Category Archives: company law

condonation of delay for restored companies

MCA had introduced a Companies Fresh Start Scheme and LLP Settlement Scheme which ran from 1st April, 2020 to 31st December, 2020 wherein companies who had delayed in filing of their past forms/ returns / filings could do so with no additional fees attached. The scheme was originally supposed to end on 30th September, 2020 but MCA extended it to 31st December, 2020. It was not extended further, despite several requests made to them.

Now the MCA has come up with another brainchild, but a vastly restricted one though. Many companies’ names were stuck off from the register due to non filings of annual financial statements or annual returns for two consecutive financial years. Such companies had filed an appeal in the National company law tribunal (NCLT). Once the orders are received from NCLT, then there is a huge process to go for regularizing the records at ROC offices and restoring the company status to active on the MCA portal.

Now for those companies who have been restored between 1st to 31st December, 2020, MCA has afforded another limited opportunity for a period of 3 months upto 31st March, 2021 to file all e-forms (except SH-7 and charge forms) without any additional filing fee. How the MCA will identify such companies on their portal, god only knows.

Copy of MCA circular no. 3/2021 is available at the MCA site viz. http://www.mca.gov.in

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CSR for covid vax

MCA has clarified vide its circular no. 1/2021 dated 13th January, 2021 that any expenditure going towards awareness campaign / public outreach campaign on the covid vaccination program will be considered as CSR activity and the expenses can accordingly be taken under that head by the companies.

Earlier it was clarified that expenditure on covid related activity be considered as a CSR spend.

Copy of the MCA circular can be found at its site.

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AGM by video conferencing

MCA has issued a very confusing circular no. 2/2021 dated 13/1/2021 wherein they have allowed companies to hold their annual general meetings of their shareholders via video conferencing means upto end of 2021 i.e. upto 31st December 2021.

In the same breath they also say that this does not confer any extension of time to hold AGM for companies and they remain liable to be prosecuted for any compliances on that count.

Its a very confusing circular worded very badly, one needs to read it half a dozen times to understand what it means.

Its a pity that MCA officers do not understand the ground reality – that many companies and their office staff are still held back due to the covid pandemic and are not attending their offices, ditto for auditors staff. The local trains of Mumbai which is the lifeline of Mumbai has not been opened for the general public. In absence of that commuting becomes extremely difficult.

Government could very well have extended the time to hold the AGM for companies having march 2020 as their annual closing date, despite the section allowing only 3 months extension, what prevented the government from passing an ordinance to that effect.

Copy of the above circular can be found at the MCA site.

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incorporation

MCA has vide its circular dated 24th December, 2020 amended the Companies (Incorporation) Rules, 2014 by giving more leeway to the name reservation, which at present is only 20 days time limit from the date of its approval.

Now they have provided that the applicants can extend the name reservation approval time limit by paying appropriate fees as under:

upto 40 days from the date of approval i.e. 20 days extra on payment of Rs.1000/-

upto 60 days from the date of approval i.e. 40 days extra on payment of Rs.2000/-

In both the above cases, the additional payment should be made before expiry of 20 days / 40 days respectively

upto 60 days from the date of approval i.e. 40 days extra on payment of Rs.3000/- if the payment is made before 20 days of the approval date.

All this is going to come into effect from 26th January, 2021 – though i am clueless why it should be so late, it should have been made applicable from 1st January 2021 itself.

This is a much needed move because the present 20 days’ time limit is vastly insufficient in order to submit/ file all the documents online at the web portal of the MCA and the govt. asks for a truckload of documents for the same.

In the Web form Spice B+ also they have introduced a column for indicating the main objects of the proposed company. Presently such indication has to be made in the attachment portion of the form.

A copy of the MCA circular can be found on the MCA site. i.e. http://www.mca.gov.in

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purchase of minority shareholdings

MCA has vide its notification dated 17th December, 2020 amended the Companies (Compromises, Arrangements & Amalgamations) Rules, 2016 as follows. It has introduced a new rule 26A specifying the procedures to be followed in the case of purchase of minority shareholding held in demat form. Read on.

  1. The company shall within two weeks of the receipt of amount equal to the price of shares to be acquired by the acquirer verify details of the shareholders holding shares in demat form;
  2. After verification as above, the company has to send notice to the shareholder (via speedpost/ courier/ e-mail/ registered post) informing him of the purchase of his shares in the company and giving a one month cut off (from the date of sending the notice) after which the shares shall be debited from his demat account and credited to the demat account of the company (designated demat account of the company);
  3. The notice as above should also be published in two widely circulated newspapers in the district where the registered office of the company is situated and also uploaded on the website of the company, if any.
  4. The company has to inform the depository after the notice has been published and also give some undertakings such as : corporate action under section 236, that the minority shareholders have been intimated, that the minority shareholders shall be paid by the company immediately after completion of corporate action and that any dispute or complaints shall be settled by the company;
  5. The Board has to authorise the company secretary or any other official for effecting transfer of shares through corporate action, to make necessary disclosures to the depository and to submit whatever documents required in this regard;
  6. The depository, upon receipt of the information as above from the company, make necessary transfer of shares from the demat account of the minority shareholder to the designated demat account of the company, unless some shareholders have made direct transaction with the acquirer in this regard. Post that they have to intimate the company accordingly;
  7. Once the intimation has been received by the company from the depository as above, they shall immediately disburse the amount into the bank account of the minority shareholders. The stamp duty on the transfers as above, has to be paid by the company itself;
  8. After the payment is made as above to the minority shareholders, the company shall intimate the same to the depository who shall then transfer the shares from the designated demat account of the company to the demat account of the acquirer;
  9. The above rules shall not apply if there is a specific order of the court or tribunal staying the transfer of any shares or payment of dividend or where the shares are pledged or hypothecated – in such case the shares shall not be transferred to the designated demat account of the company.
  10. Earlier in the definition clause “corporate action” has been defined to mean any action taken by the company relating to transfer of shares and all benefits accruing from transfer of such shares viz. bonus shares, split, consolidation, fraction shares and rights issue to the acquirer.
  11. The copy of the said notification can be found at the MCA site viz. http://www.mca.gov.in

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relaxation for independent directors

MCA has vide its amendment to the Companies (Appointment and Qualification of Directors), Rules, 2014 given relaxation to the independent directors.

First, they are now required to take the proficiency test within two years of his name being included in the data bank of the Institute recognized by the Ministry.

Secondly, exemption from proficiency test is given if somebody has been a Director in certain specified companies for a period of 3 years as on the date of the inclusion of his name in the data bank. Further some more exemptions is given in respect of the categories of companies/ bodies corporate in which the said director was an independent director such as body corporate listed on a foreign stock exchange which is recognized by the FATF, foreign bodies corporate having paid up share capital of USD 2 million or more, or statutory corporations set by a special act by the Parliament or certain designated officers like Directors in certain ministries such as corporate law, finance, heavy industries and public enterprises or Chief General Managers in SEBI, RBI, IRDA, PFRDA and having experience in corporate law matters .

The passing score has also been reduced to 50% from 60% previously.

This is much needed relief for the independent directors,

The notification can be found at the MCA site. i.e. http://www.mca.gov.in

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CRA-4 form

MCA has vide its circular no. 38 dated 1st December, 2020 extended the last date for filing of CRA-4 form for financial year 2019-20 to 31st December, 2020. The hitherto last date was 30th November, 2020. CRA-4 form is for filing of the cost audit report of the company, wherever cost audit has been mandated by the government. The relevant circular can be found at the MCA site. i.e. http://www.mca.gov.in

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one resident director

Under section 149 of the Companies Act, 2013 every company in India should have at least one director who is a resident in India, i.e. he has been in India in the financial year for at least 182 days in a year. This has been brought out by the Companies Act, 2013 w.e.f. 1st April, 2014.

Now in view of the covid pandemic, this requirement is relaxed for the financial year 2020-21. So even if a company does not or is not able to comply with the said provisions during the financial year 2020-21 it shall NOT be treated as non compliance.

MCA has clarified this vide their circular no. 36/2020 dated 20th October, 2020, which is available on the MCA site. i.e. http://www.mca.gov.in

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relief to QIBs in private placement

The Ministry of Corporate Affairs, India has vide its notification dated 16th October, 2020 amended the Companies (Prospectus and Allotment of Securities) Rules, 2014 by allowing the special resolution for allotment of shares to Qualified Institutional Buyers once a year, instead of every time it is issued to the QIBs.

A proviso has been to the Rule 14(1) which says as follows

Hitherto, the special resolution was required to be passed for each offer or invitation to the QIBs.

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MCA extension

MCA has vide its circular no. 34/2020 dated 29th September, 2020 extended all the due dates for filing of IEPF forms i.e. IEPF-1, 1-A, 2, 3, 4, 7 and verification of claims filed in form IEPF-5 without paying additional filing fees upto 31st December, 2020.

Vide another circular no. 35/2020 dated 29th September, 2020, MCA has extended the time to create deposit repayment reserve of 20% u/s 73 of the companies act, 2013 and to invest or deposit 15% of debentures u/r 18 of the companies (share capital and debentures), rules, 2014, by 3 months upto 31st December, 2020

MCA had on the same date issued four other extension orders, which can be accessed here.

https://vramonline.wordpress.com/2020/09/29/mca-extension/

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MCA extension

MCA has vide its circular no. 30/2020 dated 28th September, 2020 extended the Companies Fresh Start Scheme 2020 by 3 months upto 31st December, 2020. This scheme allows companies to file select forms without payment of additional filing fee.

We had blogged about the Companies Fresh Start Scheme here https://vramonline.wordpress.com/2020/03/31/companies-fresh-start-scheme-2020/

MCA has vide its circular no. 31/2020 dated 28th September, 2020 extended the LLP Settlement Scheme by 3 months upto 31st December, 2020. Again just like CFSS, this scheme allows LLPs (limited liability partnerships) to file select back dated forms without incurring any additional filing fee.

MCA has vide its circular no. 32/2020 dated 28th September, 2020 allowed the charge creation or modification forms i.e. form CHG-1 to be filed late without any additional filing fee, upto 31st December, 2020.

Lastly vide its circular no. 33/2020 dated 28th September, 2020 MCA has allowed extra-ordinary general meetings (EGM) to be conducted by video conferencing or any other audio visual means upto 31st December, 2020.

All circulars can be found at the MCA site .i.e. http://www.mca.gov.in

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cost audit report

Ministry of Corporate Affairs (MCA) has vide its circular dated 10th September, 2020 allowed the cost audit report for the financial year ended 31st March, 2020 to be filed by 30th November, 2020. The last date of filing form CRA-4 for financial year 2019-20 has been deferred to 30th November, 2020.

Rule 6(6) of the Companies (Cost Records and Audit) Rules, 2014 specifies that cost audit report shall be filed in form CRA-4 in XBRL format within 30 days of the receipt of the cost audit report copy. But there is a proviso which says that if the company has got an extension of time to hold the annual general meeting of the shareholders of the company, then companies may file the form CRA-4 within the resultant extended period of time for filing financial statements.

Since all the Registrar of Companies (ROCs) have vide identical orders dated 8th September, 2020 extended the time period for holding the annual general meeting in respect of financial year ending on 31st March, 2020 by 3 months upto 31st December, 2020, would companies have that benefit of the extended period for filing form CRA-4 also? There appears to be some confusion because of this circular dated 10th September, 2020. I hope MCA clarifies on this matter soon.

Copy of MCA circular can be found at MCA site. i.e. http://www.mca.gov.in

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acceptance of deposits by start-ups

MCA circular dated 7th September, 2020 amending the Companies (Acceptance of Deposits), Rules, 2013 allowing start up companies to accept deposits upto a period of 10 years from the date of their incorporation. Start-ups, of course is defined in the DIPP guidelines to that effect, which is now known as Department for promotion of Industry and Internal Trade.

Start-ups can accept deposits of an amount of Rs.25 lakhs or more by way of convertible note, convertible into equity shares or repayable within a period not exceeding 10 years from the date of issue in a single tranche;

Further maximum limit for acceptance of deposits under section 73 of the Companies Act, 2013 shall not apply to a private company which is a start for a period of 10 years from the date of its incorporation.

Hitherto, the period in both the cases was 5 years.

Copy of MCA circular can be found at MCA site.

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AGM extension

Registrar of Companies of various jurisdictions in India have issued an order, today, granting general extension of time to hold the annual general meeting of the shareholders of companies in India by 3 months time upto 31st December, 2020. All ROCs have issued identical orders to that effect. General extension is given without having to make an application in form GNL-1 and wherever application has been made in form GNL-1 and is pending processing, even in those cases it is considered as approved. Even those cases which were rejected due to any reasons has been granted extension, without those companies having to do any further in the matter.

This was very much required as 99% of the companies are facing the problem with respect to completing the audit of their accounts, holding a board meeting to approve the accounts, convene the annual general meeting and hold the same by 30th September, 2020, the deadline for holding annual general meeting for those companies whose financial years ended on 31st March, 2020.

Here is a copy of the said order.

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annual return

MCA has vide its notification dated 28th August, 2020 amended the relevant provisions of Companies (Management & Administration) Rules, 2014 by directing that where a company has posted its annual return in form MGT-9 on its website, then it need not attach the same annual return as part of its Board report on the financials of the company.

Hitherto, every company was required to attach a form MGT-9 which gives details of the company promoters, principal business activities, particulars of holding, subsidiary, associate companies, shareholding pattern of promoters, directors, key managerial personnel, indebtedness, remuneration of directors, key managerial personnel, penalties, compounding of offences if any by the company during the relevant financial year.

Every year, the company was required to make this annual return in form MGT-9 and attach it to the Board report. Now the MCA has given an option to companies to post this data on their website and give only a weblink, where the shareholders can access the same to view it.

If the company posts the annual return on its website and attaches the web link on its board report, then it will be considered as compliant with the provisions of the Act & the rules.

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