SUMMARY:
Ministry of Corporate Affairs has caused myriad amendments in the Companies Act, 2013.
In this editorial, the author shall try to cover all such amendments along with the impact of the same on the Corporates.
| No. of Notifications appeared in March, 2021 | Five |
| No. of Circulars appeared in March, 2021 | NIL |
| No. of Amendments in Rules appeared in March, 2021 | Four |
| Other Important Information | One |
Amendment THROUGH NOTIFICATIONS
- Notifications of the Sections of Companies Amendment Act, 2020:
[1]First Amendment in March 2021 is relating to the notification of Section 23(i) the Companies Amendment Act, 2020 out of the remaining 7 sections of the Companies Amendment Act, 2020. After this notification 6 sections of Companies Amendment Act, 2020 is pending for notified.
List of such sections are published on the below link:
http://csdiveshgoyal.in/list-of-notified-sections-companies-amendment-act-2020-3/
- Amendment in Schedule V:
[2]Second amendment through Notification in March 2021, MCA has issued Notification on March 18, 2021 in relation to amendment in Schedule V of Companies Act, 2013.
Schedule V, states about the Remuneration to ‘Remuneration to Managerial Person’. According to Schedule V, in case company has no profit or its profit are inadequate in such case Company can pay remuneration to managerial person as per provisions of Schedule V.
Managerial Person means, Managing Director, Whole Time Director and Manager.
There was no provisions under Companies Act 2013 for payment to Non-executive Director in case of company has no profit or inadequate profit. MCA took up this issue and made amendment in provisions of schedule V by this notification.
Through this amendment it shall be allowed to make payment of remuneration to non-executive Director and Independent Director in case of loss or inadequate profit.
Detailed article on this topic published on below link:
http://csdiveshgoyal.in/remuneration-to-non-executive-independent-director/
- Notifications of the Sections of Companies Amendment Act, 2020:
[3]Third Amendment in March 2021 is relating to the notification of Section 32 and 40 of the Companies Amendment Act, 2020 out of the remaining 6 sections of the Companies Amendment Act, 2020. After this notification 4 sections of Companies Amendment Act, 2020 is pending for notified.
| CAA 2020 | CA 2013 | Particular |
| Section 32 | Section 149 | Independent Director |
| Section 40 | Section 197 | Remuneration to Directors |
List of such sections are published on the below link:
http://csdiveshgoyal.in/remuneration-to-non-executive-independent-director/
- Amendment in Schedule III:
[4] The Ministry of Corporate Affairs, Government of India, issued notifications dated 24th March 2021 to amend Schedule III to the Companies Act, 2013 to enhance the disclosures required to be made by the Company in its Financial Statement.
Purpose of Amendment:
By these amendments MCA increasing stringency in compliances and adding numerous additional disclosures in Financial Statement. The main purpose behind these amendments is more transparency.
Detailed Article on this amendment is published on below link:
http://csdiveshgoyal.in/amendment-in-financial-statement-balance-sheet-profit-loss-account/
- Notifications of the Sections of Companies Amendment Act, 2020:
[5] Fifth Amendment in March 2021 is relating to the notification of Section 23 and 45 of the Companies Amendment Act, 2020 out of the remaining 4 sections of the Companies Amendment Act, 2020. After this notification 2 sections of Companies Amendment Act, 2020 is pending for notified.
| CAA 2020 | CA 2013 | Particular |
| Section 23 | Section 124 | Unpaid Dividend Account |
| Section 45 | Section 247 | Valuation by Registered Valuer |
List of such sections are published on the below link:
http://csdiveshgoyal.in/remuneration-to-non-executive-independent-director/
Amendment THROUGH Circulars
No Circular has been passed during the month of March, 2021.
Amendments in Rules
- Amendment in Corporate (Management and Administration) Amendment Rules, 2021:
[6]The Companies (Management and Administration) Amendment Rules, 2021 passed on 05nd March 2021.
- This Rules came into effect immediately on publication of same in official gazette.
- Amendment in Rule 11 i.e. “Annual Return”: in rule 11 sub rule 1 has been substituted
New Rule:
Every company shall file its annual return in Form No.MGT-7 except
- One Person Company (OPC) and
- Small Company.
One Person Company and Small Company shall file annual return from the financial year 2020-2021 onwards in Form No.MGT-7A.
Detailed article on this topic published on below mentioned link:
- [7]Amendment in Companies Incorporation (Third) Amendment, Rules, 2021:
The Companies Incorporation (Third) Amendment Rules, 2021 passed on 05th March 2021.
- This Rules came into effect immediately on publication of same in official gazette.
- New column inserted in INC-35- AGILE_ PRO.
“Do you wish to perform Aadhar authentication for GSTIN registration. O Yes O No”
- Amendment in Companies (Accounts) Amendment Rules, 2021:
[8]The Companies (Accounts) Amendment Rules, 2021 passed on 24th March 2021.
- This Rules came into effect w.e.f. 01st April, 2021.
First Amendment in Rule 3 i.e. Manner of Books of Account to be Kept in Electronic Mode. in Rule 3, in sub-rule (1) the proviso shall be inserted:
Rule 3(1)The books of account and other relevant books and papers maintained in electronic mode shall remain accessible in India so as to be usable for subsequent reference.
New Proviso: Provided that for the financial year commencing on or after the 1st day of April, 2022, every company which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of:-
- Recording audit trail of each and every transaction,
- Creating an edit log of each change made in books of account along with,
- The date when such changes were made and
- Ensuring that the audit trail cannot be disabled.
Second Amendment in Rule 8 i.e. Matters to be Included in Board’s Report. In rule 8, sub rule 5 after clause x, two new clauses added.
- New Clauses:
- (xi) the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 during the year along with their status as at the end of the financial year.
- (xii) the details of difference between the amount of the valuation done at the time of one time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof.
- Disclosure on above mentioned two clauses are required to give in Directors Report of Companies along with other disclosures.
Detailed Article on this amendment is published on below link:
http://csdiveshgoyal.in/amendment-in-schedule-iii/
- Amendment in Companies (Audit and Auditors) Amendment Rules, 2021:
[9]The Companies (Audit and Auditors) Amendment Rules, 2021 passed on 24th March 2021.
These Rules shall come into effect from 01st April, 2022.
Amendment in Rule 11 i.e. Other Matters to be Included in Auditors Report. In Rule 11.
-
- Existing clause (d) shall be omitted.
- New Clause (e), (f) & (g) inserted.
Rule 11(d) whether the company had provided requisite disclosures in its financial statements as to holdings as well as dealings in Specified Bank Notes during the period from 8th November, 2016 to 30th December, 2016 and if so, whether these are in accordance with the books of accounts maintained by the company.]
New Clause:
(e)
(i) Whether the management has represented that, to the best of it’s knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person(s) or entity(ies), including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
Note: Auditor have to check the details in notes to account and take a representation from director about such clause and check all the transaction of Company in respect of loan, advance, investment & their respective documents.
(ii) Whether the management has represented, that, to the best of it’s knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been received by the company from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
Note: Auditor have to check the details in notes to account and take a representation from director about such clause and check all the transaction of Company in respect of loan and advance received by company & their respective documents.
(iii) Based on such audit procedures that the auditor has considered reasonable and appropriate in the circumstances, nothing has come to their notice that has caused them to believe that the representations under sub-clause (i) and (ii) contain any material mis-statement.
(f) Whether the dividend declared or paid during the year by the company is in compliance with section 123 of the Companies Act, 2013.
(g) Whether the company has used such accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all transactions recorded in the software and the audit trail feature has not been tampered with and the audit trail has been preserved by the company as per the statutory requirements for record retention.]
Detailed Article on this amendment is published on below link:
http://csdiveshgoyal.in/latest-amendment-in-auditors-report/
MCA Other Important Information:
Central Scrutiny Centre:
As has announced by the Hon’ble Finance Minister during the Budget 2021, the launch of MCA21-Version 3.0, MCA has installed CSC (Central Scrutiny Centre) as a Key Segment to Version 3.0 in order to reconstruct the corporate governing environment in India which will scrutinize the Straight Through Process (STP) Forms filed by the corporates on the MCA21 registry.
As per the MCA notification dated 18th March 2021, all the forms filed by companies via Straight Through Processes shall be carrying out scrutiny by the Central Scrutiny Centre (CSC) which will function under the administrative control of the e-governance Cell of the Ministry of Corporate Affairs.
Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at [email protected]).
Disclaimer: The entire contents of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.
IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION
[1] http://www.mca.gov.in/Ministry/pdf/CommencementNotification_11032021.pdf
[2] http://www.mca.gov.in/Ministry/pdf/AmendmentNotification_19032021.pdf
[3] http://www.mca.gov.in/Ministry/pdf/CommencementNotification_11032021.pdf
[4] http://www.mca.gov.in/Ministry/pdf/ScheduleIIIAmendmentNotification_24032021.pdf
[5] http://www.mca.gov.in/Ministry/pdf/CommencementNotification_24032021.pdf
[6] http://www.mca.gov.in/Ministry/pdf/CompaniesMgmtAdminAmndtRules_11032021.pdf
[7] http://www.mca.gov.in/Ministry/pdf/CompaniesIncorporation3rdAmndtRules_11032021.pdf
[8] http://www.mca.gov.in/Ministry/pdf/AccountsAmendmentRules_24032021.pdf
[9] http://www.mca.gov.in/Ministry/pdf/AuditAuditorsAmendmentRules_01042021.pdf