Category Archives: compliance

MSME – Udyam registration

All MSME units as per the new definition of MSME (including those who are already registered in the Udyog Aadhar portal) are required to register/ re-register in the Udyam Registration portal (https://udyogaadhaar.gov.in/)

The classification of MSME units are as follows:

(i) a micro enterprise, where the investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;
(ii) a small enterprise, where the investment in plant and machinery or equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees; and
(iii) a medium enterprise, where the investment in plant and machinery or equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.

REGISTRATION PROCESS:

(1) Any person who intends to establish a micro, small or medium enterprise may file Udyam Registration online in the Udyam Registration portal, based on self-declaration with no requirement to upload documents, papers, certificates or proof.
(2) On registration, an enterprise (referred to as ―Udyam‖ in the Udyam Registration portal) will be assigned a permanent identity number to be known as ―Udyam Registration Number‖.
(3) An e-certificate, namely, ―Udyam Registration Certificate‖ shall be issued on completion of the registration process.

(4) Aadhaar number shall be required for Udyam Registration.
(5) The Aadhaar number shall be of the proprietor in the case of a proprietorship firm, of the managing partner in the case of a partnership firm and of a karta in the case of a Hindu Undivided Family (HUF).
(6) In case of a Company or a Limited Liability Partnership or a Cooperative Society or a Society or a Trust, the organisation or its authorised signatory shall provide its GSTIN and PAN along with its Aadhaar number.
(7) In case an enterprise is duly registered as an Udyam with PAN, any deficiency of information for previous years when it did not have PAN shall be filled up on self-declaration basis.
(8) No enterprise shall file more than one Udyam Registration:
Provided that any number of activities including manufacturing or service or both may be specified or added in one Udyam Registration.

(9) All existing enterprises registered under EM–Part-II or UAM shall register again on the Udyam Registration portal on or after the 1
st day of July, 2020.
(10) All enterprises registered till 30th June, 2020, shall be re-classified in accordance with this notification.
(11) The existing enterprises registered prior to 30th June, 2020, shall continue to be valid only for a period up to the 31stday of March, 2021.
(12) An enterprise registered with any other organisation under the Ministry of Micro, Small and Medium Enterprises shall register itself under Udyam Registration.

Copy of MSME notification in this regard can be found here

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RBI FLA return

The filing of RBI FLA return has been extended to July 31, 2020. This has come as an announcement on the form link itself which can be seen as above.

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SEBI relaxations – covid

SEBI has on 23rd March, 2020 announced a second set of relaxations for compliances due to the covid crisis.

https://www.sebi.gov.in/legal/circulars/mar-2020/relaxation-from-compliance-with-certain-provisions-of-the-sebi-listing-obligations-and-disclosure-requirements-regulations-2015-and-certain-sebi-circulars-due-to-the-covid-19-virus-pandemic-cont-_46395.html

These relaxations cover primary issues in debt market/ commercial papers, some LODR compliances, some NCD compliances/ commercial papers etc. and some municipal debt compliances.

Earlier some relaxations were made on 19th March, 2020 regarding compliances under LODR

https://www.sebi.gov.in/legal/circulars/mar-2020/relaxation-from-compliance-with-certain-provisions-of-the-sebi-listing-obligations-and-disclosure-requirements-regulations-2015-due-to-the-covid-19-virus-pandemic_46360.html

Still SEBI in both of these circulars not mentioned about the reconciliation of share capital under the SEBI (Depositories) Regulations and certificate u/r 40(9) of the LODR both of which go in April 2020 in respect of the March 2020 period. Half baked and incomplete circulars being issued by SEBI in this regard.

Meanwhile there is no news from MCA regarding extension in their deadlines – payment of challan dates, due dates for various forms which come into force for the March 2020 period, extension of the resubmission due dates, Spice+ dates etc.

Government departments seems to be working in utter disaster

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Covid readiness

MCA had introduced a web based form called CAR – company affirmation readiness towards Covid crisis. Initially they said it has to be filed on 23rd March itself and despite many protests and misgivings from the stakeholders regarding the necessity for such a form at this stage when offices are lock down and professionals are working from home with very limited resources, the ministry went ahead with the form on Monday. Soon the website of MCA became a deluge with everybody trying to the file the form within the deadline. They imposed restrictions like only two OTP in one login in 30 minutes, which was a dampener because how we were to file the form in a day with such restrictions. Soon MCA realised its folly and kept on changing the goal posts. Soon the last date became 30th March and then it vanished altogether and late in the day they announced that it is not mandatory, but voluntary to file the form. If MCA had listened to its stakeholders last week itself, it would not have such a predicament.

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FPI participation in commodity derivatives in IFSC

SEBI has vide circular dated 26th September, 2017 allowed Foreign Portfolio Investors (FPIs) to participate in commodity derivative contracts traded in stock exchanges in International Financial Services Centre (IFSC) subject to conditions, such as

a) Participation would be limited to derivative contracts in non agricultural commodities only;

b) Contracts would be cash settled on settlement price determined on overseas exchanges;

c) All transactions shall be denominated in foreign currency only.

SEBI circular can be found here i.e. http://www.sebi.gov.in/legal/circulars/sep-2017/participation-of-foreign-portfolio-investors-fpis-in-commodity-derivatives-in-ifsc_36081.html

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NCLAT Amendment Rules, 2016

The MCA has vide its notification dated 24th August, 2017, amended the National Company Law Appellate Tribunal Rules, 2016.

Rule 63 which hitherto specified that any party to any proceedings or appeal before the Appellate Tribunal may either appear in person or authorise one or more chartered accountants or cost accountants or company secretaries or legal practitioners or any other person to present his case before the Appellate Tribunal.

Now a sub Rule (2) has been added to the Rule 63, which allows the Central Government or Regional Director or Registrar of Companies or Official Liquidator to authorise an officer or an advocate to represent them in the proceedings before the Appellate Tribunal. If it is an officer, then it shall not be below the rank of junior time scale or company prosecutor.

The amendment is available at

Click to access NCLATAmendmentRules2017_25082017.pdf

 

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Companies (Acceptance of Deposits) Second Amendment Rules, 2017

MCA has brought about an amendment to the Companies (Acceptance of Deposits) Rules vide its Second Amendment Rules of 2017 on 19th September, 2017.

Rule 3(3) of the Rules stated that

“No company referred to in sub-section (2) of section 73 shall accept or renew any deposit from its members, if the amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance or renewal of such deposits exceeds [thirty five per cent] of the aggregate of the [Paid-up share capital, free Reserves and securities premium account] of the company.

[“Provided that a private company may accept from its members monies not exceeding one hundred per cent of aggregate of the paid up share capital, free reserves and securities premium account and such company shall file the details of monies so accepted to the Registrar in such manner as may be specified.”]

It is the proviso to Rule 3(3) that is being amended.

The new proviso allows specified IFSC public company and private company to accept monies from its members not exceeding 100% of the aggregate of paid-up share capital, free reserves and securities premium account and such company shall file details of monies so accepted to the Registrar in form DPT-3.

Explanation to the proviso states that specified IFSC public company is an unlisted public company licensed to operate either by RBI, SEBI, IRDA in an approved international financial services centre located in an approved multi services Special Economic Zone.

Another proviso has been added to this sub-rule viz.

that the maximum limit in respect of deposits to be accepted shall not apply to

  1. private company which is a start-up for 5 years from the date of its incorporation, or
  2. private company which fulfills all the following conditions, viz.

a) which is not an associate or subsidiary of any other company (i.e. a purely private company)

b) the borrowings of such company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or Rs.50 crores, whichever is less (i.e. if the paid up share capital is Rs.1 lakh, then the borrowings should be less than Rs.2 lakhs or Rs.50 crores, whichever is less. So obviously the borrowings in this case should be less than Rs.2 lakhs)

c) company has not defaulted in repayment of such borrowings.

All the three conditions above has to be satisfied in respect of this second clause of this second proviso.

So basically the relaxation in acceptance of deposits is in favour of IFSC public company and start up private company. In respect of a purely private company the relaxations are dependent on its paid up share capital.

The companies accepting deposits should report the same in form DPT-3.

The amendment is available at

Click to access CompaniesAcceptanceofDepositSecondAmendmentRule_22092017.pdf

 

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Restriction on no. of layers

MCA has come out with a new rule with effect from 20th September, 2017 which is called the Companies (Restrictions on Number of Layers), Rules, 2017.

As per this Rule, no company shall have more than two layers of subsidiaries. Exemptions are wholly owned subsidiary or subsidiaries. Companies can however acquire more than two layers of subsidiaries outside India as per the laws of such jurisdiction.

Banking company, NBFC, Insurance company and government company is exempted from the provisions of these Rules.

Rule 3 says that the provisions of this rule shall not be in derogation to proviso to section 186(1) of the Act. That proviso says, in the first part that the company can acquire any other company incorporated outside India, if such foreign company has investment subsidiaries beyond more than two layers as per the laws of such country. The (b) portion of the proviso says that a subsidiary company can have investment subsidiary for the purpose of meeting any requirement under any law or rule or regulation thereto. The (b) proviso pertains to the Indian jurisdiction. So basically investment subsidiaries are outside the ambit of this Rule if they are the 2nd layer of subsidiaries.

Rule 4 specifies that where a company has subsidiaries in excess of the limits specified in these Rules, as on the date the Rules come into force, then it shall, within 150 days of these Rules, file with the ROC a form i.e. CRL-1, disclosing the details specified therein in the said Form. It shall not after the commencement of these Rules, have any additional layer of subsidiaries more than what it had on the date of commencement of these Rules. In case one or more layers are reduced after these Rules come into force, the Company shall keep the layers of subsidiaries at that reduced level or at the maximum level specified in these Rules. For eg. if a company has 4 layers of subsidiaries at the commencement date and subsequently one layer has dropped off, the company cannot increase the layer from 3 to 4 merely because it had 4 layers at the commencement date. It should be kept at 3 levels only.

Rule 5 is the penalty clause whereby the fine is Rs.10,000 for the company and every officer in default and if it is a continuing default, then further fine of Rs.1000 per day during the period the contravention continues.

So basically the Rule allows the companies to retain their level of subsidiaries, but not add to it. As and when the companies delete one or more of their subsidiaries, then they should retain it at that level or upto two layers and not increase it further.

The Rules is available at the MCA site at

Click to access CompaniesRestrictionOnNumberofLayersRule_22092017.pdf

 

 

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Shifting of regd office within the state

The MCA has vide its notification dated 27th July, 2017 amended the Companies (Incorporation) Rules, 2014. Rule 28 which pertains to shifting of registered office within the same state i.e. from jurisdiction of one Registrar in the state to that of another Registrar within the same state.

Hitherto, the Rules required publication of a notice in the newspaper, serving individual notices to debenture holder, creditor, depositor etc. while making the application for change of regd office as such.

Now the rules are made much more simpler. All that is required is

(a) Board Resolution for shifting of registered office;
(b) Special Resolution of the members of the company approving the shifting of registered office;
(c) a declaration given by the Key Managerial Personnel or any two directors authorised by the Board, that the company has not defaulted in payment of dues to its workmen and has either the consent of its creditors for the proposed shifting or has made necessary provision for the payment thereof;
(d) a declaration not to seek change in the jurisdiction of the Court where cases for prosecution are pending;
(e) acknowledged copy of intimation to the Chief Secretary of the State as to the proposed shifting and that the employees interest is not adversely affected consequent to proposed shifting”.

An application has to be made in form INC-23 alongwith the aforesaid documents for shifting the registered office from one Registrar to another within the same state. The application goes to the Regional Director.

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Disclosures of defaults on loans etc. by listed entities

SEBI has vide circular dated 4th August, 2017 made it mandatory for listed entities to disclose to the stock exchanges where their securities are listed where there is a default in payment of interest/ instalment obligations on debt securities (including commercial paper), Medium Term Notes (MTNs), Foreign Currency Convertible Bonds (FCCBs), loans from banks and financial institutions, External Commercial Borrowings (ECBs) etc.

It applies to all listed entities which have listed any of the following, viz:
specified securities (equity and convertible securities), non-convertible debt securities and non-convertible and redeemable preference shares.

The entities shall make disclosures within one working day from the date of default at the first instance of default in the format specified in Clause C1. This format is given in the circular.

If there is any outstanding amount under default as on the last date of any quarter , then within 7 days from the end of such quarter, additional disclosures are required to be given in format specified in C2.

Listed entities entity shall also separately provide information pertaining to defaults to the concerned Credit Rating Agencies in a timely manner and as may be specified by SEBI from time to time.

This circular shall come into effect with effect from October 1, 2017. This is to enable listed companies to put appropriate systems in place for prompt submission of disclosures as stipulated in this circular.

The circular can be found at

http://www.sebi.gov.in/legal/circulars/aug-2017/disclosures-by-listed-entities-of-defaults-on-payment-of-interest-repayment-of-principal-amount-on-loans-from-banks-financial-institutions-debt-securities-etc_35538.html

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Companies Amendment Bill – section 403

One of the provisions of the Companies Amendment Act, 2017 which has been passed by the Lok Sabha is as follows:
Presently, under Section- 92 (Filing of Annual Return), section 137 (filing of audited accounts) and other sections (filing of other forms) Companies shall be required to file the Annual Return within 60 days of AGM audited accounts by 30 days and other documents by 30 days from the date of event. In the case of auditors appointment and change of registered office it is 15 days from the date of the event.
First proviso to section 403 of the Companies Act, 2013 gives a further 270 days for filing of the said form by paying additional filing fee. Which means effectively companies are given 270 days plus the initial period to complete the filings.

Now under the Companies Amendment Act, 2017, this proviso is being sought to be removed by the following i.e. the additional period of 270 days is being removed from the section.
“Provided that where any document, fact or information required to be submitted, filed, registered or recorded, as the case may be, under section 92 or 137 is not submitted, filed, registered or recorded, as the case may be, within the period provided in those sections, without prejudice to any other legal action or liability under this Act, it may be submitted, filed, registered or recorded, as the case may be, after expiry of the period so provided in those sections, on payment of such additional fee as may be prescribed, which shall not be less than one hundred rupees per day and different amounts may be prescribed for different classes of companies :
 
Provided further that where the document, fact or information,as the case may be, in cases other than referred to in the first proviso, is not submitted, filed, registered or recorded, as the case may be, within the period provided in the relevant section,it may, without prejudice to any other legal action or liability under this Act, be submitted, filed, registered or recorded as the case may be, on payment of such additional fee as may be prescribed and different fees may be prescribed for different classes of companies:
 
Provided also that where there is default on two or more occasions in submitting, filing, registering or recording of the document, fact or information,it may, without prejudice to any other legal action or liability under this Act, be submitted, filed, registered or recorded, as the case may be, on payment of a higher additional fee, as may be prescribed and which shall not be lesser than twice the additional fee provided under the first or the second proviso as applicable.”;
The import of these amendments is that if the documents are not filed with the specified periods given in the respective sections, then the additional fee shall be Rs.100/- per day and different amounts shall be specified for different classes of companies.
Morever, where there is a default on two or more occasions in filing the documents, the additional fees payable will become higher but not less than twice the additional fee provided above. So it shall be not less than Rs.200/- per day, if there is a default on two or more occasions. There is also a threat of a legal action against the Directors and officers in default.
This bill is still with the Rajya Sabha. After it is passed by the RS, it will go to the President for his assent and then the MCA will notify the provisions of the Amendment Act. Only on notification by the MCA in the official gazette will the amended provisions come into effect.

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Exemptions to section 8 companies

Section 8 companies are those companies which are incorporated on a no profit basis i.e. their income is not given to the shareholders of these companies. They are mostly incorporated for a charitable, social, educational, religious or such other purposes.

MCA had vide its notification dated 5th June, 2015 given a lot of exemptions to private companies from the stringent provisions of the Companies Act, 2013. The Act, when it was made and bought into force from 1st April, 2014 was extremely stringent in terms of compliance & reporting requirements which was hitherto not present in the old Act.

So the notification of 5th June, 2015 gives a lot of exemptions to the private companies. Now the MCA has vide another notification dated 13th June, 2017 amended this notification of 5th June, 2015 to provide that even section 8 companies will enjoy the benefit of these exemptions provided that the said section 8 company has not defaulted in the filing of its statutory annual documents i.e. the audited financial statements and the annual return.

So we have a notification amending another notification, which is getting cumbersome like you get in the Income Tax and Service Tax regime. Why the Government could not have provided for these amendments by way of a Regulation or an amendment to the Act itself is not clear.  Ease of Doing Business includes clarity in the Government circulars, notifications, regulations etc.

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Auditors’ rotation

The Companies Act, 2013 bought in the concept of auditors’ rotation every 5 years. Section 139 of the Act provided that all listed companies and “such other companies” shall rotate their auditors every five years.  For “such other companies” we go to the Companies (Audit and Auditors), Rules, 2014, whereby Rule 5 provided that all unlisted public companies having paid up share capital of Rs.10 crore or more and all private companies having paid up share capital of Rs.20 crore or more and all companies below these two threshold limits but having public borrowings of Rs.50 crores or more are required to rotate their auditors.

Now vide a notification dated 22nd june, 2017 the MCA has enhanced the limit for private companies from Rs.20 crore to Rs.50 crore paid up share capital. Therefore private companies need to rotate their auditors only if their paid up share capital is Rs.50 crore or more.

That takes out all those private companies whose paid up share capital is between Rs.20 crore to Rs.50 crore from the requirement of rotating their auditors.

The notification can be read here.

Click to access CompaniesAuditandAuditorsSecondAmendmentRules2017.pdf

 

 

 

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linking of PAN with Aadhar

The Income Tax (IT) Department has made it easy for taxpayers to link their PAN with Aadhaar. Responding to grievances of taxpayers regarding difficulties in linking PAN with Aadhaar as their names did not match in both systems (e.g., names with initials in one and expanded initials in another), the IT Department has come out with a simple solution now.

Taxpayers can go to http://www.incometaxindiaefiling.gov.in and click on the link on the Left Pane à Link Aadhaar, provide PAN, Aadhaar number and ENTER NAME EXACTLY AS GIVEN IN AADHAAR CARD (avoid spelling mistakes) and Submit. After verification from UIDAI, the linking will be confirmed.

Figure 1: Linking Aadhar with PAN on the Income Tax website

image 1

Figure 2: Linking Aadhar with PAN simplified

image 2

In case of any minor mismatch in Aadhaar name provided by taxpayer when compared to the actual data in Aadhaar, a One Time Password (Aadhaar OTP) will be sent to the mobile registered with Aadhaar.  Taxpayers should ensure that the date of birth and gender in PAN and Aadhaar are exactly same. In a rare case where Aadhaar name is completely different from name in PAN, then the linking will fail and taxpayer will be prompted to change the name in either Aadhaar or in PAN database.

There is no need to login or be registered on E-filing website. This facility can be used by anyone to link their Aadhaar with PAN.

This facility is also available after login on the e-filing website under Profile settings and choose Aadhaar linking. The details as per PAN will be pre-populated. Enter Aadhaar number and ENTER NAME EXACTLY AS GIVEN IN AADHAAR CARD (avoid spelling mistakes) and Submit.

 

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