Compliances Penalty

The Companies (Share Capital and

Debentures) Rules, 2014 ]

8 Issue of Sweat Equity Shares.

(1) A company other than a listed company,
which is not required to comply with the
Securities and Exchange Board of India
Regulations on sweat equity, shall not issue
sweat equity shares to its directors or
employees at a discount or for consideration
other than cash, for their providing know-how
or making available rights in the nature of
intellectual property rights or value additions,
by whatever name called, unless the issue is
authorised by a special resolution passed by the
company in general meeting.
For the purposes of this rule-
(i) the expressions ‘‘Employee’’
means-
an employee or a director as
defined in sub-clauses (a) or (b)
above of a subsidiary, in India or
outside India, or of a holding
company of the company

The Companies (Share Capital and

Debentures) Rules, 2014 ]

12 Issue of Employee Stock Options.

A company, other than a listed company,
which is not required to comply with Securities
and Exchange Board of India Employee Stock
Option Scheme Guidelines shall not offer shares
to its employees under a scheme of
employees’ stock option (hereinafter referred
to as "Employees Stock Option Scheme"),
unless it complies with the following
requirements, namely:-
(1) the issue of Employees Stock Option
Scheme has been approved by the
shareholders of the company by passing a
special resolution.
Explanation: For the purposes of clause (b) of
sub-section (1) of section 62 and this rule
‘‘Employee’’ means-
(a) a permanent employee of the company who
has been working in India or outside India; or
(b) a director of the company, whether a whole
time director or not but excluding an
independent director; or
(c) an employee as defined in clauses (a) or (b)
of a subsidiary, in India or outside India, or of a
holding company of the company

(4) The approval of shareholders by way of

separate resolution shall be obtained by the
company in case of-
(a) grant of option to employees of subsidiary
or holding company; 

Chapter IX The Companies (Accounts) Rules,

2014 ]

5 Form of Statement Containing Salient

Features of Financial Statements of
Subsidiaries
The statement containing the salient feature of
the financial statement of a company’s
subsidiary or subsidiaries, associate company or
companies and joint venture or ventures under
the first proviso to sub-section (3) of section
129 shall be in Form AOC-1.

Chapter IX The Companies (Accounts) Rules,

2014 ]

6 Manner of Consolidation of Accounts.

The consolidation of financial statements of the
company shall be made in accordance with the
provisions of Schedule III of the Act and the
applicable accounting standards:
Provided that in case of a company covered
under sub-section (3) of section 129 which is
not required to prepare consolidated financial
statements under the Accounting Standards, it
shall be sufficient if the company complies with
provisions on consolidated financial statements
provided in Schedule III of the Act.
3
[“Provided further that nothing in this rule
shall apply in respect of preparation of
consolidated financial statements by a
company if it meets the following conditions:-

(i) it is a wholly-owned subsidiary, or is a

partially-owned subsidiary of another company
and all its other members, including those not
otherwise entitled to vote, having been
intimated in writing and for which the proof of
delivery of such intimation is available with the
company, do not object to the company not
presenting consolidated financial statements;

Provided also that nothing contained in this

rule shall. subject to any other law or
regulation, apply for the financial year
commencing from the 1st day of April, 2014
and ending on the 31st March, 2015, in case of
a company which does not have a subsidiary or
subsidiaries but has one or more associate
companies or Joint ventures or both, for the
consolidation of financial statement in respect
of associate companies or joint ventures or
both, as the case may be.

[ Chapter XII The Companies (Meetings of

Board and its Powers) Rules, 2014 ]

11 Loan and investment by a company under

section 186 of the Act.
(1) Where a loan or guarantee is given or where
a security has been provided by a company to
its wholly owned subsidiary company or a joint
venture company, or acquisition is made by a
holding company, by way of subscription,
purchase or otherwise of, the securities of its
wholly owned subsidiary company, the
requirement of sub-section (3) of section
186 shall not apply:

[ Chapter XII The Companies (Meetings of

Board and its Powers) Rules, 2014 ]

15 Contract or Arrangement With a Related

Party 
[(3) For the purposes of first proviso to sub-
section (1) of section 188, except with the prior
approval of the company by a 2[resolution], a
company shall not enter into a transaction or
transactions, where the transaction or
transactions to be entred into,-

 (b) is for appointment to any office or place of

profit in the company, its subsidiary company
or associate company at a monthly
remmuneration exceeding two and a half lakh
rupees as mentioned in clause (f) of sub-section
(1) of section 188.
Explanation.-
(2) In case of wholly owned subsidiary,
the 2[resolution] is passed by the holding
companyshall be sufficient for the purpose of
entering into the transaction between the
wholly owned subsidiary and the holding
company.

Rules [ Chapter V The Companies (Acceptance 21 Punishment for Contravention.

of Deposits) Rules, 2014 ]
3. Terms and Conditions of Acceptance of
Deposits by Companies.
(3) No company referred to in sub-section (2)
of section 73 shall accept or renew any deposit
from its members, if the amount of such
deposits together with the amount of other
deposits outstanding as on the date of
acceptance or renewal of such deposits
exceeds 4[thirty five per cent] of the aggregate
of the 2[Paid-up share capital, free Reserves and
securities premium account] of the company.
Provided further that the maximum limit in
respect of deposits to be accepted from
members shall not apply to following classes
of private companies, namely:-
If any company referred to in sub-section
(2) of section 73 or any eligible company
inviting deposits or any other person
contravenes any provision of these rules for
which no punishment is provided in the Act,
the company and every officer of the
company who is in default shall be
punishable with fine which may extend to
five thousand rupees and where the
contravention is a continuing one, with a
further fine which may extend to five
hundred rupees for every day after the first
day during which the contravention
continues.

ii) a private company which fulfils all of the

following conditions, namely:-

(a) which is not an associate or a

subsidiary company of any other
company;
b) the borrowings of such a company from
banks or financial institutions or any body
corporate is less than twice of its paid up
share capital or fiffy crore rupees,
whichever is less ; and
(c) such a company has not defaulted in
the repayment of such borrowings subsisting
at the time of accepting deposits under
section 73:

 
Chapter IV The Companies (Share Capital
and Debentures) Rules, 2014 ]

18 Debentures
(1) The company shall not issue secured
debentures, unless it complies with the following
conditions, namely:-

(b) Such an issue of debentures shall be

secured by the creation of a charge on the
properties or assets of the company or its
subsidiaries or its holding company or its
associates companies, having a value which is
sufficient for the due repayment of the amount
of debentures and interest thereon.

d) the security for the debentures  by way of a

charge or mortgage shall be created in favour
of the debenture trustee on:-
 [(i) any specific movable property of the
company or its holding company or subsidiaries
or associate companies or otherwise

Provided also that in case of any loan taken by

a subsidiary company from any bank or
financial institution the charge or mortgage
under this sub-rule may also be created on the
properties or assets of the holding company.

(b) A person shall not be appointed as a

debenture trustee, if he-
(ii) is a promoter, director or key managerial
personnel or any other officer or an employee of
the company or its holding, subsidiary or
associate company;
(iv) is indebted to the company, or its subsidiary
or its holding or associate company or a
subsidiary of such holding company;

The Companies (Corporate Social

Responsibility Policy) Rules, 2014. ]

3. Corporate Social Responsibility.

(1) Every company including its holding or
subsidiary, and a foreign company defined
under clause (42) of section 2 of the Act having
its branch office or project office in India, which
fulfills the criteria specified in sub-section (I)
of section 135 of the Act shall comply with the
provisions of section 135 of the Act and these
rules
Chapter XV The Companies (Compromises,
Arrangements and Amalgamations) Rules,
2016
6. Notice of meeting. –

(3) The notice of the meeting to the

creditors and members shall be
accompanied by a copy of the scheme
of compromise or arrangement, if such
details are not already included in the
said scheme:-
(iii)     if the scheme of compromise or
arrangement relates to more than one
company, the fact and details of any
relationship subsisting between such
companies who are parties to such
scheme of compromise or arrangement,
including holding, subsidiary or of
associate companies.

[ The Companies (Restriction on Number of Layers) Rules, 2017 ]

2. Restriction on number of layers for certain classes of holding companies.-

 
(1) On and from the date of commencement of these rules, no company, other than a
company belonging to a class specified in sub rule (2), shall have more than two layers of
subsidiaries:
Provided that the provisions of this sub-rule shall not affect a company from acquiring a
company incorporated outside India with subsidiaries beyond two layers as per the laws of
such country:
Provided further that for computing the number of layers under this rule, one layer which
consists of one or more wholly owned subsidiary or subsidiaries shall not be taken into
account.
(2) The provisions of this rule shall not apply to the following classes of companies, namely: -
(a) A banking company as defrned in clause (c) of section 5 of the Banking Regulation Act
1949 (10 of 1949);
(b) A non-banking financial company as defined in clause (f) of Section 45_l of the Reserve
Bank of India Act, 1934 (2 of 1934) which is registered with the Reserve Bank of India and
considered as systematically important non-banking financial company by the Reserve Bank
of India;
(c) An insurance company being a company wtrich carries on the business of insurance in
accordance with provisions of the Insurance Act,1938 (4 of 1938) and the lnsurance
Regulatory Development Authority Act, 1999 (41 of 1999);
 (d) A Government company referred to in clause (45) of section 2 of the Act.
(3) The provisions of this rule shall not be in derogation of the proviso to sub-section (1) of
section 186 of the Act.
(4) Every company other than a company referred to in sub-rule (2) existing on or before the
commencement of these rules, which has number of layers of subsidiaries in excess of the
layers specifred in sub-rule (1) -
(i) Shall file, with the Registrar a return in Form CRL- 1 disclosing the details specified
therein, within a period of one hundred and fifty days from the date of publication of these
rules in the official Gazette;
(ii) Shall not, after the date of commencement of these rules, have any additional layer of
subsidiaries over and above the layers existing on such date; 
(i) Shall not, in case one or more layers are reduced by it subsequent to the
commencement of these rules, have the number of layers beyond the number of layers
it has after such reduction or maximum layers allowed in sub-rule (1), whichever is
more.

Penalty-
(5) If any company contravenes any provision of these rules the company and every
officer of the company who is in default shall be punishable with fine which may extend
to ten thousand rupees and where the contravention is a continuing one, with a further
fine which may extend to one thousand rupees for every day after the first during which
such contravention continues.

Chapter III Part I The Companies (Prospectus and Allotment of Securities) Rules, 2014 ]

9A. Issue of securities in dematerialised form by unlisted public companies.-

(1) Every unlisted public company shall -
(a) Issue the securities only in dematerialised form; and
(b) Facilitate dematerialisation of all its existing securities
in accordance with provisions of the Depositories Act, 1996 and regulations made there
under
(2) Every unlisted public company making any offer for issue of……………………….

(11) This rule shall not apply to an unlisted public company which is:-
(a) a Nidhi;
(b) a Government company or
(c) a wholly owned subsidiary
[ The Companies (Indian Accounting Standards) Rules, 2015 ]

4. Obligation to comply with Indian Accounting Standards (Ind AS).-

(1) The Companies and their auditors shall comply with the Indian Accounting Standards Ind AS)
specified in Annexure to these rules in preparation of their Financial statements and audit
respectively, in the following manner, namely:- 

(i) a[any company and its holding, subsidiary, joint venture or associate company] may comply with
the Indian Accounting Standards (Ind AS) for financial statements for accounting periods beginning on
or after 1st April, 2015, with the comparatives for the periods ending on 31st March, 2015, or
thereafter; 

(ii) the following companies shall comply with the Indian Accounting Standards (Ind AS) for the
accounting periods beginning on or after 1st April, 2016, with the comparatives for the periods
ending on 31st March, 2016, or thereafter, namely:- 

(c) holding, subsidiary, joint venture or associate companies of companies covered by sub-
clause (a) of clause (ii) of sub- rule (1) and sub-clause (b) Of clause (ii) of sub- rule (1) as the
case may be
(iii) the following companies shall comply with the Indian Accounting Standards (Ind AS) for
the accounting periods beginning on or after 1st April, 2017, with the comparatives for the
periods pending on 31st March, 2017, or thereafter, namely:-

(a) companies whose equity or debt securities are listed or are in the process of being listed
on any stock exchange in India or outside India and having net worth of less than rupees five
hundred crore;

(b) companies other than those covered in clause (ii) of sub- rule (1) and sub-clause (a) of
clause (iii) of sub-rule (1), that is, unlisted companies having net worth of rupees two
 hundred and fifty crore or more but less than rupees five hundred crore.

(d) holding, subsidiary, joint venture or associate companies of companies covered under sub-
clause (a) of clause (iii) of sub- rule (1) and sub-clause(b) of clause (iii) of sub- rule (1), as the
case may be:

Accounting Standards

Indian Accounting Standard (Ind AS) 7

Statement of Cash Flows
Investments in subsidiaries, associates and joint ventures  

37 When accounting for an investment in an associate, a joint venture or a subsidiary

accounted for by use of the equity or cost method, an investor restricts its reporting in
the statement of cash flows to the cash flows between itself and the investee, for
example, to dividends and advances.

Changes in ownership interests in subsidiaries and other businesses

39 The aggregate cash flows arising from obtaining or losing control of subsidiaries or
other businesses shall be presented separately and classified as investing activities.

40 An entity shall disclose, in aggregate, in respect of both obtaining and losing control
of subsidiaries or other businesses during the period each of the following:

(a) the total consideration paid or received;

 (b) the portion of the consideration consisting of cash and cash equivalents;

(c) the amount of cash and cash equivalents in the subsidiaries or other businesses over
which control is obtained or lost; and

(e) the amount of the assets and liabilities other than cash or cash equivalents in the
subsidiaries or other businesses over which control is obtained or lost, summarised by each
major category.
40A An investment entity, as defined in Ind AS 110, Consolidated Financial Statements, need
not apply paragraphs 40(c) or 40(d) to an investment in a subsidiary that is required to be
measured at fair value through profit or loss.

41 The separate presentation of the cash flow effects of obtaining or losing control of
subsidiaries or other businesses as single line items, together with the separate disclosure of
the amounts of assets and liabilities acquired or disposed of, helps to distinguish those cash
flows from the cash flows arising from the other operating, investing and financing activities.
The cash flow effects of losing control are not deducted from those of obtaining control.

42 The aggregate amount of the cash paid or received as consideration for obtaining or
losing control of subsidiaries or other businesses is reported in the statement of cash flows
net of cash and cash equivalents acquired or disposed of as part of such transactions, events
or changes in circumstances.

42A Cash flows arising from changes in ownership interests in a subsidiary that do not
result in a loss of control shall be classified as cash flows from financing activities , unless the
subsidiary is held by an investment entity, as defined in Ind AS 110, and is required to be
measured at fair value through profit or loss.

42B Changes in ownership interests in a subsidiary that do not result in a loss of control,
such as the subsequent purchase or sale by a parent of a subsidiary’s equity instruments, are
accounted for as equity transactions (see Ind AS 110), unless the subsidiary is held by an
investment entity and is required to be measured at fair value through profit or loss.
Accordingly, the resulting cash flows are classified in the same way as other transactions
with owners described in paragraph 17.

Changes in liabilities arising from financing activities

44B To the extent necessary to satisfy the requirement in paragraph 44A, an entity shall
disclose the following changes in liabilities arising from financing activities:

(a) changes from financing cash flows;

(b) changes arising from obtaining or losing control of subsidiaries or other businesses;

Other disclosures
48 An entity shall disclose, together with a commentary by management, the amount of
significant cash and cash equivalent balances held by the entity that are not available for use
by the group1.

49 There are various circumstances in which cash and cash equivalent balances held by an
entity are not available for use by the group2. Examples include cash and cash equivalent
balances held by a subsidiary that operates in a country where exchange controls or other
legal restrictions apply when the balances are not available for general use by the parent or
other subsidiaries.