Tag Archives: MCA

“APPOINTED DATE” IN CASE OF MERGER AND AMALGAMATION

The Ministry of Corporate Affairs (the MCA) vide its notification dated 21 August 2019, has provided a clarification with respect to interpretation of section 232(6) of the Companies Act (Act). Section 232(6) of the Act states that the scheme under section 232 of the Act shall clearly indicate an appointed date from which it shall be effective and the scheme shall be deemed to be effective from such date and not at a date subsequent to the appointed date. The circular has been brought in furtherance of several queries which have been received by MCA. The two important clarification sought are:

  1. Whether it is mandatory to indicate a specific calendar date as ‘appointed date’ in the scheme? and
  2. Whether the ‘acquisition date’ for the purpose of Ind-AS 103 (Business combinations) would be the ‘appointed date’ referred to in section 232(6)?

Prior to issuance of the aforementioned clarification for the first query, the MCA has referred to decision of Supreme Court in the case of  Marshall Sons & Co. India Ltd. v. lTO [223 lTR 809] where the court held that the date on which the amalgamation shall take place can be a date prior the filing of the sanctioning of the scheme by the Court, the date of filing of certified copies of the orders of the Court before the Registrar of Companies (the ROC) (i.e. Appointed Date). However, the scheme would be effective from the Appointed Date only after the order of the Court is filed with the RoC. The MCA also referred to the judgement held in Equitas Housing Finance Limited and Equitas Micro Finance Limited in C.P.Nos.l 19 to 121 of 2016 where the court was the of opinion that appointed date need not necessarily be a calendar date but can be a date tied to the occurrence of a relevant event.

Section 232(6) provides the companies a choice to decide and state a date from which the scheme shall be enforceable. The two options available while deciding the date are:

(i) a specific calendar date, or

(ii) date tied to the occurrence of an event such as of license by a competent authority or fulfilment of any preconditions agreed upon by the parties or meeting any other requirement as agreed upon between the parties, etc., which are relevant to the scheme.

In case the parties to the scheme of merger/amalgamation choose the ‘appointed date’ to be a calendar date, such date can be a date preceding the date of filing the scheme with National Company Law Tribunal. If the ‘appointed date’ is significantly dated beyond a year from the date of filing the scheme, a reason for the same has to be specifically captured in the scheme and such reason shall not be against public interest. Where the ‘appointed date’ is date tied to the occurrence of a relevant event to the scheme, such an event shall be specifically indicated in the scheme on the occurrence of which the scheme would be effective. However, in a situation where ‘appointed date’ is a date subsequent to the date of filing the order with the ROC under section 232(5) of the Act, the company has an obligation to file an intimation of the same with ROC within 30 days of such scheme coming into force and being effective.

With regard to the second query, the MCA states that the ‘acquisition date’ shall be same as ‘appointed date’ mentioned under the scheme and shall also be deemed to be the date of transfer of control for the purpose of conforming to accounting standards (including Ind-AS 103 Business Combinations).

Source: http://www.mca.gov.in/Ministry/pdf/GeneralCircular_21082019.pdf

Nidhi Provisions Notified under Companies Act, 2013

 Ministry of Corporate Affairs (“MCA”) vide Notification dated July 1, 2019,  appointed that Section 406 of the Companies Act, 2013 shall come into force from August 15, 2019.

Nidhi company is created for borrowing and lending money between members. Some prerequisites for a Nidhi company are incorporation as public limited company with minimum 200 members, net owned funds to deposits ratio not to be more than 1:20, etc.

Further, MCA vide Notification dated July 1, 2019, has notified the Nidhi (Amendment) Rules, 2019 which amends the Nidhi Rules, 2014 effective from August 15, 2019.  The brief changes are as shown below:

Rule No Existing Amendment effective from August 15, 2019
2(d) Applicability of the rules to company incorporated as Nidhi under Section 406 of Companies Act, 2013 or those under Section 620A of Companies Act, 1956 New rule inserted for applicability to every company declared as Nidhi or Mutual Benefit Society under Section 406(1) of Companies Act, 2013
3(da) Not applicable New rule inserted to define a “Nidhi” which involves a company which accepts deposits from its members and lends to only its members for mutual benefit
3A Not applicable New rule inserted prescribing the procedure for the Central Government to notify a public company as a Nidhi, pursuant to any application made inform NDH-4 and also mandating companies to comply with filing of Form NDH-4 within time limits prescribed, failing which, such companies are disallowed from filing any notice of alteration of capital in Form SH-7 or return of allotment in Form PAS-3
4 A public company could be a ‘Nidhi’ only if incorporated as a Nidhi Omission of parts of the rule that required prior incorporation as Nidhi,
5 (1) Minimum requirements for every Nidhi was to be adhered within one year from commence of the Nidhi Rules, 2014 Now the requirements are to be adhered within one (1) year from the date of Nidhi’s incorporation
5(3) Extension of time could be provided by Regional Director in case a Nidhi files an application in Form NDH-2 to comply with the requirements of minimum 200 members and for maintaining ratio of 1:20 for net owned funds to deposits The time period of extension which can be granted by a Regional Director is now limited to up to one year, through insertion of a proviso
5(4) Nidhi which failed to comply with minimum requirements were prohibited to accept deposits beyond second financial year, unless it complied Even if such Nidhi complied with the requirements beyond second financial year, prohibition to accept deposits continues till a fresh declaration is obtained under Section 406(1) of New Act
7(1) Nidhi were to issue either fully paid up or partially paid-up equity shares of the nominal value Nidhi is prohibited from issue of partly paid up equity shares
12 The application form for a deposit should contain a statement that a depositor could approach RoC over non-payment of deposit The statement is changed so that a depositor can approach only a bench of National Company Law Tribunal.

Further new rule is inserted mandating the mention of the date of declaration or notification as Nidhi in the application for deposit.

23 The Regional Director was empowered to enforce compliance Regional Director is replaced with the Central Government to enforce compliance.

Further two new rules 23A and 23B are inserted to mandate existing Nidhi to get fresh declaration as Nidhi after commencement of the Nidhi (Amendment) Rules, 2019

Form NDH-4 Not applicable Insertion of new form for filing application for declaration as Nidhi Company and for updation of status by Nidhis

Source: http://www.mca.gov.in/Ministry/pdf/NidhiRules_01072019.pdf

New BEN-2 Form for declaration of Beneficial Owners

Ministry of Corporate Affairs (“MCA”) vide Notification dated July 1, 2019, amended the Companies (Significant Beneficial Owners) Rules, 2018 by substitution of the existing Form BEN-2 for declaration of Beneficial Owners through the Companies (Significant Beneficial Owners) Second Amendment Rules, 2019.

The Companies (Significant Beneficial Owners) Rules, 2018 was framed under Section 90 of the Companies Act, 2013 to identify the owners of a company incorporated by way of multilayered intermediate entities.  Such owners hold shares of a company but will not have any beneficial interest in such shares. These owners having an interest in indirect holding of shares, but their names are not entered in the register of members, are termed as ‘Beneficial Owner’. While such beneficial owner is required to file a declaration in Form BEN-1, the company is required to file a return in Form BEN-2.  These rules were earlier amended on February 8, 2019, whereby the definition of a significant beneficial owner was amended, to one who had a right of at least 10% of shares/voting right or has the right to receive 10% or more of distributable dividend. Form BEN-2 is to be filed within 30 days from the date of receipt of declaration in Form BEN-1. No additional fees is payable if Form BEN-2 is filed within 30 days from the date of deployment on MCA-21.

Source: http://egazette.nic.in/WriteReadData/2019/206373.pdf

Incorporation of Section 8 Companies (Not for Profit Organisation) gets simplified

The Ministry of Corporate Affairs (the MCA) vide its notification dated 7 June 2019 has amended the Companies Incorporation Rules, 2014 to simplify the incorporation procedure. This shall be effective from 15 August 2019. Following are the key changes made:

  1. Any person who is desirous of incorporating a company under section 8 i.e., Not for Profit Organisation, under the Companies Act, 2013 can make an application in e-Form INC-32. No separate application for license is required to be made. Prior to this amendment, the applicant was required to make an application in Form INC 12 to obtain license and thereafter application for Incorporation was required to be made.
  2. Post scrutiny of the documents, the Certificate of Incorporation for Section 8 companies will now be issued by Registrar of Companies in Form INC-11 which earlier was issued as a licence under Form -16 or Form-17 as the case may be.

With these changes now the process of Incorporation of Section 8 Companies will be simplified and fast-tracked.

Source: http://www.mca.gov.in/Ministry/pdf/Rules_07062019.pdf

Regulatory update on Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2019

The Ministry of Corporate Affairs (the MCA) vide the Companies (Prospectus and Allotment of Securities) Rules, 2014 has introduced Form PAS-6. The said form is required to be filed by every unlisted public company within sixty days from the conclusion of each half year i.e. for each half year ended 30th September and 31st March in every financial year for each ISIN separately and duly certified by a company secretary in practice or chartered accountant in practice.

Also, every company shall immediately bring to the notice of the depositories in case there is any difference observed in its issued capital and the capital held in dematerialized form.

Sources:http://www.mca.gov.in/Ministry/pdf/Rules_23052019.pdf

Failure to file ACTIVE form would result in marking DIN of Directors as Director of ACTIVE non-compliant company

The Ministry of Corporate Affairs (the MCA) vide the Companies (Incorporation) Amendment Rules, 2019 read with the Companies (Incorporation) (Fourth Amendment) Rules, 2019 had introduced Form INC-22A ACTIVE mandating the Companies to file particulars of the Company and its registered office on or before 15 June 2019. If any company fails to file the said form within the due date, the status of the Company will be marked as “ACTIVE non-compliant”.

In addition to the above amendment, the MCA has amended the Companies (Appointment and Qualification of Directors) Rules, 2014 by inserting new rule 12B. Consequent to this amendment now the status of Director Identification Number (DIN) of those “Active non-compliant” companies will also be marked as “Director of ACTIVE non-compliant company”. The DIN status can be changed to “Director of ACTIVE compliant company”, only after filing of form INC-22A ACTIVE.

Consequences of non-filing of Form INC -22A ACTIVEon or before 15 June 2019:

(i) Penalty of INR 10,000 shall have to be paid.

(ii)  DIN of the Directors shall be marked as “Director of ACTIVE non-compliant company

(iii) The Companies are unable to file the following forms with the MCA, unless Form INC-22A ACTIVE is filed:

  • Form SH-07 (Change in Authorized Capital);
  • Form PAS-03 (Change in Paid-up Capital);
  • Form DIR-12 (Changes in Director except cessation);
  • Form INC-22 (Change in Registered Office);
  • Form INC-28 (Amalgamation, de-merger)

Source: http://www.mca.gov.in/Ministry/pdf/CompaniesRules_16052019.pdf

 

 

Clarification on Form ADT-1 (Form for Appointment of Auditor) filed through GNL-2 during the period 1 April 2014 to 20 October 2014

The Ministry of Corporate Affairs (the MCA) had received representation from various stakeholders seeking for relaxation from payment of additional fee specifically with respect to filing e-form ADT-1 which was filed through Form GNL-2 during the period from 1 April 2014 to 20 October 2014 for appointment of Auditors for the period 2014 to 2019 as the e-form ADT-1 was not available for filing during the said period and consequent to this, companies were facing difficulties in filling the details of Auditor in e-form INC-22A Active (One time return to be filed by companies on details of registered office of the Company).

MCA has considered the matter and issued a General Circular on 13 May 2019 clarifying  that the companies which had filed Form ADT-1 through form GNL-2 during non-availability of e-form ADT-1 i.e, from 1 April 2014 to 20 October 2014 may file e-form ADT-1 for appointment of Auditor for the period upto 31 March 2019 without any fee till 15 June 2019.

Further, the Companies which had filed form ADT-1 through e-form GNL-2 even after the deployment of e-form ADT-1 will have to file the e-form ADT-1 now with additional fee.

Source: http://www.mca.gov.in/Ministry/pdf/GeneralCircular13052019.pdf