Ministry of Corporate Affairs (“MCA”) recently issued various Circulars and Notifications under the Companies Act, 2013 (“Act”) amending certain rules and updating certain timelines for filing norms as follows:
- Clarification regarding gap between two board meetings
MCA vide its Circular dated May 3, 2021, clarified that owing to increased difficulties due to COVID-19, the 120 (one hundred twenty) days of interval for holding meetings of the board as provided in Section 173, be extended by 60 (sixty) days [i.e. from 120 (one hundred twenty) days to (one hundred eighty) 180 days], for first two quarters of financial year 2021-22.
- Clarification regarding spending of Corporate Social Responsibility (“CSR”) Funds
MCA vide Circular dated May 5, 2021, clarified that spending of CSR funds for ‘creating health infrastructure for COVID care’, ‘establishment of medical oxygen generation and storage plants’, ‘manufacturing and supply of oxygen concentrators, ventilators, cylinders and other medical equipment for countering COVID-19’ or similar such activities are eligible CSR activities under Schedule VII of the Act. Additionally, contribution to specified research and development projects as well as contribution to public funded universities and certain organizations engaged in conducting research in science, technology, engineering and medicine would be eligible CSR activities.
Companies including government companies vide this Circular may now undertake the activities or projects using CSR funds, directly by themselves or in collaboration as shared responsibility with other companies, subject to fulfillment of Companies (CSR Policy) Rules, 2014 and the guidelines issued by MCA from time to time.
Further, MCA vide Circular dated July 30, 2021 clarified that spending of CSR funds for COVID-19 vaccination for persons other than the employees and their families, is also an eligible CSR activity under Schedule VII of the Act relating to promotion of health care including preventive health care and subjects relating to disaster management. The companies may undertake this activity subject to fulfillment of Companies (CSR Policy) Rules, 2014 and the Circulars related to CSR issued by MCA from time to time.
- Clarification on offsetting the excess CSR spent for the financial year 2019-20
MCA vide Circular dated May 20, 2021 clarified that where a company has contributed any amount to Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (“PM-CARES Fund”) as on March 31, 2020 which is over and above the minimum amount as prescribed under Section 135(5) of the Act for the financial year 2019-20, and such excess amount or part thereof is offset against the requirement to spend under Section 135(5) for the financial year 2020-21, then the same shall not be viewed as a violation subject to conditions that:
- the amount offset as such shall have factored the unspent CSR amount for previous financial years, if any;
- the chief financial officer shall certify that the contribution to PM-CARES Fund was indeed made on March 31, 2020 in pursuance of the appeal and the same shall also be so certified by the statutory auditor of the company; and
- the details of such contribution shall be disclosed separately in the annual report on CSR as well as in the board’s Report for the financial year 2020-21 in terms of Section 134 (3) (o) of the Act.
- Companies (Incorporation) Fourth Amendment Rules, 2021
MCA vide Notification dated June 7, 2021 amended the Companies (Incorporation) Rules, 2014. As per the amendment, the application for incorporation of a company shall be accompanied by e-form AGILE – PRO-S (INC-35) containing an application for registration of the following numbers, namely:
- GSTIN with effect from 31st March, 2019.
- EPFO with effect from 8th April, 2019.
- ESIC with effect from 15th April, 2019.
- Profession Tax Registration with effect from the 23rd February, 2020.
- Opening Bank Account with effect from the 23rd February, 2020.
- Shops and Establishment Registration.
- Clarification on passing of ordinary and special resolution by companies on account of COVID-19
MCA vide Circular dated June 23, 2021 allowed companies to conduct their extraordinary general meeting through video conferencing or other audio-visual means or transact items through postal ballot in accordance with the framework for passing of ordinary and special resolutions made by companies provided in erstwhile Circulars with other requirements provided in the said Circulars remaining unchanged.
- Extension of last date of filing of Cost Audit Report to the Board of Directors
MCA vide Circular dated September 27, 2021 allowed the cost auditor to the board of directors of the companies to submit the cost audit report for the financial year 2020-21 by October 31, 2021, without being viewed as violation of Rule 6(5) of Companies (Cost Records and Audit) Rules, 2014. Consequently, the cost audit report for the financial year ended on March 31, 2021 shall be filed in e-form CRA-4 within 30 days from the date of receipt of the copy of the cost audited report by the Company.
In case a company has got extension of time for holding annual general meeting under Section 96(1) of the Act, then e-form CRA-4 may be filed within the timelines provided under the proviso to Rule 6(6) of the said rules.
- Relaxation in paying additional fees in case of delay in filing Form 8
MCA vide Circular dated October 26, 2021 owing to the challenges faced due to COVID-19 pandemic, allowed the LLPs to file Form 8 (the Statement of Account and Solvency) for the financial year 2020-21 without paying additional fees, up to December 30, 2021.
- Relaxation on levy of additional fees in filing of certain e-forms
MCA vide Circular dated October 29, 2021 provided relaxation for filing of e-forms AOC-4, AOC-4 (CFS), AOC-4 XBRL, AOC-4 Non-XBRL and MGT-7/MGT-7A in respect of the financial year ended on March 31, 2021 up to December 31, 2021 with no additional fees.
- Investor Education and Protection Fund Authority (Accounting Audit, Transfer and Refund) Amendment Rules, 2021
MCA vide Notification dated June 9, 2021 inserted new clause (fa) in Rule 3 sub-rule 2 of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (“IEPFA Rules”).
A new Rule 6A was also inserted, which deals with the manner of transfer of shares under Section 90(9) of the Act to the fund. The shares are to be credited to DEMAT account within a period of 30 (thirty) days of such transfer becoming due. The board of directors is required to authorize the company secretary or any other person to sign the necessary documents. Further, Forms IEPF-4 and IEPF-7 have also been revised.
MCA vide Notification dated November 9, 2021 further amended the IEPFA Rules and simplified the claim settlement process. For claimants, requirement of advance receipt has been waived off and requirement of succession certificate/ probate of will/ will has been relaxed up to INR 5,00,000 (Five Lakhs) both for physical & DEMAT shares.
For companies, requirement of attaching documents related to unclaimed suspense account has been eased. Companies now have the flexibility to accept transmission document viz. succession certificate, will etc. as per their internal approved procedures. Newspaper advertisement requirement for loss of physical share certificate has been waived off up to an amount of INR 5,00,000 as compared to the erstwhile threshold of INR 2,00,000.
- Companies (Meetings of Board and its Powers) Amendment Rules, 2021
MCA vide Notification dated June 15, 2021 omitted Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 which provides for restriction on matters not to be dealt with in a meeting through video conferencing or other audio-visual means. Now, all the matters can be transacted in a board meeting conducted through video conferencing or other audio-visual means.
- Companies (Incorporation) Fifth Amendment Rules, 2021
MCA vide Notification dated July 22, 2021 inserted Rule 33A-Allotment of a new name to the existing company under section 16(3) of the Act in the Companies (Incorporation) Rules, 2014. As per the said Rule, in case of failure of a company to change the name of the company on the directions of central government within a period of 3 (three) months from the date of issue of such direction, the letters “ORDNC” (which is an abbreviation of the words “Order of Regional Director Not Complied”), the year of passing of the direction, the serial number and the existing Corporate Identity Number (CIN) of the company shall become the new name of the company without any further act or deed by the company, and the registrar shall accordingly make entry of the new name in the register of companies and issue a fresh certificate of incorporation in Form No.INC-11C.
- Exemption for foreign companies and companies incorporated or to be incorporated outside India
MCA vide Notification dated August 5, 2021 exempted foreign companies and companies incorporated or to be incorporated outside India, whether the company has or has not established, or when formed may or may not establish, a place of business in India from the provision of Sections 387 to 392 of the Act insofar as they relate to offer for subscription in the securities, requirements related to the prospectus, and all matters incidental thereto in the International Financial Services Centers set up under the Special Economic Zones Act, 2005.
Section 387 to 392 of the Act deals with dating of prospectus and provisions as to experts consent and allotment, the registration of prospectus, offer of India depository receipts and the punishment for contravention.
- Companies (Specification and definitions details) Third Amendments Rules, 2021 and Companies (Registration of Foreign Companies) Amendment Rules, 2021
MCA vide Notification and Notification dated August 5, 2021 inserted the explanations in clause (h) of sub-rule (1) of Rule 2 of the Companies (Specification of definitions details) Rules, 2014 and in clause (c) of sub-rule (1) of Rule 2 of the Companies (Registration of Foreign Companies) Rules, 2014. Both the explanations provide that electronic based offering of securities, subscription thereof or listing of securities in the International Financial Services Centers is not to be construed as ‘electronic mode’ for the purpose of foreign company’s place of business through electronic mode.
- Companies (Creation and Maintenance of databank of Independent Directors) Second Amendment Rules, 2021
MCA vide Notification dated August 19, 2021 inserted Rule 6 and Schedule to the Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019. The new Rule 6 provides that an annual report should be sent within 60 (sixty) days by the institute to every individual whose name is in the data bank and to every company in which such individual is appointed as an independent director in the format provided in the Schedule to the said rules.
- Companies (Appointment and Qualification of Directors) Amendment Rules, 2021
As per the amendment, an individual shall not be required to pass the online proficiency self-assessment test to be included in independent directors databank when he has served for a total period of not less than 3 (three) years as on the date of inclusion of his name in the data bank in the pay scale of director or equivalent or above in any Ministry or Department, of the Central Government or any State Government, and having experience in handling matters relating to commerce, corporate affairs, finance, industry or public enterprises; or the affairs related to Government companies or statutory corporations set up under an Act of Parliament or any State Act and carrying on commercial activities. The amendment further provides that an individual who are or have been, for at least 10 (ten) years either as an advocate of a court or in practice as a chartered accountant or in practice as a cost accountant or in practice as a company secretary, shall not be required to pass the online proficiency self-assessment test.
 General Circular No. 08/2021, File No. 2/6/2020-CL-V dated May 3, 2021
 General Circular No. 09/2021, File No. 1/5/2021-CSR-MCA dated May 5, 2021
 General Circular No. 13/2021, E-file No. CSR-01/5/2021-CSR-MCA dated July 30, 2021
 E-file No. CSR-01/4/2021-CSR-MCA dated May 20, 2021
 G.S.R. 392(E) dated June 7, 2021
 General Circular No. 10/2021, File No. 2/6/2020-CL-V dated June 23, 2021
 General Circular No. 14/2020 dated April 8, 2020; General Circular No. 17/2020 dated April 13, 2020; General Circular No. 22/2020 dated June 15, 2020; General Circular No. 33/2020 dated September 28, 2020; and General Circular No. 39/2020 dated December 31, 2020
G.S.R. 396(E) dated June 9, 2021
G.S.R. 785(E) dated November 9, 2021
G.S.R. 503(E) dated July 22, 2021
G.S.R. 539(E) dated August 5, 2021
G.S.R. 538(E) dated August 5, 2021
G.S.R. 580(E) dated August 19, 2021