One of the contentious issues while implementing corporate decisions is the validity of the resolutions passed under the provisions of the Companies Act, 1956 (“1956 Act”) post implementation of the provisions of the Companies Act, 2013 (“2013 Act”).
First Phase of 98 sections of 2013 Act were notified on September 12, 2013. On February 27, 2014 Section 135 and schedule VII dealing with CSR was notified. Further on March 26, 2014 further 196 sections of 2013 Act were notified.
The above notifications of provisions of the 2013 Act, from time to time, raised doubts as to the fate of resolutions passed under 1956 Act and transactions initiated before notification of the new provisions.
MCA on July 23, 2014 vide General Circular No 32/2014 clarified that resolutions passed under the relevant provisions of 1956 Act during the period from September 1, 2013 to March 31, 2014 can be implemented in accordance with the provisions of 1956 Act notwithstanding the repeal of the said provisions, provided implementation of the resolutions commenced before April 1, 2014. This transitional arrangement will be available upto expiry of one year from the passing of the resolution or six months from the commencement of the corresponding provision in 2013 Act, whichever is later. Further any amendment of the resolution must be in accordance with the relevant provision of the New Act.
Various scenario and the clarified position are captured below :
|Resolution Status||Clarified Position|
|Resolution passed before 01-Sep-2013 and not implemented as on date||Invalid. New resolution to be passed under 2013 Act|
|Resolution passed during 01-Sep-2013 and 31-Mar-14 and implementation commenced pre 01-04-14||Valid until expiry of 1 year from passing of the resolution or 6 months from the commencement of the corresponding provision in 2013 Act, whichever is later|
|Resolution passed during 01-Sep-2013 and 31-Mar-14 but implementation did not commenced pre 01-04-14||Invalid. New resolution to be passed under 2013 Act|
However, wherever 2013 Act and / or rules or circulars issued thereunder contain express provision for ratification of any resolution passed under 1956 Act, the same shall apply regardless of the MCA Circular. For Eg. ratification of borrowing limits earlier approved under section 292 needs to be ratified under section.
About Pantomath Group: Pantomath group consists of a team of professionals led by the Group Founder, Mr. Mahavir Lunawat, who is a Fellow Member of The Institute of Company Secretaries of India, CFA, PGDSL and a Law Graduate and who has had stints with top notch corporates viz. ITC Ltd., Reliance Industries Ltd., and PwC. Our diversified team comprises professionals being MBA, CFA,CS, Lawyer and others. Pantomath group provides a one-stop-shop offering integrated business, legal and financial solutions to varied sections of society including SMEs and large corporate enterprises.