Company law amendments - CS Executive 2021 Dec exams
Lesson 1-Introduction to Company Law 1) Details of Changes: The Central Government has been empowered to exclude certain companies, based on listing of certain securities on recognized stock exchanges, as provided by rules, in consultation with SEBI from the definition of listed companies.
2) Details of Changes The MCA for the Ease of doing Business has revised the definition of Small companies by increasing their threshold limits for paid up capital from “not exceeding Rs. 50 Lakhs” to “not exceeding Rs. 2 Crore” and turnover from “not exceeding Rs. 2 Crore” to “not exceeding Rs. 20 Crore”. 3) Rule 2A- Companies not to be considered as listed companies, namely:- a) Public companies which have not listed their equity shares on a recognized stock exchange but have listed their – (i) non-convertible debt securities issued on private placement basis in terms of SEBI (Issue and Listing of Debt Securities) Regulations, 2008; or (ii) non-convertible redeemable preference shares issued on private placement basis in terms of SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013; or (iii) both categories of (i) and (ii) above. b) Private companies which have listed their non-convertible debt securities on private placement basis on a recognized stock exchange in terms of SEBI (Issue and Listing of Debt Securities) Regulations, 2008; c) Public companies which have not listed their equity shares on a recognized stock exchange but whose equity shares are listed on a stock exchange in a jurisdiction as specified in Section 23(3) of the Companies Act, 2013.
Lesson 2: Share and Share Capital
Details of Change This Amendment prescribes the minimum time period for which the offer for further issue of shares to existing shareholders for acceptance to be kept open, which shall not be less than seven days from the date of offer (OLD 15 DAYS)
Lesson 3: Members and Shareholders “Declaration in Respect of Beneficial Interest in any Share”- In Section 89 of the Companies Act, 2013, a new sub-section 11 has been inserted which enables the Central Government to exempt any class or classes of persons from complying with any of the requirements of this section pertaining to Declaration in Respect of Beneficial Interest in any Share, except Section 89(10), if it is considered necessary to grant such exemption in the public interest and any such exemption may be granted either unconditionally or subject to such conditions as may be specified
Lesson 6- Distribution of Profits – Dividend (penalty change)
Unpaid amount transfer to IEPF If a company fails to comply with any of the requirements of Section 124, such company shall be liable to a penalty of one lakh rupees and in case of continuing failure, with a further penalty of five hundred rupees for each day after the first during which such failure continues, subject to a maximum of ten lakh rupees and every officer of the company who is in default shall be liable to a penalty of twenty-five thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees.
Lesson 7- Corporate Social Responsibility 1) Clarification on spending of CSR funds for Awareness and public outreach on COVID-19 It was clarified that spending of CSR funds for COVID-19 is an eligible CSR activity, it is further clarified that spending of CSR funds for carrying out awareness campaigns/programmes or public outreach campaigns on COVID19 Vaccination programme is an eligible CSR activity under item no. (i), (ii) and (xii) of Schedule VII of the Companies Act, 2013 relating to promotion of health care, including preventive health care and sanitization, promoting education, and, disaster management respectively.
(a) Amendments to Provisions on CSR Spending Board of every company shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy. Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities: Provided further that if the company fails to spend such amount, the Board shall, in its report made under is required to specify the reasons for not spending the amount and, unless the unspent amount relates to any ongoing project , transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year. Section 135(6) Any amount remaining unspent under Section 135(5), pursuant to any ongoing project, fulfilling such conditions as may be prescribed, undertaken by a company in pursuance of its Corporate Social Responsibility Policy, shall be transferred by the company within a period of thirty days from the end of the financial year to a special account to be opened by the company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social Responsibility Account, and such amount shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility Policy within a period of three financial years from the date of such transfer, failing which, the company shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of completion of the third financial year.
The amended Section 135(7) is as under: If a company is in default in complying with the provisions of sub -section (5) or sub -section (6) of the Companies Act, 2013, the company shall be liable to a penalty of twice the amount required to be transferred by the company to the Fund specified in Schedule VII or the Unspent Corporate Social Responsibility Account, as the case may be, or Rs.1 crore, whichever is less, and Every officer of the company who is in default shall be liable to a penalty of one -tenth of the amount required to be transferred by the company to such Fund specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or Rs.2 Lakhs, whichever is less.
Section 135(8) The Central Government is empowered to give such general or special directions to a company or class of companies as it considers necessary to ensure compliance of provisions of section 135 and such company or class of companies shall comply with such directions.
(b) Set off of excess spending on CSR "Provided also that if the company spends an amount in excess of the requirements provided under this such company may set off such excess amount against the requirement to spend in next three succeeding financial years and in such manner, as may be prescribed."
Exemption for CSR committee Where the amount to be spent does not exceed Rs. 50 Lakh, the requirement for constitution of the Corporate Social Responsibility Committee shall not be applicable and the functions of such Committee shall be discharged by the Board of Directors of such company. clarrification on activity for vaccine development
Any company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business may undertake research and development activity of new vaccine, drugs and medical devices related to COVID-19 for financial years 2020- 21, 2021-22, 2022-23 subject to the conditions that-
(a) such research and development activities shall be carried out in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act; (b) details of such activity shall be disclosed separately in the Annual report on CSR included in the Board’s Report;
Administration expenses - 5% of CSR amt to be spend spending of CSR funds for 'setting up makeshift hospitals and temporary COVID Care facilities ' is an eligible CSR activity relating to promotion of health care, including preventive health care, and, disaster management respectively. The companies may undertake the aforesaid activities in consultation with State Governments subject
Lesson 8- Accounts, Audit and Auditors A new section 129A has been inserted to empower the Central Government to provide by rules such class or classes of unlisted companies to prepare periodical financial results of the company, audit or limited review thereof and their filing with Registrar of Companies within 30 days of completion of the relevant period as specified in the rules. As per the amendment some of the Additional disclosures which are also required to be made, including:
Disclosure of Shareholding of Promoters Trade Payables ageing schedule Reconciliation of the gross and net carrying amounts of each class of assets Trade Receivables ageing schedule Detailed disclosure regarding title deeds of Immovable Property not held in name of the Company. Disclosure regarding revaluation & Capital-Work-in Progress (CWIP). Intangible assets under development. Loans or Advances granted to promoters, directors, KMPs and the related parties Details of Benami Property held Reconciliation and reasons of material discrepancies, in quarterly statements submitted to bank and books of accounts Disclosure where a company is a declared wilful defaulter by any bank or financial Institution Relationship with Struck off Companies Pending registration of charges or satisfaction with Registrar of Companies Compliance with number of layers of companies Disclosure of 11 Ratios Compliance with approved Scheme(s) of Arrangements Utilisation of Borrowed funds and share premium Undisclosed Income Disclosure regarding Corporate Social Responsibility Details of Crypto Currency or Virtual Currency
Accounting software Postponed the mandatory applicability for maintaining the Books of Accounts by every Company in an accounting software which has a feature of recording audit trail (edit log) facility by one year. It is now applicable from April 01, 2022 instead of April 01, 2021 notified earlier.
Board Report includes “(xi) the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 during the year along with their status as at the end of the financial year. (xii) the details of difference between amount of the valuation done at the time of one-time settlement and the valuation done while taking loan from the Banks or Financial Institutions
Lesson 9 –Transparency and Disclosures Annual Return of opc \small co. Central Government to prescribe abridged form of annual return for One Person Company, small company and such other class or classes of companies as may be prescribed. Annual return of opc\ small co shall be in the form of mgt7A rather than Mgt7 from 2020 onwards
Lesson 12-An Overview of Corporate Reorganization Merger or amalgamation under section 233 of the Companies Act, 2013 (fast track mergers through relatively simpler procedure) between any of the following class of companies, namely:- (i) two or more start-up companies; or (ii) one or more start-up company with one or more small company.
Lesson 13- An Introduction to MCA- 21 and filing in XBRL MCA has revised Form (INC-35) AGILE PRO to include the option to perform Aadhar authentication for GSTIN registration at the time of incorporation of Companies. The Central Government has established a Central Scrutiny Centre (CSC) for carrying out scrutiny of Straight Through Processes (STP) e-forms filed by the companies under the Companies Act, 2013 and the rules made thereunder which has come into force from March 23, 2021.
The CSC shall function under the administrative control of the e-governance Cell of the Ministry of Corporate Affairs. It shall carry out scrutiny of the aforesaid forms and forward findings thereon, wherever required,
Lesson 17: Appointment and Remuneration of Key Managerial Personnel Managerial remuneration in case of inadequate profit new table announced
Appointment of the number of judicial and technical members in the Appellate Tribunal by the Central Government has been removed. 2021-22, for OPCs. Amendment has been introduced w.r.t. Allowing non-resident Indians to incorporate OPCs in India, Reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days, Thresholds limit of Paid-up share capital exceeding Rs. 50 lakhs and turnover exceeding Rs. 2 crores for compulsory conversion of OPC into Public/Private Company has been removed, etc.
Lesson 19- General Meetings exemption to NBFC and hosing finance company
The Central Government has been empowered to exempt any class of NBFCs and any class of Housing Finance Companies from filing of resolutions passed to grant loans or give guarantees or to provide security in respect of loans in the ordinary course of their business. Earlier, only Banking Companies were exempted few defination added
(ii) “cut-off date” means a date not earlier than seven days before the date of general meeting for determining the eligibility to vote by electronic means or in the general meeting;
(iii) “cyber security” means protecting information, equipment, devices, computer, computer resource, communication device and information stored therein from unauthorised access, use, disclosures, disruption, modification or destruction;
(iv) “electronic voting system” means a secured system based process of display of electronic ballots, recording of votes of the members and the number of votes polled in favour or against, in such a manner that the entire voting exercised by way of electronic means gets registered and counted in an electronic registry in a centralised server with adequate cyber security;
(v) “remote e-voting” means the facility of casting votes by a member using an electronic voting system from a place other than venue of general meeting
(vi) “secured system” means computer hardware, software, and procedure that-
(a) are reasonably secure from unauthorised access and misuse;
(b) provide a reasonable level of reliability and correct operation;
(c) are reasonably suited to performing the intended functions; and
(d) adhere to generally accepted security procedures
