Companies Act, 2013 An Insight into Latest Amendments

1. Companies Act, 2013 An Insight into Latest Amendments Presented By: CS (Dr.) D.K. Jain Practising Company Secretary & Insolvency Professional

2. COMPULSORY REQUIREMENT FOR DEMATERIALISATION OF SECURITIES Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2018 (By Notification No. .GSR 853(E) dated 10th Sept., 2018 New Rule 9A has been inserted, which requires that; 1. Every unlisted public company (except, WOS, Nidhi and Govt. Company) shall – (a) issue the securities only in dematerialized form; (b) facilitate Dematerialization of all its existing securities 2. Dematerialization is a pre-requisite condition to making any offer for issue of any securities; or buyback; or issue of bonus or rights offer, transfer or subscription of securities after 2nd Oct., 2018. Comments: Public company includes subsidiary of public company 3. This rules shall not apply to an unlisted public company which is:— (a) a Nidhi; (b) a Government company or (c) a wholly owned subsidiary.

3. COMPULSORY REQUIREMENT FOR DEMATERIALISATION OF SECURITIES 4. Other requirements: • Appointment of RTA, Triparty Agreement with DP, RTA and Company, and obtaining ISIN for each type of securities • Payment of security Deposit to RTA and DP for two years in advance • Submission of the Security Audit Report u/s 55A of the Depository Rules on half yearly basis within 30 days of the end by PCS to RoC (Form not Prescribed) (Before 30.04.2019 and onwards) • In case of default in payment (deposit/fee) of the custodian fee and RTA fee, company shall not be eligible for Bonus and Right issue. • In case of any grievance the complaint can be made to IEPF

4. COMPULSORY REQUIREMENT FOR DEMATERIALISATION OF SECURITIES 5. Obligations: On Company to have connectivity for D-mat, but shareholders is not bound to D-mat their holding until; • Do not wish to transfer the shares; • Do not wish to participate in rights, private placement, buy back, and bonus. • Fine: No fine prescribed for non compliances, however under the General Section 450 upto Rs. 1,000/- per day. • It is likely that in the Form MGT-7, the new details for the ISIN/RTA may be added for review of compliance by the RoC • Entire promoters, directors and KMPs shareholding must be in D-mat Form before taking any corporate action 6. Recommendation: (a) To obtain ISIN; or (b) To Convert into Private Company; or (c) Get status of WOS

5. Specified Companies (Furnishing of information about payment to micro and small enterprise) Order, 2019.MCA Notification No. GSR 368(E) dated 22.01.2019 read with the Notification SO 5622(E) dated 2nd Nov., 2018 Meaning of Specified Company: All companies, who get supplies of goods or services from micro and small enterprises and whose payments to them exceed forty five days from the date of acceptance or the date of deemed acceptance of the goods or services (as at 22.01.2019) as per the provisions of section 9 of the MSMED Act, 2006. Criteria of Micro and Small Enterprises: Section 9 of the MSMED Act, 2006 defines them as per investment In P & M /Equipments:

6. Specified Companies (Furnishing of information about payment to micro and small enterprise) Order, 2019. Whether Registration of Micro/ Small enterprises is mandatory: No, Section 8(1)(a) provides discretion to get registration, means there is no mandatory requirement for having any such registration certificate, only confirmation of them is sufficient Requirement to make payment & Interest if any Section 15 provides the maximum period of 45 days to make payment irrespective of the agreed period exceeding 45 days. Section 16 make obligations to pay monthly compounding interest for delayed period @ 3 times of the Bank Rates of the RBI. Requirement for reporting to the RoC in Form MSME-1 Required u/s 405 of the CA for providing information of stastics • 1st Time as at 22.01.2019 (within 30 days, i.e. on or before 20.02.2019) • Half yearly on 31st March and 30th Sept., within 30 days of the end of period • The form needs to be signed by the director/ cs of the Company, No certification.

7. Specified Companies (Furnishing of information about payment to micro and small enterprise) Order, 2019. Difficulties: • Finalizations of the list of creditors exceeding 45 days even before Audited figures • Obtaining details of the Micro and Small enterprises • Providing interest for the default period in the books. • RoC may ask further details and inspect u/s 405(3) • No. of multiple transactions with the same entity, disputes in the quality/ quantity, running work. Mis-use of information: for IBC or otherwise by Micro/ Small enterprises Fine: On company upto 25,000 and on Directors Rs. 25,000 to Rs. 3,00,000 or imprisonment upto 6 months or both (Compoundable)

8. Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019. Advisable Steps by Companies • Prepare list of the creditors after verifying and recording all the invoices for outstanding for more than 45 days from the date of receipt of goods or services from all the creditors as at 22.01.2019. • Interduce KYC system/ vendors registration for the first time contracts/ arrangement • Send email to all such creditors having credit balance exceeding 45 days as on 22.01.2019, requesting them to confirm their status and to provide Copy of the Registration Certificate of MSME (if any) and PAN • The above said activities should be completed before 15th Feb., 2019 positively, so that you may be able to make proper and timely compliance before the last date of compliance, i.e. on or before 20th Feb., 2019. • If possible make payment of all such dues before 21.01.2019 to avoid providing details. • Make provisions for interest @ three times of the Bank rate of RBI for the default period if any • The similar exercise needs to be repeated for 30th Sept., and 31st March, however, once details of the status once received, need not to take repeated confirmation

9. Companies (Acceptance of Deposits)Amendment Rules, 2014. AMended by MCA Notification No. 42(E) dated 22.01.2019 • In the Rule 2(1)(c)(xviii) in the exempted category of deposits “any amount received by a company from Alternate Investment Funds, Domestic Venture Funds, Infrastructure Investment Trusts, (Real Estate Investment Trusts) and Mutual Funds registered with SEBI in accordance with regulations made by it.” has been inserted. • In Rule 16 which provides that every company to which deposits rules apply, shall on or before the 30th day of June, of every year, file with the RoC, a return in Form DPT-3 and furnish the information contained therein as on the 31st day of March of that year duly audited by the auditor of the company. In the said rule the following explanation has been inserted: “It is hereby clarified that Form DPT-3 shall be used for filing return of deposit or particulars of transaction not considered as deposit or both by every company other than Government company”

10. Amendment in RULE 16A Disclosures in the financial statement. (1) Every company, other than a private company, shall disclose in its financial statement, by way of notes, about the money received from the director. (2) Every private company shall disclose in its financial statement, by way of notes, about the money received from the directors, or relatives of directors. (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, in terms of clause (c) of sub-rule 1 of rule 2 from the 1st April, 2014 to the date of 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. Revised Form DPT-3 is inserted (Not available for e-filing till now) • Form has 3 options • (o) One Time Return for disclosure of details of outstanding money or loan received by company but not considered as deposits u/r 2(1)(c) • (o) Return of Deposit or Return for Disclosures of money or loan received by the company but not considered as deposits u/s 2(1)(c) of the Rules • (o) Return or Deposit

11. Amendment in RULE 16A Disclosures in the financial statement. Therefore, • For each types of return a separate form DPT-3 would required to be filed • Every company except Govt., Company needs to file the applicable form • One time return needs to be filed for status as at 22.01.2019 within 90 days means on or before, 21st April, 2019 • The particulars from 1st April, 2014 to 31st March, 2018 also needs to be filed on or before 21st April, 2019 • Thereafter it is assumed that the amount not considered as deposits may be required to be filed on each years as at 31st March, on or before 30th June. • List of Deposits and Auditors Certificate is required to be attached with the Form DPT-3, however no requirement for certification of the Form by Professionals • All the exempted items needs to be reported in the Form

12. EXEMPTIONS TO PRIVATE COMPANIES FOR AMOUNT/DEPOSITS OBTAINED FROM DIRECTORS AND THEIR RELATIVES & MEMBERS • Amount received from the Directors and their relatives are fully exempted subject to compliances of: • At the time of receipt of the amount he must be a director in the Board • Disclosure in the Annual Report for the amount received from the Directors (c) Disclosure in the Annual Report for the amount received from the relatives Directors (d) Have furnished a declaration in writing at the time of providing money to the company that the amount is not given out of the funds acquired by him by borrowings or accepting loans or deposits from others • Amount received from the members (Shareholders are exempted subject to compliances of; • Which accept money from members not exceeding hundrend percent of paid up share capital, free reserves and Security Premium; or • Which is start up (Registered) for 5 years; or • Which fulfills all the following three conditions (i) Which is not an associate or subsidiary of other company; and (ii) If the borrowing from Banks /FIs or Company less than twice of paid up capital or Rs.50 Crores which even is lower; and (iii) Not defaulted in repayment of such borrowings (ii) above at the time of accepting deposits

13. EXEMPTIONS TO PRIVATE COMPANIES FOR AMOUNT/DEPOSITS OBTAINED FROM DIRECTORS AND THEIR RELATIVES & MEMBERS • Amount received from the members (Shareholders are exempted subject to compliances of; - Filing of Form DPT-3 to RoC

14. COMPANY (Amendment) Ordinance, 2019 Section 2(41) read with Rule 40 of Companies (Incorporation) (Fourth Amendment) Rules, 2018: (W.e.f. 02.11.2018 ) Rules Notified on 18.12.2018) “Financial year”, in general Financial year means the period ending on the 31st 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 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

15. COMPANY (Amendment) Ordinance, 2019New SECTION 10A FOR Commencement of Business INC 22A to be filed

16. COMPANY (Amendment) Ordinance, 2019 Section 12 Registered office of company 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.

17. COMPANY (Amendment) Ordinance, 2019 SECTION 14 READ WITH RULE 41 CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY. • 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, • 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 25A 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

18. COMPANY (Amendment) Ordinance, 2019 Section 77 - Duty to FILE FORM CHG-1 FOR CREATION/MOFDIFICATION OF charges

19. COMPANY (Amendment) Ordinance, 2019 Revision in form chg-4

20. Companies (Significant Beneficial Ownership) Rules, 2018 (‘SBO Rules’). MCA vide notification dated 13th June,2018 Rule 2(1)(h) Meaning Significant Beneficial Ownership In relation to reporting company means an individual referred to in section 90(1) (holding ultimate beneficial interest of not less than 10%)who acting alone or together with one or more persons or trust, posses one or more of the right or entitlement in the reporting company namely; • Holds directly or indirectly not less than 10% of the shares; • Holds directly or indirectly not less than 10% of the voting rights; • Right to receive and participant directly or indirectly in dividend of not less than 10% in a financial year; • Has right to exercise or actually exercises significant influence or control in any manner other than through direct holding,

21. Companies (Significant Beneficial Ownership) Rules, 2018 (‘SBO Rules’). MCA vide notification dated 13th June,2018 Calculation of Significant Beneficial Ownership • Holding of shares in the name of Individual; and • Beneficial ownership in the shares not registered in his name (u/s 89(2) • Hold majority stake in the member company of Reporting Company; or • Holds majority stake in the holding company of that member; • Karta- Where the member is HUF of the reporting company; • Partner- Where the member is a partnership / LLP • Trustee or beneficiary or author - Where the member is discretionary or charitable trust; • Is a general partner or is an investment manager or CEO of Entity controlled pooled investment vehicle

22. Companies (Significant Beneficial Ownership) Rules, 2018 (‘SBO Rules’). MCA vide notification dated 13th June,2018 Meaning of shares – Explanation VI Shares includes: • GDR, • Compulsorily Convertible Preference shares • Compulsorily convertible Debentures Meaning of Significant Influence (Section 2(1)(i); includes power to participate (directly or indirectly) in Financial and operating policy decision but not control of those policy

24. Companies(Significant Beneficial Ownership) Rules, 2018 (‘SBO Rules’).

25. Companies(Significant Beneficial Ownership) Rules, 2018 (‘SBO Rules’).

26. Other Important Changes needs to be considered • Section 139: Appointment/ Re-appointment of Auditors: No requirement for ratification of the Auditors at every AGM • Section 185: Loan to directors – Can be given to a company in which director is a director or member subject to the previous approval of members by Special Resolution • Section 196/197: No need for approval of Managerial Remuneration or waiver of the excess remuneration paid by public company: • Section 403: Filing fee of delayed documents @ Rs. 100/- per day after the specified period on the Form MGT-7 and AOC-4 (For previous year upto 1st July, 2018 the Normal + Additional and Rs. 100/- per day for the period till the actual date of filing will be liable to be paid • KYC of the Director after 1st April- but before 30th April by filing of the Form DIR-3 KYC

27. Other Important Changes needs to be considered • Section 135(1) CSR: Section 135(1) has been amended by inserting “[the immediately preceding financial year] for "any financial year" by Companies (Amendment) Act, 2017, w.e.f. 19-9-2018, vide Notification No. SO 4907(E), dated 19-9-2018. for requirements for constitution of the CSR Committee. Whereas section 135(5) provides that the Board of every company referred to in sub-section (1), 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, 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 clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount. [Explanation.—For the purposes of this section "net profit" shall not include such sums as may be prescribed, and shall be calculated in accordance with the provisions of section 198.

28. Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2018MCA notifies and substituted existing rule 14 related to private placement of Companies (Prospectus and Allotment of Securities) Rules, 2014 vide Notification dated 7th August, 2018 Stringent condition on utilisation of funds : The most significant change in the amendment is that an issuer is not permitted to utilise any monies raised through private placement till the allotment is complete and the return of allotment (PAS 3) is filed with the ROC within 15 days of allotment. The timelines for filing the return on allotment has been reduced to 15 days unlike the erstwhile provision of 30 days.  Relaxation in filing of PAS-4 and PAS-5 with ROC: Offer Letter in Form PAS-4 and record of persons to whom the Offer Letter is issued in Form PAS-5 are required to be maintained by the Company and are no longer required to be filed with the ROC. Resolutions to be filed prior to issue of Offer Letter: Prior to issuing the Offer Letter, the special resolution approving the issuance of securities and/or board resolution for issue of securities has to be filed with the ROC. In this regard, it has also been clarified that private companies (which were earlier exempted from filing of board resolutions) will have to file board resolutions passed for issue of securities. There is change in format of Form PAS-4

29. National Financial Reporting Authority Rules,2018 MCA notification dated 13th Nov.,2018 Key aspects specified by the NFRA rules are Classes of companies and bodies corporate governed by the NFRA Authority, Functions and duties of the NFRA Authority, Annual return, Recommending accounting standards and auditing standards, Monitoring and enforcing compliance with accounting standards and  auditing standards,  Overseeing the quality of Audit service and suggesting measures for improvement, Power to investigate, . Disciplinary proceedings, Punishment in case of non-compliance etc. Classes of Companies and Body corporate governed by the Authority – a. Listed Companies in or outside India b. Public Companies having paid-up of not less than Rs. 500 Cr. or annual turnover not less than Rs. 1000 Cr. or having an aggregate outstanding loans, debentures and deposits of not less than Rs. 500 Cr. as on the 31st March of immediately preceding financial year; c. insurance companies, banking companies, companies engaged in the generation or supply of electricity, companies governed by any special Act; d. any body corporate or company or person, or any class of bodies corporate or companies or persons, on a reference made to the Authority by the Central Government in public interest; and

30. Classes of Companies and Body corporate governed by the Authority e. a body corporate incorporated or registered outside India, which is a subsidiary or associate company of any company or body corporate incorporated or registered in India as referred to in clauses (a) to (d), if the income or net worth of such subsidiary or associate company exceeds twenty per cent. of the consolidated income or consolidated net worth of such company or the body corporate, as the case may be, referred to in clauses (a) to (d). 2. Every existing body corporate other than a company governed by these rules, shall inform Authority within 30 days of commencement of these rules, in Form NFRA-1,the particulars of the auditor as on the date of commencement of these rules 3. Every body corporate, other than a company defined in clause (20) of section 2, formed in India and governed under this rule shall,within 15 days of appointment of an auditor under section 139(1), inform the Authority in Form NFRA-1, the particulars of the auditor appointed by such body corporate. Provided that a body corporate governed under clause (e) of sub-rule (1) shall provide details of appointment of its auditor inForm NFRA-1 4. A company or a body corporate other than a company governed by these rules shall continue to be governed by Authority for period of 3 years even if its limit fall below .

31. MAJOR Amendment in THE HEADINGS OF THE schedule iii, BALANCE SHEET

32. Thank you