Regulatory Updates: June 2023 | Company, SEBI, RBI & Insolvency Law

Stay informed about the regulatory landscape with our compilation of the latest updates in June 2023. This edition covers significant changes in company law, securities law, RBI regulations, case laws, and other relevant updates. From filing due dates to penalties imposed for non-compliance, this compilation provides valuable insights into recent developments.

The regulatory updates in June 2023 encompass various areas of law, including company law, securities law, RBI regulations, and case laws. The Ministry of Corporate Affairs (MCA) has issued notifications related to due dates for filing Form CSR-2 and modifications to LLP Form 3. Additionally, the due date for filing Form DPT-3 has been extended.

In securities law, SEBI has introduced frameworks for restricting trading by Designated Persons (DPs), modifications to LODR norms, and a stricter framework for disposal of undertakings by listed entities. The updates emphasize filling key management personnel (KMP) vacancies within three months, approval of director appointments by shareholders, timely disclosure of information in mainstream media, and more.

RBI has notified a framework for green deposits, outlining their usage in renewable energy, clean transportation, and climate change adaptation. The framework mandates independent third-party assurance and review reports within three months of the fiscal year’s end.

Several case laws highlight penalties imposed for violations of the Companies Act, including failure to mention related-party contracts in the register, non-compliance with private placement provisions, and violations of secretarial standards. The consequences range from monetary penalties to disciplinary actions against directors.

Insolvency law updates and general updates, such as the validity of stamp papers and NFRA’s circular on auditors’ responsibilities in relation to fraud, are also covered in this compilation.

Regulatory updates for the Month of June 2023

COMPANY LAW

1. MCA notifies Due Date for Form CSR 2 Filing

• Form CSR-2 for FY 2022-23 shall be filed separately on or before 31st March, 2024 after filing Form No. AOC-4 or Form No. AOC-4-NBFC (Ind AS)

2. MCA Modifies LLP Form 3.

• Form 3 pertaining to LLP Agreement and changes therein revised. Additional disclosures added.

3. Due date for filing of Form DPT-3 extended

• DPT 3- Return of deposits can be filed by 31st July due to migration of MCA from V2 to V3.
• Click here for notification

SECURITIES LAW

1. SEBI’S Framework for restricting trading by Designated Persons (“DPs”) by freezing PAN at security level.

NSE has recently issued a circular clarifying the implementation of the Securities and Exchange Board of India’s (SEBI) regulations regarding the prohibition of insider trading. The focus of these regulations is to restrict the trading activities of Designated Persons (DPs) by freezing their Permanent Account Number (PAN) at the security level.

2. SEBI modifies LODR norms regarding filling of KMP vacancies and continuation of Directors.

• SEBI has inserted a new regulation 26A which states that any vacancy in the office of the Chief Executive Officer, Chief Financial Officer, Managing Director, Whole Time Director or Manager must be filled within 3 months
• Director appointment on the Board will be subject to approval by shareholders once in 5 years
• Top 100 listed companies followed by top 250 companies need to clarify, confirm, deny any information in “mainstream media” within 24 hours
• Any sale, disposal of assets outside the scheme of arrangement shall require prior shareholders approval with rationale
• Threshold limits for disclosure of events or information defined.

3. SEBI’s stricter framework for disposal of undertaking by a listed entity

• In case of slump sale approval required from majority of the public shareholders who are not interested in the transaction, disclosure of the object, commercial rationale and use of proceeds arising from such transaction to be done.

4. Filing Annual Secretarial Compliance Report In XBRL

• NSE notifies filing of Annual Secretarial Compliance Report (ASCR) in XBRL
• The due date of submission of Secretarial Compliance Report in XBRL format for Y March 31, 2023, is June 30, 2023.

RBI

1. RBI Notifies Framework for Green Deposits

• Applicable to  all  scheduled  commercial  banks  and  deposit taking NBFCs
• Green deposits, green finance and greenwashing defined
• Green deposits to be used for renewal energy, energy efficiency, clean transportation, climate change adaption and others.
• Allocation of funds require independent third party assurance
• Review report within 3 months of end of FY
• Click here for notification

CASE LAWS

1. Adani Power officials violated Companies Act

• Registrar of Companies (Gujarat) has held that Adani Power and its officials had violated provisions of the Companies Act,2013.
• Related-party contracts and transactions were not mentioned in the register of contracts for Y 2017-18, 2018-19 and 2019-20 u/s 189 of the Companies Act, 2013.
• No proof provided that RPTs were at arms length and in ordinary course of business
• The adjudicating officer imposed a penalty of Rs. 75,000 each on Gautam Adani ( Chairman & Director), Rajesh Shantilal Adani,(MD), and Vineet S Jain(WTD).

2. MCA imposes penalty on company for violating private placement provisions

• Negligence on the part of the board of directors to issue Private Placement Offer Letter and application in form PAS-4.
• Selected group of persons to whom private placement was made was not
• Failing to obtain shareholder approval for private placement
• No separate Bank account was opened
• Registrar of Companies (Mumbai) imposes Rs. 4 crore penalty on the company for violations.

3. MCA imposes penalty for violating Secretarial Standards

• ROC Delhi has issued a penalty order for failure to mention the date of signing in the minute book and serial number of the minute book.
• The penalty includes an amount of Rs.75,000 on the company and Rs.15,000 on each of directors.

Insolvency law

1. North West Carrying Company LLP VS Metro Cash and Carry India Pvt. Ltd

• NCLT notifies that for clubbing other charges such as interest, legal charges, balance cost of amortization and/or notice period rent with principal amount to meet threshold limit express stipulation has to be provided in the agreement

OTHER UPDATES

1. Stamp Paper has no expiry.

• Supreme Court in case of Thiruvengada Pillai Navaneethammal & Anr held that stamp paper has no validity
• Only for claim of refund in case stamp paper is not used, 6 months time period is provided.

2. NFRA’S Circular on Statutory Auditors’ responsibilities in relation to Fraud.

• Mere “Resignation does not absolve the Auditor of his responsibility to report suspected fraud or fraud as mandated by the ”
• In case of fraud Statutory Auditor is required to Submit Form ADT- 4 (Report to the Central Government) u/s 143(12) even in cases where the Statutory Auditor is not the first person to identify the fraud/suspected fraud.

Due Dates under various laws

Conclusion: Staying updated with regulatory changes is essential for businesses and professionals. The June 2023 edition of regulatory updates provides a comprehensive overview of changes in company law, securities law, RBI regulations, case laws, and more. Ensure compliance and mitigate risks by keeping track of due dates, understanding modifications to existing regulations, and staying informed about recent penalties imposed for non-compliance.

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Disclaimer: This newsletter is a compilation of updates prepared and circulated from the academic point of view only and are not intended to constitute professional advice on any matter. The views and opinions expressed in this newsletter are those of the author of this document and are based on the internal research done by the Author.