RECENT AMENDMENTS UNDER THE COMPANIES ACT/LLP ACT

As the various law related to companies are changing frequently like Companies Act 2013, LLP Act, etc. MCA (Ministry of Corporate Affairs) has issued various notifications and circulars time to time under the Companies and LLP Act. There have been some sweeping changes in the Companies Act, 2013 in last couple of months. Those were really material and our every corporate must need to be aware about the same. Accordingly, we have prepared a gist of it and the same is produced herein below for your ready reference:

ACCOUNTS AND AUDIT

1. Mandatory use of Accounting Software having Audit Trail with effect from 01.04.2021

From FY commencing on 01.04.2021, every Company shall use Accounting Software having feature to record audit trail of each transaction, creating the edit log of changes made & ensuring that the audit trail cannot be disabled

2. Amendments in Schedule III with effect from 01.04.2021

As per the amendments, many new disclosures have now been made mandatory to be disclosed in the Balance Sheet. The same are mentioned below:

3. Amendments in Schedule III with effect from 01.04.2021

As per the amendments, many new disclosures have now been made mandatory to be disclosed in the Balance Sheet. The same are mentioned below:

• Disclosure of Shareholding of Promoters

• Trade Payables ageing schedule with age 1 year, 1-2 year, 2-3 year & More than 3 years
• Reconciliation of the gross and net carrying amounts of each class of assets
• Trade Receivables ageing schedule with age 1 year, 1-2 year, 2-3 year & More than 3 years
• Detailed disclosure regarding title deeds of Immovable Property not held in name of the Company
• Disclosure regarding revaluation & CWIP ageing.
• Loans or Advances granted to promoters, directors, KMPs and the related parties
• Details of Benami Property held
• Reconciliation and reasons of material discrepancies, in quarterly statements submitted to bank and books of accounts.
• Disclosure where a company is a declared willful defaulter by any bank or financial Institution
• Relationship with Struck off Companies
• Pending registration of charges or satisfaction with Registrar of Companies
• Compliance with number of layers of companies
• Disclosure of 11 Ratios
• Compliance with approved Scheme(s) of Arrangements
• Utilization of Borrowed funds and share premium
• Details of transaction not recorded in the books that has been surrendered or disclosed as income in the tax assessments
• Disclosure regarding Corporate Social Responsibility
• Details of Crypto Currency or Virtual Currency

4. Other Matters to be Included in Auditors Report with effect from 01.04.2021

• Reporting regarding advances, loans & Investment other than disclosed in notes to accounts.
• Receiving of funds for further lending or investing other than disclosed in notes to accounts.
• Dividend declared or paid is in compliance of section 123 of CA, 2013.
• Comment of use of Accounting Software having Audit Trail & other rules therein.

CSR (CORPORATE SOCIAL RESPONSIBILTY)

1. Companies (CSR Policy) Amendment Rules, 2021 effective from 01.04.2021

• Every entity who intends to undertake any CSR activity, shall register itself with the Central Government by filing the Form CSR-1 electronically with the Registrar w.e.f.  01.04.2021 to be certified by CA/CS/CMA in practice. On submission, a unique CSR number will be generated.
• Transfer of unspent CSR amount to any fund included in schedule VII of the Act”.
• If the entity spend more than the prescribed amount, such excess amount can be set off against the requirement to spend up to immediate succeeding three financial years subject to condition that excess amount is not arising from CSR activities and resolution has been passed to this effect by Board.
• CSR amount may be spent by a company for creation or acquisition of a capital asset which shall be held by a company specified for this purpose.
• Any surplus arising out of CSR activities shall not form part of Business profits and shall be ploughed back into the same project or transfer to the Unspent CSR Amount and spent in pursuance of CSR policy and annual action plan of the company or fund specified in Scheduled VII of the companies act, 2013 within 6 months from the end of financial year.
• Every Company having average CSR obligation of 10 crore or more in the three immediately preceding financial years shall undertake impact assessment, through an independent agency, of their CSR projects having outlays of 1 crore rupees or more, and which have been completed not less than one year before undertaking the impact study and impact assessment reports shall be placed before the Board and shall be annexed to the annual report on CSR and the Company undertaking impact assessment may book the expenditure towards Corporate Social Responsibility for that financial year, which shall not exceed 5% of the total CSR expenditure for that financial year or 50 lakhs rupees, whichever is less. ”
• Administrative overhead expenditure shall not exceed 5% of total CSR expenditure for a financial year.

2. Clarification on spending of CSR funds for setting up makeshift hospitals and temporary COVID Care facilities

“Spending of CSR funds for setting up makeshift hospitals and temporary COVID Care facilities” is an eligible CSR activity under Schedule VII of Companies Act, 2013 relating to promotion of health care, including preventive health care, and disaster management. In continuation to this Ministry’s General circular No.10/2020 dated 23.03.2020 it is further clarified that spending of CSR funds for creating “Health infrastructure for COVID-19 care”, “Establishment of medical generation and storage plants”, manufacturing and supply of oxygen concentrators, Ventilators, cylinders and other medical equipment for countering Covid-19.

MERGERS OR AMALGAMATIONS

1. Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2021 notification dated 1st February, 2021

• A scheme of merger or amalgamation under section 233 of the Act (Fast Track Merger) may be entered into between any of the following class of companies, namely: –
• two or more start-up companies; or
• one or more start-up company with one or more small company.

SMALL COMPANY

1. Companies (Specification of Definitions Details) Amendment Rules, 2021 effective from 01.04.2021

• Small Company refers to the company whose paid up capital shall not exceed rupees 2 Crore and turnover shall not exceed rupees 20 crores.

MANAGERIAL REMUNERATION

1. Amendment to Schedule V of the Companies Act, 2013 effective from 18.03.2021 (only relevant for Public Companies)

• Inclusion of Other Director or Directors i.e. Non-executive Director or Independent Director under the purview of Schedule V.
• Limits of Yearly remuneration payable shall not exceed (in rupees) in case of other Director.

2. Amendment in Overall Maximum Managerial Remuneration and Managerial Remuneration in Case of Absence or Inadequacy of Profits

• With effect from 18th March, 2021, 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.
• Inclusion of other non-executive director, including an independent director under the purview of section 197(3) of Companies Act, 2013.

MANAGEMENT AND ADMINISTRATION (FILINGS)

1. Companies (Management and Administration) Amendment Rules, 2021 effective from 05.03.2021

• Every company shall file its annual return in Form No. MGT-7 except One Person Company (OPC) and Small Company.
• One Person Company and Small Company shall file annual return from the financial year 2020-2021 onwards in Form No.MGT-7A.

2. Gap between two Board Meeting 

Due to the difficulties of holding Board Meetings, during the Quarter-April to June 2021 and Quarter-July to September, 2021, instead of 120 days, the gap between two consecutive meetings may extend upto 180 days.

INCORPORATION AND MISC

1. Companies (Incorporation) Second Amendment Rules, 2021 effective from 01.04.2021

• For the Purpose of this rule “Resident in India” means a person who has stayed in India for a period of not less than 120 days during the immediately preceding financial year
• Company shall file an application in e-Form No.INC-6 for its conversion into Private or Public Company.

2. Companies (Incorporation) Third Amendment Rules, 2021 effective from 05.03.2021

Change in Form INC-35 AGILE-PRO, part of SPICe+.

3. Relaxation of Additional fees in filing of Certain forms under the Companies Act, 2013 and LLP Act, 2008

Due to the current situation of COVID, the Ministry has granted additional time to file the various forms which are due to be filed during the period of 01.04.2021 to 31.05.2021 (other than CHG-1 Form, CHG-4 Form, CHG-9 Form) upto 31st July, 2021 without any additional fees.

4. Relaxation of time for filing forms related to creation or modification of Charges under the Companies Act, 2013

This is applicable in respect of filing of Form No.CHG-1 and CHG-9 by a company or a charge holder, where the date of creation/modification of charge:

1. Is before 01.04.2021, but the timeline for filing form has not expired as on 01.04.2021

• Relaxation of Time: The period beginning from 01.04.2021 and ending 31.05.2021, shall not be counted towards the number of days under section 77 or 78 of the Act.
• Applicable Fees: If the form is filed before 31.05.2021, the fees as on 31.03.2021 as per fees rules shall be charged, but if form is filed after 01.06.2021, the fees shall be leviable as per fee rules after counting the number of days elapsed after 01.6.2021 till form is filed.

2. Falls on any date between 01.04.2021 to 31.05.2021(both days inclusive)

• Relaxation of Time: The period beginning from 01.04.2021 and ending 31.05.2021, shall not be counted towards the number of days under section 77 or 78 of the Act and period will start from 01.06.2021.
• Applicable Fees: If the form is filed before 31.05.2021, the fees as per fees rules shall be charged, but if form is filed after 01.06.2021, the fees shall be leviable as per fee rules after counting the number of days elapsed after 01.6.2021 till form is filed.

For any clarifications/suggestions or any queries please write drop a comment or write to us at info@sigmalegal.in

AMIT KUMAR

(CS DEPARTMENT)

TEAM SIGMA LEGAL