Companies (Restriction on number of layers) Rules, 2017

Ministry of Corporate Affairs has notified the Rules that will be called as Companies (Restriction on number of layers) Rules, 2017. They shall come into force on the date of their publication in the official Gazette i.e. 20th September, 2017.

Restriction on number of layers for certain classes of holding companies.-

It provides that on and from the date of the Commencement of these Rules, no company, other than a company belonging to a class specified in sub rule (2), shall have more than two layers of subsidiaries.

However, the Companies are not restricted to acquire any Company incorporated outside India with subsidiaries beyond two layers as per the laws of such country.

 Further, for computing the number of layers under this rule, one layer which consists of one or more wholly owned subsidiary or subsidiaries shall not be taken into account.

 Sub-Rule (2) as stated above provides for the class of Companies which are exempted from the provisions of the aforesaid Sub-Rule (1). These are as follows:

  • Banking Company
  • Non-banking financial company
  • Insurance Company
  • Government Company

 The provisions of this rule shall not be in derogation of the proviso to sub-section (1) of Section 186 of the Companies Act 2013.

 On the commencement of these Rules:

  • Every Company other than the exempted Companies, which has number of layers of subsidiaries in excess of the 2 layers, shall file, with the Registrar a return in Form CRL-1 disclosing the details specified therein, within a period of one hundred and fifty days (150 days) from the date of publication of these rules in the official Gazette , and
  • Shall not, after the date of commencement of these rules,have any additional layer of subsidiaries over and above the layers existing on such date.
  • If the layers of holding in subsidiaries are subsequently reduced, the company shall have the numbers of layers after reduction or limit specified in these rules, whichever is more.

Penalty:

If any company contravenes any provision of these rules the Company and every officer of the company who is in default shall be punishable with fine which may extend to ten thousand rupees and where the contravention is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which such contravention continues.

For Detailed Information:

http://www.mca.gov.in/Ministry/pdf/CompaniesRestrictionOnNumberofLayersRule_22092017.pdf

Disclaimer: The entire content of this document have been prepared as per the information existing at the time of the preparation. The blog is based on author’s personal views and the author does not take any responsibility of the same.

 

Advertisements

MALAYSIAN ASSOCIATION OF COMPANY SECRETARIES (MACS) TO ADOPT THE SECRETARIAL STANDARDS ISSUED BY THE INSTITUTE OF COMPANY SECRETARIES OF INDIA (ICSI) AS THE BENCHMARK.

The Ministry of Corporate Affairs has approved a request of the Malaysian Association of Company Secretaries (MACS) for adoption of the Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI) as the benchmark in the development of Secretarial Standards of MACS.

The Secretarial Standards on Meetings of the Board of Directors and Secretarial Standard on General Meetings were approved by the Ministry of Corporate Affairs, Government of India under sub-section 10 of Section 118 of the Companies Act, 2013 and are in place with effect from 1st July, 2015.

 

Source of Information: http://pib.nic.in/newsite/PrintRelease.aspx?relid=170764

Clarification issued by MCA regarding the meaning of Joint Venture used under Rule 4 of Companies (Appointment and Qualification Of Directors) Amendment Rules, 2017

Ministry of Corporate Affairs has issued a clarification [vide Circular No. 1/22/2013-CL-Y dated 05/09/2017] for the term Joint Venture for availing the exemption covered under Rule 4 of Companies (Appointment and Qualification Of Directors) Amendment Rules, 2017.  (For details about the said amended Rule 4- Click here)

Stakeholders have sought clarifications from the Ministry with regard to the meaning of Joint Venture for availing the exemption of not to appoint Independent Directors vide the amended Rule 4 Rule 4 of Companies (Appointment and Qualification Of Directors) Amendment Rules, 2017.

The issue has been examined and it has been clarified that:-

A Joint Venture would mean a joint arrangement, entered into in writing, whereby the parties that have joint control of the arrangement, have rights to the net assets of the arrangement.

The usage of the term is similar to that under the Accounting Standards.

Source: http://www.mca.gov.in/Ministry/pdf/GeneralCircular_05092017.pdf

 

Disclaimer: The entire content of this document have been prepared as per the information existing at the time of the preparation. The author of this blog does not take any responsibility of the same.

Serious Fraud Investigation Office’s Powers to Arrest under Companies Act, 2013.

The Ministry of Corporate Affairs has notified the provisions of Sub-Section (8), (9), (10) of Section 212 of the Companies Act, 2013 to come into force with effect from 24th day of August, 2017.

Section 212 of the Companies Act, 2013 deals with the Provisions of Investigation into Affairs of Company by Serious Fraud Investigation Office

Now, with Central Government notifying the said provisions, Serious Fraud Investigation Office has the power to arrest any person if he is found guilty of any offence punishable under Section 212 of the Companies Act, 2013. For Details: Read Section 212 of the Companies Act, 2013.

Further, the Ministry of Corporate affairs has notified the rules for arrest of person in connection with investigation under Companies Act, 2013. These rules may be called the Companies (Arrests in connection with Investigation by Serious Fraud Investigation Office) Rules, 2017.

For More Details Refer:

http://mca.gov.in/Ministry/pdf/companiesArrestsconnectionSFIORule_25082017.pdf

 

Disclaimer: The entire content of this document have been prepared as per the information existing at the time of the preparation. The author of this blog does not take any responsibility of the same.

Revision of SS-1 and SS-2 by ICSI- All You Need to Know

According to a press release on the ICSI website, Secretarial Standards on Board Meeting (SS-1) and General Meeting (SS-2) have been revised by the Institute of Company Secretaries of India and approval of the Central Government, as required, under Section 118(10) of the Companies Act, 2013 has been obtained for the revised SS-l and SS-2 vide Ministry of Corporate Affairs letter No. 1/3/2014-CL.I dated 14th June, 2017 thereby replacing the existing SS-1 & SS-2.

Earlier, Secretarial Standards on Board Meeting (SS-1) and General Meeting (SS-2) were approved by the Central Government under Section 118(10) of the Companies Act, 2013 on 10th April, 2015 and were published in the Gazette of India Extraordinary Part III -Section 4 on 23rd April, 2015 vide ICSI Notification No. (1) SS of 2015, making them effective from 1st July, 2015.

Now, it has been decided by the council to withdraw such notification w.e.f. 30th September, 2017 without affecting the enforceability of SS-1 and SS-2 during the period before such withdrawal. Further, the Revised SS-1 and SS-2 shall be applicable w.e.f. 1st October, 2017 as per the release.

It can be summed up from above that only the ICSI Notification No. (1) SS of 2015 dated 23rd April, 2015 stands withdrawn w.e.f. 30th September, 2017 and it shall not at all affect their enforceability during the period before withdrawal. Therefore the existing SS-1 and SS-2 shall be replaced by the revised ones and shall not be withdrawn.

Source of Information:

https://www.icsi.edu/WebModules/Announcement_on_Revised_Secretarial_Standards.pdf

 

Disclaimer: The entire content of this document have been prepared as per the information existing at the time of the preparation. The author of this blog does not take any responsibility of the same.

Companies(Appointment and Qualification of Directors) Amendment Rules, 2017

The Amendment Rules shall come into force from the date of publication of this notification in the Official Gazette i.e. 5th July, 2017.

As per the Notification, amendment is made in Rule 4 of Companies(Appointment and Qualification of Directors) Rules, 2014. The earlier Rule 4 shall be numbered as sub rule(1) and after sub-rule (1) as so renumbered, the following sub-rule shall be inserted namely:-

The following classes of unlisted public company shall not be covered under sub-rule (1), namely:-

(a) a joint venture;

(b) a wholly owned subsidiary; and

(c) a dormant company as defined under section 455 of the Act

Through this notification, exemptions have been granted to certain classes of companies from appointment of Independent Director on the Board of the Company.

Further, In the principal rules, in the Annexure, for Physical Form DIR-5 (Application for surrender of Director Identification Number) an e-form DIR-5 shall be substituted.

Rule 4 of Companies(Appointment and Qualification of Directors) Rules, 2014 after Amendment:

Rule 4: Number of Independent Directors

(1) The following class or classes of companies shall have at least two directors as        independent directors

  1. the Public Companies having paid up share capital of ten Crore rupees or more; or
  2. the Public Companies having turnover of one hundred Crore rupees or more; or
  3. the Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty Crore rupees:

Provided that in case a company covered under this rule is required to appoint a higher number of independent directors due to composition of its audit committee, such higher number of independent directors shall be applicable to it:

Provided further that any intermittent vacancy of an independent director shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or three months from the date of such vacancy, whichever is later:

Provided also that where a company ceases to fulfil any of three conditions laid down in sub-rule (1) for three consecutive years, it shall not be required to comply with these provisions until such time as it meets any of such conditions;

Explanation. – For the purposes of this rule, it is here by clarified that, the paid up share capital or turnover or outstanding loans, debentures and deposits, as the case may be, as existing on the last date of latest audited financial statements shall be taken into account:

Provided that a company belonging to any class of companies for which a higher number of independent directors has been specified in the law for the time being in force shall comply with the requirements specified in such law.

(2) The following classes of unlisted public company shall not be covered under sub-rule (1), namely:-

  (a) A joint venture;

(b) A wholly owned subsidiary; and

(c) A dormant company as defined under section 455 of the Act.

For Detailed Analysis Please watch my YouTube Video on this Topic at: https://youtu.be/yl1ljtr1RHI 

Disclaimer: The entire content of this document have been prepared as per the information existing at the time of the preparation. The blog is based on author’s personal views and the author does not take any responsibility of the same.

Companies (Audit and Auditors) Second Amendment Rules, 2017

Following rules are made by the Central Government to further amend the Companies (Audit and Auditors) Rules, 2014, namely:—

In Rule 5, clause (b) of the Companies (Audit and Auditors) Rules, 2014 the word “twenty”, will be replaced by the word “fifty”.

This notification shall come into effect on the date of their publication in the Official Gazette. (i.e w.e.f. 22nd June, 2017.)

It implies that;

From now on, the provisions of section 139(2) of the Companies Act, 2013 i.e. [related to Rotation of auditor] shall be applicable on all Private Companies having paid up share capital of Rupees Fifty Crore or more instead of Rupees Twenty Crores or more.

All other class of Companies as mentioned in Rule 5 of the Companies (Audit and Auditors) Rules, 2014 shall remain the same.

For more details:

Refer http://egazette.nic.in/WriteReadData/2017/176824.pdf