8 Sep 2020

AGM due date extended till 31.12.2020 for all companies

by | posted in: Accounting Standards, Audit, Due Diligence, Company Incorporations, e-filing of MCA Returns, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0
Companies will be given three months’ extension to hold their AGMs.

A major relief has been granted to around 1.2 million companies, by MCA granting extension of 3 months for holding annual general meeting.

The MCA had earlier allowed companies to hold virtual AGMs due to Covid-19. However, companies were finding it difficult to complete the audit functions and finalize the annual reports.

The Companies with AGM due date as 30.09.2020 can now conduct their AGM by 31.12.2020, as per MCA.

There is no need of separate application in form GNL-1 for extension.

Companies are required to hold the AGM within six months of the end of a financial year which means by September 30, 2020 for FY2019-20. Now, they can hold it by December 31 this year.

Below are the excerpt of the extension notification by the various ROCs.

Section 96 of the Companies Act 2013 provide that every company other than a One Person Company , shall in each year hold an a general meeting as its Annual General Meeting (AGM) and shall specify the meeting as such in the notices calling it and not more than fifteen months shall elapse between the date of one AGM of a company and that of the next

And WHEREAS the first proviso of section 96 of the Act provides that in case of the first AGM, it shall be held within a period of nine months from the date of closing of the first financial year of the company and in other case, within a six months, from the date of closing of the financial year

And WHEREAS, the third proviso to Sub-section (I) of section 96 of the Act provides that the Registrar may, for any special reason, extend the time within which any annual general meeting, other than the first annual general meeting, shall As held, by a period not exceeding three months

And WHEREAS, various representations have been received from the companies, bodies and Professional Institutes pointing out that several companies are finding it difficult to hold their AGM for the financial year ended on 31.03.2020 due to the difficulties faced in view of the COVID 19 pandemic

And WHEREAS, the representations have been considered and the undersign is of the considered opinion that due to such unprecedented special reasons, the time within which the AGM for the financial year ended on 31.03.2020 is required to be held as per provisions to be extended

The undersigned hereby extend the time to hold the AGM, other than the first AGM, for the Financial year ended 31.03.2020 for companies that are unable to hold their AGM within due date of holding or period of three months from the due date are extended without companies requiring to file GNL 1 Form.

The approval for extension of AGM upto 3 months from the due date of AGM shall be deemed to have been granted by the undersigned without any further action on the part of Company.

The MCA issued directions to the registrar of companies (ROCs) to issue orders to even those who have not filed formal applications to this effect. Even those applications, which have already already filed, but not approved, or rejected, are also covered under this relief, MCA said in a release.

Extension of AGM order of Respective ROC’s – Source: Ministry of Corporate Affairs

 

6 Sep 2020

RBI releases Long Form Audit Report (LFAR)

by | posted in: Accounting Standards, Audit, Due Diligence, Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0
The overall objective of the LFAR should be to identify and assess the gaps and vulnerable areas in the business operations, risk management, compliance and the efficacy of internal audit and provide an independent opinion on the same to the Board of the bank and provide their observations

The Reserve Bank on Saturday came up with revised long format audit report (LFAR) norms with a view to improving efficacy of internal audit and risk management systems.

 

The LFAR, which applies to statutory central auditors (SCA) and branch auditors of banks, has been updated keeping in view the large scale changes in the size, complexities, business model and risks in the banking operations, the RBI said.

 

RBI/2020-21/33
Ref.No.DOS.CO.PPG./SEC.01/11.01.005/2020-21

September 05, 2020

To:

The Chairman / Managing Director / Chief Executive Officer
All Scheduled Commercial Banks (Excluding RRBs)
All Local Area Banks
All Small Finance Banks and
All Payment Banks

Madam /Dear Sir,

Long Form Audit Report (LFAR) – Review

Please refer to RBI circular No. DBS.CO.PP.BC.11/11.01.005/2001-2002 dated April 17, 2002 on revision of Long Form Audit Report (LFAR).

2. Keeping in view the large scale changes in the size, complexities, business model and risks in the banking operations, a review of the LFAR formats, in consultation with the stakeholders, including the Institute of Chartered Accountants of India (ICAI), was undertaken and it has been decided to make the following changes.

3. The format of LFAR, as mentioned below, have been revised:

  1. Annex I for Statutory Central Auditors (SCA)
  2. Annex II for Branch Auditors
  3. An Appendix as part of Annex II for the specialized branches and
  4. Annex III on Large / Irregular / Critical accounts for branch auditors.

The revised formats are enclosed.

4. The revised LFAR formats are required to be put into operation for the period covering FY 2020-21 and onwards. The mandate and scope of the audit will be as per this format and if the SCA feels the need of any material additions, etc., this may be done by giving specific justification by the SCA and with the prior intimation of the bank’s Audit Committee of Board (ACB).

5. Regarding other operational issues relating to submission of LFAR, we further advise as under:

  1. Timely receipt of LFARs from the auditors should be ensured;
  2. The LFAR on the bank, after due examination, should be placed before the ACB / Local Advisory Board of the bank indicating the action taken/proposed to be taken for rectification of the irregularities, if any, mentioned therein; and
  3. A copy each of the LFAR (i.e. for the bank / all Indian Offices of foreign bank as a whole) and the relative agenda note, together with the Board’s views or directions, should be forwarded to the concerned Senior Supervisory Manager (SSM) in the Department of Supervision, Reserve Bank of India within 60 days of submission of the LFAR by the statutory auditors.

6. The LFAR format and other instructions issued vide RBI circular No. DBS.CO.PP.BC.11/11.01.005/2001-2002 dated April 17, 2002 stand repealed.

7. Please acknowledge receipt.

Yours faithfully,

(Ajay Kumar Choudhary)
Chief General Manager

Encl: Annex I and II and III

23 Aug 2020

Extension of Annual General Meeting for the FY 2019-20 – MCA

by | posted in: Accounting Standards, Audit, Due Diligence, Company Incorporations, e-filing of MCA Returns, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0

Due to the widespread of COVID-19 and social distancing norms and consequential restrictions linked thereto, MCA has received several representations to allow companies to hold their Annual General Meeting for the financial year ended on 31st March, 2020 beyond the statutory period provided in section 96 of the Companies Act, 2013.

The matter was examined and MCA clarified vide General Circular No. 20/2020, dated 05.05.2020 regarding holding of AGM through video conferencing (VC) or other audiovisual means (OAVM), the companies which were unable to hold their AGM were advised to prefer applications for extension of AGM at a suitable point of time before the concerned Registrar of Companies under Section 96 of the Act.

MCA, in this regard, vide General Circular no. 28/2020 dated 17th August,2020 has issued clarification on extension of Annual General Meeting for the financial year ended as at 31.03.2020.

Provisions of holding Annual General Meeting (AGM) as per Companies Act, 2013.

According to section 96 of the Companies Act, 2013, companies are to hold their Annual General Meeting (AGM) within a period of 6 months from the date of closing of the financial year and companies which are to hold their first AGM shall be held within a period of 9 months from the date of closing of the financial year of that company.

The Ministry once again reiterated that the companies which are unable to hold their AGM for the financial year ended on March 31, 2020, despite availing the relaxations provided in MCA General Circular No. 20/2020 ought to file their applications in E-Form GNL-1 for seeking an extension of time in holding of AGM for the financial year ended on March 31, 2020, with the concerned Registrar of Companies on or before 29th September, 2020.

Also the Ministry has directed Registrars of Companies to consider all such applications (Filed in E-Form GNL-1) liberally in view of the hardships faced by the stakeholders and to grant an extension for the period as applied for (up to three months i.e. 31st December) in such applications.

Procedure to file Application seeking extension of time for holding Annual General Meeting:

1.Chairman /Director of the company shall call for a meeting of Board of Director for which a notice must be send at least 7 days before holding of Meeting of Board.
2.Convene a Board Meeting on the specified date.
3.Pass a resolution for extension of time limit for holding annual general meeting specifying the due reason for extension of AGM.
4.File an application to Registrar of Companies in E-Form No. GNL-1. (Reason for not holding AGM, along with other necessary information to be provided)
5.Attach the Certified true copy of the Board Resolution in E-Form-GNL-1.
6.The registrar will examine the application on the specific grounds and grant an extension.

 Obtain the Certificate of Grant of extension in holding Annual General Meeting of the Company.

 Convening of Annual General Meeting in extended period:

Once the extension is granted, the company may convene the Annual General Meeting of the Company within the period as allowed by the Registrar of Companies. 

MCA Circular on Extension of AGM

6 Aug 2020

RBI sets new conditions for Current Accounts to improve Credit Discipline

by | posted in: Accounting Standards, Audit, Due Diligence, Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0
Banks cannot open a current account for a customer, who has already availed himself of credit facilities from the banking system.

The Reserve Bank of India set new conditions for banks to open current accounts for large borrowers in order to strengthen credit discipline. Use of multiple operating accounts by borrowers—both current well as cash/overdraft accounts—has been observed to be prone to vitiating credit discipline, the RBI said its Statement on Developmental and Regulatory Policies on Thursday.

“The checks and balances put in place in the extant framework, for opening of current accounts, are found to be inadequate,” it said, adding that the central bank has revised its guidelines to bring in appropriate safeguards

The revised norms are also expected to bring in the requisite discipline in collective actions by creditors for speedier resolution of stress in the accounts of borrowers, it said.

The purpose of the revised guidelines is to ensure that borrowers route their payments to and from a current account with a bank that has the largest exposure to the borrower, instead of having multiple current accounts across banks.

Here are the revised guidelines:

Opening Current Accounts

For a borrower with an existing CC or OD Facility
The bank cannot open a current account for the borrower and all transactions have to be routed through the cash credit or overdraft account.

For a borrower with No existing CC or OD Facility
Banks can open a current account if the total exposure to the borrower is less than Rs 5 crore. As and when the exposure goes beyond Rs 5 crore, the borrower has to inform the bank and, thereafter, it will be governed differently.

Credit Facilities of Rs 5 Crore to Rs 50 Crore

Any lender can open a current account, while non-lending banks can only open a collection account.

Credit Facilities of more than Rs 50 Crore

Any lender can open a current account, while non-lending banks can only open a collection account. Credit Facilities of more than Rs 50 Crore Banks have been mandated to create an escrow mechanism and only the escrow-managing lender or agent can open the current account for the borrower.

The balances in such accounts cannot be used as a margin for availing any non-fund based credit facilities. While there is no prohibition on the amount or the number of credits in ‘collection accounts’, any debits will be limited to the purpose of remitting the proceeds to the escrow account.

The banks should not route any withdrawal transaction from term loans availed by the borrower through current accounts and, instead, funds from term loans should be remitted directly to the supplier of goods and services.

Expenses incurred by the borrower for day-to-day operations should be routed through the cash credit/overdraft account, if the borrower has one; else, it should be routed through a current account.

Conditions to avail CC Or OD Facility
When a bank’s exposure to a borrower is less than 10% of Aggregate Banking System Exposure

The CC and OD facility can be availed but it can only be used for credits. Any debit transaction can only be to remit funds to the borrower’s CC or OD account held with a bank which has an exposure of 10% or more of the banking system’s total exposure to the borrower.

When a bank’s exposure to a borrower is more than 10% of Aggregate Banking System Exposure

Banks can provide the borrower with a CC/OD facility. If the borrower has availed loans from more than one bank and more than one bank has an exposure of 10%, the bank to which the funds are to be remitted may be decided mutually between the borrower and the banks.

All large borrowers that have a working capital facility bifurcated between a loan component and a cash credit component need to maintain the balances at individual banks in all cases, including consortium lending.

“The RBI has been concerned about diversion of funds. Therefore, the norm that RBI has put in place is that if a bank opens a current account, they receive a no-objection-certificate from the lending bank, so that the lending bank knows another current account is being opened for its loan customer,” said Rajiv Anand, executive director, Axis Bank.

These conditions have been put in place to bring in credit discipline and ensure that the issue if diversion of funds is much better managed than it is today, he said.

According to Ajay Shaw, partner, DSK Legal, the new conditions are aimed at ensuring that large borrowers do not use multiple accounts and route money to and from them.

“The RBI is insisting that all current accounts should be unified and for large borrowers there should be an escrow or trust and retention mechanism, with a waterfall, to ensure that there is a control of cash-flows.”

In an extreme case, if a borrower had an escrow account in a consortium loan and another lender is brought in, the borrower would then route all payments to the new lender and not to others, he said.

The RBI, according to Shaw, is trying to avoid these situations. “Banks will need to review all their current accounts and they have already begun informing their clients to close accounts and to maintain only one,” he said.

Source: Bloomberg Quint

29 Jul 2020

SEBI extends deadline for filing April-June corporate financial results to September 15

by | posted in: Accounting Standards, Audit, Due Diligence, Company Incorporations, e-filing of MCA Returns, Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0

In a major relief to companies, the Securities and Exchange Board of India (SEBI) today extended the deadline for submission of financial results for the quarter, half-year, and financial year ended 30 June 2020 to September 15. The SEBI circular said that it has received representations requesting an extension of time for submission of financial results for the quarter or half year-ended 30 June 2020, due to the shortened time gap between the extended deadline for submission of financial results for the period-ended 31 March 2020 and the quarter or half year-ended June 30, 2020.

Under Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘LODR Regulations’), a listed entity is required to submit its quarterly, half-yearly, or annual financial results within 45 days or 60 days, as applicable, from the end of each quarter, half year, or financial year.

Accordingly, listed entities were required to submit the financial results for the quarter, half-year-ended 30 June 2020 on or before 14 August 2020.

Earlier, the regulatory body had also extended the timeline for submission of financial results by listed entities for the quarter, half-year, or financial year-ended 31 March 2020 to 31 July 2020, due to the impact of the coronavirus pandemic.

SEBI further said that today’s announcement shall come into force with immediate effect and advised all stock exchanges to bring the provisions of this circular to the notice of all listed entities.

It has asked the stock exchanges to bring the provisions of the circular to the notice of all listed entities and also disseminate on their websites.

Meanwhile, SEBI’s move to relax the deadlines is expected to give more time to companies already struggling with operations part amid the pandemic.

In-line with the efforts to provide relief to the sagging businesses, Finance Minister Nirmala Sitharaman earlier announced to decriminalise some offences under the Companies Act.

The SEBI has also introduced new norms to give more fund-raising flexibility to stressed firms.

The amendments can help promoters get financial investors on board without losing control of the company.

4 Jul 2020

The Micro Small and Medium Enterprises (MSMEs) hit by Covid pandemic may have something to cheer at last.

by | posted in: Accounting Standards, Audit, Due Diligence, Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0

Insolvency and Bankruptcy Board of India (IBBI) has formulated a Special Resolution Process (SRP) for MSMEs who find their financial position unmanageable due to Covid crisis.


While presenting the ‘Atma Nirbhar Bharat’ package Finance Minister had announced to come out with a Special insolvency resolution framework for MSMEs under section 240A of the Insolvency and Bankruptcy Code.

According to sources close to the development, the scheme would be available to corporate MSMEs, that is, units incorporated as Companies or LLP.

The salient features of the scheme are proposed to be:

  —   If an MSME finds it unable to meet its financial obligations, the insolvency resolution process could be initiated on the occurrence of default of at least Rs.1 lakh

  —   It can be triggered by the MSME promoter/ owner only (not by the Financial or other creditors)

  —   During the process of resolution, the MSME owner remains in control and keeps running the unit but all legal proceedings to take control of assets by creditors are stopped.

  —   It provides first right of offer to promoters of the MSME to submit resolution plans

  —   It proposes a simplified claim verification process and preparation of information memorandum

  —   It expands the scope of interim finance to facilitate rescue financing of the CD during COVID-19 with the approval of 3/4th financial creditors in value.

Federation of Indian Micro and Small & Medium Enterprises (FISME) which facilitated a consultation round of MSME associations with IBBI shared that most participants found the scheme potentially useful.

According to Lucknow based V K Agarwal Managing Director of Shashi Cables Ltd and former FISME President, the scheme seemed to be modelled on insolvency provisions under US chapter-11, was very promising indeed but some way needed to be found to make financial creditors to come on board and cooperate.

The scheme envisages appointment of an Insolvency Professional (IP) as Resolution Professional to conduct the process, with the consent of the unrelated financial creditors having at least 25% of the outstanding financial claims.

The scheme is under final stages of approval and is expected to be announced soon.

24 Jun 2020

Cooperative banks to be brought under RBI supervision

by | posted in: Accounting Standards, Audit, Due Diligence, Corporate & Business Advisory Services, Corporate Updates, Economy, Business Updates, Corporate Affairs | 0

Government banks, including 1,482 urban cooperative banks and 58 multi-state cooperative banks, are now being brought under the supervisory powers of the RBI.
RBI’s powers will also apply to the cooperative banks as they apply to scheduled banks.

The Union Cabinet on Wednesday decided to bring all co-operative banks under the Reserve Bank of India through an ordinance. This was announced by Union information and broadcasting minister Prakash Javadekar during a virtual press conference.

“Government banks, including 1,482 urban cooperative banks and 58 multi-state cooperative banks, are now being brought under supervisory powers of Reserve Bank of India (RBI),” Javadekar said today. These banks will come under the supervision of RBI with immediate effect from date of President’s approval on the ordinance.

After the Punjab and Maharashtra Cooperative (PMC) Banks fiasco last year, the Union Cabinet in February amended Banking Regulation Act to strengthen the cooperative banks in the country. During Budget 2020, Finance Minister Nirmala Sitharaman also announced that cooperative banks will be brought under the ambit of RBI.

There are more than 8.6 crore depositors in over 1,500 urban and multi-state cooperative banks across the country. “Depositors’ money amounting to ₹4.84 lakh crore in the cooperatives banks will stay safe,” Javadekar said while announcing the decision.

The government also announced to provide 2% interest subvention to borrowers under the ‘Shishu’ category of the flagship Pradhan Mantri MUDRA Yojana (PMMY). Under the Shishu category, collateral free loans of up to ₹50,000 will be given to beneficiaries.

“The Union Cabinet has approved the scheme for interest subvention of 2% to Shishu loan category borrowers under PMMY, outstanding as on March 31, 2020, for a period of 12 months to eligible borrowers,” Javadekar said.

Launched in 2015, the Pradhan Mantri MUDRA Yojana provides loans up to ₹10 lakh to non-corporate, non-farm small/micro enterprises. These loans are classified as MUDRA loans under PMMY. Commercial banks, RRBs, small finance banks, MFIs and NBFCs provide MUDRA loans.

In the wake of coronavirus outbreak, the central government decided to extend the tenure of the OBC Commission by six months, Union minister Prakash Javadekar said. The government also announced ₹15,000-crore infrastructure fund to provide interest subvention of up to 3% to private players for setting up of dairy, poultry and meat processing units.

“A fund worth ₹15,000 crore has been approved by the Cabinet that will be open to all and will help in increasing milk production, boost exports and create 35 lakh jobs in the country,” Javadekar told.

Source: Economic Times

Continued