1. EIRC OF ICAI Recent Amendments under Companies Act 2013
November14, 2018
Kolkata
Presentation by:
Rahul Parasrampuria
ACS, B.com(H)
Prop, Parasrampuria & Associates
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2. Topics to be covered Key Points – Companies Amendment Ordinance 2018
DIR 3 KYC
Managerial Remuneration
Audit CheckList
NAFRA 2018
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DIR 3 KYC
Introduced by the Ministry of Corporate Affairs (MCA) wide its notification dated July 5, 2018, by issuing an amendment to Companies (Appointment and Qualification of Directors) Rules, 2014.
Every Director (Indian and Forigner) who has been allotted DIN as on or before 31st March of a financial year submits e-form DIR-3KYC with Central Government.
disqualified directors are also required to file form DIR-3 KYC.
Every DIN holder whose DIN has been ‘Deactivated due to Non-filing of DIR-3 KYC’ has to necessarily file DIR-3 KYC first along with applicable fee. Once the form (DIR-3 KYC) is filed, it is approved on STP basis. On approval, the system will automatically ‘reactivate’ the DIN. Non-compliant DIN’s status would remain ‘Deactivated due to Non-filing of DIR-3 KYC’.
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To retain the oldest Din
Consequence of Non Filing
Out of 33 Lakhs Director only 12Lakhs completed the same for free.
Ghost Directors
Continuous process
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5. Managerial Remuneration
By a Notification issued by the MCA, the amended sections came into force on 12th September 2018 , rules , Sch V
These amendments are prospective and not retrospective in effect; hence, they would apply only to the remuneration payable to a managing director/whole-time director/manager of a public company, from 12 September 2018
Appointment of a person who is over 70 : SR not reqd but has managed to pass OR
Appointment without Central Government approval : IBC , GST , ECONOMIC OFFENDER
Sec 197
Government approval dispensed with , : In GM by OR , exceeding 11% of Net Profits of the Company but Subject to provision of Sch V
Excess remuneration to require special resolution: In case of MD/WTD
Bank and financial institution approval
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Remuneration to managing director/whole-time director/manager in the financial year of loss or inadequate profit: Government approval dispensed with :
- Two Options : 1. Pay within limit as specified in item A
2. Pay in excess with approval of Shareholder by SR
Recovery of excess remuneration
Auditor’s duty to report
- the auditor of the company will have to state in his report under section 143, as to whether the remuneration paid by the company to its directors (executive as well as non-executive) is in accordance with the provisions of section 197 and whether the remuneration paid to any director is in excess of the limit laid down in that section (and also in Schedule V), and give such other details as may be prescribed.
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7. Companies(Amdt) Ordinance 2018
President of India’s assent with effect from 2 November, 2018.
Twin objectives of the Ordinance are the promotion of Ease of Doing Business along with better corporate compliance.
Aim of Amendments:
- Overhauling of Offences
- Technology Driven Adjudication
- Division of Work b/w NCLT & RD
- Shell Companies
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Categories:
1.Offences liable to penalty;
2. Offences liable to fine;
3. Offences liable to fine or imprisonment at the discretion of the Court;
4. Offences punishable with imprisonment;
5. Offences punishable with fine and imprisonment.
the Ordinance has brought forth a liberalization in the provisions with respect to offences committed under the Act,
technical defaults or procedural lapses as civil liabilities and shift or transfer the proceedings of such case to in-house adjudication.
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Section 2(41) : Authority to make Application for adopting differenr financial year has been shifted to CG from Tribunal.
Section 10A : newly inserted
- Declaration to be filed by director within 180days from date of Incorporation , confirming Subscriber has paid the value, verifying registered office form has been filed.
- No declaration filed + reasonable cause to believe that company is not conducting any business or operations , ROC can remove the name.
- Fine clause Exists.
Section 12: Registered Office
- Reasonable cause to believe company not carrying on business , then may cause a physical verification
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Sec 77 : Duty to Register Charges
In case of charges created before 2 November, 2018 the registrar may—on application by the company—allow registration of the charge, within a period of 300 days of such charge creation. If the registration is not made within 300 days, the registration of the charge can be made within six months from the date of commencement of the Ordinance.
In case of charges created after 2 November, 2018 the registrar may—on application by the company—allow registration of the charge within 60 days of such charge creation. If the charge is not created within the aforesaid period, the registration shall be made within an additional period of 60 days after payment of such ad-valorem fees
Section 86 : Punishment for Contravention
Now have subsections , (1) General Penalty
(2) Willful furnish of incorrect or false information or Knowingly Suppressing any Material Information wrt sec 77 will attract 447
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Sec 87 : Rectification by CG in Register of Charges ( Section is Substituted)
CG(RD) on Satisfaction that :
i) Omission to give intimation to ROC of Payment / satisfaction within prescribed time, or
ii) Omission or misstatement of any particulars wrt to any charge or Modification of Charge or wrt any Memorandum of satisfaction or other entry u/s 82 & 83
Was accidentaly or inadvertently made may direct on Application that time for giving of intimation of payment or satisfaction shall be extended or can be rectified
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2(60); Officer in Default
increased monetary penalties and imprisonment.
more stringent and for making key officials of the companies more responsible, the definition of the term officer in default is in place
Following Officers are Included:
WTD
KMP
NO KPM then such director as specified , all director if no such specification
any person charged with the specific responsibility or any Key managerial personnel, is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorizes, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default;
Any person as per whose advice, directions or instructions the BOD acts,other then person giving advise in professional capacity;
every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance;
in respect of the issue or transfer of any shares of a company, the Share transfer agents, registrars and merchant bankers to the issue or transfer;
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Penal Provisions
Section 102 : Statement to be annexed to Notice
Section 105 : Proxies , Penalty of 5000 (Every officer)
- (2) In every notice calling a meeting of a company which has a share capital, or the articles of which provide for voting by proxy at the meeting, there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint a proxy, or, where that is allowed, one or more proxies, to attend and vote instead of himself, and that a proxy need not be a member.
Section 117 : Resolutions and agreements to be filed, for Both Company and Officer in default.
117(1) Matters Specified in (3) to be filed within 30days , Rule 24 Mgt 14
117(2) Substituted with Penalty
117(3) Resolution to be passed and filed
179(3) Power of BoD by means of passing resolution at BM .
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Section 121 : Report on AGM , For both Company ( 1L , in case of continuous failure 500/day Max 5L rupees)
and Officer in Default (25k , in case of continous failure 500/day Max 1L rupees)
- Applicable to Only Listed Co’s
Section 92 : Annual Return
Subsection 5 has been introduced with Penal Provision i.e., Company and Every officer in default Rs
And in case of continuing default , further penalty of Rs.100 for each day upto Max Rs. 5 Lakhs
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15. Sec 140: Resignation of Auditor
Compliance by Auditor after resignation from office (2) & (3)
If the auditor has resigned from co. has to file a statement within 30days from date of resignation (ADT 3)
In accodance with Substituted subsection (3)
if Auditor fails to file ADT 3 within 30days the liable to PENALTY of Rs or remuneration w.e., lower with further penalty of Rs. 500/ day Max 5lakhs.
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Section 157 (2) Intimation of DIN , Substituted with PENALTY both Company and officer in default
Section 159 : Punishment for contravention of sections 152 (Appt of Dir),155 (More then one DIN) and 156(Dir to Intimate DIN) , Now comes with PENALTY Clause.
Section 165 : Number of Directorship , On contravention PENALTY of Rs.50000/day.
Save Disqualification by Complying with newly inserted clause (i) in sec 164 wrt to number of directorship.
Section 203: Appointment of KMP
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17. SEC 248 Power of Registrar to remove the name of the companies
Ordinance introduces 2 new clauses
Subscriber of MOA not paid the amount and declaration in this regard is not furnished within 180 Days
The co. is not carrying on any business or operations , as revealed after the physical verification u/s 12(9)
Solution post 248 is 252 .ie., Appeal to Tribunal.
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18. Compounding of offences
Jurisdiction of RD is increased from Rs. 5Lakhs to 25 Lakhs
Also with Substitution of Subsection 6 it is clarified that offences that are punishable with imprisonment only or with imprisonment and fine shall not be compoundable.
Sec 441
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19. Sec 447 : Punishment for Fraud
For the purposes of this section— (i) “fraud” in relation to affairs of a company or any body corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss; (ii) “wrongful gain” means the gain by unlawful means of property to which the person gaining is not legally entitled; (iii) “wrongful loss” means the loss by unlawful means of property to which the person losing is legally entitled.
Here Fine increased to Rs.50Lakhs
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20. Sec 454A Penalty for repeated default
Newly Inserted
For repeated default within 3 years from the date of order , shall be liable for the second and subsequent defaults for an amount equal to twice the penalty provided for such default.
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NAFRA Rules 2018
Come into force from
Contains 19 Rules and one form NAFRA -1
the Ministry has asked the companies to submit the details of the Auditors in NFRA Form 1 within thirty days from the date of implementation of rules.
Rule 3 Companies Governed by Authority
(1) power to monitor and enforce compliance with accounting standards and auditing standards, oversee the quality of service under sub-section (2) of section 132 or undertake investigation under sub-section (4) of such section of the auditors of the following class of companies and bodies corporate, namely:-
(a) companies whose securities are listed on any stock exchange in India or outside India;
(b) unlisted public companies having paid-up capital of not less than rupees five hundred crores or having annual turnover of not less than rupees one thousand crores or having, in aggregate, outstanding loans, debentures and deposits of not less than rupees five hundred crores as on the 31st March of immediately preceding financial Year;
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(c) insurance companies, banking companies, companies engaged in the generation or supply of electricity, companies governed by any special Act for the time being in force or bodies corporate incorporated by an Act in accordance with clauses (b), (c), (d), (e) and (f) of sub-section (4) of section 1 ofthe Act;
(d) any body corporate or company or person, or any class of bodies corporate or companIes or persons, on a reference made to the Authority by the central Government in public interest, and
(e) a body corporate incorporated or registered outside India, which is a subsidiary or assocIate company of any company or body corporate incorporated or registered in India as referred to in clauses (a) to (d), if the income or networth of such subsidiary or associate company exceeds twenty per cent of the consolidated income or consolidated networth of such company or the body corporate, as the case may be, referred to in clauses (a) to (d).
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(2) Every existing body corporate other than a company governed by these rules, shall inform the Authority within thirty days of the commencement of these rules, in Form NFRA-1, the particulars of the auditor as on the date of commencement of these rules.
(3) Every body corporate, other than a company as defined in clause (20) of section 2, formed in India and governed under this rule shall, within fifteen days of appointment of an auditor under sub-section (1) of section 139, inform the Authority in Form NFRA-1 , the particulars of the auditor appointed by such body corporate: Provided that a body corporate governed under clause (e) of sub-rule (1) shall provide details of appointment of its auditor in Form NFRA-1.
A company or a body corporate other than a company governed under this rule shall continue to be governed by the Authority for a period of three years after it ceases to be listed or its paid-up capital or turnover or aggregate of loans, debentures and deposits falls below the limit stated therein
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the Authority shall:-
(a) maintain details of particulars of auditors appointed in the companies and bodies corporate specified in rule 3;
(b) recommend accounting standards and auditing standards for approval by the Central Government;
(c) monitor and enforce compliance with accounting standards and auditing standards;
(d) oversee the quality of service of the professions associated with ensuring compliance with such standards and suggest measures for improvement in the quality of service,
(e) promote awareness in relation to the compliance of accounting standards and auditing standards;
(f) co-operate with national and international organisations of independent audit regulators in establishing and overseeing adherence to accounting standards and auditing standards; and
(g) perform such other functions and duties as may be necessary or incidental to the aforesaid functions and duties.
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COMPLIANCE OF LAWS
Indicative Checklist
Whether there are any Alterations in the MOA / AOA viz.,
Change in name
Change in registered office.
Change in object clause.
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COMPLIANCE OF LAWS
Indicative Checklist
Whether there is any issue of shares / debentures during the audit period?
Whether there is any buyback of shares?
Whether the company has accepted deposits?
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COMPLIANCE OF LAWS
Indicative Checklist
Whether the company has taken any loans?
Whether there are related party transactions?
Whether charges have been created by the Company?
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COMPLIANCE OF LAWS
Indicative Checklist
What is the shareholding pattern (particularly, details about majority shareholders)?
What are the implications under Companies Act (i.e., what sections are applicable on a particular shareholding level)? Whether the company becomes subsidiary, associate company due to particular shareholding?
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COMPLIANCE OF LAWS
Indicative Checklist
Check the Board structure;
Whether the company is required to appoint independent directors?
Whether the company is maintaining statutory registers?
Status of filing of forms and returns by the company?
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30. Indicative Checklist –Meetings
COMPLIANCE OF LAWS
Indicative Checklist –Meetings
Minutes of board meetings held during the audit period.
Minutes of general meetings held during the audit period.
Adherence to SS-1 and SS-2
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31. Parasrampuria & Associates Practising Company Secretaries
Thank you
Feel free to Contact
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Practising Company Secretaries
18A,228 MG Road 3rd Floor Kolkata
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