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Corporate Laws

 

  1. Important Circulars/Notifications issued by MCA in the month of July-2011

 

  1. Video conference mandatory for AGM from next fiscal – MCA

 

  1. Draft Circular on providing gifts to the shareholders during annual general meeting (AGM) of the company

 

  1. DoT seeks Trai view on exit policy for new telecom players

 

  1. Amendments in Schedule XIII of the Companies Act, 1956

 

A.          Important Circulars/Notifications issued by MCA in the month of July-2011

A.(1) FILING OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT IN EXTENSIBLE BUSINESS REPORTING LANGUAGE (XBRL) MODE - EXTENSION OF DATE OF FILING AND VERIFICATION AND CERTIFICATION OF THE XBRL DOCUMENT OF FINANCIAL STATEMENTS BY AUTHORIZED SIGNATORY OF THE COMPANY AS WELL AS PROFESSIONAL LIKE CHARTERED ACCOUNTANT OR COMPANY SECRETARY OR COST ACCOUNTANT IN WHOLE TIME PRACTICE.

 

CIRCULAR NO. 57/2011, DATED 28-7-2011

 

The Para 3 of the Circular No. 37/2011, dated 7-6-2011 may be read as under: -

"All companies falling in Phase-I class of companies (excluding exempted class) are permitted to file their financial statements without any additional fee up to 30-11-2011 or within 60 days of their due date, whichever is later."

 

2. Further, in supersession of Para 2(i) of Ministry's Circular No. 43/2011, dated 7-7-2011, it is informed that the verification and certification of the XBRL document of financial statements on the e-forms would continue to be done by authorized signatory of the company as well as professional like Chartered Accountant or Company Secretary or Cost Accountant in whole time practice.

 

3. This issue with approval of Competent Authority

 

A.(2) SECTION 538 OF THE COMPANIES ACT, 1956 - WINDING UP - OFFENCES BY OFFICERS OF COMPANIES IN LIQUIDATION - SCRUTINY INSPECTION AND INVESTIGATION IN ALL WINDING UP CASES

GENERAL CIRCULAR NO. 55/2011, DATED 26-7-2011

It has been noticed that winding up petitions are being filed by management after having committed major violations under the Companies Act, 1956 as well as misappropriation of funds of the company. Winding up of such companies are also being filed by creditors. In order to curb such malpractices following procedure may be followed in all such cases:—

(a) The moment winding up petition is filed before the Court, Official Liquidator (OL) will obtain a copy of petition and forward the same to the Registrar of Companies (ROC) concerned.

(b) ROC will have a scrutiny of the details/documents available in respect of the company in MCA 21 registry and will submit a preliminary report to the Ministry within a week time for inspection or investigation, if so required, containing following information for the past five years of the date of filing of petition:—

(i) History of the company, viz. incorporation, maintenance of registered office, main object and present business activities;

(ii) Management pattern, including details of directors/nominee directors and their directorship in other companies;

(iii) Capital structure and shareholding pattern;

(iv) Financial position and working results;

(v) Comments on filing position and compliances of Schedule VI read with Accounting Standards;

(vi) Nature of complaints registered on MCA-21, their nature and any noticeable findings;

(vii) Whether any complaint was received alleging that the company is involved in fraudulent activities, siphoning of funds etc. If so, the details thereof.

(viii)Whether any scrutiny/inspection was carried out, if so, the details thereof;

(ix) Whether the company is having any holding or subsidiary company, if so, details thereof;

(x) Whether company has raised funds through IPO, if so, the utilization of amount collected, compliance of provisions of the Act for deviation from the object stated in Prospectus/Offer Document; transactions with related parties;

(xi) In case of public company, whether it has accepted public deposit. If so, whether the payment of matured amount including interest was made as per schedule. In case any amount is still pending, the details of amount and interest thereon.

(xii) The quantum of unsecured loan amount and related party transactions thereto.

(xiii)Secretarial reports and qualifications made by the auditors on accounts of the company;

(xiv) Whether company or its members/creditors have requested for investigation into the affairs of the company, if so, the details thereof.

(c) MCA will take a final view in the matter within a period of 15 days from the date of receipt of preliminary report from ROC. If any inspection under section 209A and/or investigation under section 235/237 of the Act is ordered, the same will be completed by the ROC and forwarded to the OL within 30 days.

(d) The OL will place the report before the Hon'ble High Courts for seeking appropriate order/action under sections 539 to 544 and other relevant provisions of the Act. Simultaneously, necessary action as per law will be initiated against the director, ex-director and key management of the company for any violation of law/Companies Act, 1956.

(e) These cases will be monitored in the monthly staff meeting of Regional Directors.

 

 

 

A.(3) SECTION 297 OF THE COMPANIES ACT, 1956 - BOARD'S SANCTION TO BE REQUIRED FOR CERTAIN CONTRACTS IN WHICH PARTICULAR DIRECTORS ARE INTERESTED - SIMPLIFIED PROCEDURE FOR OBTAINING ONLINE APPROVAL OF CENTRAL GOVERNMENT UNDER SECTION 297

 

GENERAL CIRCULAR NO. 52/2011, DATED 25-7-2011

 

The Ministry of Corporate Affairs has been receiving representations form various stakeholders to simplify the approval processes under section 297 of the Companies Act, 1956.

In order to cut timelines in giving approval, the Ministry has decided to simplify the procedures and to give approval online, if the proposed contract has been approved by the shareholders by way of special resolutions in a general meeting.

2. According to new procedure, application will be made in a new e-form with the prescribed fee. The relevant information like terms of contract and details of Board resolutions and special resolutions shall be captured in the e-form. The e-form shall also be certified by the practicing professional who shall specifically certify the correctness of the information and declarations given by the company in the e-form.

3. The company while seeking approval of the directors and shareholders in their meetings shall specifically take approval to the effect that:—

  (i)  Proposed contract is competitive, at an arm's length, without conflict of interest and is not less advantageous to it as compared to similar contracts with other parties.

 (ii)  The company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon and has filed its upto date Balance Sheets and Annual Returns with the Registrar of Companies.

(iii)  The proposed contract is falling within the provisions of section 297 of the Act and provisions of sections 198, 269, 309, 314 and 295 are not applicable in the proposed contract.

 (iv)  The company and its Directors have complied with the provisions of sections 173, 287, 299, 300, 301 and other applicable provisions of the Companies Act, 1956 with regard to the proposed contract.

4. The application will be processed online and approval of Central Government shall also be made available to the applicant company online on the basis of declarations made by the company and certifications by the professionals given in the e-form.

5. If any of the information or declaration given by the company or certificate given by the professional in the e-form is found to be wrong, then the applicant company, its Directors and professional shall be liable for penal action under sections 297 and 628 of the Companies Act, 1956 in addition to penal action prescribed in regulations of the respective professional institutes.

6. The process of online approval of Central Government under section 297 of the Companies Act, 1956 is likely to be implemented with effect from 24th September, 2011.

 

 

 

 

 

A.(4) SECTION 141 OF THE COMPANIES ACT, 1956 - RECTIFICATION BY CENTRAL GOVERNMENT OF REGISTER OF CHARGES - SIMPLIFIED PROCEDURE FOR RECTIFICATION OF REGISTER OF CHARGES UNDER SECTION 141

 

GENERAL CIRCULAR NO. 51/2011, DATED 25-7-2011

 

In order to simplify the procedures and cut timelines, the Ministry has decided to notify section 20 of the Companies (Second Amendment) Act, 2002 (1 of 2003) thereby the work relating to rectification of register of charges under section 141 of the Companies Act, 1956 shall be shifted from the jurisdiction of Company Law Board to the Central Government.

 

2. It has further been decided to delegate this work to the respective Registrar of Companies under whose jurisdiction the registered office of the company is situated. The petitions filed with the Company Law Board and pending as on the effective date of notification shall be transferred to respective Registrar of Companies.

 

3. The revised e-forms and business re-engineering process under MCA-21 system is being developed and the simplified procedures to be followed by the companies and Registrar of Companies shall be given in the modified e-forms and instruction kit thereto shortly.

 

4. It is expected that on discharging of these functions by the respective Registrar of Companies on implementation of simplified procedures, the cost and the time to get condonation under section 141 of the Companies Act, 1956 shall be reduced.

 

5. The above simplified process is likely to be implemented with effect from 24th September, 2011

 

 

A.(5) Shifting of Registered Office from one state to another state now becomes easier

General Circular No. 50 / 2011; GOI; MCA; Dated 25th July, 2011

All Regional Directors, All Registrar of Companies, All Stakeholders

 Sub: Simplified procedure for obtaining confirmation of shifting of registered office from one state to another state under section 17 of the Companies Act,1956.

In order to simplify the procedures and cut timelines, the Ministry has decided to notify section 8 of the Companies (Second Amendment) Ac t, 2002 (1) of 2003 thereby the work relating to confirmation of shifting of registered office from one state to another state and consequent alteration to Memorandum of Association of the company under section 17 of the Companies Ac t, 1956 shall be shifted from the jurisdiction of Company Law Board to the Central Government.

2. It has further been decided to delegate this work to the respective Registrar of Companies under whose jurisdiction the registered office of the company is situated. The petitions filed with the Company Law Board and pending as on the effective date of notification shall be transferred to respective Registrar of Companies.

3. The revised e-forms and business re-engineering process under MCA-21 system is being developed and the simplified procedures to be followed by the companies and Registrar of Companies shall be given in the modified e-forms and instruction kit thereto shortly.

4. It is expected that on discharging of these functions by the respective Registrar of Companies on implementation of simplified procedures, the cost and the time to get such confirmation and alteration to Memorandum of Association under section 17 of the Companies Ac t, 1956 shall be reduced.

5. The above simplified process is likely to be implemented with effect from 24th September, 2011.

(Kamna Sharma)

 Assistant Director

 

 

 

 

A.(6) SECTION 12 OF THE COMPANIES ACT, 1956 - MODE OF FORMING INCORPORATED COMPANY - ONLINE INCORPORATION OF COMPANIES WITHIN 24 HOURS

 

GENERAL CIRCULAR NO. 49/2011, DATED 23-7-2011

 

In order to give ease to the corporate world to carry business in India, the Ministry of Corporate Affairs has been simplifying the procedures under the Companies Act, 1956. As another step in this direction, the Ministry is modifying the incorporation procedures to enable promoters to get their companies incorporated online within 24 hours.

2. Ministry has already implemented online approval of Director's Identification Number (DIN) with effect from 12-6-2011 and names of the proposed company will also be made available online with effect from 24-7-2011. The digital certificate of incorporation is already being issued online by the Registrar of Companies.

3. Now, the Ministry is also simplifying the procedures to approve incorporation applications forms online.

In case the e-forms 1, 18, 32 and e-form for Memorandum of Association (MOA) and Articles of Association (AOA) have been certified by the practicing professional regarding the correctness of the information and declarations given by the subscribers, the application shall be processed electronically and the digital certificate of incorporation shall be issued immediately online by the Registrar of Companies.

4. The above facility is optional to the existing process of backend processing of applications by the Registrar of Companies where no such certifications have been done by the practicing professional.

5. If any of the information or declaration given by the company or certificate given by the professional in the e-forms and attachment(s) thereto is/are, found to be wrong, false or illegal then the subscribers, declarant(s) and professional(s) shall be liable for penal action under sections 628 and 629 of the Companies Act, 1956 in addition to penal action prescribed in regulations of the respective professional institutes.

6. Where a company has been registered online on the basis of declarations made by the subscribers, declarant(s) and certifications by the professional(s) given in the e-form, if it is found later on that the company ought not to have been registered under provisions of the Companies Act, 1956 read with Rules and Regulations made therein, the Registrar of Companies shall take necessary action to put the company in state of suspended animation and initiate the process of revocation of the registration of the company after giving an opportunity of being heard.

7. It is expected that the above immediate online approvals of DIN, availability of name and registration of e-forms-1, 18, 32 and MOA and AOA, the complete process of incorporation of a company can be completed within 24 hours.

8. The above simplified process of online incorporation of companies is likely to be implemented with effect from 11th August, 2011.

 

A.(7) SCHEDULE VI OF THE COMPANIES ACT, 1956 - BALANCE SHEETS - FILING OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT IN EXTENSIBLE BUSINESS REPORTING LANGUAGE (XBRL) MODE - FILING ON MCA 21 IN THE XBRL MODE WILL BE EFFECTIVE IN RESPECT OF FINANCIAL STATEMENTS CLOSING ON OR AFTER 31-3-2011 INSTEAD OF THE YEAR 2011-12

 

GENERAL CIRCULAR NO. 43/2011, DATED 7-7-2011

 

In partial modification to Para 2 of Ministry's Circular No. 26/2011, dated 18-5-2011, the filing on MCA-21 in the XBRL mode will be effective in respect of financial statements closing on or after 31-3-2011 instead of the year 2011-12.

2. Further, in continuation to the Circular No. 37/2011, dated 7-6-2011, the further information is given as under:‑

  (i)  Besides signing by signatories as specified under section 215 of the Companies Act, 1956, the Statutory Auditor has to certify the financial statements prepared in XBRL mode for filing on MCA-21 portal.

 (ii)  Phase-1 class of companies as per Circular 9/2011, dated 31-3-2011 and later exempted from XBRL filing (under Power sector, Insurance sector, NBFC and Banking sector) who are unable to file their financial statements would be exempted from additional fee due to delay in filing up to 30-9-2011.

3. This issue with approval of Competent Authority.

 

 

 

B.    Video conference mandatory for AGM from next fiscal – MCA

 

The Ministry of Corporate Affairs on Thursday said it would be mandatory for listed companies to provide the option of video conferencing for shareholders to participate in the annual general meeting from next fiscal.

 

“In respect of shareholders’ meetings to be held during 2011-12, the video conferencing facility for shareholders is optional. Thereafter, it is mandatory for all listed companies,” an official statement said. The move, part of the MCA’s green initiative campaign for corporate governance, would provide larger participation and help curbing costs.

The video conference facility enables all persons participating in a meeting to communicate concurrently with each other without an intermediary, and to participate effectively in the meeting. However, the Ministry said it was not mandatory for companies to provide its directors, the facility to attend meetings through video conferencing.

 

Listed companies will also have to ensure that video conferencing connectivity during such meetings at least five places in India.

 

 

 

C.     SECTION 166 OF THE COMPANIES ACT, 1956 - MEETINGS & PROCEEDINGS - ANNUAL GENERAL MEETING - PROVIDING GIFTS TO THE SHAREHOLDERS DURING ANNUAL GENERAL MEETING (AGM) OF THE COMPANY

DRAFT CIRCULAR [F. NO. 17/218/2011 CL.V], DATED - JULY, 2011

The Ministry of Corporate Affairs has been receiving representations form various stakeholders that it has become a general practice in the country to give gifts to the shareholders while they attend any AGM in addition to the dividend recommended by the Board of Directors.

2. It has also been brought to the notice of the Ministry that the companies offer gifts, extravagant food and other charms to shareholders who attend AGM to divert the attention of the shareholders from the main purpose of AGM and their right of key role in the management of the company through AGM. In addition, shareholders are made busy to collect gifts, gift coupons, packet of snacks etc., in the duration of meeting while corporate manage to pass certain resolutions without any debate on the same.

3. The Secretarial Standards on General Meeting issued by the Institute of Company Secretaries of India has also specifically mentioned that no gifts, gifts coupons or cash in lieu of gifts should be distributed to the members at or in connection with the meeting.

4. Keeping the principle of good corporate governance view, it has been decided that no company shall offer any other thing except tea, coffee, soft drinks and snacks etc. in the AGM. As a courtesy to the shareholders, the same may be made available before the start of the meeting. Any other gifts, food coupons or gift coupons and other enticement shall be treated as misconduct on the part of board of directors of the company. The directors of such companies shall be liable to pay back the cost of such expenses to the company and shall also be liable for the penal action as provided under section 168 of the Companies Act, 1956 for not convening the AGM properly as required under section 166 of the Companies Act, 1956.

5. All the stakeholders are requested to consider and examine the above proposal of the Ministry and furnish their views/comments/recommendations to the Ministry by 14th August, 2011 on following e-mail addresses - Kamna.sharma@mca.gov.in / monika.gupta@mca.gov.in

 

 

D.    DoT seeks Trai view on exit policy for new telecom players

 

The Department of Telecommunications (DoT) will seek the views of Telecom Regulatory Authority of India (Trai) on the exit policy for new players. “We are considering it (exit policy) and it may take some time.We will ask Trai to initiate the consultation process and seek industry and public views on the subject,” said Communications and IT Minister Kapil Sibal. The issue will be part of the New Telecom Policy 2011, being formulated by DoT. Several new operators, who had entered the market, have not rolled out their services, including Videocon and Etisalat DB. In another development, the Telecom Commission, the decision-making arm of the DoT, has cleared the Rs 20,000-crore project to provide broadband connectivity to all villages within the next three years. “The Telecom Commission has approved the project that will be funded through the Universal Service Obligation (USO) Fund. We will take the proposal to the Cabinet soon,” Sibal said.

 

 

E.     GOVERNMENT OF INDIA, MINISTRY OF CORPORATE AFFAIRS

New Delhi, the,14 July, 2011

NOTIFICATION

GSR  – In exercise of the powers conferred by the sub section (1) of Section 641 of the Companies Act, 1956, the Central Government hereby makes the following further amendments in Schedule XIII of the Companies Act, 1956: -

1.       In GSR 396(E) dated 23th May, 2011 in Para 1(i) the words “fourth proviso” may be read as “third proviso”.

2.       In Schedule XIII, in part II, in Section II –

in sub-para (C), the fourth proviso shall be substituted by the proviso as under: -

“Provided further that approval of Central Government is not required for a subsidiary of a listed company, if —

i. the Remuneration Committee and Board of Directors of the holding company give their consent for the amount of such remuneration of the applicant and for the said amount to be deemed remuneration by the holding company for the purpose of section 198 of the Companies Act, 1956 and;

ii. a special resolution has been passed at the general meeting of the company for payment of remuneration of the applicant and;

iii the remuneration of the applicant is deemed to be remuneration paid by holding company and;

iv. all members of the subsidiary are bodies corporate.

Provided that a listed company or a subsidiary of a Listed company shall not require Central Government approval for the payment of remuneration to its managerial personnel, if the remuneration is fixed by Board of Industrial and Financial Reconstruction.”

3.       In Schedule XIII, in part II, in Section II- in sub-para (C), after fourth proviso, the following proviso shall be inserted, namely

“Provided that no approval of Central Government is required if the managerial person is not having any interest in the capital of the company or its holding company, directly or indirectly or through any other statutory structures and not having any direct or indirect interest or related to the directors or promoters of the company or its holding company at any time during last two years before or on the date of appointment and is having a graduate level qualification with expert and specialized knowledge in the field of his profession.”

4.       After Explanation VI, to the Section II in part II of Schedule XIII of the Companies Act, 1956 following shall be inserted;-

“Explanation WI: For the purpose of Section II of this part, “Statutory Structure” means any entity which is entitled to hold shares in any company formed under any statute.”

5. It shall come in to force from the date of its publication in the Official Gazette

(F.No. 14/3/2011-CL.VII)

(J. N. Tikku)

Joint Director

 

 

 

 

 

 

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