SOURCE OUT OF WHICH THE COMPANY SHALL NOT UTILISE FOR THE PURPOSE OF ISSUE OF BONUS SHARES

a.    The Company shall not issue Bonus Shares by capitalizing reserve created out revaluation of Assets

b.    The Company shall not issue shares in lieu of Dividend.

iii. SECRETARIAL FORMALITIES TO BE COMPLIED WITH

In order to capitalize its profits or reserves for the purpose of issue of Bonus Shares the Company has to comply with the following :

a.    The Articles of Association of the Company should authorize such issue.

b.   The Board has to recommend the issue of Bonus Shares

c.    The Company in a general Meeting should authorize the issue of Bonus Shares

iv. COMPANY NOT ELIGIBILE IN ISSUING BONUS SHARES

A Company shall not be in a position to issue Bonus Shares if

a.   It has defaulted in repayment of deposit.

b.   It has defaulted deposit interest.

c.   It has defaulted in debt securities.

d.   It has defaulted in respect of payment of statutory dues of the employees viz., contribution to Provident fund, Bonus, gratuity.

e.   Any outstanding partly paid shares remains unpaid

v. BONUS ISSUE ONCE ANNOUNCED CANNOT BE WITHDRAWN

Under Section 63(2)(f) empowers the Central Government to stipulate fresh conditions to comply with as and when required for the issue of Bonus Shares.

One such condition presently notified is that the Bonus Issue once recommended by the Board and announced by the Company, it cannot be withdrawn subsequently.

COMPLIANCE CHECK LIST AND GENERATION OF VARIOUS DOCUMENTS AND REGISTERS DURING PRE AND POST ISSUE

Once the professional understands the requirements of Section 63 as stated above, he should then have the following ‘Compliance Check List’ which will enable him to prepare the required Documents/ registers during Pre and Post Issue of Bonus Shares

Compliance Check List

1. Source out of which the bonus issue is to be made

a. Current Profit ……..Value :

b. Current Reserves……Value:

c. Current Securities Premium Account….Value:

2. Quantum of Issue:

a. No of Shares

b. Nominal Value per share:

c. Total:

3. Intended Date of Board Meeting:

a. For alteration of Articles subject to the approval of the shareholders (if required)

b. For recommending the Issue

c. Convening of EGM

4. Intended Date of EGM for considering the alteration of Article if required and/or approval of the Bonus Issue:

5. Intended Date of Board meeting for the allotment of Bonus Shares:

PRE ISSUE WORK FOR THE ISSUE OF BONUS SHARES

Once the professional prepares the compliance checklist, he could then proceed to generate the following documents during the pre issue of Bonus Shares

a.  Draft Notice and the draft minutes of the Board Meeting for considering the following :

i. alteration of Articles (only when required)

ii. recommending the Bonus Issue

iii. convening of EGM

1. For alteration of Articles which do not provide for capitalization of reserves (only when required)

2. approving the Bonus Issue recommended by the Board.

b. Draft EGM Notice, explanatory Statement and the Minutes for considering the following special business

i. For alteration of Articles (which do not provide for capitalization of reserves)

ii. approving the Bonus Issue recommended by the Board.

c. Draft Notice and the Minutes of the Board Meeting for

i. Allotment of Bonus Shares

d. Filing of Form No 7.14 with the Registrar of Companies for registering the Special resolution (only when the Articles of Association is amended for making provision for capitalization of profits)

POST ISSUE OF BONUS SHARES

a. Preparation and Issue of Share Certificates in Format No.4.1

b. Making entries in the Register of Members in Format No.7.1

c. Making entries in the Register of Directors and Key Management Personnel and their Shareholdings asper Section 170

d. Filing Form No.3.3. with regard to Allotment of Bonus Shares

Conclusion

TWO ISSUES THAT NEED CLARIFICATION

The Following are the two contentious issues in Section 63 which needs attention of the Central Government

i. A Company cannot issue Bonus Shares if it has defaulted in repayment of deposits, interest on deposits, debt securities, and statutory dues like, PF, gratuity and Bonus. There is no definition for the word ‘default’ in the Companies Act, 2013. For instance, if a Company fails to pay PF in a particular month and subsequently pays in the next month, a default is committed. Whether such a Company can or cannot issue Bonus Shares? The words such as ‘defaulting’ or ‘Continuing Default’ are not used in the Section. What does the MCA want to convey? I do not think that there is a possibility of any 100% Non defaulting Companies to be in existence since Incorporation till its dissolution. Even a single day delay in payment of the above dues is a default. What mechanism we have to monitor such an event of default?

ii. Once the Board recommends, the Bonus issue cannot be withdrawn even if the members decide so. That means no revocation of the recommendations made by the Board of Directors is possible. In other words you are forcing the shareholders to accept the recommendation of the Board. So it is only a formality to seek approval of the Shareholders. Let us assume that the Bonus Issue is recommended by the Board and is rejected or not passed by the members in the EGM, the company still has to go ahead with the Issue of Bonus Shares by virtue of Section 63(2)(f).