Company Law

1. Company Law Settlement Scheme, 2014
The
Ministry of Corporate Affairs, vide General Circular No. 34/2014 dated
12-08-2014, has launched the Company Law Settlement Scheme, 2014
(CLSS-2014), to enable companies who have failed to file annual
statutory documents (Annual Return and Financial Statements) an
opportunity to file them and enable them:

1. To make their default good by filing belated documents at a reduced additional fee of 25% of actual fees.

2. Avoid penal action, especially disqualification of the Directors u/s. 164(2) of Companies Act, 2013.

3.
I nactive companies can get their companies declared as ‘dormant
Company’ u/s. 455 of the Act by completing the filing at reduced penalty
and get themselves declared as ‘Dormant Company’ by filing e-form MSC- 1
at 25% of the fee for the form or apply for strike off by filing e-form
FTE at 25% of fee payable.

4. Grants immunity from prosecution
for delayed filing. Under the Companies Act, 2013 the quantum of
punishment has been enhanced for repeated defaults in section 451.

The Scheme is in force from 15th August, 2014 to 15th October, 2014.

CLSS shall not apply to the filing of belated documents other than the following:

1. Form 20B-Form for filing annual return by a company having share capital.

2. F orm 21A-Particulars of Annual Return for the company not having share capital.

3. F orm 23AC, 23ACA, 23AC-XBRL and 23ACA-XBRLForms for filing Balance Sheet and Profit & Loss account.

4. Form 66-Form for submission of Compliance Certificate with the Registrar.

5. F orm 23B-Form for intimation for Appointment of Auditors.

Further, CLSS shall not apply in the following cases:
1.
Companies against which action for striking off the name under s/s. (5)
of section 560 of Companies Act, 1956 has already been initiated by the
Registrar of Companies; or

2. Where any application has already
been filed by the companies for action of striking off name from the
Register of Companies; or

3. Where applications have been filed for obtaining Dormant status under section 455 of the Companies Act, 2013;

4. Vanishing companies.

Companies
need to file an application in the e-Form CLSS 2014 to seek immunity
for filing belated documents. After granting the immunity, the Registrar
concerned shall withdraw the prosecution(s) pending, if any, before the
concerned court.

2. Clarification With Regard Section 139 (5) and 139 (7) of Companies Act, 2013

The
Ministry of Corporate Affairs has vide General Circular No. 33/2014
dated 31st July, 2014 issued clarification regarding appointment of
Auditors to deemed Government Companies as no specific provisions of
deemed Government Companies are included in the New Act. It is clarified
that the new Act does not alter the position with regard to audit of
such deemed government Companies through C & AG and thus such
companies are covered under s/s. (5) and (7) of section 139 of the new
act.

Further, the Shareholders Agreement and the Articles of
Association envisaging control, are to be taken into account to decide
whether an individual Company other than those refereed above is covered
under the provisions of s/s. (5) and (7) of section 139 of the Act.
Also, clarified that where a newly incorporated Company requires the
appointment of Auditor by the C & AG, it is the primary
responsibility of the Company to inform the same to the C & AG and
to share such intimation to the relevant Government so that the
Government can also send a suitable request to the C & AG.

3. Clarification On Transitional Period For Resolutions Passed Under Companies Act, 1956

The
Ministry of Corporate Affairs has vide General Circular No. 32/2014
dated 23rd July, 2014, clarified that resolution approved or passed by
Companies under the relevant applicable provisions of the old Act during
the period 1st September, 2013 to 31st March, 2014, can be implemented,
in accordance with the Old Act, notwithstanding the repeal of the
relevant provision subject to the conditions:

(a) that the implementation of the resolution actually commenced before 1st April, 2014; and
(b)
that this transitional arrangement will be available upto expiry of one
year from the passing of the resolution or 6 months from the
commencement of the corresponding provision in the New Act whichever is
later.

It is also clarified that any amendment to the resolution must be in accordance with the relevant provision of the New Act.

4. Companies (Meetings of Board and its Powers) Rules, 2014

The
Ministry of Corporate Affairs has vide notification dated 14th August,
2014, issued the Companies (Meetings of Board and its Powers) Second
Amendment Rules, 2014, in exercise of the powers conferred u/s. 173,
175, 177, 178, 179, 184, 185, 186, 187, 188, 189 and section 191 read
with section 469 of the Companies Act, 2013 (18 of 2013), which shall
come into force on the date of their publication in the Official
Gazette.

In the Companies (Meetings of Board and its Powers) Rules, 2014:

(1)
in Rule 3, in sub-Rule (6), the words and commas,“which shall be in
India,” shall be omitted whereby the scheduled venue of the Board
meeting through video conferencing or audio visual will be the place
where the recording takes place.

(2) (a) in Rule 4, (a) in sub-Rule (1), for the brackets, figure and word “(1) The,” the word “The” shall be substituted;

(b)
in Clause (iv), for the words “consideration of accounts,” the words
“consideration of financial statement including consolidated financial
statement, if any, to be approved by the Board under s/s. (1) of section
134 of the Act” shall be substituted, i.e, Audit Committee meetings for
consideration of accounts is to now read, the Audit Committee Meetings
for consideration of any financial statement including Consolidated
Financial Statement cannot be done through video conferencing.

(3) in Rule 15, for sub-Rule (3), the following sub-Rule shall be substituted, namely:-

“(3)
For the purposes of first proviso to s/s. (1) of section 188, except
with the prior approval of the company by a special resolution, a
company shall not enter into a transaction or transactions, where the
transaction or transactions to be entered into, –

a. as
contracts or arrangements with respect to clauses (a) to (e) of s/s. (1)
of section 188, with criteria as mentioned below –

i) sale,
purchase or supply of any goods or materials, directly or through
appointment of agent, exceeding ten per cent. of the turnover of the
company or rupees one hundred crore, whichever is lower, as mentioned in
Clause (a) and Clause (e) respectively of s/s. (1) of section 188;
ii)
selling or otherwise disposing of or buying property of any kind,
directly or through appointment of agent, exceeding ten per cent. of net
worth of the company or rupees one hundred crore, whichever is lower,
as mentioned in Clause (b) and Clause (e) respectively of s/s. (1) of
section 188;
iii) leasing of property of any kind exceeding ten per cent. of the net worth of the company or ten per cent. of
turnover of the company or rupees one hundred crore, whichever is
lower, as mentioned in Clause (c) of s/s. (1) of section 188;

iv)    availing or rendering of any services, directly or through appointment of agent, exceeding ten per cent. of the turnover of the company or rupees fifty crore, whichever is lower, as mentioned in Clause (d) and Clause (e) respectively of s/s. (1) of section 188:

Explanation- It is hereby clarified that the limits specified in sub-Clauses (i) to (iv) shall apply for transaction or transactions to be entered into either individually or taken together with the previous transactions during a financial year.

b.    is for appointment to any office or place of profit in the company, its subsidiary company or associate com- pany at a monthly remuneration exceeding two and half lakh rupees as mentioned in Clause (f) of s/s. (1) of section 188; or

c.    is for remuneration for underwriting the subscription of any securities or derivatives thereof, of the company exceeding one per cent of the net worth as mentioned in Clause (g) of s/s. (1) of section 188.

Explanation.-

(1)    the turnover or net Worth referred in the above sub- rules shall be computed on the basis of the audited Financial Statement of the preceding financial year.

(2)    in case of a wholly-owned subsidiary, the special reso- lution passed by the holding company shall be suf- ficient for the purpose of entering into the transactions between the wholly owned subsidiary and the holding company.

(3)    the explanatory statement to be annexed to the notice of a general meeting convened pursuant to section 101 shall contain the following particulars, namely:-
a.    name of the related party;
b.    name of the director or key managerial personnel who is related, if any;
c.    nature of relationship;
d.    nature, material terms, monetary value and particulars of the contract or arrangement;
e.    any  other  information  relevant  or  important   for the members to take a decision on the proposed resolution.”

5.    Second amendment to Companies (Management and administration) rules, 2014

The ministry of Corporate affairs has on 24th july, 2014 vide Gsr 537(e) amended the Companies (manage- ment and administration) rules, 2014 by insertion of the following:

i.    in rule 9 after sub-rule (3) – “provided that nothing contained in this rule shall apply in relation to a trust which is created, to set up a mutual fund or Venture Capital fund or such other fund as may be approved by SEBI.”
ii.    and in rule 13 the words “either value or volume of the shares “shall be and the explanation shall be omitted.
iii.    In Rule 23 (1) for the words “not less than five lakhs rupees,” the words “not more than five lakh rupees” substituted.
iv.    In rule 27, in sub-rule (1) and in the explanation, for the word “shall”, the word “may” shall be substituted.

6.    Addition to Schedule VII – of Companies act, 2013

The Central Government vide Notification dated 6th August, 2014, Gsr 568 (e) has made the following amendment to schedule Vii pertaining to Corporate social responsibility:

insertion of
“(xi) slum area development.

Explanation – for the purposes of this item, ‘slum area’ shall mean any area declared as such by the Central Government or any state Government or any other Com- petent authority under any law for the time being in force.”

7.    ‘Class of Companies “ for the purposes of Section 203 (1) of the Companies act, 2013

Vide Notification No. S O 1913(E) the Ministry of Corpo- rate Affairs has on 25th July, 2014 it has notified that public Companies having :

a)    paid up Capital of Rs. 100 crores or more; and
b)    annual turnover of Rs. 1,000 crores or more; and
c)    which are engaged in multiple businesses; and
d)    have appointed Chief Executive Officer for each such business shall be the ‘class of Companies’ for the purposes of section 203 (1) of the Companies act, 2013 which pertains to appointment of Key managerial personnel.

8. Companies (removal of Difficulties) Sixth Order, 2014

The ministry of Corporate affairs has vide s o 1894 (e) dated 24th july, 2014, issued the Companies (removal of Difficulties) Sixth Order, 2014. To overcome the difficulties arising, and resultant disharmonious interpretation of Clause 76 of section 2 pertaining to related party, due to absence of the word ‘relative’ in clause (iv), the Central Government has issued the said order and amended section 2 as follows:

“In Clause (76) in sub-Clause (iv) after the word ‘manager’ the word ‘or his relative’ shall be inserted.”