1. Companies (Acceptance of Deposits) Amendment Rules, 2016
The Ministry of Corporate Affairs has vide Notification No GSR 639 (E ) dated 29th June 2016, notified amendments to the Companies (Acceptance of Deposit) Rules, 2014. Among other amendments, it has excluded an amount of Rs. 25 Lakh or more received by a start-up company, by way of a convertible note (convertible into equity shares or repayable within a period not exceeding five years from the date of issue) in a single tranche, from a person.
A Start-up Company means a private company incorporated under the Companies Act, 2013 or Companies Act, 1956 and recognised as such in accordance with notification number G.S.R. 180(E) dated 17th February, 2016 issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry.
A Convertible Note means an instrument evidencing receipt of money initially as a debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of the start-up company upon occurrence of specified events and as per the other terms and conditions agreed to and indicated in the instrument.
In Rule 3 to the Principal rule which limits the eligible Company to accept or renew any deposit from its members, the limit has been increased from 25% to 35% of the aggregate of the paid-up share capital and free reserves of the company.
Also the following proviso to Rule 3 of the Principal rules, after sub Rule 3 has been inserted-
“Provided that a private company may accept from its members monies not exceeding one hundred per cent of aggregate of the paid up share capital, free reserves and securities premium account and such company shall file the details of monies so accepted to the Registrar in such manner as may be specified.
Rule 16 A pertaining to “Disclosures in the financial statement” has been introduced as follows:
(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.
The full notification can be accessed at http://www. mca.gov.in/Ministry/pdf/Rules_30062016.pdf
2. Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2016
The Ministry of Corporate Affairs has vide notification No. G.S.R. 646(E) dated 30th June 2016 issued amendments to the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014.
The disclosures applicable to listed companies as mentioned in Rule 5 of the principal rules, sub-rule (1), “clauses (v), (vi), (vii) and (ix) to (xi)” have been omitted:
(v) the explanation on the relationship between average increase in remuneration and company performance;
(vi) comparison of the remuneration of the Key Managerial Personnel against the performance of the company;
(vii) variations in the market capitalisation of the company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer in case of listed companies, and in case of unlisted companies, the variations in the net worth of the company as at the close of the current financial year and previous financial year;
(ix) comparison of the each remuneration of the Key Managerial Personnel against the performance of the company;
(x) the key parameters for any variable component of remuneration availed by the directors;
(xi) the ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year;
Following Disclosures in the Directors report are also required:
Details of remuneration of every employee drawing in excess of Rs 1,02,00,000/- pa or Rs. 8,50,000/- per month is to be disclosed alongwith the names of the top ten employees in terms of remuneration drawn.
Further the filing of Form No. MR-1 for the appointment of Chief Executive Officer, Chief Financial Officer and Company Secretary has been omitted.
The full notification can be accessed at http://www. mca.gov.in/Ministry/pdf/AmendmentRules_01072016. pdf
3. Removal of Difficulties Third Order – Rotation of Auditors
The Ministry of Corporate Affairs has vide Order no S.O. 2264(E) dated 30th June 2016, issued the Removal of Difficulties Third Order, which is deemed to be effective from 1st April 2014.
The third proviso of section 139 (2) (pertaining to Appointment of Auditors) of the Companies Act 2013 states that every company existing on or before the commencement of the Act and falling within the ambit of section 139 (2) (i.e. provisions relating to rotation of auditors) of the Act, are required to comply with the requirements of the said sub-section within 3 years from the date of commencement of the Act.
Given the above, difficulties have arisen regarding compliance with the provisions of the third proviso to section 139 (2) of the Act in so far as they relate to the period within which companies would comply with the provisions of section 139 (2) of the Act. In this regard, the Central Government has made the order by which, the third proviso to section 139 (2) of the Act would be substituted with the following proviso:
“Provided also that every company, existing on or before the commencement of this Act which is required to comply with the provisions of this sub-section, shall comply with requirements of this sub-section within a period which shall not be later than the date of the first annual general meeting of the company held, within the period specified under sub-section (1) of section 96, after three years from the date of commencement of this Act.”
This order aims to remove the difficulties that have arisen regarding compliance with Rotation of Auditors. The provisions of third proviso to section 139(2)in so far as they relate to the period within which companies would comply with provisions of section 139(2) of the said Act is substituted as follows:
The full notification can be accessed at http://www.mca.gov.in/Ministry/pdf/ROD_Third_Order_2016.pdf
4. Companies (Incorporation) Third Amendment Rules, 2016
The Ministry of Corporate Affairs has vide Notification No G.S.R. 743(E) dated 27th July 2016 issued Companies (Incorporation) Third Amendment Rules, 2016 to amend the Companies (Incorporation) Rules 2014.
Rule 3(2) has been substituted as follows:
“(2) A natural person shall not be member of more than a One Person Company at any point of time and the said person shall not be a nominee of more than a One Person Company”
Rule 26 with respect to Publication of the name of the Company has been substitutes as follows :
(1) Every company which has a website for conducting online business or otherwise, shall disclose/publish its name, address of its registered office, the Corporate Identity Number, Telephone number, fax number if any, email and the name of the person who may be contacted in case of any queries or grievances on the landing/home page of the said website.”
In Rule 28(2) the following proviso has been added after 2nd Proviso:
“Provided also that on completion of such inquiry, inspection or investigation as a consequence of which no prosecution is envisaged or no prosecution is pending, shifting of registered office shall be allowed. R ule 29 (1) is substituted as follows:
“(1) The change of name shall not be allowed to a company which has not filed annual returns or financial statements due for filing with the Registrar or which has failed to pay or repay matured deposits or debentures or interest thereon:
Provided that the change of name shall be allowed upon filing necessary documents or payment or repayment of matured deposits or debentures or interest thereon as the case may be.”
The rule for Conversion of unlimited liability company into a limited liability company by shares or guarantee have been incorporated in newly added Rule 37.
The full notification can be accessed at http://www.mca.gov.in/Ministry/pdf/CompaniesThridAmendementRules_28072016.pdf
5. Companies (Share Capital and Debentures) Fourth Amendment Rules, 2016
The Ministry of Corporate Affairs has vide Notification No G.S.R. 791(E) dated 12th August 2016 notified amendments to Companies (Share Capital and Debentures) Rules, 2014.
Rule 18, after Sub-rule (10), the following sub-rule shall be inserted.
“(11) Nothing contained in this rule shall apply to rupee denominated bonds issued exclusively to overseas investors in terms of A.P. (DIR Series) Circular No. 17 dated September 29, 2015 of the Reserve Bank of India.”
The full notification can be accessed at http://www.mca.gov.in/Ministry/pdf/CompaniesFourthAmendmentRules_17082016.pdf.
