prpri Recent Developments From The Ministry of Corporate Affairs Recent Developments From The Ministry of Corporate Affairs

I. GOVERNMENT ALLOWS COMPANIES TO CONDUCT EGMs THROUGH VS OR OAVM AND EXTENDS TIMELINE FOR THE SAME:

  • The Ministry of Corporate Affairs vide notification dated 15th June 2021 allowed companies to conduct extraordinary general meetings (EGMs) through Video Conferencing (VC) or other audiovisual means (OAVM), or through postal ballot.
  • The ministry in view of the COVD-19 pandemic has extended the timeline for the same until 31st December 2021.

II. GOVERNMENT AMENDS THE COMPANIES (CREATION AND MAINTENANCE OF DATABANK OF INDEPENDENT DIRECTORS) RULES, 2019:

The Ministry of Corporate Affairs vide Notification dated 18th June 2021 notified the Companies (Creation and Maintenance of databank of Independent Directors) Amendment Rules, 2021, as per which the following amendments have been made in the Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019:

  • In case individual delays his/her application to the Indian Institute of Corporate Affairs (IICA) for inclusion of a name or for renewal, such inclusion or renewal may be allowed by IICA “after charging further fees of one thousand rupees.
  • The Rules shall be applicable to existing Independent directors and individuals who are willing to be appointed as independent directors also the Companies that are required to appoint Independent Directors under the Companies Act 2013.
  • Therefore, the amended provisions as per the new Rules are as follows:

individuals for inclusion or renewal of their names in the data bank of independent directors; and The Ministry of Corporate Affairs vide circular dated 18th June 2021 notified the Companies (Creation and Maintenance of databank of Independent Directors) Amendment Rules, 2021, as per which the following amendments have been made in the Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019:

Rule 3(7) (a) – (7) the institute shall, with the prior approval of the Central Government, fix a reasonable fee to be charged from:-

a. Rule 3(8) – In case of delay on the part of an individual in applying to the institute under sub-rule (7) for inclusion of his name in the data bank or in case of delay in filing an application for renewal thereof, the institute shall allow such inclusion or renewal, as the case may be, under rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014 after charging further fees of one thousand rupees on account of such delay.

III. GOVERNMENT NOTIFIES THE ACCOUNTING STANDARDS FOR SMALL AND MEDIUM COMPANIES:

As per the Notification dated 23rd June 2021, the Ministry of Corporate Affairs notified the Companies (Accounting Standards) Rules, 2021, the salient provisions of which are as follows:

The definition of Small and Medium-Sized Companies (SMCs) under the standards has been revised. As per the new definition, the turnover limit has been increased from Rs 50 crore to not exceeding Rs 250 crore and with enhanced borrowing limits. This is in addition to the requirements that such entities should be unlisted companies, which are not banks,
financial institutions, or insurance companies. The definition states as follows: An SMC is a company:

1. whose equity/ or debt securities are not listed or are not in the process of listing on any stock exchange, whether in India or outside India;\

2. which is not a bank, financial institution or an insurance company

3. whose turnover (excluding other income) does not exceed Rs. 250 crores in the immediately preceding accounting year;

4. which does not have borrowings (including public deposits) in excess of Rs. 50 crores at any time during the immediately preceding accounting year; and

5. Which is not a holding or subsidiary company of a company that is not an SMC

For the purposes of this clause (i.e. only the holding or subsidiary relation criteria), a company shall qualify as an SMC, if the conditions mentioned therein are satisfied as at the end of the relevant accounting period.

  • The definition of an SMC excludes companies that do not have borrowings (including public deposits) in excess of Rs. 50 crores at any time during the immediately preceding accounting year. Though the term borrowings have not been defined under these Rules, it shall include all loans, debentures, bonds, and other debt instruments issued by the company and public deposits.
  • If a company is a holding company or subsidiary company of another company that is a non-SMC then such company shall be qualified as Non SMC. Therefore, if a company has a non-SMC company in its group (subsidiary or holding) it shall be a non-SMC.
  • Further, the above criterion is based only on group company relation restricted to holding and subsidiary relationship. Accordingly, this criterion does not include joint venture, associates unlike Ind AS Roadmap under Companies (Indian Accounting Standards) Rules, 2015.
  • The said rules basically deals with small and medium companies for revising the turnover and borrowing limits and help in making disclosure requirements less onerous.
  • All companies and their auditors (except Companies on which Indian Accounting Standards as per Companies (Indian Accounting Standards) Rules, 2015 are applicable) shall abide by the accounting standards provided under the new Rules.
  • The Accounting Standards shall be applied in the preparation of Financial Statements. SMC’s which do not disclose certain information pursuant to the exemptions or relaxations provided to them shall disclose (by way of a note to its financial statements) the fact that they are SMCs and have complied with the Accounting Standards insofar as they are applicable to an SMC.
  • The Rules, therefore, stated as follows “The Company is a Small and Medium-Sized Company (SMC) as defined in the Companies (Accounting Standards) Rules, 2021 notified under the Companies Act, 2013. Accordingly, the Company has complied with the Accounting Standards as applicable to a Small and Medium-Sized Company.”

Where a company, being an SMC, has qualified for an exemption or relaxation previously but no longer qualifies for the relevant exemption or relaxation in the current accounting period, the relevant standards or requirements become applicable from the current period and the figures for the corresponding period of the previous accounting period need not be revised merely by reason of its having ceased to be an SMC. The fact that the company was an SMC in the previous period and it had availed of the exemptions or relaxations available to SMCs shall be disclosed in the notes to the financial statements.

IV. GOVERNMENT EXTENDS TIMELINE FOR FILING OF FORMS FOR CREATION OR MODIFICATION OF CHARGES:

  • In view of the COVID 19 Pandemic, the Ministry of Corporate Affairs vide notification dated 30th June 2021, has decided to extend the time for filing any forms pertaining to creation or modification of charges under the Companies Act, 2013, from “31.05.2021 and 01.06.2021” to “ 31.07.2021 and 01.08.2021” respectively.
  • However, the said notification is not applicable to belated filings that have
    already been made with additional fees.

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