Article contains updates with respect to Notifications, Circulars, Rules, Regulations issued in the Month of March 2021 by Ministry of Corporate Affairs (MCA), Securities Exchange Board of India, Updates of the Reserve Bank of India (RBI), Insolvency and Bankruptcy Board of India (IBBI) and also includes Recent Corporate News. Article attempts to analyses Notifications, Circulars, Rules, Regulations issued in the Month of March 2021 in simple Language for understanding of Readers.Updates of the Ministry of Corporate Affairs (MCA)
“Provided that for the financial year commencing on or after the 1st day of April, 2021, every company which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.”
“(xi) the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year.
(xii) the details of difference between amount of the valuation done at the time of one time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof.”
√ Firstly, Whether the management has represented that, to the best of it’s knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person(s) or entity(ies), including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
√ Whether the management has represented, that, to the best of it’s knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been received by the company from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
√ Based on such audit procedures that the auditor has considered reasonable and appropriate in the circumstances, nothing has come to their notice that has caused them to believe that the representations under sub-clause (i) and (ii) contain any material mis-statement.
√ Secondly, whether the dividend declared or paid during the year by the company is in compliance with section 123 of the Companies Act, 2013.
√ Lastly, whether the company has used such accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all transactions recorded in the software and the audit trail feature has not been tampered with and the audit trail has been preserved by the company as per the statutory requirements for record retention. (Applicable from 01.04.2022)
|Sl. No.||Where the effective capital (in rupees) is||Limit of yearly remuneration payable shall not exceed (in Rupees) in case of a managerial person||Limit of yearly remuneration payable shall not exceed (in rupees) in case of other director|
|(i)||Negative or less than 5 crores.||60 lakhs||12 Lakhs|
|(ii)||5 crores and above but less than 100 crores.||84 lakhs||17 Lakhs|
|(iii)||100 crores and above but less than 250 crores.||120 lakhs||24 Lakhs|
|(iv)||250 crores and above.||120 lakhs plus 0.01% of the effective capital in excess of Rs.250 crores||24 Lakhs plus 0.01% of the effective capital in excess of Rs.250 crores|
♦ Establishment of a Central Scrutiny Centre (CSC):
√ Now companies have to round off the figures appearing in the financial statements, thereto it was optional. Further, the criteria for rounding off shall be based on “total income” in place of “turnover”.
√ Company shall disclose Shareholding of Promoters.
√ Current maturities of Long term borrowings shall be disclosed separately.
√ Trade Payables ageing schedule to be given.
√ Trade Receivables ageing schedule to be given.
√ Security deposits shall not be disclosed under ‘Long term loans and advances’ but disclosed under ‘Other non-current assets’.
√ The company shall disclose the reason of utilization of funds for the purposes other than for which they were borrowed and shall also disclose the purposes for which the funds were utilized.
√ Company needs to disclose if the books of accounts are tallied with the quarterly or monthly returns filed with banker in cases where company has borrowed funds from banks on the basis securities of current assets, or else a separate reconciliation statement needs to be provided.
√ The company shall provide the details of all the immovable property (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee) whose title deeds are not held and where such immovable property is jointly held with others, details are required to be given to the extent of the company’s share.
√ In cases where revaluation has been done in case of Property Plant and Equipment, the company shall disclose if the valuation was done by registered valuer.
√ Disclosures to be made where Loans or Advances in the nature of loans are granted to promoters, directors, KMPs and related parties (loans given to promoters as a % of total loans)
√ For Capital-work-in progress, ageing schedule shall be given
√ For Intangible assets under development, aging schedule to be given.
√ Disclosure of any proceedings initiated or pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 to be made.
√ Where a company is a declared wilful defaulter by any bank or financial Institution or other lender, details to be given.
√ Disclosure of any transactions with companies struck off
√ Where any charges or satisfaction yet to be registered with Registrar of Companies beyond the statutory period, details and reasons thereof shall be disclosed.
√ Following Ratios to be disclosed:
(a) Current Ratio (b) Debt-Equity Ratio (c) Debt Service Coverage Ratio (d) Return on Equity Ratio (e) Inventory Turnover Ratio (f) Trade Receivables Turnover Ratio (g) Trade Payables Turnover Ratio (h) Net Capital Turnover Ratio (i) Net Profit Ratio (j) Return on Capital Employed (k) Return on investment.
√ Disclosure of Utilization of Borrowed funds and share premium to be given. Explanation is required if there’s change of more than 25% as compare to preceding financial year.
√ Further disclosures shall be made where the company has received funds from any persons or entities including foreign entities to further lend or invest or provide any guarantee, security to third parties.
√ Where a scheme of arrangement has been approved, disclosure shall be made of the effect of the same on the books of accounts and any deviation from the accounting standards for the same.
|Sr. No.||Section of the Companies (Amendment) Act, 2020||Section of the Companies Act, 2013||Particulars|
|1.||Section 23||Section 124(7)||Unpaid Dividend Account|
|2.||Section 45||Section 247 (3)||Valuation by Registered Valuers|
♦ Availability of e-form CSR-1:
♦ Postponement of mandatory use of Accounting Software:
♦ Prior Approval for Change in control: Transfer of shareholdings among immediate relatives and transmission of shareholdings and their effect on change in control: Circular Dated 25th March, 2021- With effect from 25th March, 2021
♦ Transfer /transmission of shareholding in case of unlisted body corporate intermediary:
In following scenarios, change in shareholding of the intermediary will not be construed as change in control:
√ Transfer of shareholding among immediate relatives shall not result into change in control. Immediate relative shall be construed as defined under Regulation 2(l) of SEBI SAST Regulations which inter-alia includes any spouse of that person, or any parent, brother, sister or child of the person or of the spouse;
√ Transfer of shareholding by way of transmission to immediate relative or not, shall not result into change in control.
♦ Transfer /transmission of shareholding in case of a proprietary firm type intermediary:
In case of an intermediary being a proprietary concern, the transfer or bequeathing of the business/capital by way of transmission to another person is a change in the legal formation or ownership and hence by the definition of change in control, such transmission or transfer shall be considered as change in control. The legal heir / transferee in such cases is required to obtain prior approval and thereafter fresh registration shall be obtained in the name legal heir/transferee.
♦ Transfer /transmission of ownership interest in case of partnership firm type intermediary:
Change in partners and their ownership interest of the partnership firm type intermediary shall be dealt in following manner:
√ Transfer of ownership interest in case of partnership firm:
In case a SEBI registered entity is registered as a partnership firm with more than two partners, then inter-se transfer amongst the partners shall not be construed to be change in control. Where the partnership firm consists of two partners only, the same would stand as dissolved upon the death of one of the partners. However, if a new partner is inducted in the firm, then the same would be considered as a change in control, requiring fresh registration and prior approval of SEBI.
√ Transmission of ownership interest in case of partnership firm:
Where the partnership deed contains a clause that in case of death of a partner, the legal heir(s) of deceased partner be admitted, then the legal heir(s) may become the partner (s) of the partnership firm. In such scenario the partnership firm is reconstituted. Bequeathing of partnership right to legal heir(s) by way of transmission shall not be considered as change in control.
♦ Incoming entities/ shareholders becoming part of controlling interest in the intermediary pursuant to transfer of shares from immediate relative / transmission of shares (immediate relative or not), need to satisfy the fit and proper person criteria stipulated in Schedule II of SEBI (Intermediaries) Regulations, 2008.
√ The transferee shall obtain fresh registration from SEBI in the same capacity before the transfer of business if it is not registered with SEBI in the same capacity. SEBI shall issue new registration number to transferee different from transferor’s registration number in the following scenario:
√ Business is transferred through regulatory process (pursuant to merger/ amalgamation/ corporate restructuring by way of order of primary regulator /govt / NCLT, etc.) or non-regulatory process (as per private agreement /MOU pursuant to commercial dealing / private arrangement) irrespective of transferor continues to exist or ceases to exist after the said transfer.
√ In case of change in control pursuant to both regulatory process and non-regulatory process, prior approval and fresh registration shall be obtained. While granting fresh registration to same legal entity pursuant to change in control, same registration number shall be retained.
√ If the transferor ceases to exist, its certificate of registration shall be surrendered.
√ In case of complete transfer of business by transferor, it shall surrender its certificate of registration.
√ In case of partial transfer of business by transferor, it can continue to hold certificate of registration.
√ In case of non-receipt of minimum subscription – The issuer is mandated to refund all the application monies within a period of four days from the closure of the issue;
√ In case the issuer fails to obtain listing or trading permission from the stock exchanges where the specified securities were to be listed regulation – The Issuer shall refund the entire monies received within four days of receipt of intimation from stock exchanges rejecting the application for listing of specified securities.
Notification on Extension of Cheque Truncation System (CTS) across all bank branches in the country dated 15th March, 2021 With effect from 15th March, 2021
Notification on Annual Closing of Government Accounts – Transactions of Central / State Governments – Special Measures for the Current Financial Year (2020-21) dated 25th March, 2021 With effect from 25th March, 2021
Circular on Reporting of status of ongoing corporate insolvency resolution processes (CIRPs) through Form CIRP 7 dated 18th March, 2021 With effect from 18th March, 2021
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