Amended requirement of Appointing CS & Secretarial Audit Report

Ministry of Corporate Affairs (MCA) had vide notification dated January 03, 2020 notified Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2020 and amended the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Following are the glimpse of the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2020:

1. The attached rules will be applicable for Financial Year commencing on or after April 01, 2020

2. Section 203 & Rule 8, 8A- Appointment of Key Managerial Personnel– Every Private Company which has a paid up share capital of ten crore rupees or more shall have a whole -time company secretary.

Capsule:

Currently every Listed Company and Public Company with Paid up share capital of ten crore rupees or more shall have a whole -time company secretary; & every Private Limited Company with Paid up share capital of Five crore rupees or more shall have a whole -time company secretary.

Thus, Financial Year commencing on or after April 01, 2020, every Company i.e., Public or Private Companies with Paid up share capital of ten crore rupees or more shall have a whole -time Company Secretary.

3.Section 204 & Rule 9- Secretarial Audit for bigger Companies- Applicability: following Clause c has been inserted

“(c) every company having outstanding loans or borrowings from banks or public financial institutions of one hundred crore rupees or more.”.

Capsule:

Currently (before taking into account the effect of the MCA notification attached herewith) following class of Companies are required to annex with its Boards Report Secretarial Audit Report as mentioned in Section 204:

Thus, Financial Year commencing on or after April 01, 2020, even Private Companies fulfilling the Criteria mentioned above i.e., having outstanding loans or borrowings from banks or public financial institutions of one hundred crore rupees or more will be required to annex Secretarial Audit Report with the Board Report.

Thus, the amendments has widened the scope of Section 204.

Also, an explanation has been inserted herewith, removing the ambiguity existing therein

“Explanation :- For the purposes of this sub-rule, it is hereby clarified that the paid up share capital, turnover, or outstanding loans or borrowings as the case may be, existing on the last date of latest audited financial statement shall be taken into account.”.