Recent Amendments in Various Rules of the Companies Act, 2013 By Ankita Dutta


Team Mamta Binani & Associates 

 
On the 7th of May, 2018 the MCA brought in the following Circulars:
  

  1. Companies (Prospectus and Allotment of Securities) Amendment Rules, 2018[1]
  2. Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2018[2]
  3. Companies (Meetings of Board and its Powers) Amendment Rules, 2018[3]
  4. Companies (Audit and Auditors) Amendment Rules, 2018[4]
  5. Companies (Share Capital and Debentures) Amendment Rules, 2018[5]
  6. Companies (Registration Offices and Fees) Second Amendment Rules, 2018[6]
  7. Companies (Specification of Definition Details) Rules, 2018[7]

 

This note aims at providing a brief understanding of the changes brought in vide the amendments.

 

COMPANIES (PROSPECTUS AND ALLOTMENT OF SECURITIES) AMENDMENT RULES, 2018

 

{BASE RULE - COMPANIES (PROSPECTUS AND ALLOTMENT OF SECURITIES) AMENDMENT RULES, 2014}

 

NOTE: These rules shall come into force on the date of their publication in the Official Gazette.

Sl. No.

Rule / Regulation/

Section No.

Particulars

Amendment

Remarks

1.

Rule 3

Information to be stated in prospectus

Omitted

As per Companies (Prospectus and Allotment of Securities) Amendment Rules, 2018, rule 3 relating to Information to be stated in the prospectus of Companies (Prospectus And Allotment Of Securities) Amendment Rules, 2014 has been omitted.

 

2.

Rule 4

Reports to be set out with the prospectus

Omitted

As per Companies (Prospectus and Allotment of Securities) Amendment Rules, 2018, rule 4 relating to Reports to be set out with the prospectus of Companies (Prospectus And Allotment Of Securities) Amendment Rules, 2014 has been omitted.

 

3.

Rule 5

Other matters & reports to be stated in the prospectus

Omitted

As per Companies (Prospectus and Allotment of Securities) Amendment Rules, 2018, rule 5 relating to Other matters & reports to be stated in the prospectus of Companies (Prospectus And Allotment Of Securities) Amendment Rules, 2014 has been omitted.

 

4.

Rule 6

Period for which information to be provided in certain cases

Omitted

As per Companies (Prospectus and Allotment of Securities) Amendment Rules, 2018, rule 6 relating to Period for which information to be provided in certain cases of Companies (Prospectus And Allotment Of Securities) Amendment Rules, 2014 has been omitted.

 

  

COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS) SECOND AMENDMENT RULES, 2018

 

{ BASE RULE - COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS) RULES, 2014}

 

NOTE: These rules shall come into force on the date of their publication in the Official Gazette

Sl. No.

Rule / Regulation/

Section No.

Particulars

Amendment

Remarks

1.

Rule 5

Qualification of Independent Director

Rule 5 shall be numbered as Sub-rule (1) and after sub-rule (1), sub-rule (2) shall be inserted.

As per Companies (Appointment and Qualification of Directors) Rules,2018, Rule 5 shall be numbered as Sub-rule (1) which states:

“An Independent director shall possess appropriate skills, experience and knowledge in one or more fields of finance, law, management, sales, marketing, administration, research, corporate governance, technical operations or other disciplines related to the company’s business.”

And after sub-rule (1), sub-rule (2) shall be inserted which states:

“None of the relatives of an independent director, for the purposes of sub-clauses (ii) and (iii) of clause (d) of sub-section (6) of section 149,-

(i) is indebted to the company, its holding, subsidiary or associate company or their promoters, or directors; or (ii) has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, its holding, subsidiary or associate company or their promoters, or directors of such holding company, for an amount of fifty lakhs rupees, at any time during the two immediately preceding financial years or during the current financial year."

2.

Rule 16

Copy of resignation of Director to be forwarded by him

For the word “shall”, the word “may” shall be substituted.

Rule 16:

Where a director resigns from his office, he may within a period of thirty days from the date of resignation, forward to the Registrar a copy of his resignation along with reasons for the resignation in Form DIR 11 along with the fee as provided in the Companies (Registration offices and Fees) Rules, 2014

 

COMPANIES ( MEETINGS OF BOARD AND ITS POWERS) AMENDMENT RULES, 2018

 

{ BASE RULE - COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS) RULES, 2014}

 

NOTE: These rules shall come into force on the date of their publication in the Official Gazette.

Sl. No.

Rule / Regulation/

Section No.

Particular

Amendment

Remarks

1.

Rule 4

Matters not to be dealt with in a meeting through video conferencing or other audio visual means

A proviso shall be inserted.

“Provided that where there is quorum presence in a meeting through physical of directors, any other director may participate conferencing through video or other audio visual means.”

2.

Rule 6

Committees of the Board

For the words “every listed company”, the words “every listed public company” shall be substituted.

The Board of Directors of every listed pubic company and a company covered under rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 shall constitute an ‘Audit Committee’ and ‘ Nomination and Remuneration Committee of the Board’

 

COMPANIES (AUDIT AND AUDITORS) AMENDMENT RULES, 2018

 

{ BASE RULE - COMPANIES (AUDIT AND AUDITORS) RULES, 2014}

NOTE: These rules shall come into force on the date of their publication in the Official Gazette.

Sl. No.

Rule / Regulation/

Section No.

Particular

Amendment

Remarks

1.

Rule 3

 

Manner & procedure of selection and appointment of Auditors

(a)   Explanation shall be omitted.

(b)  The proviso to sub-rule (7) shall be omitted.

As per the Companies (Audit And Auditors) Amendment Rules, 2018, explanation to Rule 3 and Proviso to Rule 3(7) stating-

 

“The auditor appointment shall be subject to ratification in every annual general meeting till the sixth such meeting by way of the passing of an ordinary resolution” has been omitted.

2.

Rule 9

Liability to devolve on concerned partners only

Omitted

Rule 9 of Companies (Audit And Auditors) Amendment Rules, 2018 states-

 

In case of criminal liability of any audit firm, the liability other than fine shall devolve only on the concerned partner or partners, who acted in a fraudulent manner or abetted or, as the case may be, colluded in any fraud, has been omitted

3.

Rule 10 A

 

For the words “adequate internal financial controls system”, the words “internal financial controls with reference to financial statements” shall be substituted.

The report of the auditor shall state about the existence of internal financial controls with reference to financial statements and its operating effectiveness.

4.

Rule 14

Remuneration of Cost Auditor

(a)   In clause (a), in sub-clause (i), for the words, “who is a cost accountant in practice”, the words “who is a cost accountant” shall be substituted;

(b)  In clause (b) for the words “who is a cost accountant in practice”, the words “who is a cost accountant” shall be substituted.

Rule 14(a) (i) - The companies which are required to constitute an audit committee, the Board shall appoint an individual who is a cost accountant or firm of cost accountants, as cost auditor on commendation of the Audit committee, which shall also recommend remuneration for such cost auditor.

 

Rule 14(b) –   The companies which are not required to constitute an audit committee, the Board shall appoint an individual who is a cost accountant or firm of cost accountants, as cost auditor and the remuneration of such cost auditor shall be ratified by shareholders subsequently.

 

COMPANIES ( SHARE CAPITAL AND DEBENTURES) SECOND AMENDMENT RULES, 2018

 

{ BASE RULE - COMPANIES ( SHARE CAPITAL AND DEBENTURES) RULES, 2014} 

NOTE: These rules shall come into force on the date of their publication in the Official Gazette.

Sl. No.

Rule / Regulation/

Section No.

Particular

Amendment

Remarks

1.

Rule 8

 

The issue of sweat equity shares

In rule 8, in sub-rule (1), in the explanation, in clause (i) in sub clause (a), the words “for atleast last one year” shall be omitted.

As per the Companies

(Share capital and Debentures) Second Amendment Rules, 2018, in rule 8(1), in the explanation, in clause (i)(a), the words “for atleast last one year” shall be omitted


COMPANIES (REGISTRATION OFFICES AND FEES) SECOND AMENDMENT   RULES, 2018 

{ BASE RULE - COMPANIES (REGISTRATION OFFICES AND FEES) RULES, 2014}

NOTE: Save as otherwise provided in these rules, they shall come into force on the date of their publication in the Official Gazette.

Sl. No.

Rule / Regulation/

Section No.

Particular

Amendment

Remarks

1.

Rule 10

 

Procedure on receipt of any application or form or document electronically

In rule 10, sub-rule (3), a proviso shall be substituted.

The following proviso has been substituted after Rule(10)(3)-“Provided that Registrar shall allow fifteen days, time for re-submission in case of reservation of a name through web service -"RUN for rectifications of defects if any.”

 

2.

Section 403 of Companies Act, 2013

Fee for filing

In Section 403, subsection (1) & (2) shall be substituted.

Substituted by the Companies (Registration Offices And Fees) Second Amendment Rules, 2018 -

 

Section 403(1) :

 

"Provided that where any document, fact or information required to be submitted, filed, registered or recorded, as the case may be, under section 92 or 137 is not submitted, filed, registered or recorded, as the case may be, within the period provided in those sections, without prejudice to any other legal action or liability under this Act, it may be submitted, filed, registered or recorded, as the case may be, after expiry of the period so provided in those sections, on payment of such additional fee as may be prescribed, which shall not be less than one hundred rupees per day and different amounts may be prescribed for different classes of companies;

 

Provided further that where the document, fact or information, as the case may be, in cases other than referred to in the first proviso, is not submitted, filed, registered or recorded, as the case may be, within the period provided in the relevant section, it may, without prejudice to any other legal action or liability under this Act, be submitted, filed, registered or recorded as the case may be, on payment of such additional fee as may be prescribed and different fees may be prescribed for different classes of companies;

 

 Provided also that where there is default on two or more occasions in submitting, filing, registering or recording of the document, fact or information, it may, without prejudice to any other legal action or liability under this Act, be submitted, filed, registered or recorded, as the case may be, on payment of a higher additional fee, as may be prescribed and which shall not be lesser than twice the additional fee provided under the first or the second proviso as applicable."

 

Section 403(2) :

 

“Where a company fails or commits any default to submit, file, register or record any document, fact or information under sub-section (1) before the expiry of the period specified in the relevant section, the company and the officers of the company who are in default, shall, without prejudice to the liability for the payment of fee and additional fee, be liable for the penalty or punishment provided under this Act for such failure or default."

 


 

COMPANIES (SPECIFICATION OF DEFINITION DETAILS) AMENDMENT RULES, 2018

 

{ BASE RULE - COMPANIES (SPECIFICATION OF DEFINITION DETAILS) RULES, 2014}

 

NOTE: These rules shall come into force on the date of their publication in the Official Gazette.

Sl. No.

Rule / Regulation/

Section No.

Particular

Amendment

Remarks

1.

Rule 2

 

Total Share Capital

In rule 2, sub-rule (1), clause (r) shall be omitted.

The definition of Total share capital in Rule 2(1) (r) of the Companies (Specification Of Definition Details) Amendment Rules, 2018 has been omitted.

 

 

[1] http://www.mca.gov.in/Ministry/pdf/CompaniesProspectusRules_07052018.pdf

[2] http://www.mca.gov.in/Ministry/pdf/AppointmentDirectorsRules_07052018.pdf

[3] http://www.mca.gov.in/Ministry/pdf/CompaniesBoardsPowersRules_07052018.pdf

[4] http://www.mca.gov.in/Ministry/pdf/AuditAuditorsRules_07052018.pdf

[5] http://www.mca.gov.in/Ministry/pdf/CompaniesShareCapitalRules_07052018.pdf

[6] http://www.mca.gov.in/Ministry/pdf/CompaniesOfficesFeesRules_07052018.pdf

[7] http://www.mca.gov.in/Ministry/pdf/CompaniesSpecificationRules_07052018.pdf

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