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MCA issues amendments dated 05th July 2017

Anjali Gorsia 
on 10 July 2017

LinkedIn


In this article, we will highlight the recent amendments by Central Government read  with section 469 of the Companies Act, 2013 (18 of 2013) under the following heads issued by Ministry of Corporate Affairs through a notification dated 05th July 2017.

a. Amendment in Schedule IV of the Companies Act, 2013
http://www.mca.gov.in/Ministry/pdf/AmendmentIV_06072017.pdf

b. Amendments in Companies (Appointment and Qualification of Directors) Rules, 2014 to be called as 'Companies (Appointment and Qualification of Directors) Amendment Rules, 2017'
http://www.mca.gov.in/Ministry/pdf/CompaniesApptandQualificationofDirectorsAmdtRules_06072017.pdf

c. Central Government hereby amends further National Company Law Tribunals Rules, 2016 called 'National Company Law Tribunal (Amendment) Rules, 2017'
 http://www.mca.gov.in/Ministry/pdf/Rules_28122016.pdf

Amendment in Schedule IV of the Companies Act, 2013; CODE OF INDEPENDENT  DIRECTORS

In exercise of the powers conferred by sub-section (1) of section 467 of the Companies  Act,  2013 (18 of 2013), the Central Government hereby makes the following amendments to Schedule IV of the said Act, namely:-


PARTICULARS

PRE AMENDMENTS

POST AMENDMENTS

paragraph III, in sub-Para (12); Substitution of words

"acting within his authority", assist in protecting the legitimate interests of the company, shareholders and its employees

"Act within their authority" assist in protecting the legitimate interests of the company,  shareholders  and  its employees

paragraph VI, sub-Para (2), Substitution of words

An independent director who resigns or is removed from the Board of the Company shall be place by a new independent director within 'a period of not more than one hundred and eighty days" from the date of such resignation or removal, as the case may be.

An independent director who resigns or is  removed  from  the Board of the Company shall be place by a new independent director within 'three months' from the date of such resignation or removal, as the case may be.

Paragraph VII, in sub-  Para (1). Substitution of words

The Independent Directors of the Company shall at least  one meeting in a 'year', without the attendance of non-independent directors and members of management.

The Independent Directors of the Company shall at least one meeting in a 'financial year' year, without the attendance of non-independent directors and members of management

after paragraph VIII, the the following note shall be inserted "Note: The provisions of sub-paragraph (2) and (7) of paragraph II, paragraph IV, paragraph V, clauses (a) and (b) of sub-paragraph (3) of paragraph VII and paragraph VIII shall not apply in the case of a Government company as defined under clause (45) of section 2 of the Companies Act, 2013 (18 of 2013), if the requirements in respect of matters specified in these paragraphs are specified by the concerned Ministries or Departments of the Central Government or as the case may be, the State Governments and such requirements are complied with by the Government companies."

In nutshell:

The following code of conducts shall not be applicable to the Independent Directors of 'Government Company' as defined as defined under clause (45) of section 2 of the Companies Act, 2013'

a. Sub-paragraph (2) of paragraph II: bring an objective view in the evaluation of the performance of board and management;

b. Sub-paragraph (7) of paragraph II: determine appropriate levels of remuneration of executive directors, key managerial personnel and senior management and have a prime role in appointing and where necessary recommend removal of executive directors, key managerial personnel and senior management;

c. Paragraph IV: Manner of Appointment of Independent Director

d. Paragraph V: Re-appointment:
The re-appointment of independent director shall be on the basis of report of performance evaluation

e. Clauses (a) and (b) of sub-paragraph (3) of paragraph VII: Separate meetings;

(a) review the performance of non-independent directors and the Board as a whole;
(b) review the performance of the Chairperson of the company, taking into account the views of executive directors and non-executive directors;

Paragraph VIII; Evaluation Mechanism.

This notification shall come into force on the date of its publication in the Official Gazette.

Companies (Appointment and Qualification of Directors) Amendment Rules, 2017

The Central Government further amends the  rules  of  Companies  (Appointment  and  Qualification of Directors) Rules, 2014, these rules may be called as the  Companies  (Appointment and Qualification of Directors) Amendment Rules, 2017.

This notification shall come into force on the date of its publication in the Official Gazette.

1. Rule 4  pertaining to 'Number of Independent  Directors'  has  been  amended  in  the following manner:

'Rule 4 shall be numbered as sub-rule (1)  and after sub-rule (1)  as so renumbered,  Rule 2 shall be inserted in the following manner:

PRE AMENDMENTS:

Rule 4: Number of Independent Directors

The following class or classes of companies shall have at least two directors as independent directors -

(i) the Public Companies having paid up share capital of ten crore rupees or more; or
(ii) the Public Companies having turnover of one hundred crore rupees or more; or
(iii) the Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty crore rupees:

Provided that in case a company covered under this rule is required to appoint a higher number of independent directors due to composition of its audit committee, such higher number of independent directors shall be applicable to it:

Provided further that any intermittent vacancy of an independent director shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or three months from the date of such vacancy, whichever is later:

Provided also that where a company ceases to fulfill any of three conditions laid down in sub- rule (1) for three consecutive years, it shall not be required to comply with these provisions until such time as it meets any of such conditions;

Explanation.- For the purposes of this rule, it is hereby clarified that, the paid up share capital or turnover or outstanding loans, debentures and deposits, as the case may be, as existing on the last date of latest audited financial statements shall be taken into account:

Provided that a company belonging to any class of companies for which a higher number of independent directors has been specified in the law for the time being in force shall comply with the requirements specified in such law.

POST AMENDMENTS:
Rule 4; Number of Independent Directors

(1) The following class or classes of companies shall have at least two directors as independent directors –

i. the Public Companies having paid up share capital of ten crore rupees or more; or
ii. the Public Companies having turnover of one hundred crore rupees or more; or
iii. the Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty crore rupees:

Provided that in case a company covered under this rule is required to appoint a higher number of independent directors due to composition of its audit committee, such higher number of independent directors shall be applicable to it:

Provided further that any intermittent vacancy of an independent director shall be filled-up by the Board at the earliest but not later than immediate next Board meeting or three months from the date of such vacancy, whichever is later:

Provided also that where a company ceases to fulfill any of three conditions laid down in sub- rule (1) for three consecutive years, it shall not be required to comply with these provisions until such time as it meets any of such conditions;

Explanation. For the purposes of this rule, it is here by clarified that, the paid up share capital or turnover or outstanding loans, debentures and deposits, as the case may be, as existing on the last date of latest audited financial statements shall be taken into account:

Provided that a company belonging to any class of companies for which a higher number of independent directors has been specified in the law for the time being in force shall comply with the requirements specified in such law.

(2) The following classes of unlisted public company shall not be covered under sub-rule (1), namely:-

(a) a joint venture;
(b) a wholly owned subsidiary; and
(c) a dormant company as defined under section 455 of the Act."

2. In annexure to Companies (Appointment and Qualification of Directors) Rules, 2014, Form DIR-5, will be substituted, with amendments which will be made available at MCA site also.

'National Company Law Tribunal (Amendment) Rules,2017

Notification dated 05th July 2017 issued by Central Government hereby amends further National Company Law Tribunals Rules, 2016 called 'National Company Law Tribunal (Amendment) Rules, 2017' .
It discusses about the 'Revival/ Restoration of Struck off Companies By Registrar' under Section 248 of the Companies Act, 2013 read with rules Companies (Removal of Name of Companies from the Registrar of Companies) Rules, 2016 by making an Appeal to Tribunal.

Rule 87A inserted after Rule 87:

As per this rule;

i. Application for appeal u/s 252 (1) & application u/s 252 (3) shall be made to NCLT in Form NCLT-9, with such modification as necessary
ii. Copy of same to be served to Registrar and any other person as per the direction of NCLT at least 14 days before the date of hearing is fixed for appeal, as the case may be.
iii. Tribunal may pass order as may deem fit, after hearing the appeal or application.

Compliance to be done: After the tribunal pass an order for restoration:

i. Certified Copy of the order to be filed with Registrar, within 30 days of the date of the order.
ii. Shall be filed by the company in form INC-28 along with fee
iii. Registrar shall do, in his official name and seal, publish the order in the Official Gazette; from notice of such delivery,
iv. The Company to comply with pending filing of financial statements and annual returns with Registrar complying with Companies Act, 2013 and rules thereof;
v.  Restoration costs to be paid to Registrar by appellant or applicant unless the Tribunal directs otherwise.

Hope this is article simplifies the conceptuality.

DISCLAIMER: This entire document has been developed according to the information available in public domain and for reading purpose only and any person wishing to act on the basis of this document should personally do so only after cross checking with the original source. READER SHOULD SEEK APPROPRIATE COUNSEL FOR THEIR OWN SITUATION, AUTHOR SHALL NOT BE HELD LIABLE FOR ANY OF THE CONSEQUENCES DIRECTLY OR INDIRECTLY.


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