Professional Documents
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COMPANY LAW
AMENDMENTS for Dec 21
Guess who?
No prizes for the right answer!!
CS Vikas Vohra
CS Vikas Vohra CA CS Harish A. Mathariya
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(ii) non-convertible redeemable preference shares issued on private placement basis in terms of
SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013;
or
(iii) both categories of (i) and (ii) above.
b) Private companies which have listed their non-convertible debt securities on private placement
basis on a recognized stock exchange in terms of SEBI (Issue and Listing of Debt Securities)
Regulations, 2008;
c) Public companies which have not listed their equity shares on a recognized stock exchange but
whose equity shares are listed on a stock exchange in a jurisdiction as specified in Section
23(3) of the Companies Act, 2013.
Only a natural person who is an Indian citizen and WHETHER resident in India OR OTHERWISE
a. Shall be eligible to incorporate a One Person Company.
b. Shall be a nominee for the sole member of a One Person Company.
The term resident in India means a person who has stayed in India for a period of not less
than 182 120 days during the immediately preceding financial year.
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DECLARATION BY PERSONS NOT HOLDING BENEFICIAL INTEREST IN ANY SHARE (SEC 89)
ADDITION
A new sub-section 11 has been inserted which enables the Central Government to exempt any
class or classes of persons from complying with any of the requirements of this section
pertaining to Declaration in Respect of Beneficial Interest in any Share, except Section 89(10),
if it is considered necessary to grant such exemption in the public interest and any such
exemption may be granted either unconditionally or subject to such conditions as may be
specified in the notification.
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NEW PROVISION
If a company fails to comply with any of the requirements of Section 124, such company shall
be liable to a penalty of one lakh rupees and in case of continuing failure, with a further
penalty of five hundred rupees for each day after the first during which such failure continues,
subject to a maximum of ten lakh rupees and every officer of the company who is in default
shall be liable to a penalty of twenty-five thousand rupees and in case of continuing failure,
with a further penalty of one hundred rupees for each day after the first during which such
failure continues, subject to a maximum of two lakh rupees.
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The company shall give preference to the local area and areas around it where it operates.
If the company fails to spend such amount, the Board shall, in its report, is required to specify
the reasons for not spending the amount and, unless the unspent amount relates to any
ongoing project referred to in section 135(6), transfer such unspent amount to a Fund specified
in Schedule VII, within a period of six months of the expiry of the financial year.
After Section 135 (5), the following sub-section (6), (7) & (8) is inserted, namely:—
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Section 135(6)
Any amount remaining unspent under Section 135(5), pursuant to any ongoing project, fulfilling
such conditions as may be prescribed, undertaken by a company in pursuance of its Corporate
Social Responsibility Policy, shall be transferred by the company within a period of thirty days
from the end of the financial year to a special account to be opened by the company in that
behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social
Responsibility Account, and such amount shall be spent by the company in pursuance of its
obligation towards the Corporate Social Responsibility Policy within a period of three financial
years from the date of such transfer, failing which, the company shall transfer the same to a
Fund specified in Schedule VII, within a period of thirty days from the date of completion of
the third financial year.
PENALTY FOR NON-COMPLIANCE OF SECTION 135(5) & (6) UNDER SECTION 135 (7)
Section 135(7)
If a company is in default in complying with the provisions of sub -section (5) or sub -section
(6) of the Companies Act, 2013, the company shall be liable to a penalty of twice the amount
required to be transferred by the company to the Fund specified in Schedule VII or the Unspent
Corporate Social Responsibility Account, as the case may be, or Rs. 1 crore, whichever is less,
and every officer of the company who is in default shall be liable to a penalty of one -tenth
of the amount required to be transferred by the company to such Fund specified in Schedule
VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or Rs.2 Lakhs,
whichever is less.
Section 135(8)
The Central Government is empowered to give such general or special directions to a company
or class of companies as it considers necessary to ensure compliance of provisions of section
135 and such company or class of companies shall comply with such directions.
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Section 135(9)
Where the amount to be spent by a company under Section 135(5) of the Companies Act,
2013 does not exceed Rs. 50 Lakh, the requirement for constitution of the Corporate Social
Responsibility Committee shall not be applicable and the functions of such Committee provided
under this section shall, in such cases, be discharged by the Board of Directors of such
company.
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(ii) any activity undertaken by the company outside India except for training of Indian sports
personnel representing any State or Union territory at national level or India at international
level;
(iii) contribution of any amount directly or indirectly to any political party under section 182 of the
Act;
(iv) activities benefitting employees of the company as defined in clause (k) of section 2 of the
Code on Wages, 2019 (29 of 2019);
(v) activities supported by the companies on sponsorship basis for deriving marketing benefits for
its products or services;
(vi) activities carried out for fulfilment of any other statutory obligations under any law in force in
India;
"CSR Policy" means a statement containing the approach and direction given by the board of
a company, taking into account the recommendations of its CSR Committee, and includes
guiding principles for selection, implementation and monitoring of activities as well as formu-
lation of the annual action plan;
"Net profit" means the net profit of a company as per its financial statement prepared in
accordance with the applicable provisions of the Act, but shall not include the following,
namely:-
(i) any profit arising from any overseas branch or branches of the company, whether operated as
a separate company or otherwise; and
(ii) any dividend received from other companies in India, which are covered under and complying
with the provisions of section 135 of the Act:
In case of a foreign company covered under these rules, net profit means the net profit of
such company as per profit and loss account prepared in terms of clause (a) of sub-section
(1) of section 381, read with section 198 of the Act;
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CSR IMPLEMENTATION
ADDITION
(1) The Board shall ensure that the CSR activities are undertaken by the company itself or
through –
(a) a company established under section 8 of the Companies Act, 2013 or a registered public
trust or a registered society, registered under section 12A and 80 G of the Income Tax Act,
1961 (43 of 1961), established by the company, either singly or along with any other company,
or
(b) a company established under section 8 of the Companies Act, 2013 or a registered trust or a
registered society, established by the Central Government or State Government; or
(c) any entity established under an Act of Parliament or a State legislature; or
(d) a company established under section 8 of the Companies Act, 2013 or a registered public
trust or a registered society, registered under section 12A and 80G of the Income Tax Act,
1961, and having an established track record of at least three years in undertaking similar
activities.
(2)
(a) Every entity, covered under sub-rule (1), who intends to undertake any CSR activity, shall
register itself with the Central Government by filing the Form CSR-1 electronically with the
Registrar, with effect from the 01st day of April 2021. The provisions of this sub-rule shall
not affect the CSR projects or programmes approved prior to the 01st day of April 2021.
(b) Form CSR-1 shall be signed and submitted electronically by the entity and shall be verified
digitally by a Chartered Accountant in practice or a Company Secretary in practice or a Cost
Accountant in practice.
(c) On the submission of the Form CSR-1 on the portal, a unique CSR Registration Number shall
be generated by the system automatically.
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(3) A company may engage international organisations for designing, monitoring and evaluation of
the CSR projects or programmes as per its CSR policy as well as for capacity building of their
own personnel for CSR.
(4) A company may also collaborate with other companies for undertaking projects or programmes
or CSR activities in such a manner that the CSR committees of respective companies are in
position to report separately on such projects or programmes in accordance with these rules.
(5) The Board of a company shall satisfy itself that the funds so disbursed have been utilised for
the purposes and in the manner as approved by it and the Chief Financial Officer or the
person responsible for financial management shall certify to the effect.
(6) In case of ongoing project, the Board of a Company shall monitor the implementation of the
project with reference to the approved timelines and year-wise allocation and shall be com-
petent to make modifications, if any, for smooth implementation of the project within the
overall permissible time period.
CSR COMMITTEE
ADDITION
The CSR Committee shall formulate and recommend to the Board, an annual action plan in
pursuance of its CSR policy, which shall include the following, namely:-
(a) the list of CSR projects or programmes that are approved to be undertaken in areas or subjects
specified in Schedule VII of the Act;
(b) the manner of execution of such projects or programmes as specified in sub-rule (1) of rule 4;
(c) the modalities of utilisation of funds and implementation schedules for the projects or pro-
grammes;
(d) monitoring and reporting mechanism for the projects or programmes; and
(e) details of need and impact assessment, if any, for the projects undertaken by the company:
Provided that Board may alter such plan at any time during the financial year, as per the
recommendation of its CSR Committee, based on the reasonable justification to that effect.
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CSR EXPENDITURE
ADDITION
(1) The board shall ensure that the administrative overheads shall not exceed five percent of total
CSR expenditure of the company for the financial year.
(2) Any surplus arising out of the CSR activities shall not form part of the business profit of a
company and shall be ploughed back into the same project or shall be transferred to the
Unspent CSR Account and spent in pursuance of CSR policy and annual action plan of the
company or transfer such surplus amount to a Fund specified in Schedule VII, within a period
of six months of the expiry of the financial year.
(3) Where a company spends an amount in excess of requirement provided, such excess amount
may be set off against the requirement to spend up to immediate succeeding three financial
years subject to the conditions that –
(i) the excess amount available for set off shall not include the surplus arising out of the CSR
activities, if any, in pursuance of sub-rule (2) of this rule.
(ii) the Board of the company shall pass a resolution to that effect.
(4) The CSR amount may be spent by a company for creation or acquisition of a capital asset,
which shall be held by –
(a) a company established under section 8 of the Companies Act, 2013 or a Registered Public
Trust or Registered Society, having charitable objects and CSR Registration Number; or
(b) beneficiaries of the said CSR project, in the form of self-help groups, collectives, entities; or
(c) a public authority:
Provided that any capital asset created by a company prior to the commencement of the
Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, shall within a
period of one hundred and eighty days from such commencement comply with the requirement
of this rule, which may be extended by a further period of not more than ninety days with
the approval of the Board based on reasonable justification.
CSR REPORTING
ADDITION
(1) The Board's Report of a company covered under these rules pertaining to any financial year
shall include an annual report on CSR containing particulars as applicable.
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(2) In case of a foreign company, the balance sheet filed shall contain an annual report on CSR
containing particulars as applicable.
(3)
(a) Every company having average CSR obligation of ten crore rupees or more, in the three
immediately preceding financial years, shall undertake impact assessment, through an inde-
pendent agency, of their CSR projects having outlays of one crore rupees or more, and which
have been completed not less than one year before undertaking the impact study.
(b) The impact assessment reports shall be placed before the Board and shall be annexed to the
annual report on CSR.
(c) A company undertaking impact assessment may book the expenditure towards Corporate Social
Responsibility for that financial year, which shall not exceed five percent of the total CSR
expenditure for that financial year or fifty lakh rupees, whichever is less.
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Schedule VII of the Companies Act, 2013 relating to promotion of health care, including pre-
ventive health care, and, disaster management respectively.
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Further MCA has done away with annexing extract of Annual Return in the Board’s Report.
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Section II –
After the words “managerial person”, wherever occurred, the words “or other director”
has been inserted;
(ii) for Table (A), the following has been substituted, namely –
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In Section III, –
(i) after the words “managerial person”, wherever occurred, except in clause (i) of the proviso,
the words “or other director” has been inserted;
(ii) after the words “managerial persons”, wherever occurred, the words “or other directors” has
been inserted;
(iii) following explanation has been inserted at the end, namely: -
“Explanation. - For the purposes of Section I, Section II and Section III, the term “or other
director” means a non-executive director or an independent director.”
Details of Changes
With this Amendment the MCA has amended Schedule V of the Companies Act, 2013 pertaining
to Remuneration by inserting the provisions w.r.t. the maximum limit of remuneration payable
by companies to other directors (non-executive director or an independent director). Earlier the
limit was only for managerial person.
Amendment in Section 149(9) of the Companies Act, 2013 wherein, a proviso has been
inserted, namely:
“if a company has no profits or its profits are inadequate, an independent director may receive
remuneration, exclusive of any fees payable under sub-section (5) of section 197, in accordance
with the provisions of Schedule V.”
Amendment in Section 197(3) of the Companies Act, 2013 wherein Non-Executive Director
and Independent Director has been brought within the scope of remuneration payable
following Schedule V of in the event of absence or inadequate profits
“Notwithstanding anything contained in sub-sections (1) and (2), but subject to the provisions
of Schedule V, if, in any financial year, a company has no profits or its profits are inadequate,
the company shall not pay to its directors, including any managing or whole-time director or
manager [or any other non-executive director, including an independent director], by way
of remuneration any sum exclusive of any fees payable to directors under sub-section (5)
hereunder except in accordance with the provisions of Schedule V.”
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NEW
"Provided further that nothing contained in this clause shall apply in respect of a resolution
passed to grant loans, or give guarantee or provide security in respect of loans under clause (f)
of sub - section (3) of section 179 in the ordinary course of its business by, —
(a) a banking company;
(b) any class of non -banking financial company registered under Chapter IIIB of the Reserve Bank
of India Act, 1934, as may be prescribed in consultation with the Reserve Bank of India;
(c) any class of housing finance company registered under the National Housing Bank Act, 1987,
as may be prescribed in consultation with the National Housing Bank; ".
Details of Changes
The Central Government has been empowered to exempt any class of NBFCs and any class of
Housing Finance Companies from filing of resolutions passed to grant loans or give guarantees
or to provide security in respect of loans in the ordinary course of their business.
Earlier, only Banking Companies were exempted.
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