Posts Tagged ‘Companies Act’


The Companies Bill, 2011, which was passed by the Lok Sabha yesterday, on its enactment will allow the country to have a modern legislation for growth and regulation of corporate sector in India. The existing statute for regulation of companies in the country, viz. the Companies Act, 1956 had been under consideration for quite long for comprehensive revision in view of the changing economic and commercial environment nationally as well as internationally. In view of various reformatory and contemporary provisions proposed in the Companies Bill, 2011, together with omission of existing unwanted and obsolete compliance requirements, the companies in the country will be able to comply with the requirements of the proposed Companies Act in a better and more effective manner.

The Salient features of the Companies Bill 2011 are as follows:

1. (Amendment in Clause 135): In the Section on Corporate Social Responsibility (Section135), which is being introduced as a statutory provision for the first time, the words ‘make every endeavour to’ have been omitted from its Sub-clause (5). So that the first para of Sub-clause (5) of Clause 135 now reads as follows: “The Board of every company referred to in sub-section (1), shall ensure that the company spends in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.”

Such clause is also amended to provide that the company shall give preference to local areas where it operates, for spending amount earmarked for Corporate Social Responsibility (CSR) activities. The approach to ‘implement or cite reasons for non implementation’ retained.

2. (Amendment in Clause 36): To help in curbing a major source of corporate delinquency, Clause 36 (c) amended, to also include punishment for falsely inducing a person to enter into any agreement with bank or financial institution, with a view to obtaining credit facilities.

3. (Amendment in Clause 143): Provisions relating to audit of Government Companies by Comptroller and Auditor General of India (C&AG) modified to enable C&AG to perform such audit more effectively.

4. (Amendment in Clause 186): Clause 186 amended to provide that the rate of interest on inter corporate loans will be the prevailing rate of interest on dated Government Securities.

5. (Amendment in Clause 144): Provisions relating to restrictions on non audit services modified to provide that such restrictions shall not apply to associate companies and further to provide for transitional period for complying with such provisions.

6. (Amendment in Clause 203): Provisions relating to separation of office of Chairman and Managing Director (MD) modified to allow, in certain cases, a class of companies having multiple business and separate divisional MDs to appoint same person as chairman as well as MD.

7. (Amendments in Clause 147 and 245): Provisions relating to extent of criminal liability of auditors – particularly in case of partners of an audit firm – reviewed to bring clarity. Further, to ensure that the liability in respect of damages paid by auditor, as per the order of the Court, (in case of conviction under Clause 147) is promptly used for payment to affected parties including tax authorities, Central Government has been empowered to specify any statutory body/authority for such purpose.

8. (Amendment in Clause 141): The limit in respect of maximum number of companies in which a person may be appointed as auditor has been proposed as twenty companies.

9. (Amendment in Clause 139): Appointment of auditors for five years shall be subject to ratification by members at every Annual General Meeting.

10. (Amendment in Clause 139): Provisions relating to voluntary rotation of auditing partner (in case of an audit firm) modified to provide that members may rotate the partner ‘at such interval as may be resolved by members’ instead of ‘every year’ proposed in the clause earlier.

11. (Amendment in Clause 2): ‘Whole-time director’ has been included in the definition of the term ‘key managerial personnel’.

12. (Amendment in Clause 42): The term ‘private placement’ has been defined to bring clarity.

13. (Amendment in Clause 61): Approval of the Tribunal shall be required for consolidation and division of share capital only if the voting percentage of shareholders changes consequent on such consolidation.

14. (Amendment in Clause 152): Clarification included in the Bill to provide that ‘Independent Directors’ shall be excluded for the purpose of computing ‘one third of retiring Directors’. This would bring harmonisation between provisions of Clause 149(12) and rotational norms provided in Clause 152.

15. (Amendment in Clause 470): Provisions in respect of removal of difficulty modified to provide that the power to remove difficulties may be exercised by the Central Government up to ‘five years’ (after enactment of the legislation) instead of earlier up to ‘three years’. This is considered necessary to avoid serious hardship and dislocation since many provisions of the Bill involve transition from pre-existing arrangements to new systems.

Source: Press Information Bureau.


General Circular No.37/2012, No. 3/151/2012 CL-II, dated November 06, 2012.

To,

All Regional Directors

All Registrars of Companies

It is considered expedient to issue the following circular for general information.

2. Every company registered under the provisions of the Companies Act, 1956 is required to file its balance sheet annually with the office of the Registrar of Companies within whose jurisdiction the registered office of the company is located. Presently, there are more than 8 lakh companies registered with various offices of the RoCs located all over the country. Balance sheets of all the companies who carry out the filing are available for public inspection on the portal of this Ministry (http://www.mca.gov.in). The underlying idea behind the filing of balance sheets and other documents which require similar filings is to publicly disclose information which reflects various aspects of the working of a company so that the company’s public accountability is maintained. It is neither intended nor feasible for the Registrars to scrutinize or verify the contents of filing except on a random basis. Companies and its Directors and officials are liable to be penalized for any incorrect, false or misleading information that such filing disclose. In the following cases, however, the Registrars routinely scrutinize balance sheets:

(i) of companies against whom there are complaints;

(ii) of companies which have raised money from the public through public issue of shares/debentures etc.;

(iii)  in cases where the auditors have qualified their reports.

(iv) Default in payment of matured deposits and debentures.

(v) References received from other regulatory authorities pointing out violations/irregularities calling for action under the Companies Act, 1956.

3. After the scrutiny suitable steps are initiated wherever necessary to obtain explanation and clarification and to institute inspections, investigations and prosecutions wherever warranted.

Click here to download the complete text of the above Circular in PDF Format- General Circular No. 37/2012 dated 06.11.2012.

Source: Ministry of Corporate Affairs.


Appointment of Cost Auditor by Companies 

General Circular No. 36/2012, 52/5/CAB-2011, dated November 6, 2012

To,

The President,

Institute of Cost and Works Accountants of India,

12, Sudder Street,

Kolkata – 700 016.

In continuation of the General Circular No. 15/2011 dated 11th April 2011, Ministry hereby makes the following changes:

(a) The company shall, within thirty days from the date of approval by MCA of the application made to the Central Government in the prescribed Form 23C seeking its prior approval for the appointment of cost auditor, issue formal letter of appointment to the cost auditor, as approved by the Board.

(b) The cost auditor shall, within thirty days of the date of formal letter of appointment issued by the company, inform the Central Government in the prescribed form 23D, alongwith a copy of such appointment.

(c) In case of change of cost auditor caused by the death of existing cost auditor, companies are allowed to file fresh e-form 23C, without any additional fee, within 90 days of the date of death.

The additional fee payable as per the Companies (Fees on Applications) Rules, 1999 [as amended] shall become applicable after expiry of the said 90 days. Accordingly, e-forms 23C and 23D are being modified to capture such details.

(d) In case of change of cost auditor for reasons other than death of the existing cost auditor, companies are required to file fresh eform 23C with applicable fee & additional fee, clearly specifying the reasons of change. In case of change due to resignation of the existing cost auditor, e-form 23C should be accompanied by the resignation letter of the existing cost auditor. In case of change due to the management policy of periodical rotation, then attach a copy of the Board approved rotational policy with the e-form 23C. In any other case, the change should be duly justified and supported with the relevant documents.

(e) In order to ensure compliance of section 224(1-B) of the Companies Act 1956, required changes are being made in the MCA21 system to restrict the number of cost audit approvals to the limits specified in section 224(1-B) through a counter on the membership number of the sole proprietor or partner of the firm. It will be further ensured that in case of a sole proprietor, he has completed the audit and submitted the cost audit report. In case of a partnership firm, the partner so appointed or any other partner of the same firm is allowed to complete the audit & submit cost audit report subject to his total numbers not exceeding the limit specified in section 224(1-B).

2. MCA is regularly receiving requests from the companies and cost auditors for making corrections in the e-forms 23C & 23D in respect of minor typographical errors or other mistakes such as incorrect financial year, incorrect name of the cost auditor or the cost audit firm, incorrect PAN number, incorrect scope of audit, etc. In MCA21 system, no changes are permitted in the approved e-forms. Therefore, all companies and cost auditors are hereby informed to carefully verify all particulars before uploading e-forms 23C or 23D on the MCA21 portal. In any rare case, if still any error/mistake is observed, it should be brought to the notice of MCA well before its approval enabling it to return the said e-form for re-submission after making the required corrections. Else, the companies and cost auditors shall be required to file fresh e-forms 23C & 23D containing correct particulars, alongwith the applicable fee and additional fee.

3. If a company or the cost auditor contravenes any provisions of this circular, the company and every officer thereof who is found to be in default, and the cost auditor in case he is in default, shall be punishable as per applicable provisions of the Companies Act, 1956.

4. The modifications contained in this circular shall be effective from the financial year commencing on or after the 1st day of January, 2013.

5. The Institute is requested to bring this to the general information of all Members in practice, and of the corporate sector.

Click here to download the complete text of the above Circular in PDF Format- General Circular No. 36/2012 dated 06.11.2012.

Source: Ministry of Corporate Affairs.


Default by the Cost Auditors in filing Form 23D against the corresponding Form 23C 

General Circular No. 35/2012, F. No.52/5/CAB-2011, dated November 5, 2012. 

To,

The President,

Institute of Cost Accountants of India,

12, Sudder Street,

Kolkata – 700 016.

Ministry of Corporate Affairs vide General Circular No. 15/2011, dated April 11, 2011 had prescribed a revised procedure to be followed for appointment of cost auditors. As per the revised procedure, each company is required to e-file its application with the Central Government in the prescribed Form 23C within ninety days from the date of commencement of each financial year, which shall be approved by MCA within 30 days.

2. Upon approval by MCA, the company is required to issue formal letter of appointment to the cost auditor, who shall, within 30 days of receipt of such letter of appointment, inform the Central Government in the prescribed Form 23D alongwith a copy of such appointment.

3. It is, however, observed that since April 1, 2011, though all the appointment applications made by the companies concerned in Form 23C have already been approved by the MCA, a large number of cost auditors have defaulted in filing the required Form 23D within the stipulated time. In many cases, the default period is even more than a year. This has been viewed very seriously by the Ministry.

4. Keeping in view the initial operation of the revised procedure, all the defaulting cost auditors are requested to file their required Form 23D that have already become due till date, by December 16, 2012 positively. In case of any further default, names of such defaulting members shall be sent to the Institute on December 17, 2012 intimating the Institute to initiate Disciplinary Proceedings against them under the relevant provisions of Cost and Works Accountants Act, 1959.

5. In cases where the company concerned, after approval of Form 23C, has failed to issue the formal letter of appointment to the cost auditor, they shall do so within 15 days of the issue of this Circular enabling the cost auditor to file Form 23D within the extended time indicated above. In case of non-compliance, the company and every officer thereof who is found to be in default shall be punishable as per provisions of the Companies Act, 1956.

6. The Institute is requested to circulate this for the information of all concerned.

Click here to download the complete text of the above Circular in PDF Format- General Circular No. 35/2012 dated 05.11.2012.

Source: Ministry of Corporate Affairs.


Notification, [F.No. 1/5/2001 – CL-V], dated 15th October, 2012

S.O (E) ………. . — In exercise of the powers conferred by sub- section (1) of section 210A of the Companies Act, 1956 (1 of 1956), the Central Government hereby makes the following amendments in the notification of the Government of India in the Ministry of Corporate Affairs number S.O. 804 (E), dated the 11th April, 2012 published in Part II, Section 3, Sub-section (ii) of the Gazette of India Extra-ordinary dated the 11th April, 2012, namely:-

In the said notification,-

(i) for serial number 5 and the entries relating thereto, the following serial number and entries shall be substituted, namely:-

“(5) Shri Deepak Singhal, Chief General Manager-in-charge, Department of Banking Operations and Development, Nominee of Reserve Bank of India. Member, [nominated under clause (d) of sub-section (2) of section 210A].”

(ii)  for serial number 11 and the entries relating thereto, the following serial number and entries shall be substituted, namely:-

“(11) Shri V.S. Sundaresan, Chief General Manager, Corporation Finance Department, Securities and Exchange Board of India. Member, [nominated under clause (i) of sub-section (2) of section 210A].”.

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.

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Click here to download the complete text of the above Circular in PDF Format- S.O(E) dated 15.10.2012.

Source: Ministry of Corporate Affairs.