A Study on Recent Amendments in Companies Act, 2013
4/19/2019 Prepared by Divya Rajput, Sanjulata Jaiswal, Kanchan Kaku, Pranita Dalvi and Nagarjuna Kurelli
Genesis of Companies Act, 2013
The 1956 Act has been in need of a substantial revamp for quite some time now, to make it more contemporary and relevant to corporates, regulators and other stakeholders in India. While several unsuccessful attempts have been made in the past to revise the existing 1956 Act, there have been quite a few changes in the administrative portion of the 1956 Act. The most recent attempt to revise the 1956 Act was the Companies Bill, 2009 which was introduced in the Lok Sabha, one of the two Houses of Parliament of India, on 3 August 2009. This Companies Bill, 2009 was referred to the Parliamentary Standing Committee on Finance, which submitted its report on 31 August 2010 and was withdrawn after the introduction of the Companies Bill, 2011. The Companies Bill, 2011 was also considered by the Parliamentary Standing Committee on Finance which submitted its report on 26 June 2012. Subsequently, the Bill was considered and approved by the Lok Sabha on 18 December 2012 as the Companies Bill, 2012 (the Bill). The Bill was then considered and approved by the Rajya Sabha too on 8 August 2013. It received the President’s assent on 29 August 2013 and has now become the Companies Act, 2013. The changes in the 2013 Act have far- reaching implications that are set to significantly change the manner in which corporates operate in India. In this study report, we have encapsulated the major amendments of the companies act, 2013 and the potential implications of these changes.
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Table of Contents
1. COMMENCEMENT OF BUSINESS ...... 5 Extract of Section 10A. Commencement of business etc...... 5 SECTION 10 A- Commencement Of Business ...... 5 Fee for filing e-Form 20A: ...... 6 2. REGISTRATION OF CHARGES ...... 8 3. Siginificant Benefecial Ownership rules ...... 1 Background of SBO Rules ...... 12 Objectives of SBO rules ...... 13 Recent Amendments on SBO Rules ...... 13 Meaning of SBO ...... 13 SBO Rules ...... 14 How to determine direct holding ...... 14 How to determine indirect shareholding ...... 14 Meaning of few Key Terms ...... 16 Declaration by SBO ...... 16 Exemptions ...... 17 Application to the tribunal ...... 17 Order of Tribunal ...... 17 Penal Provisions ...... 18 3. Companies (Acceptance of Deposits) Amendments Rules, 2019...... 19 FAQs on Companies (Acceptance of Deposits) Amendments Rules, 2019:- ...... 26 4. The COMPANIES (AMENDMENT) ORDINANCE, 2019 ...... 28 Introduction ...... 28 What was the intention? ...... 28 The Amendments and Impact Thereof ...... 29 Re-introduction of Commencement of Business Declaration ...... 29 Significant Beneficial Ownership Disclosure ...... 29 Disqualification for Appointment of a Director ...... 29 Power of Regional Director to Compound Offences ...... 30 Re-Categorisation of Certain Offences ...... 30 Section 12 Registered Office of company ...... 32 Physical Verification of the Registered Office ...... 32 Registration of Charges ...... 35 5. INC- 22A: Active Company Tagging Identities and Verification (ACTIVE) ...... 37 Last date of Filing INC-22A: ...... 38
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INC-22A Form Filing Fees charged by MCA: ...... 38 Consequences of Non- filing INC-22A: ...... 39 Pre-requisites of the form INC-22A: ...... 39 Procedure for filing the Form INC-22A: ...... 40 Certification of Form INC-22A: ...... 40 Points to Remember before filing of Form INC-22A: ...... 41 The Companies (Prospectus and Allotment of Securities) Rules, 2014Rule 9A – Issue of Securities in dematerialized form by unlisted public Companies ...... 42 TReDS for MSME and Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019 ...... 45 Penalty for Non-Filing of Form MSME-1: ...... 47
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1. COMMENCEMENT OF BUSINESS
Declaration for Commencement of business is re-introduced by way of inserting a new Section 10A after section 10 of the Companies Act, 2013. The DETAIL of Section 10A is as follow;
Extract of Section 10A. Commencement of business etc.
(1) A company incorporated after the commencement of the Companies (Amendment) Ordinance, 2018 and having a share capital shall not commence any business or exercise any borrowing powers unless— (a) a declaration is filed by a director within a period of one hundred and eighty days of the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and (b) The company has filed with the Registrar a verification of its registered office as provided in sub-section (2) of section 12. (2) If any default is made in complying with the requirements of this section, the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees. (3) Where no declaration has been filed with the Registrar under clause (a) of sub-section (1) within a period of one hundred and eighty days of the date of incorporation of the company and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may, without prejudice to the provisions of sub-section (2), initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.]]
SECTION 10 A- Commencement of Business
MANDATORY TO OBTAIN CERTIFICATE OF COMMENCEMENT OF BUSINESS FOR REGISTERED COMPANIES: Companies registered on or after November 02, 2018 are required to file the declaration for commencement of business with the Registrar of companies *Time limit:* The declaration for commencement of business shall be filled within 180 days from the date of getting CERTIFICATE OF INCORPORATION.
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Fee for filing e-Form 20A:
1. In case of company have share capital Nominal Share Capital Fee applicable Less than 1,00,000 Rupees 200 1,00,000 to 4,99,999 Rupees 300 5,00,000 to 24,99,999 Rupees 400 25,00,000 to 99,99,999 Rupees 500 1,00,00,000 or more Rupees 600
2. In case of company do not have share capital: Rupees 200
Additional fee after 180 days from the date of Incorporation Period of delays Fees Up to 30 days 2 times of normal fees More than 30 days and up to 60 days 4 times of normal fees More than 60 days and up to 90 days 6 times of normal fees More than 90 days and up to 180 days 10 times of normal fees More than 180 days 12 times of normal fees
The ordinance was come into force on 2nd Nov 2018 therefore all the provisions of this section become applicable from 2nd November 2018. Therefore every company having share capital incorporated after 2nd November 2018 has to file form 20A with 180 days i.e. before 1st May 2019. The Ministry of Corporate affairs has launched the form 20A and it’s available on it portal.
CERTIFICATION OF FORM 20A This e-form 20A needs to be verified by a practicing professional i,e, (Company Secretary) CS / (Chartered Accountant) CA/ (Cost accountant) CWA. For any negligence or default in certification practicing professional shall be liable for face the consequences as per the PROVISION of section 448 and 449 of the companies Act, 2013.
VERIFICATION OF REGISTERED OFFICE – SEC-12(2) Declaration in E-form INC-20A by a director, also states a point i.e. point no – 4 that “The company has filed with the registrar a verification of its registered office as provided in subsection (2) of section 12”, now the question is who is required to file this verification with the registrar of companies and by what time period? While incorporation of company, in company incorporation form SPICE – INC-32, if you have selected option “No” in point 4(b) i.e. whether the address for correspondence is the address of registered office of the company, then you need to file verification of registered office with the registrar of companies within 30 days from the date of incorporation of the company.
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Verification shall be file in e-from inc-22 within 30 days from the date of incorporation.
Attachments of E-form INC-22: – (a) Proof of registered office – Rent Agreement/Lease agreement or Conveyance agreement (b) Copy of Utility Bill (not older than two months) – Electricity Bill/Water Bill/Telephone Bill (any one) (c) A proof that the Company is permitted to use the address as the registered office of the Company if the same is owned by any other entity/ Person – NOC from the owner of the premises (in case of rented premises) (d) List of all the companies (specifying their CIN) having the same registered office address, if any Documents Consequences Who Needs To When To Forms To Penal Required, If Of Non- Apply? Apply? Be Filed? Provision? Any? Filing? All Companies Compulsory Signed Copy A Company INC-20 A Company : Rs. Incorporated Compliance of Bank Cannot initiate and INC 22 50,000 on/after within 180 Statement of its business along with Director: Rs. 02ndNovember, days of Company, activity & also Govt. Fees. 1000 per day. 2018. Company Showing cannot Max. upto Rs. Registration. credit entries exercise any 1 Lac of borrowing subscription power. money.
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2. REGISTRATION OF CHARGES
The government with a aim to strengthen the enforcement of law against serious offences have formed Injeti Srinivas Committee (the“Committee”) on July 13, 2018, to make recommendations to the Government inter alia on re-categorization of certain ‘acts’ punishable as compoundable offences to ‘acts’ carrying civil liabilities, improvements to be made in the in-house adjudication mechanism, etc. To implement the recommendation of the Committee, Ministry of Law and Justice vide its ordinance dated November 2, 2018 have promulgated Companies (Amendment) Ordinance, 2018 (“Ordinance”) bringing amendments in 31 sections of the Companies Act, 2013 (the “Act”) being enforced from the even date. The amendment includes several essential elements related to corporate governance such as declaration of commencement of business, maintenance of registered office, restructuring of Corporate Offences to relieve Special Courts from adjudicating routine offences, De-clogging the NCLT, etc. The ordinance has been published in the Official Gazette and comes into effect from November 2, 2018. There will be probable effects of the Companies (Amendment) Ordinance, 2018 on the affairs of the Company; one such impact which drew our attention is Chapter VI pertaining to charges. The brief of the amendment along with the changes have been discussed below:
PRE AMENDMENT POST AMENDMENT IMPACT First and Second Proviso to First and Second Proviso to The period of 300 days Section 77 of the Section 77 Companies Act, for creation and Companies Act, 2013 2013 modification of charges under Section 77 of the has Provided that the Registrar Provided that the Registrar been reduced to 60 days i.e. may, on an application by may, on an application by the 30 days of normal filing the company, allow such company, allow such period and 30 days of registration to be made registration to be made additional fees. a) In case of charges created within a period of three The provision of seeking before the commencement of hundred days of such extension of time under the Companies (Amendment) creation on payment of such Section 87 as per second Ordinance, 2018 within a additional fees as may be proviso to section 77(1), is period of three hundred days prescribed: also modified, whereby a of such creation Provided further that if prohibitive ad valorem fees b) In case of charges created registration is not made based on the amount of on or after the within a period of three charge be levied for commencement of hundred days of such creation/modification of creation, the company shall the Companies (Amendment) charge beyond 60 days but Ordinance, 2018, within a seek extension of time in within 120 days period of sixty days of such accordance with section 87: creation. On payment of such additional fees as may be prescribed: Provided further that if registration is not made within the period specified- (a) In clause (a) to the first proviso, the registration of the charge shall be made
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within six months from the date of commencement of the Companies (Amendment) Ordinance, 2018, on payment of such additional fees as may be prescribed and diff fees may be prescribed for diff classes of companies (b) In clause (b) to the first proviso, the registrar may, on application, allow such registration to be made within a period of sixty days after payment of such advalorem fees
Section 86 of the Companies Section 86 of the Companies Reference to Section 447 of Act, 2013 Act, 2013 the Companies Act, 2013 has 86. Punishment for 86. (1) Punishment for been provided in case any contravention.—If any contravention.—If any person willfully furnishes any company contravenes any company contravenes any false or incorrect information provision of this Chapter, provision of this Chapter, the or knowingly suppress any the company shall be company shall be punishable material information, punishable with fine which with fine which shall not be required to be registered shall not be less than one less than one lakh rupees but under Section 77 of the lakh rupees but which may which may extend to ten lakh Companies Act, 2013 extend to ten lakh rupees rupees and every officer of and every officer of the the company who is in company who is in default default shall be punishable shall be punishable with with imprisonment for a term imprisonment for a term which may extend to six which may extend to six months or with fine which months or with fine which shall not be less than twenty shall not be less than twenty five thousand rupees but five thousand rupees but which may extend to one lakh which may extend to one rupees, or with both. lakh rupees, or with both (2) If any person willfully furnishes any false or incorrect information or knowingly suppresses any material information required to be registered in accordance with the provisions of Section 77, he shall be liable for action under Section 447.
87. Rectification by Central 87. Rectification by Central CG may provide relaxation in Government in register of Government in register of registration of charges on charges.— charges.— being satisfied on certain (1) The Central Government The Central Government on conditions:
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on being satisfied that— being satisfied that— a. Omission in giving (I) (a) the omission to file (a) the omission to give intimation to the ROC with the Registrar the intimation to the registrar of regarding satisfaction of particulars of any charge the payment or satisfaction of charge within the prescribed created by a company or any a charge, within the time time charge subject to which any required under this Chapter; b. Omission or misstatement property has been acquired or of an particulars w.r.t. any by a company or any (b) the omission such charge or modification modification of such charge; or misstatement of any of charge or w.r.t any or particulars with respect to memorandum of satisfaction (b) the omission to register any such charge or or other entry made u/s 82 or any charge within the time modification or with respect 83, was accidental or required under this Chapter to any memorandum of inadvertently made may or the omission to give satisfaction or other entry direct for extending the time intimation to the Registrar made in pursuance of section for intimating about the of the payment or the 82 or section 83, was satisfaction of charge and satisfaction of a charge, accidental or due to rectification of the within the time required inadvertence or some other misstatement or omission under this Chapter; or sufficient cause or it is not of made. (c) the omission or mis- a nature to prejudice the statement of any particular position of creditors or with respect to any such shareholders of the company, charge or modification or it may, on the application of with respect to any the company or any person memorandum of satisfaction interested and on such terms or other entry made in and conditions as it may pursuance of section 82 or seem to the Central section 83, was accidental or Government just and due to inadvertence or some expedient, direct that the time other sufficient cause or it is for the filing of the not of a nature to prejudice particulars or for the the position of creditors or registration of the charge or shareholders of the for the giving of intimation of company; or (ii) on any payment or satisfaction shall other grounds, it is just and be extended or, as the case equitable to grant relief, it may require, that the may on the application of omission or mis-statement the company or any person shall be rectified Clause (c) interested and on such terms has been omitted and conditions as it may seem to the Central Government just and expedient, direct that the time for the filing of the particulars or for the registration of the charge or for the giving of intimation of payment or satisfaction shall be extended or, as the case may require, that the omission or mis-statement
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shall be rectified. (2) Where the Central Government extends the time for the registration of a charge, the order shall not prejudice any rights acquired in respect of the property concerned before the charge is actually registered
Conclusion The aforesaid changes will ensure timely reporting of creation and modification of charges and will act as a check on laxity on the part of companies as well as creditors in timely reporting.
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3. Significant Beneficial Ownership rules
Background of SBO Rules
The concept of beneficial interest was introduced u/s 187C of the erstwhile Companies Act, 1956 which dealt with declaration of beneficial interest as replaced with Section 89 of the Companies Act, 2013 ("Companies Act, 2013"). Section 187C was introduced with an objective to declare the beneficial interest held by a person in a company. Likewise, Section 89 of the Companies Act, 2013 is a simple provision as far as compliance is concerned.
Section 90 of the Companies Act, 2013, which is similar to Section 187D of the erstwhile Companies Act, 1956 was substituted by the Companies (Amendment) Act, 2017, four years after the Companies Act, 2013 was notified. The SBO Rules clarifying the stance taken by the substituted Section 90 of the Companies Act, 2013 were only notified recently
The reason for substitution of Section 90 was to shift the onus from the Central Government (which was originally required to investigate and report the beneficial ownership of shares by any person) to the individuals to make necessary declaration to the company; and the company in turn is required to file the return of such declaration with the Registrar of Companies. This substitution is a welcome move by the Ministry of Corporate Affairs ("MCA") to ensure better governance and compliance by companies.
The reason for introduction of the SBO Rules read with Section 90 of the Companies Act, 2013 was to lift the corporate veil on significant beneficial ownership held by individuals by ensuring compliance with disclosure requirements. Yet entities in India are currently struggling to reach a consensus on the implications of such disclosure requirements and their applicability thereto.
While Section 89 of the Companies Act, 2013 deals with the declaration of "beneficial interest" in shares by the registered owner and the beneficial owner, the substituted Section 90 read with the SBO Rules deals with declaration of "significant beneficial ownership" by an individual. The provisions of Section 90 are also applicable in the event "significant influence" or "control" is exercised by such individuals over a company.
A harmonious interpretation of Section 89 and 90 of the Companies Act, 2013, would imply that Section 89 would be applicable when a person acquires any beneficial interest in the shares of a company irrespective of the holding, whereas Section 90 would become applicable only in the event the beneficial interest acquired by an individual is 10% or more.
Although the term "significant beneficial interest" is a newly introduced concept under the Companies Act, 2013, the term "beneficial interest" is an already existing concept prevailing under the Prevention of Money‐Laundering Act, 2002 ("PMLA Act") and the Rules framed there under. The PMLA Rules defines the term "beneficial interest" to mean "the natural person who ultimately owns or controls a client and or the person on whose behalf a transaction is being conducted, and includes a person who exercises ultimate effective control over a juridical person". Under the PMLA Rules, the intention of the Legislature for introducing the concept of "beneficial interest" was to include every natural person exercising
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ultimate effective control over a juridical person under its ambit. This is a slight contrast for the reason the Legislature introduced the concept of "significant beneficial interest" under the Companies Act, 2013
Upon interpretation of the PMLA Rules and the Companies Act, 2013, it can be observed that even though the PMLA Rules applied to "beneficial interest" held by a natural person in banking companies, financial institutions and intermediaries, thereby widening the scope of persons under its ambit, the term "significant beneficial interest" under the Companies Act, 2013 has narrowed down the term "beneficial interest" by setting a minimum holding of 10%, even though the expression refers to "significant" beneficial interest.
Objectives of SBO rules
1. To close loop on combating money Laundering 2. Transparency 3. The mandate of the rules is to “Look through” the entire maze of intermediate entities and identify the ultimate individual owners of the company 4. Identify individual who ultimately holding significant beneficial ownership
Recent Amendments on SBO Rules
MCA on 15th February, 2018, came out with draft of Companies (Beneficial Interest and Significant Beneficial Interest) Rules, 2018 On June 14, 2018, MCA issued the Companies (Beneficial Interest and Significant Beneficial Interest) Rules, 2018 (‘Final Rules’) and enforced section 90 of the Amendment Act. On Feb 8, 2019, MCA has notified the revised rules on SBO.
Meaning of SBO
Section 90 of Companies act, 2013
Every individual-
Who acting alone or together, or Through one or more persons or trust, including a trust and persons resident outside India, Holds beneficial interests, of not less than twenty-five per cent. or such other percentage as may be prescribed, in shares of a company or the right to exercise, or the actual exercising of significant influence or control as defined in clause (27) of section 2 of the Act.
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SBO Rules
SBO in relation to a reporting co. means an individual referred to in sub-section (1) of section 90, who acting alone or, together, or through one or more persons or trust, who possesses one or more of the following rights or entitlements in such co., namely:-
Holds indirectly, or together with any direct holdings, not less than ten percent of the shares; Holds indirectly, or together with any direct holdings, not less than ten percent of the voting rights in the shares; Has right to receive or participate in not less than ten percent of the total distributable dividend, or any other distribution, in a financial year through indirect holdings alone, or together with any direct holdings; Has right to exercise or actually exercises, directly or indirectly, significant influence or control, in any manner other than through direct holdings alone.
How to determine direct holding
An individual shall be considered to hold a right or entitlement directly in the reporting company, if he satisfies any of the following criteria
The shares in the reporting co. representing such right or entitlement are held in the name of the individual The individual holds or acquires a beneficial interest in the share of the reporting co. u/s 89(2), and has made a declaration in this regard to the reporting co.
How to determine indirect shareholding
Meaning of Hold ‘Right or Entitlement Indirectly” an INDIVIDUAL shall be considered to hold a right or entitlement directly in the reporting company, if he satisfies any of the following criteria, in respect of a member of the reporting company, namely:
A. Body Corporate Member: Where the member of reporting Company is a body corporate.
Note:
1. Whether incorporated or registered in India Or 2. Whether Incorporated or registered in abroad. 3. Other than a Limited Liability Partnership and
The Individual-
Hold majority stake in that Member (means such individual hold majority stake in that body corporate member); or Hold majority stake in the ultimate holding Company of that Member
“Majority Stake” means;-
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1. Holding more than one-half of the equity share capital in the body corporate; or 2. Holding more than one-half of the voting rights in the body corporate; or 3. Having the right to receive or participate in more than one-half of the distributable dividend or any other distribution by the body corporate.
B. HUF Member: Where the member of reporting Company is a HUF and individual is Karta of the HUF
C. Partnership Entity Member: Where the member of reporting Company is a Partnership Entity and the Individual
Note:
1. Firm is member through itself or 2. Firm is member through partners.
Is a partner; or
Holds majority stake in the body corporate which is a partner of the partnership entity; or Holds majority stake in the ultimate holding company of the body corporate which is a partner of the partnership entity;
D. Trust Member: Where the member of reporting Company is a Trust (through trustee) and the Individual
Is a trustee in case of a discretionary trust or a charitable trust; Is a beneficiary in case of a specific trust; Is the author or settler in case of a revocable trust.
E. Pooled Investment vehicle member: Where the member of the reporting company is,- (a) a pooled investment vehicle; or (b) an entity controlled by the pooled investment vehicle, based in member State of the FATF on Money Laundering and the regulator of the securities market in such member State is a member of the International Organization of Securities Commissions, and the individual in relation to the pooled investment vehicle,-
Is a general partner; or Is an investment manager; or Is a Chief Executive Officer where the investment manager of such pooled vehicle is a body corporate or a partnership entity.
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Meaning of few Key Terms
Majority Stake: Majority stake means:
Holding of more than 50% of the equity share capital in the body corporate; or Holding of more than 50% of the voting rights in the body corporate; or Having the right to receive or participate in more than 50% of the distributable dividend or any other distribution by the body corporate.
Person acting together:
1. If any individual, or individuals acting through any person or trust, act with a: Common intent; or Purpose of exercising any rights or entitlements; or Exercising control; or Significant influence,
2. Over a reporting company, pursuant to an agreement or understanding, formal or informal, such individual, or individuals, acting through any person or trust, as the case may be, shall be deemed to be 'acting together'.
Shares:
The instruments in the form of global depository receipts, compulsorily convertible preference shares or compulsorily convertible debentures shall also be treated as ‘shares’.
Declaration by SBO
Initial Disclosure:
Every individual who is a SBO in a reporting company is required to file a declaration in Form No. BEN-1 to the reporting company within 90 days from February 8, 2019.
Continual Disclosure:
Every individual, who subsequently becomes a SBO/ or where his significant beneficial ownership undergoes any change shall file a declaration in Form No. BEN-1 to the reporting company, within 30 days of acquiring such significant beneficial ownership or any change therein.
Clarification wrt becoming the SBO or any change therein during the transition time
Where an individual becomes a SBO, or where his significant beneficial ownership undergoes any change, within 90 days of the commencement of the Rules, it shall be deemed that such individual became the SBO or any change therein happened on the date of expiry of 90 days Page 16 of 47
from the date of commencement of said rules, and the period of 30 days for filing will be reckoned accordingly.
Exemptions
The rules are not applicable to the extent the shares of the reporting company are held by:
IEPF Authority It’s holding reporting company; however, the details of such holding reporting company shall be reported in Form No. BEN-2 The Central Government, State Government or any local Authority reporting co; or a body corporate; or an entity, controlled by the CG or by any SG or Gov or partially by the CG and partly by one or more SGs SEBI reg Investment Vehicles such as mutual funds, alternative investment funds (AIF), Real Estate Investment Trusts (REITs), Infrastructure Investment Trust (lnVITs) regulated by SEBI Investment Vehicles regulated by RBI, or IRDA, or Pension Fund Regulatory and Development Authority
Application to the tribunal
The Co. shall apply to the Tribunal within a period of 15 days of the expiry of the period specified in the notice -
1. Where that person fails to give the company the information required by the notice within the time Specified therein; or 2. Where the information given is not satisfactory
For an order directing that the shares in question be subject to
Restrictions with regard to transfer of interest, Suspension of the right to receive dividend; Suspension of voting rights; Any other restriction on all or any of the rights attached with the shares in question.
Order of Tribunal
The Tribunal may
After giving an opportunity of being heard to the parties concerned, make such order restricting the rights attached with the shares Within a period of sixty days 60 days of receipt of application or such other period as may be prescribed [section 90(7)]
The company or the person aggrieved by the order of the Tribunal may make an application to the Tribunal for relaxation or lifting of the restrictions placed by the Tribunal.
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Penal Provisions
Declaration of SBO
If any person fails to make the declaration, he shall be punishable with fine which shall not be less than 1 lakh rupees but which may extend to 10 lakh rupees and where the failure is a continuing one, with a further fine which may extend to 1000 rupees for every day after the first during which the failure continues.
Register of SBO
If a company, required to maintain register and file the information, fails to do so or denies inspection as provided therein, the company and every officer of the company who is in default shall be punishable with fine which shall not be less than 10 lakh rupees but which may extend to 50 lakh rupees and where the failure is a continuing one, with a further fine which may extend to 1000 rupees for every day after the first during which the failure continues.
False or incorrect information
If any person willfully furnishes any false or incorrect information or suppresses any material information of which he is aware in the declaration made under this section, he shall be liable to action under section 447 (which deals with punishment of fraud - imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud)
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3. Companies (Acceptance of Deposits) Amendments Rules, 2019
MCA on 22nd January, 2019 has published Companies (Acceptance of Deposits) amendment Rules, 2019 which came into force on 22nd January, 2019.
In exercise of powers conferred by clause (31) of section 73 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013, the Central Government in consultation with the RBI has amended the Companies (Acceptance of Deposits) Rules, 2014 through the Companies (Acceptance of Deposits) Amendments Rules, 2019 which came into force on January 22, 2019. According to the said amendment every company other than Government company shall file a onetime return of outstanding receipt of money or loan by a company but not considered as deposits, in terms of clause (c) of sub-rule 1of rule 2 of the Companies (Acceptance of Deposits) Rules, 2014 from the 01 April, 2014 to 22 January, 2019, as specified in Form DPT-3 within ninety days from the date of said publication of this notification along with fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.
Amendment in Rules Rules Amendment Effect of amendment Rule 16 of Explanation has been added to Form DPT-3 can be used for filing of theCompanies the Rule that : It is hereby details of exempted deposits. Earlier (Acceptance clarified that Form DPT-3 shall particulars of exempted deposits were of Deposits) be used for filing return of not required to mention in Form DPT-3 Rules deposit or particulars of transaction not considered as deposit or both by every company other than Government company. Rule 16A of Every company other than After reading the amendment, one can theCompanies Government company shall file opine that from 22nd January, 2019 a (Acceptance a onetime return of outstanding Company whether accepted loan from of Deposits) receipt of money or loan by a directors, body corporates or any other Rules company but not considered as exempted deposit shall file e-form DPT- deposits, in terms of clause (c) of 3. However earlier particulars of sub-rule 1 of rule 2 from the 01st exempted deposits were not required to
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April, 2014 to the date of mentioned in DPT-3. publication of this notification in the Official Gazette, as specified in Form DPT-3 within ninety days from the date of said publication of this notification along with fee as provided in the Companies (Registration Offices and Fees) Rules, 2014]
MCA vide its general circular 05/2019 dated 12th April, 2019, clarified that now Companies are required to file data with regard to exempted deposits upto 31st March, 2019 (as opposed to the publication of earlier notification date i.e 22nd January, 2019). Now, Companies are required to file data of exempted deposits for the period of 01st April, 2014 to 31st March, 2019, within 30 days from the deployment of a new version of DPT-3.
List of exempted Deposits:
As rule 2(c) of theCompanies (Acceptance of Deposits) Rules, 2014deposit" includes any receipt of money by way of deposit or loan or in any other form, by a company, but does not include:
i. any amount received from the Central Government or a State Government, or any amount received from any other source whose repayment is guaranteed by the Central Government or a State Government, or any amount received from a local authority, or any amount received from a statutory authority constituted under an Act of Parliament or a State Legislature ; ii. any amount received from foreign Governments, foreign or international banks, multilateral financial institutions (including, but not limited to, International Finance Corporation, Asian Development Bank, Commonwealth Development Corporation and International Bank for Industrial and Financial Reconstruction), foreign Governments owned development financial institutions, foreign export credit agencies, foreign collaborators, foreign bodies corporate and foreign citizens, foreign authorities or persons resident outside India subject to the provisions of Foreign
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Exchange Management Act, 1999 (42 of 1999) and rules and regulations made there under; iii. any amount received as a loan or facility from any banking company or from the State Bank of India or any of its subsidiary banks or from a banking institution notified by the Central Government under section 51 of the Banking Regulation Act, 1949 (10 of 1949), or a corresponding new bank as defined in clause (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or in clause (b) of section (2) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980) , or from a co-operative bank as defined in clause (b-ii) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934) ; iv. any amount received as a loan or financial assistance from Public Financial Institutions notified by the Central Government in this behalf in consultation with the Reserve Bank of India or any regional financial institutions or Insurance Companies or Scheduled Banks as defined in the Reserve Bank of India Act, 1934 (2 of 1934); v. any amount received against issue of commercial paper or any other instruments issued in accordance with the guidelines or notification issued by the Reserve Bank of India; vi. any amount received by a company from any other company; vii. any amount received and held pursuant to an offer made in accordance with the provisions of the Act towards subscription to any securities, including share application money or advance towards allotment of securities pending allotment, so long as such amount is appropriated only against the amount due on allotment of the securities applied for; Explanation. - For the purposes of this sub-clause, it is hereby clarified that - (a) Without prejudice to any other liability or action, if the securities for which application money or advance for such securities was received cannot be allotted within sixty days from the date of receipt of the application money or advance for such securities and such application money or advance is not refunded to the subscribers within fifteen days from the date of completion of sixty days, such amount shall be treated as a deposit under these rules. Provided that unless otherwise required under the Companies Act, 1956 (l of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or rules or regulations made thereunder to allot any share, stock, bond, or debenture within a specified period, if a company receives any amount by way of subscriptions to any
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shares, stock, bonds or debentures before the lst April,2014 and disclosed in the balance sheet for the financial year ending on or before the 3lst March,2014 against which the allotment is pending on the 3lst March,2015, the company shall, by the lst June 2015, either return such amounts to the persons from whom these were received or allot shares, stock, bonds or debentures or comply with these rules (b) Any adjustment of the amount for any other purpose shall not be treated as refund. viii. any amount received from a person who, at the time of the receipt of the amount, was a director of the company or a relative of the director of the Private company: ix. Provided that the director of the company or relative of the director of the private company, as the case may be, from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others and the company shall disclose the details of money so accepted in the Board's report; x. any amount raised by the issue of bonds or debentures secured by a first charge or a charge ranking pari passu with the first charge on any assets referred to in Schedule III of the Act excluding intangible assets of the company or bonds or debentures compulsorily convertible into shares of the company within 6[Ten years]: xi. Provided that if such bonds or debentures are secured by the charge of any assets referred to in Schedule III of the Act, excluding intangible assets, the amount of such bonds or debentures shall not exceed the market value of such assets as assessed by a registered valuer; xii. Any amount raised by issue of non-convertible debenture not constituting a charge on the assets of the company and listed on a recognised stock exchange as per applicable regulations made by Securities and Exchange Board of India. xiii. any amount received from an employee of the company not exceeding his annual salary under a contract of employment with the company in the nature of non-interest bearing security deposit; xiv. any non-interest bearing amount received and held in trust; xv. any amount received in the course of, or for the purposes of, the business of the company,- a. as an advance for the supply of goods or provision of services accounted for in any manner whatsoever provided that such advance is appropriated against supply of
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goods or provision of services within a period of three hundred and sixty five days from the date of acceptance of such advance: Provided that in case of any advance which is subject matter of any legal proceedings before any court of law, the said time limit of three hundred and sixty five days shall not apply: b. as advance, accounted for in any manner whatsoever, received in connection with consideration for an immovable property under an agreement or arrangement , provided that such advance is adjusted against such property in accordance with the terms of agreement or arrangement; c. as security deposit for the performance of the contract for supply of goods or provision of services; d. as advance received under long term projects for supply of capital goods except those covered under item (b) above: e. as an advance towards consideration for providing future services in the form of a warranty or maintenance contract as per written agreement or arrangement, if the period for providing such services does not exceed the period prevalent as per common business practice or five years, from the date of acceptance of such service whichever is less; f. as an advance received and as allowed by any sectoral regulator or in accordance with directions of Central or State Government; g. as an advance for subscription towards publication, whether in print or in electronic to be adjusted against receipt of such publications; Provided that if the amount received under items (a), (b) and (d) above becomes refundable (with or without interest) due to the reasons that the company accepting the money does not have necessary permission or approval, wherever required, to deal in the goods or properties or services for which the money is taken, then the amount received shall be deemed to be a deposit under these rules: Explanation. - For the purposes of this sub-clause the amount 4 &10[Omitted] shall be deemed to be deposits on the expiry of fifteen days from the date they become due for refund. xvi. any amount brought in by the promoters of the company by way of unsecured loan in pursuance of the stipulation of any lending financial institution or a bank subject to fulfillment of the following conditions, namely:-
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a. the loan is brought in pursuance of the stipulation imposed by the lending institutions on the promoters to contribute such finance; b. the loan is provided by the promoters themselves or by their relatives or by both; and c. the exemption under this sub-clause shall be available only till the loans of financial institution or bank are repaid and not thereafter; xvii. Any amount accepted by a Nidhi company in accordance with the rules made under section 406 of the Act. Explanation. - For the purposes of this clause, any amount.- a. received by the company, whether in the form of installments or otherwise, from a person with promise or offer to give returns, in cash or in kind, on completion of the period specified in the promise or offer, or earlier, accounted for in any manner whatsoever, or b. any additional contributions, over and above the amount under item (a) above, made by the company as part of such promise or offer, shall be considered as deposits unless specifically excluded under this clause d. ‘‘depositor’’ means, (i) any member of the company who has made a deposit with the company in accordance with the provisions of sub-section (2) of section 73 of the Act, or (ii) any person who has made a deposit with a public company in accordance with the provisions of section 76 of the Act; e. "eligible company" means a public company as referred to in sub-section (1) of section 76, having a net worth of not less than one hundred crore rupees or a turnover of not less than five hundred crore rupees and which has obtained the prior consent of the company in general meeting by means of a special resolution and also filed the said resolution with the Registrar of Companies before making any invitation to the Public for acceptance of deposits: Provided that an eligible company, which is accepting deposits within the limits specified under clause (c) of sub-section (1) of section 180, may accept deposits by means of an ordinary resolution; f. "fees" means fees as specified in the Companies (Registration Offices and Fees) Rules, 2014; g. "Form" or ‘e-Form" means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;
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h. "section" means section of the Act; i. "Trustee" means the trustee as defined in section 3 of the Indian Trusts Act, 1882 (12 of 1882). xviii. any amount received by way of subscription in respect of a chit under the Chit Fund Act, 1982 (40 of 1982); xix. any amount received by the company under any collective investment scheme in compliance with regulations framed by the Securities and Exchange Board of India; xx. an amount of twenty five lakh rupees or more received by a start-up company, by way of a convertible note (convertible into equity shares or repayable within a period not exceeding five years from the date of issue) in a single tranche, from a person. Explanation. - For the purposes of this sub-clause,- I. “start-up company” means a private company incorporated under the Companies Act, 2013 or Companies Act, 1956 and recognised as such in accordance with notification number G.S.R. 180(E) dated 17th February, 2016 issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry; II.”Convertible note” means an instrument evidencing receipt of money initially as a debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of the start-up company upon occurrence of specified events and as per the other terms and conditions agreed to and indicated in the instrument. xxi. any amount received by a company from Alternate Investment Funds, Domestic Venture Capital Funds, 13["Infrastructure Investment Trusts"] 14[Real Estate Investment Trusts] and Mutual Funds registered with the Securities and Exchange Board of India in accordance with regulations made by it.”.] (2) Words and expressions used in these rules but not defined and defined in the Act or in the Reserve Bank of India Act, 1934 (2 of 1934) or in the Companies (Specification of definitions details) Rules, 2014, shall have the meanings respectively assigned to them in the said Acts or in the said rules.
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FAQs on Companies (Acceptance of Deposits) Amendments Rules, 2019:-
1. Whether every company needs to file e-form DPT-3 as per rule 16A. EveryCompany (Whether, Small, Non Small, Private, Public, OPC, etc.) other than Government company, NBFC and banking Company is required to file DPT-3 after publication of these rules.
2. What is the meaning of “Particulars Not Considered as Deposit” as mentioned in explanation. Particular non considered as deposit: Whatever loan exempted under deposit rules and sections 73 shall be considered as particular of non-considered as deposit. Example- i. Loan from Director is exempted Deposit. However will be covered under this head. ii. Loan from shareholders in case of private Companies. iii. Loan from Body Corporates not considered as deposit. However covered under above head etc.
3. What is due date for filing of e-form DPT-3 in Rule 16A? Form DPT-3 shall be filed within 30 days of deployment of new version on form DPT-3 on MCA portal.
4. Whether DPT-3 required filing for Secured or Unsecured Loan or Both? Yes, DPT-3 required for filing for both secured and unsecured Loan.
5. Whether DPT-3 required for ECB received by Company? As per rule 16A DPT-3 required to file for each and every loan received by Company. Therefore, one can opine that if Company has received ECB in such case Company have to mandatorily file e-form DPT-3.
6. Outstanding Loan and outstanding receipt of money in relation to which period required to be report under this rule. Outstanding receipt of Money and Loan from 1st April, 2019 to 31st March, 2019 is required to be reported in e-form DPT-3.
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7. If Company received loan from Holding Company or Subsidiary Company or Associate Company. Whether company need to file DPT-3. As per rule 16A DPT-3 required to file for each and every loan received by Company. Therefore, Company required to file e-form DPT-3 even for loan received from Holding, Subsidiary and Associate.
8. If a company not having any outstanding loan or outstanding receipt of money as on 31.03.2019whether company need to file e-form DPT-3. As per rule 16A DPT-3 Every Company other than Government Company shall file a onetime return of outstanding receipt of money or loan by a company but not considered as deposits. Therefore, one can opine that in the above mentioned situation there is no need to file e-form DPT-3.
9. If some outstanding receipt of money or loan had become due before 01st April, 2014, still continuing and outstanding in record of Company. Whether such outstanding loan or receipt required to report in DPT-3. Form DPT-3 required to file for each and every loan received by Company outstanding as on 31.03.2019. Therefore, one can opine that such outstanding loan is required to report to ROC in e-form DPT-3.
10. If Company received loan after 01st April, 2014 but such loan is not outstanding as on 31.03.2019. Whether company need to report such loan in DPT-3. If Company has already paid Loan and such loan is not outstanding in record of Company. There is no need to inform such loan to ROC.
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1. The COMPANIES (AMENDMENT) ORDINANCE, 2019
Introduction
The Ministry of Law and Justice has come out with an Ordinance dated 2nd November, 2018, further amending 31 provisions of the Companies Act, 2013 (“Act”) based on the recommendations of the Committee formed by the Ministry of the Company Affairs (“MCA”) under the chairmanship of Mr.Injeti Srinivas to review the offences under the Act. The amendments have been made effective from 2ndNovember, 2018 and the same primarily focus on the current prosecution structure under the Act and re-categorization of offences which are technical defaults or procedural lapses as civil default and shift or transfer the proceedings of such case to in-house adjudication. The Article attempts to provide a detailed analysis of the amendments along with the impacts thereof.
As an Ordinance comes with an expiry date i.e. 6 weeks from the re-assembly of the Houses of the Parliament, it was necessary to pass the Ordinance by the Houses of the Parliament in order to imbibe the amendments in the Act. The re-assembly of the Houses of the Parliament started from 11th December, 2018 and continued till 8th January, 2019 and the Ordinance got its approval from the House of People on 4th January, 2019 but considering other exigent matters, it could not be taken up for passing by the Council of States.
Therefore, as the Ordinance will cease to operate on 21st January, 2019, so in order to have a continued effect of the amendments brought in by the Ordinance, the Ordinance have been repealed by Companies (Amendment) Ordinance, 2019 (“Ordinance, 2019”) on 12th January, 2019.
The write-up covers the snapshot of the changes brought in the Act by the Ordinance which is subsequently repealed and replaced by Ordinance, 2019.
What was the intention?
A Committee under the chairmanship of Mr.Injeti Srinivas formed by the Ministry of the Company Affairs ("MCA") gave their recommendations to relook the offences under the Companies Act, 2013 ("Act"). Consequently, The Ministry of Law and Justice had come out with an Ordinance dated 2nd November, 2018, further amending 31 provisions of the Act. Ordinance will cease to operate on 21st January, 2019. Since the Bill to make amendments to the Companies Act, 2013, is pending in the Rajya Sabha, the ordinance has been re-
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promulgated.Hence,the Government of India has re-promulgated an ordinance to amend the companies law to further implement the amended provisions of the Act.
The Amendments and Impact Thereof
Set forth below is an analysis of the key provisions of the Ordinance:
Re-introduction of Commencement of Business Declaration
The Ordinance has introduced Section 10A in the Act which mandates that every company incorporated after commencement of the Ordinance shall not commence business or exercise any borrowing powers unless it satisfies the following two conditions:(i) A declaration is filed by a director within a period of 180 days of the date of incorporation of the company with the Registrar in the prescribed form, stating that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making such declaration; and (ii) A declaration is filed by the Company with the Registrar furnishing verification of its registered office within a period of 30 days from its incorporation.
In case no declaration is filed within 180 days of incorporation and the Registrar has reasonable cause to believe that the Company is not conducting any business or operations, the Registrar may initiate the removal of the Company's name from the register of companies.
Significant Beneficial Ownership Disclosure
In case the rights of a shareholder have been suspended by the NCLT for not providing disclosure of beneficial interests as provided under the Act, the company or person aggrieved by its order may make an application to it for relaxation or lifting of restrictions within a period of 1 year from the date of order. In case no application is filed as prescribed herein, the underlying shares will be transferred to the Investor Education and Protection Fund.
Disqualification for Appointment of a Director
A new provision for disqualification of a person for appointment as a director has been introduced as per which if a person holds more than the total number of directorships allowed as per the Act, then he will be disqualified for being appointed as director of the Company. The Act allows a person to hold not more than 20 directorships, out of which directorship in public companies cannot exceed 10.
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Power of Regional Director to Compound Offences
Offences (excluding offences punishable with imprisonment or with imprisonment and fine), carrying maximum amount of fine not exceeding INR 25,00,000, will now be compounded by the Regional Director or any authorized officer of the Central Government. The earlier limit was up to INR 0.5 million only, and any matter beyond such limit had to be compounded by the NCLT.
Re-Categorisation of Certain Offences
Certain offences under the Act have been re-categorised as defaults carrying civil liabilities to bring them under an in-house adjudication mechanism. Some of the key provisions amended are as follows:
Relevant Old Penalty Amended Penalty Provision Issue of shares at a A fine ranging from INR 1-5 The company and every officer in discount by a lakhs and every officer in default default will be liable to a penalty upto company in was punishable with an amount raised through the issue of contravention of the imprisonment for a term upto 6 shares at a discount or INR 5 lakhs, Act. months or with fine ranging from whichever is less. The company will INR 1-5 lakhs. be liable to refund all monies received with interest at the rate of 12% p.a. from the date of issue of such shares to the persons to whom such shares have been issued.
Non-filing of annual Punishable with a fine not less The company and every officer in return by a than INR 50,000 and upto default will be liable to a penalty of company within the maximum of INR 5 lakhs and INR 50,000 and in case of continuing due date every officer of the company in failure, with further penalty of INR default was punishable with an 100 for each day during which such imprisonment for a term upto 6 failure continues, subject to a months or with fine not less than maximum of INR 5 lakhs. INR 50,000 and upto a maximum of INR 5 lakhs or with both.
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Failure/delay by a Punishable with fine of INR No change company in filing 1,000 for every day during which financial statement the failure continues but the total The managing director and the CFO of penalty not exceeding INR 10 the company, if any, and, in the lakhs. absence of the managing director and the CFO, any director responsible for The managing director and the complying with the relevant CFO of the company, if any, and, provisions, and, in the absence of any in the absence of the managing such director, all the directors of the director and the CFO, any company will be liable to a penalty of director responsible for INR 1 lakh and in case of continuing complying with the relevant failure, with further penalty of INR 1 provisions, and, in the absence of hundred for each day after the first day any such director, all the directors during which such failure continues, of the company, were punishable subject to a maximum of INR 5 lakhs. with imprisonment for a term extending upto six months or with fine of between INR 1-5 lakhs, or with both. Failure/delay in Penalty of INR 50,000 or the Penalty of INR 50,000 or an amount filing statement by remuneration of the auditor, equal to the remuneration of the the auditor after whichever is less but extending auditor, whichever is less and in case resignation upto INR 5 lakhs of continuing failure, a further penalty of INR 500 for each day after the first day, during which such failure continues, subject to a maximum of INR 5 lakhs.
Section 2(41) read with Rule 40 of Companies (Incorporation) (Fourth Amendment) Rules, 2018: (W.e.f. 02.11.2018 ) Rules Notified on 8.12.2018)
“Financial year”, in general financial year means the period ending on the31st day of March every year and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year.” Existing proviso has been substituted as; Provided that where a company or body corporate, which is a holding company or a subsidiary or Associate of a company incorporated outside
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India and is required to follow a different financial year for consolidation of its accounts outside India, the Central Government may, on an application made to Regional Director in Form RD-1, allow any period as its financial year, whether or not that period is a year;
All the applications pending before the Tribunal on the date 02.11.2018 shall be disposed by Tribunal in accordance with the previous rules
Section 12 Registered Office of company
Physical Verification of the Registered Office
Sub-section 9 to Section 12 has been introduced through the Ordinance. As per the same, if the Registrar has reasonable cause to believe that the Company is not carrying on any business or operations, he may cause a physical verification of the registered office of the Company in the prescribed manner. If any default is found to be made on such verification, the Registrar may initiate action for removal of the Company's name from the register of companies.
If the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may cause a physical verification of the registered office of the company and if any default is found he may initiate action for the removal of the name of the company for Registrar of Companies.
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SECTION 14 READ WITH RULE 41
Approval for Conversion of Public Company into Private Company
The Ordinance provides that any alteration of articles of association having the effect of conversion of a public company into a private company will not be valid unless it is approved by an order of the Central Government on an application made in a prescribed manner. Earlier, National Company Law Tribunal ("NCLT") was responsible for granting this approval. For applications pending with the NCLT as on the date of the Ordinance, NCLT only will be responsible for granting the approval.
Conversion of Company
Old Provision New Provision
File Application to File Petition to CG power NCLT delegated to RD in Form RD-1
Any application pending before tribunal shall be disposed off by it in accordance with the provisions applicable to it before such commencement.
Application needs to be made within 60 days of Special Resolution with fee as per CG Rules along with;
Declaration of two directors for No. of members and Deposits,
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For Creation / Filing Delayed Further Fee payable Modification of within Filing application Charge days
30 - - Normal filing fee
31-60 Upto 30 - Normal+ Additional fee as
Form CHG-1 for may be prescribed charge created 61+ 120 As the From to Normal+ additional fee up to after02.11.2018 date of case may the 12 times filing be RD/Centr Further 6 months provided 120 days + As above al Govt without applying for
Central condonation of delay Govt As may be ordered
30 270 - Normal+ additional fee up to 12 times Further 6 months provided For Charges without applying for created before condonation of delay 02.11.2018 300+ actual As the case Form CHG-8 to As may be ordered date of may be RD Filing of Form INC-28 Filing
Declaration by KMP/Director for compliance of sec. 73-76A, 177, 178,179(3)185, 186, 188 List of Creditors, Debenture holders not older than 30 days of filing application to the RD Publication of Advertisement in Form 25 atleast 21 days before application Service of notice by Regd. Post to creditors, debenture holders, RoC and regulating authority if any. RD may ask further information (upto 2 resubmission) in the Form RD-GNL 5 within 15 days RD shall approve the application within 30 days of submission of all information, he may call hearing in person
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Registration of Charges
Section 77 of the Act which talks about registration of charges has been amended through the Ordinance. As per such amendment, in case of charges created by the Company before November 2, 2018, the Registrar may on application by the company allow registration of the charge, within a period of 300 days of such charge creation. If the registration is not made within 300 days, the registration of the charge can be made within six months from the date of commencement of the Ordinance.
In case of charges created after November 2, 2018 the Registrar may on application by the Company allow registration of the charge within 60 days of such charge creation. If the charge is not registered within the aforesaid period, the registration shall be made within an additional period of 60 days after payment of such ad-valorem fees.
Section 77 - Duty to File Form Chg-1 for Creation /Modification of Charges
Revision in Form CHG-4
Filing Delayed Further Fee payable within Filing application days
30 - - Normal filing fee
31-300 As the case - Normal+ Additional fee as may Form CHG- may be be prescribed 4 for charge created after 300+ As the From to the As may be ordered 02.11.2018 case Central may be Govt Central Govt
30 Upto 30 - Normal+ additional fee without applying for For satisfied condonation of delay
before 60+ As the Form CHG-8 to As may be ordered Filing of 02.11.2018 actual case RD Form INC-28 date of may be filing
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Fine Replaced With Penalty
16 Cases: Fine by NCLT, Penalty by ROC / RD; 1. S. 53(3) – Prohibition on issue of shares at discount 2. S. 64(2) - Notice to be given to Registrar for alteration of share capital 3. S. 92(5) – Annual Return 4. S. 102(5) - Statement to be annexed to Notice 5. S. 105 - Proxies 6. S. 117(2) - Resolutions and Agreements to be filed 7. S. 121(3) -Report on annual general meeting
8. S. 137(3) - Copy of financial statement to be filed with Registrar 9. S. 140(3) - Removal, resignation of auditor and giving of special notice 10. S. 157(2) - Company to inform DIN to Registrar 11. S. 159 - Punishment for Contravention – in respect of DIN 12. S. 165(6) - Number of Directorships 13. S. 191(5) - Payment to Director for Loss of Office 14. S. 197(15) - Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits 15. S. 203(5) - Appointment of KMP 16. S. 238(3) - Registration of the offer of scheme involving transfer of shares
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2. INC- 22A: Active Company Tagging Identities and Verification (ACTIVE)
The ministry of corporate affairs (MCA) in its drive to tackle ‘letter box companies’ have unveiled the Companies (Incorporation) Amendment Rules, 2019 (the Amendment Rules) vide its notification dated 21 February 2019, thereby amending the provisions of Companies (Incorporation) Rules, 2014 (the Rules).
Background:
The government has launched a sustained campaign in the last four years against black money and has taken several bold steps including constitution of the special investigation team on black money, enactment of the ‘Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015’, income declaration scheme, 2016, Benami Transactions (Prohibition) Amendment Act, 2016 and the demonetization scheme. One such measure was the setting up of a task force in February 2017 by the prime minister’s office under the joint chairmanship of the revenue secretary and secretary, MCA.
Introduction:
The introduction of the amendment rules are part of the crackdown on shell companies. The new e-form INC 22A-ACTIVE introduced through the amendment rules will record the address of the registered office along with a photo of the registered office with the latitude and longitude of the place where registered office is situated. Basically the e-form enables geo-tagging, i.e. attaching data of the exact location of the office, it will allow the online return filing system to alert government officials wherever it detects that far too many companies are registered in the same premises, a trend noticed in past investigations into shell companies.
Analysis of the Amendment Rules
The analysis of the amendments brought in by the amendment rules has been reproduced hereunder:
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Applicability:
The rules shall come into force from 25 February 2019
Who shall file INC-22A?
Every Company Files Form INC- incorporated on ACTIVE 22A on or before or before 31st Compliant 25th April, 2019 December, 2017
Which companies are exempt from filing INC-22A?
Sl.No. Type of Companies
1. Struck off Companies (Whether by ROC or sue motto)
2. Companies under the process of Strike off
3. Companies under amalgamation
4. Companies Dissolved
Last date of Filing INC-22A:
The last date for filing INC-22A is 25thApril 2019.
INC-22A Form Filing Fees charged by MCA:
MCA is not charging any fees for the filing of INC-22A, if the form is filed by 25thApril, 2019. The practicing professionals who are certifying the form may charge their certification fees.
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Consequences of Non- filing INC-22A:
The company which do not file INC-22A shall be marked as ACTIVE- non- compliant with effect from 26th April 2019 and shall be liable to action under Section 12(9) of the Act, i.e. the Registrar may conduct a physical verification of the Registered Office and if any default is found, may initiate action for the removal of the name of the company from the Registrar of Companies.
Also, the defaulting company will be restricted from the filing of the following forms:
Sl.No. FORM NO.
1. SH-07 (Change in Authorized Capital)
2. PAS-03 (Change in Paid- Up Capital)
3. DIR-12 ( Change in Director, except Cessation)
4. INC-22 (Change in Registered Office)
5. INC-28 ( Amalgamation, de-merger)
Further, the directors of the company shall be marked as the “Directors of the ACTIVE- Non- Compliant”.
However, the company and its directors can revive its status of ACTIVE-Compliant, as soon as the compliances are done along with payment of late fees of Rs.10000/-
Pre-requisites of the form INC-22A:
Before filing the INC-22A, the company must ensure that all compliances with regard to the filing of Financial Statements (Section 137) and Annual Returns (Section 92) for the Financial Year 2017-18 have been made, unless the company is under the management dispute (as per Circular No. 19/2011 dated 02.05.2011) and the Registrar has recorded the same.
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Procedure for filing the Form INC-22A:
A. Active Fields i.e. fields to be filled:
1. CIN of the company 2. Latitude and Longitude details 3. E-mail id of the company 4. OTP received on the E-mail id provided 5. Whether a company is required to appoint a Cost Auditor (Yes/ No)? (Please note that only the aforesaid fields can be manually filled by the company, all other details shall be pre-filled)
Attachment with form INC-22A:
The only attachment required in the form is the photograph of any one of the Directors/KMP signing INC-22A. The photograph must be taken inside as well as outside the Registered Office showing the name and address of the Company. 2 standard images have been enclosed for the purpose of reference only.
Certification of Form INC-22A:
1. 2 Directors or 1 Director and 1KMP (1 Director in case of OPC) 2. Practicing CA/CS/CWA (CA shall be required to generate a UDIN for all the certifications made on or after 1stFebruary 2019)
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Points to Remember before filing of Form INC-22A:
1. Please ensure that the status of DIN of all the Directors is “Approved”.
2. Though as per the Proviso to Rule 25A, only 4 categories of companies as stated earlier is exempt from the filing of INC-22A, however, practically, the form as on date is not accepting the CIN of a Dormant Company.
3. All the details in the form are pre-filled except the few already mentioned earlier, which means that before the filing of INC-22A all other compliances shall be done at least for the Financial Year 2017-18 (Recommendation: Kindly update the filing status for all the years)
4. “Send OTP” button will automatically get activated after the form has been completely filled and no errors have occurred after clicking the “Check Form” option.
Once a company is marked as ACTIVE non-compliant, it would not be able to make changes to its capital structure or go ahead with merger or amalgamation deals.
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The Companies (Prospectus and Allotment of Securities) Rules, 2014Rule 9A – Issue of Securities in dematerialized form by unlisted public Companies
Background:
Section 29 of the Companies Act, 2013 requires a) Every public Company making public offer; and b) Such other class and classes of public companies as may be prescribed, to issue the securities only in dematerialized form.
In Pursuance to Section 29(b) of the Act, the Ministry of Corporate Affairs has notified the amendment in the Companies (Prospectus and Allotment of Securities) Rules, 2014 (the existing rules) effective 2 October, 2018. These rules shall be called as the Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2018 (the amended rules).
The MCA amended rules have inserted Rule 9A (the new rule) to the existing rules on 10th September, 2018. Pursuant to the new rule, every unlisted public Company shall issue securities only in dematerialized form and facilitate dematerialization of all its existing securities in accordance with the provisions of the Depositories Act, 1996 and regulations made there under.
An On January 2019, in the Companies (Prospectus and Allotment of Securities) Rules, 2014, in rule 9A, after sub-rule (10) a new sub rule (11) has being inserted
The rule is explained as follows:
(1) Every unlisted public company shall - (a) Issue the securities only in dematerialized form; and (b) Facilitate dematerialization of all its existing securities In accordance with provisions of the Depositories Act, 1996 and regulations made there under
(2) Every unlisted public company making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer shall ensure that before making such offer, entire holding of securities of its promoters, directors, and key managerial personnel has been dematerialized in accordance with provisions of the Depositories Act 1996 and regulations made there under. (3) Every holder of securities of an unlisted public company, _
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(a) Who intends to transfer such securities on or after 2nd October, 2018, shall get such securities dematerialized before the transfer; or
(b) Who subscribes to any securities of an unlisted public company (whether by way of private placement or bonus shares or rights offer) on or after 2nd October, 2018 shall ensure that all his existing securities are herd in dematerialized form before such subscription.
(4) Every unlisted public company shall facilitate dematerialization of all its existing securities by making necessary application to a depository as defined in clause (e) of sub- section (1) of section 2 of the Depositories Act, 1996 and shall secure International security Identification Number (ISIN) for each type of security and shall in-form all its existing security holders about such facility.
(5) Every unlisted public company shall ensure that _ (a) It makes timely payment of fees (admission as well as annual) to the depository and registrar to an issue and share transfer agent in accordance with the agreement executed between the parties;
(b) it maintains security deposit at all times, of not less than two years, fees with the depository and registrar to an issue and share transfer agent in such form as may be agreed between the parties; and
(c) it complies with the regulations or directions or guidelines or circulars, if any, issued by the securities and Exchange Board or Depository from time to time with respect to dematerialization of shares of unlisted public companies and matters incidental or related thereto.
(6) No unlisted public company which has defaulted in sub-rule (5) shall make offer of any securities or buyback its securities or issue any bonus or right shares till the payments to depositories or registrar to an issue and share transfer agent are made.
(7) Except as provided in sub-rule (s), the provisions of the Depositories Act 1996 the securities and Exchange Board of India (Depositories and participants) Regulations, 1996 and the securities and Exchange Board of India (Registrars to an Issue and share Transfer Agents)
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Regulations, 1993 shall apply mutatis mutandis to dematerialization of securities of unlisted public companies.
(8) The audit report provided under regulation 55A of the securities and Exchange Board of India (Depositories and participants) Regulations, 1996 shall be submitted by the unlisted public company on a half-yearly basis to the Registrar under whose jurisdiction the registered office of the company is situated.
(9) The grievances, if any, of security holders of unlisted public companies under this rule shall be filed before the Investor Education and protection Fund Authority.
(10) The Investor Education and protection Fund Authority shall initiate any action against a depository or participant or registrar to an issue and share transfer agent after prior consultation with the securities and Exchange Board of India
(11) This rule shall not apply to an unlisted public company which is:- (a) A Nidhi; (b) A Government company or (c) A wholly owned subsidiary.
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TReDS for MSME and Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019
Introduction:
On 2 November 2018, the Union government issued a notification under the Micro, Small and Medium Enterprises (MSMEs) Development Act, 2006 ostensibly to ensure timely and smooth flow of credit to MSMEs and minimise sickness among them.
Integration of companies having turnover more than Rs. 500 crores and all Central Public Sector Enterprises (CPSE) with the Trade Receivables Discounting System Platform (TReDS) setup by Reserve Bank of India.
The Central Government issued the instruction that every company registered under the Companies Act, 2013 and having turnover of more than Rs. 500 Crore and all Central Public Sector Enterprises (CPSE) shall be required to get themselves on boarded on the Trade Receivables Discounting System Platform (TReDS) setup by Reserve Bank of India.
Registrar of Companies (ROC) in each state for companies and Department of Public Enterprises for CPSEs shall be competent authority to implement and monitor the above instruction and ROC further instruct the Institute of Company Secretaries of India (ICSI) and In this regard, the Institute has received a communication from Ministry of Corporate Affairs (MCA) to advise Company Secretaries of such companies to ensure registration of such companies on the TReDS platform at the earliest and confirm compliance.
Furnishing of information about the payment to MSME suppliers:
Every Company who get supplies of goods and services from MSME and whose payment to MSME supplier exceeds 45 days from the date of acceptance or the date of deemed acceptance of the goods or services shall submit a half yearly return to the MCA stating the following:
a) the amount of payment due; and b) the reasons of the delay;
Specified Company means Every Company “Public or Private” who Received Goods or Services ‘from’ Micro or Small Enterprises ‘of which’ Payment Due or Not Paid till 45 days
Thus, in a nutshell
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1. Every Company which has received goods or services from Micro & Small Enterprise and 2. Payment is due/ not paid to such enterprise for 46 days from date of acceptance shall file in MSME Form I details of all outstanding dues to Micro or small enterprises suppliers existing on the date of notification of this order (i.e. 22nd January 2019) within thirty days from the date of publication of this notification – Means the Due date for First Return is 21st Feb, 2019 as explained below:
Period for which Due date of Filing Type of Return Time of Return return is to be filed MSME Form I Initial Return One Time Return Micro or small 21st February, 2019 enterprises suppliers existing on 22nd January, 2019 Subsequent Return Half Yearly April to September 31st October in each year Half Yearly October to March 30th April
What is Date of Acceptance?
(a) The day of the actual delivery of goods or the rendering of services; or
(b) where any objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day on which such objection is removed by the supplier;
What is Date of Deemed Acceptance? where no objection is made in writing by the buyer regarding acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day of the actual delivery of goods or the rendering of services;
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Penalty for Non-Filing of Form MSME-1:
Non-compliance will lead to punishment and penalty under the provision of the Companies Act. As per Penalty Provision of Section 405 (4) of the Companies Act, 2013 Fine will be as follows:
> On Company – upto Rs. 25,000
> On Directors, CFO and CS – Imprisonment – up to 6 Months
Or
Fine – not less than Rs. 25000 upto Rs. 300000 per person
Exemption to this Rule:
1. Form MSME-1 is not applicable in the case of Medium Enterprises;
Manufacturing Sector Service Sector (Investment Particulars (Investment in plant & in equipment) machinery)
Medium Enterprises More than Rs. 5 Crore but More than Rs. 2 Crore but does not exceed Rs 10 Crore does not exceed Rs.5 Crore
2. This Rule applicable only for those Specified Companies whose payment to Micro & Small Enterprises exceed 45 days from the date of acceptance or the date of deemed acceptance of the goods or services as per the provisions of section 9 of the MSME Development Act, 2006;
3. If payment Exceed 45 days but supplier/Creditors given a declaration that they do not fall under Micro or small Enterprises.
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