Amendment 1.
Definition of a Small Company, Companies (Specification of Definitions and Details) Rules of 2014
The term “small company” will now be defined as “a company whose Paid Up Capital and Turnover will not exceed Rs. 2 crore and Rs. 20 crore, respectively.”
Amendment 2:
NGOs that wish to raise public funds must register with the MCA.
(a) Starting on April 1, 2021, every entity covered by Rule 4 of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021, that plans to engage in any public activity must register with the Central Government by submitting the form CSR-1 electronically to the Registrar. As long as the terms of this sub-rule do not apply to public projects or programmes that were approved before April 1, 2021.
(b) The entity must electronically sign and submit Form CSR-1, and a Chartered Accountant in practise, a Company Secretary in practise, or a Cost Accountant in practise must verify the signature digitally.
(c) The system will generate a special public Registration Number after the Form CSR-1 is submitted on the site.
3rd Amendment:
Change to definition of Listed Company : On February 19, 2021, The Companies (Specification of Definitions Details) Second Amendment, Rules 2021 were passed. These Regulations became operative on April 1, 2021. This amendment modifies the definition of “Listed Company” to say that the following corporations shall not be regarded as Listed Companies: a. Public corporations that have listed their common stock but not their equity shares on a recognised stock exchange
Non-convertible debt securities issued on a private placement basis in accordance with SEBI’s 2008 Regulations for the Issuance and Listing of Debt Securities; or (ü) non-convertible redeemable preference shares issued on a private placement basis in accordance with SEBI’s 2013 Regulations for the Issuance and Listing of Non-Convertible Redeemable Preference Shares
Amendment 4:
The required minimum offer term for a right offer has been lowered from 15 to 7 days. The following rule shall be placed after rule 12 in the Companies (Share Capital and Debentures) Rules 2014, namely: “12A.Period for notice under sub-clause I of clause (a) of sub-section (1) of sec 62.- The time period within which the offer shall be made for acceptance shall be not less than seven days from the date of offer for the purposes of sub clause I of clause (a) of sub-section (1) of section 62.
Amendment 5
Companies are not to be regarded as Listed Companies.
The following rule shall be placed after rule 2 of the Companies (Specification of Definitions Details) Rules, 2014, namely:- Firms that shouldn’t be counted as listed companies are: – The following classes of companies shall not be regarded as listed companies for the purposes of the proviso to clause (52) of section 2 of the Act, namely:-
The following categories of companies must not be regarded as listed companies under subsection (52) of section 2 of the Act, namely:-
(a) Public firms that have listed their common stock but not their equity shares on a recognised stock exchange. according to the SEBI (Issue and Listing of Debt Instruments) Regulations, 2008, non-convertible debt securities issued through private placement;
non-convertible redeemable preference shares issued by private placement in accordance with the 2013 SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations; or
(iii) Both I and (ii) categories (ii)
b) Private enterprises that, in accordance with the SEBI (Issue and Listing of Debt Instruments) Regulations, 2008, listed their non-convertible debt securities on a private placement basis on a recognised stock exchange;
(c) Public corporations whose equity shares are listed on a stock market in a country that is listed in subsection (3) of section 23 of the Act but whose equity shares have not been listed on a recognised stock exchange.
Amendment 6
OPC and small business annual report in abbreviated form MGT-7A
The following sub-rule shall be substituted in rule 11 of the Companies (Management and Administration) Rules, 2014 (hereinafter referred to as the said rules) in place of sub-rule (1): “(1) Every company shall file its annual return in Form No.MGT-7, with the exception of One Person Companies (OPC) and Small Companies. From the financial year 2020–2021 forward, One Person Companies and Small Companies must file annual returns in Form No.MGT-7A.
Amendment 7:
Changes to Schedule V :
Prescribed ceilings on compensation paid to “other directors” in the event of a loss. The following provisions are found in Schedule V of the Companies Act of 2013, under the heading REMUNERATION: (a) in Section I, in the first paragraph, the words or other director or directors shall be inserted; (b) in Section II I wherever the words “managerial person” appeared, the words “or other director” shall be inserted.
The phrase “or other director” shall imply a non-executive director or an independent director for the purposes of Sections I, II, and III.
Amendment 8
It requires businesses to utilise accounting software with a transaction audit trail. According to the Companies (Accounts) Rules, 2014, every business that uses accounting software to maintain its books of account must only use programmes that have the ability to record an audit trail of every transaction, create an edit log of every change made to the books of account along with the date the change was made, and ensure that the audit trail cannot be disabled. (This modification took effect on April 1, 2022.)
Amendment 9
Section 132: National Financial Reporting Authority (NFRA)
The National Financial Reporting Authority was established by the Union Government in accordance with the Companies Act to address concerns relating to corporate accounting and auditing standards. The NFRA aims to protect the interests of creditors, investors, and other parties associated with the enterprises or other corporate entities, as well as the public interest. While taking note of the NFRA-related laws, CLC has proposed that NFRA’s operational autonomy be expanded by implementing penalties against auditors, adopting regulations, and creating a particular NFRA fund.
10th amendment
The audit report’s scope of reporting by the auditors was expanded.
The clause defining “Other Matters to be Included in the Audit Report” has been inserted in rule 11 of the Companies (Audit and Auditors) Rules, 2014, which broadens the scope of reporting.
(a) Advances, Loans, and Investment Reporting Not Described in Notes to Accounts
(b) Receiving money for additional lending or investment that isn’t specified in account notes. (c) Discuss the aforementioned two aspects and whether the representation made contained any material information.
(d) The dividend declared or paid complies with Section 123 of the CA, 2013.
(e) A comment on the application of accounting software with an audit trail and other regulations
Amendment 11:
The Balance Sheet and P/L A/c need to include additional disclosures.
The broad guidelines for preparing the balance sheet and the profit and loss account of an Ind AS compliant firm, along with extra disclosure requirements, were incorporated into Schedule III to the Companies Act, 2013 by notification dated March 24, 2021. The following Additional Disclosures are also needed in accordance with the amendment:
- Disclosure of Promoters’ Shareholdings
- Trade Receivables ageing schedule with ages of one year, two years, three years, and more
- Comparison of each asset class’s gross and net carrying amounts
- Ageing schedule for trade receivables includes 1 year, 2 years, 3 years, and more.
- Detailed disclosure of title documents to real estate that is not held in the name of the company
- Disclosure of revaluation and CWIP
- Loans or Advances made to Promoters, Directors, KMPs, and Related Parties
- Specifics of the Benami Property owned
- Reconciliation of quarterly statements given to the bank and explanations of any major inconsistencies where a company has been labelled a willful defaulter by any bank or financial institution
- Relations with Struck-Off Companies Pending Registration of Charges or Satisfaction with the Registrar of Companies
- conformity with the amount of corporate levels
- Information on 11 Ratios
- Observation of authorised Scheme(s) of Arrangements
- Using borrowed money and share premium
- Information about a transaction that wasn’t documented in the books but was turned in or declared as income in tax assessments
- Information about the corporate social responsibility of virtual or crypto currencies
Amendment 12.
Amending the idea of a one-person company
On February 1, 2021, the Companies (Incorporation) Second Amendment Rules, 2021 were passed. Through these rules, the MCA amended numerous One Person Company provisions, including: This Regulations became operative on April 1, 2021.
1. NRIs can register a single-person business in India.
2. Regardless of Turnover, One Person Companies are not required to change into another sort of firm.
3. OPC can change its corporate structure at any moment after its incorporation, with no waiting period.
4. The OPC process has been entirely revised for different types of companies.
Amendment 13:
The new CARO’S Applicability:
The (Companies Auditor’s Report Order), 2020 (CARO, 2020), which will be applicable for the qualified companies for the financial year beginning on or after 1 April 2021, has been announced by the Ministry of Corporate Affairs. Compared to CARO 2016, which had 16 provisions, CARO 2021 has a total of 21 clauses.
Seven new clauses are added while one old clause is deleted, one is combined with another, and one is added. Auditors must therefore apply the revised CARO when creating the auditor report for the fiscal year 2021–2022
Amendment 14:
NEW CLAUSES IN THE FINANCIAL STATEMENT (SCHEDULE III):
Schedule III to the Companies Act, 2013, has been revised by the Ministry of Corporate Affairs by notification dated 24 March 2021. This amendment will take effect on April 1st, 2021, for the fiscal years 2021–2022. The Ministry has made numerous new disclosures in the Notes to Accounts of the Balance Sheet and P&L as a result of this revision, including:
i. Rounding off of figures
ii. Promoters’ shareholdings iii. Trade payables ageing schedule
iii. Trade receivables ageing schedule
iv. Title deeds for real estate not held in the company’s name
v. Disclosure on asset revaluation
Information on asset revaluation
Disclosure of Loans to Directors, Advances to KMP, and Related Parties
viii. Information on the Benami Property owned
ix. Borrowing Details
x. Willful Defaulter
xi.Relationship with Struck Off Companies,
xii. Registration of Charges or Satisfaction with Registrar of Companies,
xiii.Compliance with the Number of Layers of Companies,
xiv. Disclosure of Ratios,
xv. Undisclosed Income (Reconciliation of Income Tax and Companies Act),
xi. CSR Disclosure
Amendment 15:
Change in Report’s direct disclosure
The Companies (Account) Amendment Rules, 2021 have been revised by the Ministry of Corporate Affairs by notification dated 24 March 2021. These changes will take effect on April 1st, 2021 for the fiscal years 2021–2022. First Amendment of Rule 3, which specifies how accounting records should be kept electronically. Rule 3’s sub-rule (1) requires the following proviso to be added:
New Proviso: Provided, however, that every company using accounting software to maintain its books of account shall use only such software that has the following features: Recording an audit trail of each and every transaction; Creating an edit log of each change made to the books of account along with the date such changes were made; and Ensuring that the audit trail cannot be disabled. This provision will apply to financial years beginning on or after April 1, 2021. An audit trail is a sequential record that documents events step by step and serves as proof.
of the source of the recorded history of financial transactions. Using the audit trail, an auditor can follow the financial data of a specific transaction from the general ledger to its original source document.
Rules for the provision of an audit trail will take effect on April 1st, 2022. Matters to be Included in the Board’s Report, second amendment to Rule 8. After clause x in rule 8, sub rule 5, two more clauses were inserted.
Added Clauses: (applicable w.e.f. 01.04.2021)
(xi) the specifics of any applications submitted or legal actions taken during the year in accordance with the Insolvency and Bankruptcy Code, 2016, as well as their standing as of the end of the fiscal year.
(xii) Information regarding the facts of the discrepancy between the amount of the valuation performed during the one-time settlement and the valuation performed while applying for a loan from the banks or financial institutions, as well as the reasons wherefore. Along with other disclosures, the directors report of a company must include information on the aforementioned two clauses.
Landmark and recent case Laws:
The case is Cyrus Investments Pvt. Ltd. v. Tata Consultancy Services Limited.
Facts of the Situation
Following separate shareholder votes, Cyrus was removed from the boards of Tata Industries Ltd., Tata Consultancy Services Ltd., and Tata Teleservices Ltd.
Cyrus then gave notice of his resignation from a couple more board posts. Following that, Cyrus Investments Pvt. Ltd. and Sterling Investment Corporation Pvt. Ltd., both members of the SP Group, filed a company petition under Sections 241, 242, and 244 of the Companies Act, 2013, alleging mismanagement, oppression, and discrimination.
The transfer by Tata Sons from a public to a private business was also contested by the complainants.
” Cyrus Mistry was ordered to be reinstated after the National Company Law Tribunal found that his expulsion as executive chairman was illegal.
The NCLAT order was put on hold by the Supreme Court in January 2020, and the judgement wasn’t rendered until December 17, 2020. The Supreme Court has now determined that Tata Sons’ actions did not constitute mismanagement or persecution of minority shareholders.
Judgement
The verdict was favourable to the Tata Group.
All of Cyrus Mistry’s accusations of mistreatment and poor management against Tata Sons Limited were rejected by the court. The decision was reached by a Supreme Court panel that included Chief Justice S. A. Bobde, Justice V. Ramasubramanian, and Justice A. S.
Bopanna.
The National Company Law Appellate Tribunal (NCLAT) decision to reinstall Cyrus Mistry as executive chairman of Tata Sons was delayed by the Supreme Court on December 18, 2019.
The Supreme Court ruled that, barring circumstances where the removal would be harsh, improperly handled, or detrimental to the company, its members, or the general public, the Company Law Tribunal could not interfere in a petition submitted under Section 241 of the Companies Act, 2013.
The National Company Law Appellate Tribunal (NCLAT) decision to reinstall Cyrus Mistry as executive chairman of Tata Sons was therefore rejected by the Supreme Court on December 18, 2019.
In the case of Union of India v. Delhi Gymkhana Club, the Indian government filed the complaint alleging tyranny and poor management.
In order to make a complaint to the Tribunal under Section 241(2), the Central Government must express its opinion as to whether the company’s operations are being carried out in a way that is detrimental to the public interest (2).
The Tribunal is unable to determine whether the information the government relied on to form its opinion was sufficient or not, especially as the Central Government is not accused of acting dishonestly. The phrase “Public Interest” cannot be taken to refer to all Indian citizens.
It would be adequate if the rights, security, well-being, and safety of even a small portion of society, such as those applying to become common citizens, were protected.
In Smruti Shreyans Shah v. The Lok Prakashan Ltd. & Ors., the NCLAT came to the conclusion that the Tribunal might issue interim orders under Section 242 if a prima facie case was established.
It was underlined that the entry of an interim order by the Tribunal according to Section 242(4) presupposes that the company’s affairs have not been conducted in compliance with the laws and the Articles of Association.
The member who is alleging tyranny and mismanagement must demonstrate that he has raised pertinent issues in the Company Petition that warrant examination in order to build a prima facie case.
The Supreme Court ruled in Aruna Oswal v. Pankaj Oswal & Ors that the status quo had been ordered in the SC case because matters of right, title, and interest in shares as a result of nomination were still being heard by a civil court.
It would not be possible for a shareholder whose ownership of the shares was in question and who was ineligible to file a petition under Section 244 to bring up issues surrounding the contested shares through a petition for oppression and mismanagement, including by requesting a waiver of Section 244’s requirements.
In Dhananjay Mishra v. Dynatron Services Private Limited & Ors., the NCLAT determined that failures to serve meeting notices, falsify financial records, and fail to appoint directors are all directly addressed under the Companies Act.
Even though it cannot be disputed as a general proposition that the dispute arising out of breach of contractual obligations referable to the MOUs or otherwise would be arbitrable, it is within the Tribunal’s jurisdiction to consider grant of relief under Section 242 of the Companies Act, rendering the dispute non-arbitrable.
In the case of fraud and management failure in Deloitte Haskins & Sells LLP v. Union of India, the NCLAT gave the government the ability to arrest a company’s auditors. Infrastructure Leasing & Financial Services (“IL&FS”) and IL&FS Financial Services (IFIN) were the targets of a Section 241 petition filed by the Central Government, which included allegations of fraud, poor management, and behaviour detrimental to the public interest .
The statutory auditing firms of IL&FS and IFIN, as well as the partners of those businesses, were also targets of prosecution by the central government (those who were still working with the firm or who had resigned.
The auditors challenged this, asserting that they were not necessary parties to the proceedings and had resigned from their position prior to the formation of the proceedings by the Central Government.
The NCLAT rejected the claim, concluding that Section 242 gives the Tribunal extensive authority and that it may consult with any party, including the former auditors, before delivering a ruling to protect the interests of the firm or the public.