Amendments for Nov 2016:

Transcription

1 Amendments for Nov 2016: Companies Act, Amendment 1: (Medium Amendment) Effective date of applicability of Sec 143(12) & 177(4)(iv) proviso. The CG has notified that following provisions of sec 13 and 14 of Companies Amendment Act, 2015 shall come into force from 14 th Dec Sec 13 of Companies Amendment Act, 2015 In section 143 of the principal Act, for sub-section (12), the following sub-section shall be substituted, namely: (12) Notwithstanding anything contained in this section, if an auditor of a company in the course of the performance of his duties as auditor, has reason to believe that an offence of fraud involving such amount or amounts as may be prescribed, is being or has been committed in the company by its officers or employees, the auditor shall report the matter to the Central Government within such time and in such manner as may be prescribed: Provided that in case of a fraud involving lesser than the specified amount, the auditor shall report the matter to the audit committee constituted under section 177 or to the Board in other cases within such time and in such manner as may be prescribed: Provided further that the companies, whose auditors have reported frauds under this sub-section to the audit committee or the Board but not reported to the Central Government, shall disclose the details about such frauds in the Board's report in such manner as may be prescribed. Sec 14: of Companies Amendment Act, 2015 In section 177 of the principal Act, in sub-section (4), in clause (iv), the following proviso shall be inserted, namely: "Provided that the Audit Committee may make omnibus approval for related party transactions proposed to be entered into by the company subject to such conditions as may be prescribed;" Supporting Rule 13 of Companies (Audit & Auditors) Rules, (1) If an auditor of a company finds an offence of fraud, which involves or is expected to involve individually an amount of Rs. 1 cr or above, the auditor shall report the matter to the Central Government. (2) Auditor shall take following steps to report the matter. a) Auditor shall report fraud to Board or audit committee within 2 days if it is of Rs. 1 cr or more. b) The BOD or audit committee shall give reply on the same in 45 days. c) Auditor shall forward such fraud with reply of BOD or audit committee with his comments to CG within 15 days. If no reply is received from BOD or Audit committee auditor shall still communicate the same to CG in 15 days after expiry of 45 days. d) The report shall be given to CG in form ADT-4 and shall be forwarded to secretary of MCA with sign and seal by auditor. (3) If fraud involves lesser amount than Rs. 1 cr then the auditor shall report the same to BOD & Audit committee as follows and they shall mention same in board report. a) Nature of Fraud with description b) Approximate Amount involved c) Parties involved, if remedial action not taken d) Remedial actions taken CA Darshan D. Khare 1.1

2 Amendments For CA Final Law: Nov 2016 Amendment 2: (Medium Amendment) Creation of The Companies (Meetings of Board & Its Powers) Second Amendment Rules, 2015 The amendment is made in Original The Companies (Meetings of Board & Its Powers) Rules, 2014 The Special Resolution under Rule 15 required under sec 188 shall be replaced with Ordinary Resolution. In the Companies (Meetings of Board and its Powers) Rules, 2014 After rule 6, the following rule shall be inserted, namely:- Rule 6A: Omnibus approval for related party transactions on annual basis. 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, namely:- (1) 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 Committee at 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. (2) The Audit Committee shall consider the following factors while specifying the criteria for making omnibus approval, namely: - (a) repetitiveness of the transactions (in past or in future); (b) justification for the need of omnibus approval. (3) The Audit Committee shall satisfy itself on the need for omnibus approval for transactions of repetitive nature and that such approval is in the interest of the company. (4) The omnibus approval shall contain or indicate 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. (5) 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. (6) Omnibus approval shall not be made for transactions in respect of selling or disposing of the undertaking of the company. 1.2 CA Darshan D. Khare

3 (7) Any other conditions as the Audit Committee may deem fit. Amendment 3: (Minor Amendment) Delegation of Power by CG to Regional Directors under sec In exercise of the powers conferred by section 458 of the Companies Act, 2013 (18 of 2013) the Central Government hereby delegates to the Regional Directors at Mumbai, Kolkata, Chennai, Delhi, Ahmedabad, Hyderabad and Shillong, the power vested in it under section 208 of the said Act for receiving the report from the Registrar (having jurisdiction over the place of registered office of the company concerned) or from the Inspector where such report recommends action for violation of offences under the said Act for which imprisonment of less than two years is provided. 2. On receipt of the report referred to in paragraph 1, the Regional Director (a) shall examine the report and obtain legal advice, if required; (b) shall direct initiation of prosecution if he agrees with the recommendation of the Registrar or inspector to initiate prosecution against the company, officers or employees, present or past of the company, or any other person connected with the affairs of the company; and (c) shall inform the Central Government (along with reasons for non-acceptance of recommendation of Registrar or Inspector, wherever he disagrees) about the action taken on the report submitted by Registrar or Inspector. 3. The Regional Director shall, on receipt of the report, where such report recommends action for violation of offences other than those specified in paragraph 1, examine the same, obtain legal advice, if required, and submit it to the Central Government seeking initiation of prosecution. Amendment 4: (Medium Amendment) Effectiveness of Sec 125 (5), (6) & (7) from 13 th Jan 2016 Effectiveness of provisions of Investor Education and Protection Fund Bare Text Text for Understanding 125(1): Establishment of IEPF The Central Government shall establish a Fund to be called the Investor Education and Protection Fund (herein referred to as the Fund). 125(2): Deposit to Fund There shall be credited to the Fund (a) the amount given by the Central Government by way of grants after due appropriation made by Parliament by law in this behalf for being utilised for the purposes of the Fund; (b) donations given to the Fund by the Central Government, State Governments, companies or any other institution for the purposes of the Fund; (c) the amount in the Unpaid Dividend Account of companies transferred to the Fund under subsection (5) of section 124; (d) the amount in the general revenue account of the Central Government which had been transferred to that account under sub-section (5) of section 205A of the Companies Act, 1956, as it stood immediately before the commencement of the Companies (Amendment) Act, 1999, and remaining unpaid or unclaimed on the commencement of this Act; (e) the amount lying in the Investor Education and Protection Fund under section 205C of the Companies Act, 1956 (1 of 1956); CA Darshan D. Khare 1.3

4 1.4 Amendments For CA Final Law: Nov 2016 (f) the interest or other income received out of investments made from the Fund; (g) the amount received under sub-section (4) of section 38; [Surrender of securities acquired with fraud] (h) the application money received by companies for allotment of any securities and due for refund; (i) matured deposits with companies other than banking companies; (j) matured debentures with companies; (k) interest accrued on the amounts referred to in clauses (h) to (j); (l) sale proceeds of fractional shares arising out of issuance of bonus shares, merger and amalgamation for seven or more years; (m) redemption amount of preference shares remaining unpaid or unclaimed for seven or more years; and (n) such other amount as may be prescribed: Provided that no such amount referred to in clauses (h) to (j) shall form part of the Fund unless such amount has remained unclaimed and unpaid for a period of seven years from the date it became due for payment. The Fund shall be utilised for The unclaimed application money or matured deposit or matured debentures will be transferred to IEPF only after expiry of 7 years from the date it is due for payment. 125(3): Utilisation of Fund (a) the refund in respect of unclaimed dividends, matured deposits, matured debentures, the application money due for refund and interest thereon; (b) promotion of investors education, awareness and protection; (c) distribution of any disgorged amount among eligible and identifiable applicants for shares or debentures, shareholders, debenture-holders or depositors who have suffered losses due to wrong actions by any person, in accordance with the orders made by the Court which had ordered disgorgement; (d) reimbursement of legal expenses incurred in pursuing class action suits under sections 37 and 245 by members, debenture-holders or depositors as may be sanctioned by the Tribunal; and (e) any other purpose incidental thereto, in accordance with such rules as may be prescribed Provided that the person whose amounts referred to in clauses (a) to (d) of sub-section (2) of section 205C transferred to Investor Education and Protection Fund, after the expiry of the period of seven years as per provisions of the Companies Act, 1956, shall be entitled to get refund out of the fund in respect of such claims in accordance with rules made under this section. The person was eligible under old law to claim the amount stated above from the IEPF maintained u/s 205C under old Companies Act, (4): Application to Authority to claim the funds The person can claim the funds as stated above only if he makes the application to the Any person claiming to be entitled to the amount referred in sub-section (2) may apply to CA Darshan D. Khare

5 the authority constituted under sub-section (5) for the payment of the money claimed. authority constituted u/s 125(5) as below. 125(5): Establishment of authority for Refund of claims The CG can constitute the authority with: a. 1 chairman; & b. 7 other members; & c. CEO The application for claiming unpaid amounts can be made to such authority. The Central Government shall constitute, by notification, an authority for administration of the Fund consisting of a chairperson and such other members, not exceeding seven and a chief executive officer, as the Central Government may appoint. 125(6): The Management and Administration The CG have power to decide following things by making new rules: a. Administration of fund. b. Appointment of chairman. c. Appointment of members. d. Appointment of CEO e. Holding the meetings of authority. 125(7): Resources to Authority The CG have power to provide resources to authority by making rules. The manner of administration of the Fund, appointment of chairperson, members and chief executive officer, holding of meetings of the authority shall be in accordance with such rules as may be prescribed. The Central Government may provide to the authority such offices, officers, employees and other resources in accordance with such rules as may be prescribed. 125(8): Administration and Accounts of Fund The authority shall: a. Administer the fund; b. Prepare and maintain the records as needed as per CAG. The authority shall administer the Fund and maintain separate accounts and other relevant records in relation to the Fund in such form as may be prescribed after consultation with the Comptroller and Auditor-General of India. 125(9): Power of authority to expend the fund for specific object of sec 125(3) The authority can expend the amount in fund or allocate the same for meeting the objects mentioned in sec 125(3) above. It shall be competent for the authority constituted under sub-section (5) to spend money out of the Fund for carrying out the objects specified in sub-section (3). 125(10): Audit and Reporting The accounts of the Fund shall be audited by 1. The audit of the IEPF will be conducted the Comptroller and Auditor-General of India by CAG. at such intervals as may be specified by him and 2. CAG will decide the time, frequency and scope of audit. such audited accounts together with the audit 3. The audited accounts and audit report report thereon shall be forwarded annually by shall be forwarded by CAG or authority the authority to the Central Government. to CG annually or on demand. 125(11): Reporting to CG The authority shall prepare in such form and at The authority and the CAG shall prepare and CA Darshan D. Khare 1.5

6 Amendments For CA Final Law: Nov 2016 such time for each financial year as may be prescribed its annual report giving a full account of its activities during the financial year and forward a copy thereof to the Central Government and the Central Government shall cause the annual report and the audit report given by the Comptroller and Auditor-General of India to be laid before each House of Parliament. present the following documents and reports before the parliament of India. a. Annual report; b. Audit report by CAG. The reports shall be first given to the CG and then CG will put the same before the parliament of India. Amendment 5 / 6 : (Minor Amendment) Creation of NACAS committee till creation of NFRA u/s 132 NACAS to recommend the AS to CG In the Companies Act, 2013, in section 143, in sub-section (ii), the following proviso shall be inserted, namely:- Provided that until the National Financial Reporting Authority is constituted under section 132, the Central Government may hold consultation required under this sub-section with the Committee chaired by an officer of the rank of Joint Secretary or equivalent in the Ministry of Corporate Affairs and the Committee shall have the representatives from the Institute of Chartered Accountants of India and Industry Chambers and also special invitees from the National Advisory Committee on Accounting Standards and the office of the Comptroller and Auditor-General. In section 133 of the Companies Act, 2013 (herein after referred to as the said Act), the following proviso shall be inserted, namely:- Provided that until the National Financial Reporting Authority is constituted under section 132 of the Companies Act, 2013 (18 of 2013), the Central Government may prescribe the standards of accounting or any addendum thereto, as recommended by the Institute of Chartered Accountants of India, constituted under section 3 of the Chartered Accountants Act, 1949 (38 of 1949), in consultation with and after examination of the recommendations made by National Advisory Committee on Accounting Standards constituted under section 210 A of the Companies Act, 1956 Amendment 7: (Minor Amendment) Delegation of power to appoint Inspection officer u/s 206(5) by CG to regional directors. S.O. E. In exercise of the powers conferred by sub-section (1) of section 458 of the Companies Act (18 of 201:J)' the Central Government being satisfied that circumstances warrant, hereby delegates the powers to appoint inspector for inspection of books and papers of a company under sub-section (5) of section 206 as ordered by Central Government to the Regional Directors. 1.6 CA Darshan D. Khare

7 FEMA, 1999 Amendment 9: (Medium Amendment) Amendment of meaning of Real Estate in Prohibited CAT for PROI. No person resident outside India shall make investment in India, in any form, in any company or partnership firm or proprietary concern or any entity, whether incorporated or not, which is engaged or proposes to engage - 1. in the business of chit fund, or 2. as Nidhi Company, or 3. in agricultural or plantation activities or 4. in real estate business, or construction of farm houses or 5. in trading in Transferable Development Rights (TDRs). New: For the purpose of this regulation, "real estate business" shall not include development of townships, construction of residential/commercial premises, roads or bridges. Amendment 10: (Minor Amendment) Declaration about Liberalised Remittance Scheme. 1. Within the contours of the Regulations, Reserve Bank of India also issues directions to Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA), These directions lay down the modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/constituents with a view to implementing the regulations framed. 2. This Master Direction consolidates the existing instructions on the "Liberalised Remittance Scheme" at one place. Reporting instructions can be found in Master Direction on reporting) 3. It may be noted that, whenever necessary, Reserve Bank shall issue directions to Authorised Persons through A.P. (DIR Series) Circulars in regard to any change in the Regulations or the manner in which relative transactions are to be conducted by the Authorised Persons with their customers/ constituents. The Master Direction issued herewith shall be amended suitably simultaneously. Amendment 11: (Major Amendment) Regulation regarding export of Goods and Services. Procedure Every exporter of goods or software in physical form or through any other form, either directly or indirectly, to any place outside India, other than Nepal and Bhutan, shall furnish to the specified authority, a declaration in one of the forms set out in the Schedule and supported by such evidence as may be specified, containing true and correct material particulars including the amount representing (i) the full export value of the goods or software; or (ii) if the full export value is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions expects to receive on the sale of the goods or the software in overseas market, and affirms in the said declaration that the full export value of goods (whether ascertainable at the time of export or not) or the software has been or will within the specified period be, paid in the specified manner. CA Darshan D. Khare 1.7

8 Amendments For CA Final Law: Nov 2016 Export for which no declaration is needed (a) trade samples of goods and publicity material supplied free of payment; (b) personal effects of travellers, whether accompanied or unaccompanied; (c) ship s stores, trans-shipment cargo and goods supplied under the orders of Central Government or of such officers as may be appointed by the Central Government in this behalf or of the military, naval or air force authorities in India for military, naval or air force requirements; (d) goods or software accompanied by a declaration by the exporter that they are not more than twenty-five thousand USD in value; (d) by way of gift of goods accompanied by a declaration by the exporter that they are not more than five lakh rupees in value; (e) aircrafts or aircraft engines and spare parts for overhauling and/or repairs abroad subject to their re-import into India after overhauling/repairs, within a period of six months from the date of their export; (f) goods imported free of cost on re-export basis; (g) goods not exceeding U.S. $ 1000 or its equivalent in value per transaction exported to Myanmar under the Barter Trade Agreement between the Central Government and the Government of Myanmar; (g) the following goods which are permitted by the Development Commissioner of the Export Processing Zones 1Electronic Hardware Technology Parks, Electronic Software Technology Parks] or Free Trade Zones to be re-exported, namely : (1) imported goods found defective, for the purpose of their replacement by the foreign suppliers/collaborators; (2) goods imported from foreign suppliers/collaborators on loan basis; (3) goods imported from foreign suppliers/collaborators free of cost, found surplus after production operations; (ga) goods listed at items (1), (2) and (3) of clause (i) to be re-exported by units in Special Economic Zones, under intimation to the Development Commissioner of Special Economic Zones/ concerned Assistant Commissioner or Deputy Commissioner of Customs; (h) replacement goods exported free of charge in accordance with the provisions of Exim Policy in force, for the time being; (i) goods sent outside India for testing subject to re-import into India; (j) defective goods sent outside India for repair and re-import provided the goods are accompanied by a certificate from an authorised dealer in India that the export is for repair and re-import and that the export does not involve any transaction in foreign exchange; (k) exports permitted by the Reserve Bank, on application made to it, subject to the terms and conditions, if any, as stipulated in the permission.] Heads Actions Indicated on all copies of the declaration forms submitted by the exporter. Importer-exporter code number allotted by the Director General of Foreign Trade Declaration for goods. in form EDF shall be submitted in duplicate to the Commissioner of Customs. Declaration for Software, and audio/video/ television The declaration in Form SOFTEX software Duplicate Declaration Forms to be retained with CA Darshan D. Khare

9 Authorised Dealers Manner of payment of export value of goods Period within which export value of goods/software/ services to be realised. Submission of export documents. SEBI, 1992 The amount representing the full export value of the goods exported shall be paid through an authorised dealer Goods are exported to a warehouse established outside India: ASAP In any case within fifteen months from the date of shipment of goods. Submitted to the authorised dealer mentioned in the relevant export declaration form, within 21 days from the date of export Amendment 8: (Medium Amendment) SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLO- SURE REQUIREMENTS) (SECOND AMENDMENT) REGULATIONS, 2016 Option to Exit to Dissenting shareholders in case of change in object clause of MOA & Change in content of prospectus. Cross Refer: Sec 13 (Amendment of MOA) & Sec 27 (Change in Content of Prospectus) of Companies Act, CHAPTER VI-A CONDITIONS AND MANNER OF PROVIDING EXIT OPPORTUNITY TO DISSENTING SHAREHOLDERS Applicability. 69A. (1) The provisions of this Chapter shall apply to an exit offer made by the promoters or shareholders in control of an issuer to the dissenting shareholders in terms of section 13(8) and section 27(2) of the Companies Act, 2013, in case of change in objects or variation in the terms of contract referred to in the prospectus. (2) The provisions of this Chapter shall not apply where there are neither identifiable promoters nor shareholders in control of the listed issuer. Definitions. 69B. For the purpose of this Chapter: (a) dissenting shareholders means those shareholders who have voted against the resolution for change in objects or variation in terms of a contract, referred to in the prospectus of the issuer; (b) frequently traded shares shall have the same meaning as assigned to it in the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, (c) relevant date means date of the board meeting in which the proposal for change in objects or variation in terms of a contract, referred to in the prospectus is approved, before seeking shareholders approval. Conditions for exit offer. 69C. The promoters or shareholders in control shall make the exit offer in accordance with the provisions of this Chapter, to the dissenting shareholders, if: (a) the public issue has opened after April 1, 2014; and (b) the proposal for change in objects or variation in terms of a contract, referred to in the prospectus is dissented by at least ten per cent. of the shareholders who voted in the general meeting; and CA Darshan D. Khare 1.9

10 Amendments For CA Final Law: Nov 2016 (c) the amount to be utilized for the objects for which the prospectus was issued is less than seventy five per cent. of the amount raised (including the amount earmarked for general corporate purposes as disclosed in the offer document). Eligibility of shareholders for availing the exit offer 69D. Only those dissenting shareholders of the issuer who are holding shares as on the relevant date shall be eligible to avail the exit offer made under this Chapter. Exit offer price. 69E. The exit price payable to the dissenting shareholders shall be the highest of the following: (a) the volume-weighted average price paid or payable for acquisitions, whether by the promoters or shareholders having control or by any person acting in concert with them, during the fifty-two weeks immediately preceding the relevant date; (b) the highest price paid or payable for any acquisition, whether by the promoters or shareholders having control or by any person acting in concert with them, during the twenty-six weeks immediately preceding the relevant date; (c) the volume-weighted average market price of such shares for a period of sixty trading days immediately preceding the relevant date as traded on the recognised stock exchange where the maximum volume of trading in the shares of the issuer are recorded during such period, provided such shares are frequently traded; where the shares are not frequently traded, the price determined by the promoters or shareholders having control and the merchant banker taking into account valuation parameters including book value, comparable trading multiples, and such other parameters as are customary for valuation of shares of such issuers. Competition Act, 2002 Amendment 12: (Major Amendment) Notifications regarding (a) exemption regarding group ; (b) Target exemption; (c) increase in value of assets and turnover. 1. The CG, in public interest, hereby exempts the Group exercising less than 50% of voting rights in other enterprise from the provisions of section 5 of the said Act for a period of 5 years with effect from the date of publication of this notification in the official gazette. 2. the CG, in public interest, hereby exempts an enterprise, whose control, shares, voting rights or assets are being acquired has either assets of the value of not more Rs. 350 cr in India or turnover of not more than Rs 1000 cr in India from the provisions of section 5 of the said Act for a period of 5 years from the date of publication of the notification in the official gazette. 3. The CG in consultation with the Competition Commission of India, hereby enhances, on the basis of the wholesale price index, the value of assets and the value of turnover, by 100% for the purposes of section 5 of the said Act, from the date of publication of this notification in the Official Gazette CA Darshan D. Khare

11 Combination Chart for Understanding Combination Control on assets or shares or voting rights Direct or Indirect Control over other entity Amalgamation or Merger of Entity Entities Separately In India 1. Asset > Rs cr; Or 2. Turnover > Rs cr OR All over the world 1. World Asset > $ 750 mn; & India Asset > Rs. 750 cr Or 2. World Turnover > $ 2250 mn; & India Turnover > Rs cr Entities Together / Combined In India 1. Asset > Rs cr; Or 2. Turnover > Rs cr OR All over the world 1. World Asset > $ 2 bn; & India Asset > Rs. 500 cr Or 2. World Turnover > $ 6 bn; & India Turnover > Rs cr CA Darshan D. Khare 1.11