Government mulls ceiling for audit firms amid crack down on lapses

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Governance lapses, negligence has loaded the banks with one of the world’s worst piles of bad debt.
A government-appointed panel on regulating auditors and the networks had suggested that the fee from non-audit services should not be more than 50% of the audit fee.

India is considering tougher rules for audit firms, including a cap on the number of listed companies they can examine, according to a person with knowledge of the matter, as the government seeks to tighten oversight after a recent spate of governance lapses.

In India, 70% of the about 1,800 companies that trade on the National Stock Exchange are audited by firms affiliated to EY, Deloitte & Touche, KPMG and PWC, according to Delhi-based Prime Database. Current rules stipulate that individual auditors can examine accounts of up to 20 companies, though there is no limit on number of audits for the company.

The Big Four in India operate through a network of local chartered accountants firms. One way for them is to partner as a member of a local firm. They can also allow their brand name to be used by sub-licensee of a member local firm. The ministry hasn’t decided if the cap on audits will be at the group level or on each member firm, the person said.

The government is planning to expand the list of services which can’t be offered by statutory auditors under the Companies Act. Currently, statutory auditors can’t offer nine services, directly or indirectly, including internal audit, investment banking, and actuarial services. There is no restriction on providing services such as taxation or restructuring and valuation.

One option is to tweak the present cap on fees that can be generated through offering non-audit services, the person said. This cap, fixed in 2002, says fees from non-audit work can’t be more than the aggregate statutory audit fees. A spokeswoman for the corporate affairs ministry declined to comment.

A government-appointed panel on regulating auditors and the networks had suggested that the fee from non-audit services should not be more than 50% of the audit fee.

Deloitte Ban
Governance lapses and negligence has loaded the nation’s banks with one of the world’s worst piles of bad debt. In some cases, allegations of fund diversion have surfaced, while the founders of some shadow banks have faced accusations of accepting kickbacks in exchange for loans.

The corporate affairs ministry earlier this month sought a ban on Deloitte Haskins & Sells and BSR & Co. for their role as auditors to IL&FS Financial Services, a part of the IL&FS Group that was seized by the government last year after a string of debt defaults.

Deloitte in an emailed statement said it’s fully compliant with Indian audit standards, while BSR said it would defend its position in accordance with the law.

Meanwhile, the banking regulator forbid EY affiliate S. R. Batliboi & Co. from taking on bank audits for a year and, in 2018, the markets watchdog banned the local unit of PricewaterhouseCoopers LLP for two years in relations to work from a decade earlier.

Source: Economic Times

Clarification on Auditor’s Certificate on Return of Deposits-DPT-3

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Clarification on Auditor’s Certificate on Return of Deposits pursuant to Rule 16 of the Companies (Acceptance of Deposits) Rules, 2014

This has reference to Rule 16 of the Companies (Acceptance of Deposits) Rules, 2014 and further amendments.

In this regard, the Ministry of Corporate Affairs vide its letter no. File No: P-01/08/2013- CL-V Vol. VI dated June 24, 2019 has clarified on the matter as under:

  • The Auditor’s Certificate is mandatory only in case of return of deposits.
  • For filing particulars of transactions not considered as deposits information contained therein as on 31st March of that year need not be from the duly audited Financial Statement.
  • Only in case of Return of Deposit information contained therein as on 31st March of that year should be from duly audited financial statement of the company.

Return of Deposits

Also in order to provide guidance to members, the Auditing and Assurance Standards Board of ICAI has issued Illustrative Auditor’s Certificate on Return of Deposits, which is available on the below cited link:

Illustrative Auditor’s Certificate on Return of Deposits as at [state the year end] pursuant to Rule 16 of the Companies (Acceptance of Deposits) Rules, 2014, as amended

(Chairman & Vice Chairman, Auditing and Assurance Standards Board)

June, 26th 2019

All companies to file a one-time return of all outstanding receipts of money or loans from April 1, 2014, to March 31st, 2019

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With a spate of corporate irregularities coming to the fore, the Centre has decided to make disclosure norms more stringent. Corporate India is now required to submit details of transactions involving the receipt of money or loans taken by them, which are otherwise not considered deposits.

Every company other than Government company to which these rules apply, shall on or before the 29th day of June, of every year, file with the Registrar, a return in Form DPT–3 along with the fee as provided in Companies (Registration Offices and Fees) Rules, 2014 and furnish the information contained therein as on the 31st day of March of that year duly audited by the auditor of the company.

Form DPT–3 shall be used for filing return of deposit or particulars of transaction not considered as a deposit or both by every company other than Government company.

  1. Due Date of the Form DPT-3 – Return of Deposits: Every company shall on or before the 30th day of June, of every year, file a return of deposit with the Registrar and furnish the information contained therein as on the 31st day of March of that year duly audited by the auditor of the company.
  2. Due Date of the Form DPT-3 (ONE TIME): Form DPT-3 one time Due Date – all companies would be required to file Form DPT-3 one-time on or before the 29th June 2019
  3. DPT-3 Due Date (EVERY YEAR): Form DPT-3 every year on or before 30th June of the preceding year.

Auditor of Company prepare the financial statements which include the following (Audited Copy)

  • Balance sheet,
  • Profit and loss account
  • Income and expenditure account
  • Cash flow statement
  • Statement of changes in equity

Due Date: 29th May 2019

Penalty On the defaulting company
A fine of minimum Rs. 1 crore or twice the amount of deposit so accepted, whichever is lower, which may extend to Rs.10 crores; and

Every Officer who is in default: Imprisonment up to seven years and with a fine of not less than Rs. 25 lakh which may extend to Rs. 2 crores.

MCA brings more clarity on guidelines for reserving the name of the Company

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The MCA has amended the Companies (Incorporation) Rules, 2014. In the revised Rule 8 for reservation of name of a company, the Ministry has elaborated the provision by inserting various illustrations. The Rule has been divided in to 2 parts – Rule 8A and Rule 8B. Rule 8A deals with the undesirable names and Rule 8B limits use of words such as Board, commission, National, Republic etc. only after obtaining previous approval of Government.

MCA has created a dedicated unit Central Registration Centre (CRC) to expedite the incorporation related activities including Name approval. Yet the stakeholders were facing difficulty in getting the name approved due to lack clarity in the Rules for selection of desired name. This amendment may bring relief to the stakeholders while choosing the name of a company. Revised Rules with detailed illustration will serve as ready-made guidance for both practicing professionals and CRC thereby further easing the incorporation process.

The MCA has amended the Companies (Incorporation) Rules, 2014. In the revised Rule 8 for reservation of name of a company, the Ministry has elaborated the provision by inserting various illustrations. The Rule has been divided in to 2 parts – Rule 8A and Rule 8B.

Rule 8A deals with the undesirable names and Rule 8B limits use of words such as Board, commission, National, Republic etc. only after obtaining previous approval of Central Government.

While considering the application related to name approval the following illustrations must be considered otherwise the names shall be considered as undesirable and will not be approved. Some of the illustrations have been discussed hereunder:

1. Name should not be identical to singular or plural form of existing company:

User of plural or singular form of the words will be considered as undesirable and such name wouldn’t be approved by authority on receipt of application for reservation of name of company. This can be better understood with the help of illustration as provided by MCA:

– For e.g. Green Technology Limited shall be considered same as Greens Technology Limited and Greens Technologies Limited.

2. Change in Tense would be considered as Similar Name:

The department will reject the application for reservation of name of the company if someone use different tense in name of the company such as:

– Ascend Solution ltd. is same as Ascended Solutions Ltd and Ascending Solutions Ltd.

3. Different use of phonetic spellings is treated as identical name:

Chemtech Ltd is same as Chemtec Ltd, Chemtek Ltd, Cemtek ltd, Kemtech Ltd and Kemteck Ltd.

4. Change in order of words of name and use of article before proposed name:

The application for reservation of name will not be considered if an applicant just changes the order of words or use of article before any name of the existing company for e.g.:

1. Ravi Builders and Contractors Ltd is same as Ravi Contractors and Builders Ltd

2. Congenial Tours Ltd is same as A Congenial Tours Ltd. and The Congenial Tours Ltd.

5. Variation in spelling of two name:

Name including slightly variation in spelling of existing company name would be considered as resembling name and department will reject the application for reserving a name of the company. For example,

– Color Technologies Ltd is similar as Colour Technologies Ltd.

6. Addition, deletion or modification of exiting name:

Addition, deletion or modification in any existing name of the company is not allowed and the concerned department will spare no time to reject the proposed name of the company. To instance,

1. Salvage Technologies Ltd is an existing name and it is same as Salvage Technologies Delhi Ltd. and Salvage Delhi Technologies Ltd.

2. Thunder Services Ltd is same as Thunder11 Services Ltd. and OneThunder Services Ltd.

7. Change in meaning either in Hindi or English:

Complete translation or transliteration or nay part of an existing name either in Hindi or English. For Example:

– National Electricity Corporation Ltd is same as Rashtriya Vidyut Nigam Ltd

8. Use of host name such as ‘www’ or a domain extension such as ‘net’, ‘org’, ‘dot’ or ‘com’ in one or both name: For Example

(i) Ultra Solutions Ltd. is same as Ultrasolutions.com Ltd.

(ii) Supreme Ultra Solutions Ltd. is not the same as Ultrasolutions.com Ltd.

9. Word or expression which can be used only after obtaining previous approval of Central Government are given below:

(a) Board;

(b) Commission;

(c) Authority;

(d) Undertaking;

(e) National;

(f) Union;

(g) Central;

(h) Federal;

(i) Republic;

(j) President;

(k) Rashtrapati;

(l) Small Scale Industries;

(m) Khadi and Village Industries Corporation;

(n) Financial Corporation and the like;

(o) Municipal;

(p) Panchayat;

(q) Development Authority;

(r) Prime Minister or Chief Minister;

(s) Minister;

(t) Nation;

(u) Forest corporation;

(v) Development Scheme;

(w) Statute or Statutory;

(x) Court or Judiciary;

(y) Governor;

(z) the use of word Scheme with the name of Government (s), State, India, Bharat or any Government authority or in any manner resembling with the schemes launched by Central, State or local Governments and authorities; and

(za) Bureau

 

DIR-3-DIN eKYC annual filing deadline extended to 30th June of next financial year

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MCA extends due date of DIR -3 / E-KYC of Directors

 

 

MINISTRY OF CORPORATE AFFAIRS

NOTIFICATION

New Delhi, 30th April, 2019

 

MCA has notified that the Deadline for Annual Filing of Form DIR 3 ((KYC of Directors) has been Extended from 30 April to 30 June, of the immediately next financial year, i.e. the due date for filing of DIR 3 (KYC of Directors) for Financial Year 2018-19 has been extended from 30 April 2019 to 30 June 2019.

G.S.R.-(E).- In exercise of the powers conferred by the second proviso to sub-section (1), sub-section (4), clause (f) of sub-section (6) of section 149, sub-sections (3) and (a) of section 150, section 151, sub-section (5) of section 152, section 153, section 154, section 157, section 160, sub-section (1) of section 158 and section 170 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Appointment and Qualification of Directors) Rules, 2014, namely: –

1. (1) These rules may be called the Companies (Appointment and Qualification of Directors) Amendment Rules, 2019.

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

2. In the Companies (Appointment and Qualification of Directors) Rules, 2014, in rule 12A, for the words and figures “on or before 30th, April of immediate next financial year”, the words and figures “on or before 30th June of immediate next financial year” shall be substituted.

[F. N o. 1/22/2013-CL-V]

(K.V.R. Murty)
Joint Secretary to the Government of India

Note: – The principal notification was published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i) vide number G.S.R. 259(E) dated the 31st March, 2014 and subsequently amended vide the following notifications:-

Read the MCA – Notification here

MCA Extends Due date of filing form INC 22A (ACTIVE) till 15th June 2019

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A non-compliant company would not be able to amend its capital structure or carry out any merger or amalgamation.

The Government of India, through the Ministry of Corporate Affairs, has made it mandatory for to file ACTIVE eForm or INC-22A.  The due date for filing INC-22A was 25th April 2019.

There have been representations made to the MCA for Form INC-22A due date extension.

News coming that government has extended the deadline of filing form INC 22A (ACTIVE) to June 15, gives companies more time to comply, with a provision aimed at spotting shell companies.

The disclosure requirement, which came into effect from February, makes it mandatory for registered companies to upload pictures of their business premises and at least one director.

The last date for filing FORM INC 22A (ACTIVE),which was Thursday, April 25 is now extended till 15th June 2019.

Ministry of Corporate Affairs have received many representations from industry associations for Extension of the Due date with many companies yet to comply thereafter Ministry of Corporate Affairs decided to Extend the Due date of form INC 22A.

Startups have, in particular, pointed out that many of them operate out of homes or shared premises or office suites.

The government had launched a crackdown on shell companies as part of the anti-black money drive and these norms were follow-up measures to establish existence of registered entities. Names of thousands of shell companies were struck off as part of this drive.

This new electronic form INC 22A, which is also known as e-Form ACTIVE (Active Company Tagging Identities and Verification), was notified as part of the Companies (Incorporation) Amendment Rules, 2019 in February.

MCA VPD Service

The Ministry of Corporate Affairs on 24/04/2019 has announced the following on their homepage “VPD service will be unavailable from 8:00AM to 08:00PM IST on 24th – 25th Apr 2019 for system maintenance. Stakeholders are requested to plan accordingly.”

VPD Service means View Public Documents Service which can be accessed from http://www.mca.gov.in/mcafoportal/viewPublicDocumentsFilter.do

With VPD Service being taken down on the same last date for filing of INC22A ACTIVE eForm, there are more chances for the due date being extended for INC-22A filing.

Representation from ICSI

The Institute of Companies Secretaries of India has made a representation to the Ministry of Corporate Affairs on 22nd April 2019. In the letter, the Institute explains the difficulty faced by certain stakeholders while filing Form INC22A-ACTIVE as below:

  • The Auditors’ details not getting prefilled in certain cases.
  • Compliance by dormant companies.
  • Companies in management disputes.
  • Issues faced by corporates having a different financial year.

As the difficulties are still unresolved as on 22nd April 2019, the ICSI has requested the MCA to extend the due date for filing of Form INC-22A.

A non-compliant company would not be able to amend its Capital Structure, Change in Directorship or carry out any Merger or Amalgamation, as per the various provisions listed below:

  • Changes in authorized capital (Form SH-07)
  • Changes in paid-up capital (Form PAS-03)
  • Changes in Director (Form DIR-12) (cessation would be allowed).
  • Changes in Registered Office (Form INC-22)
  • Amalgamation or Merger (INC-28)

If the form is filed within the due date, there is no fee, while late filing will attract a fine of Rs 10,000.

Read the Official Notification from MCA

Filing of e-Form DIR 3 for KYC of Directors mandatory, on Annual Basis – MCA

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MCA latest message on e-form DIR-3 KYC filings on Annual Basis made mandatory

MCA’s Clarification on filing of e Form DIR – 3 KYC, annually, by all Directors holding DIN

The Ministry of Corporate Affairs (MCA) has on 13th April, 2019, given the clarification with regards to filling of e-Form DIR – 3 KYC by all Directors holding DIN that all DIN holders are required to file the DIR-3 KYC form every year, so that they are aware of and confirm the data & information as available in the MCA21 system.

With the objective of making the form more user friendly, the form is presently being modified to enable pre-filling of data & information so that annual filings can be done by DIN holders in a simple and user friendly manner. The revised form, which will be shortly deployed, can be filed without any fee within a period of 30 days from the date of deployment.

Hence, now all DIN holders have to complete their KYC, annually by filling e-form DIR 3 KYC every year before 30th April of immediate next financial year.

However, as the form is presently being modified to enable pre-filling of data & information, the time limit for filling e-form DIR 3 KYC for FY 2018-19 has been extended and it can be filed without any fee within a period of 30 days from the date of deployment of the Form on the MCA website. Once the form is deployed on the MCA website, it will be notified to all stakeholders.

As per rule 12A of the Companies (Appointment and Qualification of Directors) Rules 2014,

“every individual who has been allotted a Director Identification Number (DIN) as on 31st March of a financial year as per these rules shall, submit e-form DIR-3-KYC to the Central Government on or before 30th April of immediate next financial year. Provided that every individual who has already been allotted a Director Identification Number (DIN) as at 31st March, 2018, shall submit e-form DIR-3 KYC on or before 5th October,2018.”

However, the DIR-3 KYC e-form presently available on the portal does not cater for the following:

(i) Filing on annual basis, and

(ii) Filing in respect of DINs allotted post 31 March 2018.

It presently caters only to those individuals who were allotted DINs as on 31st March 2018 and whose DINs have been marked as ‘Deactivated due to non-filing of DIR-3 KYC’.

Stakeholders may please note that DIN holders are required to file the DIR-3 KYC form every year, so that they are aware of and confirm the data & information as available in the MCA21 system.

With the objective of making the form more user friendly, the form is presently being modified to enable pre-filling of data & information so that annual filings can be done by DIN holders in a simple and user friendly manner.

The revised form, which will be shortly deployed, can be filed without any fee within a period of 30 days from the date of deployment.

Accordingly, DIN holders who had filed DIR-3 KYC form earlier and complied with the said provisions may kindly await the deployment of the modified form for fulfilling their compliance requirements.

MCA Circular on filing of DIR3 KYC on Annual Basis