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The Analysis of the Companies (Meetings of Board and its Powers) Second Amendment Rules, 2015 and Companies (Audit and Auditors) Amendment Rules 2015 which was published in the Gazette of India as on 14th December, 2015.

In the Companies (Meeting of Board and its Powers) Rules, 2014,

After Rule 6 of Companies (Meeting of Board and its Powers) Rules, 2014 the Rule 6A inserted:

Before Amendments:

 Rule 6 of Companies (Meeting of Board and its Powers) Rules, 2014 talks about Committee of the Board:

The Board of Directors of every listed Company and:

i. All public Companies having Paid up Capital of Rs. 10 crore or more;

ii. All public Companies having Turnover of Rs. 1 Crore or more;

iii. All public Companies having in aggregate, outstanding loans or borrowings or Debenture or Deposits exceeding 50 Crore or more.

(The paid up capital or turnover or outstanding loans or borrowings, debenture or deposits as the case may be, as existing on the date of last audited Financial Statements shall be taken into account for the purposes of this rule):

Proviso (inserted vide GSR 398(E), dt. 12-06-2014, w.e.f. 12-06-2014) Public Companies which has no requirement to Constitute Audit Committee under section 292A of the Companies Act, 1956, shall constitute their audit Committee within one Year form the commencement of this rules or appointment of Independent Directors by them whichever is earlier:

Provided further that public Companies covered under this rule shall constitute their Nomination and Remuneration Committee within one year from the Commencement of these rules or appointment of Independent Directors by them, whichever is earlier?

After this, Rule 6A of Companies (Meetings of Board and its Powers) Second Amendment Rules, 2015 inserted,

All related party transactions shall require approval of the Audit Committee and the Audit Committee may make omnibus approval for related party transactions proposed to be entered into by the company subject to the following conditions,:-

(l) The Audit Committee shall, after obtaining approval of the Board of Directors, specify the criteria for making the omnibus approval which shall include the following, namely:-

a. Maximum value of the transactions, in aggregate, which can be allowed under the omnibus route in a year;

b. The maximum value per transaction which can be allowed;

c. Extent and manner of disclosures to be made to the Audit the time of seeking omnibus approval;

d. Review, at such intervals as the Audit Committee may deem fit, related Party Transaction entered into by the company pursuant to each of the omnibus approval made;

e. Transactions which cannot be subject to the omnibus approval by the Audit Committee.

(II) The Audit Committee shall consider the following factors while specifying the criteria for making omnibus approval, namely: -

  • Repetitiveness of the transactions (in past or in future);
  • Justification for the need of omnibus approval.

(III) The Audit Committee shall satisfies itself on the need for omnibus Approval for transaction of repetitive nature and that such approval is in the interest of the Company

(IV) The omnibus approval shall contain the following: -

a. name of the related parties:

b. Nature and duration of the transaction;

c. Maximum amount of transaction that can be entered into;

d. The indicative base price or current contracted price and the formula for variation in the price, if any; and

e. Any other information relevant or important for the Audit Committee to take a decision on the proposed transaction:

Provided that where the need for related party transaction cannot be foreseen and aforesaid details are not available, audit committee may make omnibus approval for such transactions subject to their value not exceeding rupees one crore per transaction

(V) Omnibus approval shall be valid for a period not exceeding one financial year and shall require fresh approval after the expiry of such financial year.  

(VI) Omnibus approval shall not be made for transactions in respect of selling or disposing of the undertaking of the Company.

(VII) Any other conditions as the Audit Committee may deem fit.”

Rule 10 of Companies (Meeting of Board and its Powers) Rules, 2014 shall be omitted:

(It said: - 1). Any loan made by holding Company to its wholly owned subsidiary Company or any Guarantee give or Security provided by a holding Company in respect of any loan made to its wholly owned subsidiary company is exempted from the requirements under this section; and

2). Any Guarantee given or security provided by a holding Company in respect of loan made by any bank or financial institution to its subsidiary company is exempted from requirements under this section:

Provided that such loans made under sub-rule (1) and (2) are utilized by the subsidiary company for its principal Business activities.)

(Sub Rule 3)* of Rule 15 of Companies (Meeting of Board and its Powers) Rules, 2014 amended

Word “Special Resolution” whenever they occur the word “Resolution” shall be substituted.

Before Amendments

For the purpose of first proviso to sub section 1 of the section 188 of Companies Act, 2013 except with the prior approval of the Company by special resolutions, a company shall not enter into a transaction or transactions as prescribed.

After Amendments

For the purpose of first proviso to sub section 1 of the section 188 of Companies Act, 2013 except with the prior approval of the Company by resolutions, a company shall not enter into a transaction or transactions as prescribed.

(*Substituted by the Companies (Meetings of Board and its Powers) Second Amendments Rules, 2014 w.e.f. 14-08-2014)

In Companies (Audit and Auditors) Amendment Rules 2014

Section 143(12) of Companies Act, 2013 states

If an Auditor of the Company, in the course of the performance of his duties as auditor, has reason to believe that an offence involving fraud is being or has been committed against the company by officers or employees of the company, he shall immediately report the matter to the Central Government within such time and in such manner as may be prescribed.

Companies (Amendments) Act, 2015 (21 of 2015), dt. 25-05-2015 stated

If an Auditor of the Company, in the course of the performance of his duties as auditor, has reason to believe that an offence of fraud involving such amounts or amount as may be prescribed, is being or has been committed in the company by its officer or employees, the auditor shall report the matter to the central Government within such time and in such manner as may be prescribed.

In the Companies (Audit and Auditors) Rules, 2014 (hereinafter referred to as the principal rules),- Amended as on 14-12-2015,

Before Amendments

1. For the purpose of section 143(12), in case of auditor has sufficient reason to believe that an offence involving fraud, is being or has been committed against the company by officers or employees of the company, he shall report the matter to CG immediately but not later than 60 Days of his knowledge and after following the procedure mentioned below:-

i. Auditor shall forward his report to the Board or the Audit Committee (if any), immediately after he comes to knowledge of the Fraud, seeing their reply or observation within 45 Days.

ii. On receipt of such reply or observations the auditor shall forward his report and reply or observation of the Board or the Audit Committee along with his comment to the CG within 45 Days of receipt of such reply or observations;

iii. In case the auditor fails to get any reply or observations from the Board or Audit Committee within the 45 Days, he shall forward his report to CG along with a note containing the details of his report that was earlier forward to the Board or Audit Committee for which he fails to receive any reply or observation within the stipulate time.

2. The report shall be sent to the Secretary, Ministry of Corporate Affairs in a sealed cover by Registered Post with Acknowledgement Due or by Speed Post followed by an e-mail in confirmation of the same;

3. The report shall be on the letter-head of the auditor containing postal address, e-mail address and contact telephone number or mobile number and be signed by the auditor with his seal and shall indicate his Membership Number.

4. The report shall be in the form of a statement as specified in Form ADT-4.

5. The provision of this rule shall also apply, mutatis mutandis, to a Cost Auditor and a Secretarial Auditor during the performance of his duties under section 148 and section 204 respectively.”

After Amendments

“13. Reporting of frauds by auditor and other matters:

(1) If an auditor of a company, in the course of the performance of his duties as statutory auditor, has reason to believe that an offence of fraud, which involves or is expected to involve individually an amount of rupees one crore or above, is being or has been committed against the company by its officers or employees, the auditor shall report the matter to the Central Government.

(2) The auditor shall report the matter to the Central Government as under:-

(a) The auditor shall report the matter to the Board or the Audit Committee, as the case may be, immediately but not later than two days of his knowledge of the fraud, seeking their reply or observations within forty-five days;

(b) On receipt of such reply or observations, the auditor shall forward his report and the reply or observations of the Board or the Audit Committee along with his comments (on such reply or observations of the Board or the Audit Committee) to the Central Government within fifteen days from the date of receipt of such reply or observations;

(c) In case the auditor fails to get any reply or observations from the Board or the Audit Committee within the stipulated period of forty-five days, he shall forward his report to the Central Government along with a note containing the details of his report that was earlier forwarded to the Board or the Audit Committee for which he has not received any reply or observations;

(d) The report shall be sent to the Secretary, Ministry of Corporate Affairs in a sealed cover by Registered Post with Acknowledgement Due or by Speed Post followed by an e-mail in confirmation of the same;

(e) The report shall be on the letter-head of the auditor containing postal address, e-mail address and contact telephone number or mobile number and be signed by the auditor with his seal and shall indicate his Membership Number; and

(f) The report shall be in the form of a statement as specified in Form ADT-4.

(3) In case of a fraud involving lesser than the amount specified in sub-rule (1), the auditor shall report the matter to Audit Committee constituted under section 177 or to the Board immediately but not later than two days of his knowledge of the fraud and he shall report the matter specifying the following:-

(a) Nature of Fraud with description;
(b) Approximate amount involved; and
(c) Parties involved.  

(4) The following details of each of the fraud reported to the Audit Committee or the Board under sub-rule (3) during the year shall be disclosed in the Board’s Report:-

(a) Nature of Fraud with description;
(b) Approximate Amount involved;
(c) Parties involved, if remedial action not taken; and
(d) Remedial actions taken.

(5) The provision of this rule shall also apply, mutatis mutandis, to a Cost Auditor and a Secretarial Auditor during the performance of his duties under section 148 and section 204 respectively.

Prepared by: Sanoj Kumar (CS Trainee)


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Category Corporate Law, Other Articles by - SANOJ KUMAR 



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