The Companies (Amendment) Bill, 2016 introduced in Loksabha

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On 16th March 2016 Lok Sabha has passed the Companies (Amendment) Bill 2016 to further amend the Companies Act, 2013

The Act introduced significant changes related to disclosures to stakeholders, accountability of directors, auditors and key managerial personnel, investor protection and corporate governance. However, Government received number of representations from industry Chambers, Professional Institutes, legal experts and Ministries/Departments regarding difficulties faced in compliance of certain provisions. Amendments of the Act were carried out through the Companies (Amendment) Act, 2015 to address the immediate difficulties arising out of the initial experience of the working of the Act, and to facilitate “ease of doing business”.

The changes introduced are broadly aimed at addressing difficulties in implementation owing to stringency of compliance requirements; facilitating ease of doing business in order to promote growth with employment; harmonization with accounting standards, the regulations of Securities and Exchange Board of India Act, 1992 and the Reserve Bank of India Act, 1934; rectifying omissions and inconsistencies in the Act, and carrying out amendments in the provisions relating to qualifications and selection of members of the National Company Law Tribunal and the National Company Law Appellate Tribunal in accordance with the directions of the Supreme Court.

The Companies (Amendment) Bill, 2016, inter alia, proposes the following, namely:—

  • Simplification of the private placements: Simplification of the private placement process by doing away with separate offer letter, by making filing of details or records of applicants to be part of return of allotment only, and reducing number of filings to Registrar;

Earlier, there was significant difficulty was created by the Companies Act, with the unduly restrictive set of provisions pertaining to private placements. This over-ambitious scheme of regulation was a direct result of some incidents in the past. One such provision requires every private placement to be routed through a separate bank account opened for this purpose, and a bar on utilization of the money until allotment. More often than not, the amount received in private placement is large, and companies cannot afford to keep the amount idle.

Now, this private placements process has been simplified with the Companies (Amendment) Bill, 2016.

(b) Allow unrestricted object clause in the Memorandum of Association dispensing with detailed listing of objects, self-declarations to replace affidavits from subscribers to memorandum and first directors;

(c) Provisions relating to forward dealing and insider trading to be omitted from the Act;

(d) Requirement of approval of the Central Government for Managerial remuneration done away with:

Requirement of approval of the Central Government for Managerial remuneration above prescribed limits is replaced by approval through special resolution by shareholders;

Central Government control on managerial remuneration is eliminated. Section 197, which places limits on managerial remuneration, will now require special resolution only, if the limits placed under the law are exceeded.

(e) Loans to entities in which directors are interested:

A company may give loans to entities in which directors are interested after passing special resolution and adhering to disclosure requirement;

 (f) Provisions easing business by overseas entities

In support of the “Make in India” policy, it is quite appropriate that the Companies (Amendment) Bill, 2016 must have enabled foreign owned businesses to form companies in India. Accordingly, there are several provisions to facilitate foreign-owned businesses:

– EGM of a wholly-owned subsidiary of a foreign company may be called anywhere in India.

– The requirement for a resident director provided in section 149 is sought to be amended to provide that in case of newly incorporated companies the condition may be satisfied subsequent to incorporation, rather than before incorporation.

– Remove restrictions on layers of subsidiaries and investment companies

(g) Allow for exempting class of foreign companies from registering and compliance regime under the Act;

(h) Align prescription for companies to have Audit Committee and Nomination and Remuneration Committee with that of Independent Directors;

(i) Test of materiality to be introduced for pecuniary interest for testing independence of Independent Directors;

(j) Disclosures in the prospectus required under the Companies Act and the Securities and Exchange Board of India Act, 1992 and the regulations made thereunder to be aligned by omitting prescriptions in the Companies Act and allowing these prescriptions to be made by the Securities and Exchange Board of India in consultation with the Central Government;

(k) Provide for maintenance of register of significant beneficial owners by a company, and filing of returns in this regard to the Registrar;

(l) Removal of requirement for annual ratification of appointment or continuance of auditor;

(m) Amend provisions relating to Corporate Social Responsibility to bring greater clarity.

http://www.prsindia.org/uploads/media/Companies,%202016/Companies%20bill,%202016.pdf

Government working on approving companies’ names in 24 hours: MCA

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The government is working on ensuring that the name of a new company is approved within 24 hours, a step towards improving ease of doing business and reducing overall transaction costs.

Corporate Affairs Secretary Tapan Ray said his Ministry is focused on reducing the problems faced by the industry and ensuring that ease of doing business becomes the “order of the day”.

“Incorporating a company is now much easier and will be made further easier as we go along the road. We are aiming to get a name (of a new company) approved within 24 hours,” Ray said.

The Corporate Affairs Ministry is fully geared up to improve ease of doing business, not only for starting a venture but also for the life cycle of companies as a whole, he noted.

Speaking at an event organised by the Institute of Cost Accountants of India (ICAI) here, Ray said speedier approval of names is itself a cost-cutting experiment because any delay adds to transaction costs.

“So ease of doing business is directly related to transaction costs. So the moment you make the ease of doing business better, transaction costs comes down and ultimately it has an affect on the product,” Ray said.

Stressing the need for becoming globally competitive, he said the dream of making India a manufacturing hub can be realised when costs are low.

“People will only start manufacturing in India if it is the cheapest,” he added.

Corporate Affairs Ministry, which is implementing the Companies Act, has been taking various steps to improve ease of doing business in the country.

Ray said setting up of the National Company Law Tribunal (NCLT) would further facilitate business in the country.

The Ministry has sought comments from stakeholders on draft rules pertaining to the proposed NCLT, which would replace the Company Law Board (CLB).

Source:
http://economictimes.indiatimes.com/articleshow/50785152.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

MCA extends last date of filing of AOC-4 and MGT-7 E-Forms to 30.01.2016 to Tamil Nadu & Pondicherry

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MCA

The Circular from Ministry of Corporate Affairs extends one more month time, for Annual Filings of MGT -7 , Annual Return & AOC-4, Audited Financial Statements, without additional fees, to Tamil Nadu & Pondicherry, which were affected by floods.

The extract of the circular issued today, i.e., 30 December, 2015 is as below:

 

In continuation of the ministry’s circular 15/2015 dated 30.11.2015, keeping in view the requests received from various stakeholders stating that due to heavy rains and floods in the State of Tamil Nadu and Union Territory of Puducherry, the normal life/work was affected, it has been decided to relax the additional fees payable for the State of Tamil Nadu and UT of Puducherry on e-forms AOC-4, AOC (CFS) AOC-4 XBRL and e- Form MGT-7 up to 30.01.2016, wherever additional fee is applicable.

The last date of filing forms AOC-4 (XBRL, non-XBRL & CFS) and MGT-7 till 30th Dec 2015, without additional fees, has ended.

 

The Ministry of Corporate Affairs, Government of India has earlier vide its General Circular No.15/2015 dated 31/11/2015, extended the last date for filing the Annual Returns by 30 days and relaxed the additional fees for the forms filed till December 31, 2015. This has ended now.

 

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Integrated e-Form INC-29 for Company Incorporation and Ease of doing business

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INC 29Analysis of integrated e-Form INC-29 for Company Incorporation and Ease of doing business

With the introduction of the INC-29, the Ministry of Corporate Affairs (MCA) has begun to make good on its promise to improve India’s ranking on the World Bank’s Ease of Starting a Business Index to within the top 50 from the current 158.

The INC-29 form for company registration, combines the application for DIN allotment, name reservation, incorporation and even PAN & TAN, while making the process faster and simpler. As the entire incorporation process is in a single form, correct filing could mean approval in 48 hours. Compared to the old process, this helps in formation of company saving a lot of time, if properly implemented.

Purpose of the eForm – eForm INC-29 deals with the single application for reservation of name, incorporation of a new company and/or application for allotment of DIN. This eForm is accompanied by supporting documents including details of Directors & subscribers, MoA and AoA etc. Once the eForm is processed and found complete, company would be incorporated with Corporate Identification Number (CIN) and the Certificate of Incorporation would be issued. Also DINs gets issued to the proposed Directors, who do not have a valid DIN. Maximum three Directors are allowed for using this integrated form for allotment of DIN while incorporating a company.

Key Features of e-form INC-29 

  1. The integrated e-Form INC-29 is available with effect from 01.05.2015 for One Person Company, Private Company as well as Public Company.
  2. INC-29 does away with filing of multiple applications/forms saving time and payable fees.

It combines the processes relating to:-

  • Allotment of Director Identification Number (DIN) (up to three Directors),
  • Incorporation of a company, and
  • Appointment of first Directors of the company.

3. The new e-Form does away with the need for reserving a name for the company prior to applying for its incorporation.

  1. Declarations are in-built in the e-Form. Separate attachments containing such declarations are not required.
  1. The e-Form is enabled for future integration with e-Biz platform of DIPP for generating applications for PAN, ESIC and EPFO numbers on the platform and therefore provides a single interface for these applications also.

 

Forms no longer to be filed individually as per the new Form INC 29:

Continued

Government wants to reduce time for registering company

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During the past one year, Corporate Affairs Ministry has taken a number of steps, and is further streamlining processes and regulatory framework, to reduce the overall time taken for incorporating a company as a part of ‘ease of doing business’ effort, Finance Ministry has said.
The Government of India proposes to bring down the average number of days required for incorporating a company to one to two days, a move aimed at further improving ‘ease of doing business’ in the country.

During the past one year, Corporate Affairs Ministry has taken a number of steps, and is further streamlining processes and regulatory framework, to reduce the overall time taken for incorporating a company as a part of ‘ease of doing business’ effort, Finance Ministry said in a statement.
As a result of the many steps, the average number of days taken for incorporation of a company has come down significantly from 9.57 days in December, 2014 to 4.51 days in November, 2015.
“It (Ministry of Corporate Affairs) is targeting that the average number of days would be further reduced to one to two days for approval in normal cases,” the statement said.

Giving details of the step, it said the introduction of an Integrated Incorporation Form INC29 and tighter monitoring of Registrar of Companies’ (ROCs’) performance has resulted in faster approvals and lesser number of clarifications being asked from the stakeholders.
The Corporate Affairs Ministry will soon introduce a new version of Form INC29, incorporating suggestions received from the stakeholders, allowing up to five directors to be appointed and greater flexibility in proposing a name for a company, it said.

“This will allow an even more wider use of this integrated Form, which is already gaining popularity,” the statement added.

Further, the rules with regard to reserving and approving of names for companies are also being simplified, and a centralised new process will be introduced soon for strictly time bound approval of names for companies.

Source: http://www.dnaindia.com/money/report-government-plans-to-reduce-average-time-for-registering-a-company-to-1-2-days-2154784

Ease of doing business in India – Related Party Transactions

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Related party Transactions.

As part of its ongoing efforts to improve ease of doing business in the country, the Corporate Affairs Ministry has notified changes that further relax compliance requirements.

As another major step, the Companies Amendment Act, 2015 addresses “problems faced by large stakeholders who are related parties”.

In this new amendment, it replaces “special resolution with ordinary resolution for approval of related party transactions [Section 188] by non-related shareholders”.

Besides, related party transactions between holding companies and wholly owned subsidiaries have been exempted from the requirement of approval of non-related shareholders.

As per the amendment, the requirement of passing special resolution for approving certain related party transactions has been done away with. With this, certain related party transactions can now be approved through ‘ordinary resolution’ instead of ‘special resolution’.

Further, it has also been provided that for related party transactions between a holding company and its wholly owned subsidiary, no resolutions are required to be passed if the accounts of the holding and subsidiary company are consolidated and placed before the shareholders in a general meeting for approval.

Punishment for Contravention on defaults relating to deposits

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Punishment for Contravention of Section 73 and Section 76 of Companies Act, 2013 for Acceptance of Deposits by Companies [New Section 76A inserted]

 

The Companies (Amendment) Act, 2015 has inserted a new Section 76A after Section 76 which introduces penal provisions for contravention of provisions of Section 73 and Section 76 (pertaining to acceptance of deposits by a company) or rules made thereunder, or if a company fails to repay deposits within the time specified.

As per the amended law:
A company, if it fails to repay deposits within the specified time, shall be punishable with a fine which shall not be less than Rs.1 crore but which may extend to Rs. 10 crores, in addition to the payment of the amount of deposit or part thereof and the interest due.
Every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with a fine which shall not be less than Rs. 25 lakhs but which may extend to Rs. 2 crore, or with both.
Thus, specific punishment is prescribed for non-compliance to norms governing deposits taking activities.