Category: Company Law

In order to bring in greater transparency in reporting of financial statements, the Ministry of Corporate Affairs (MCA) vide notification dated 24.03.2021 has amended the Schedule III to the Companies Act, 2013 effective from 01st April, 2021 to mandate various disclosures by companies in their financial statements. This was stated by Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply to a question in Rajya Sabha today.

The Minister stated that the new disclosures with respect to the virtual currency/crypto currency transactions and CSR spending undertaken by companies during a financial year are:-

1. Details of Crypto Currency or Virtual Currency

Where the Company has traded or invested in Crypto currency or Virtual Currency during the financial year, the following shall be disclosed:-

1. profit or loss on transactions involving Crypto currency or Virtual Currency
2. amount of currency held as at the reporting date,
3. deposits or advances from any person for the purpose of trading or investing in Crypto Currency/virtual currency.
4. Details of Corporate Social Responsibility (CSR)

Where the company covered under section 135 of the companies act, the following shall be disclosed with regard to CSR activities:-

1. amount required to be spent by the company during the year,
2. amount of expenditure incurred,
3. shortfall at the end of the year,
4. total of previous years shortfall,
5. reason for shortfall,
6. nature of CSR activities,
7. details of related party transactions, e., contribution to a trust controlled by the company in relation to CSR expenditure as per relevant Accounting Standard,
8. where a provision is made with respect to a liability incurred by entering into a contractual obligation, the movements in the provision during the year should be shown separately.

****

MCA updates -07 Aug 2021

====================

MCA exempts foreign & companies incorporated outside India from provisions of sections 387 to 392 (offering for subscription in the securities, requirements related to the prospectus and all matters incidental thereto)

MCA notifies Companies (Registration of Foreign Companies) Amendment Rules, 2021 vide Notification No. G.S.R. 538(E) dated 5th August, 2021 (The purpose of this amendment is to exclude from the definition of foreign company u/s 2(42) of the Act, the electronic presence of a foreign company by the means of- electronic based offering of securities, subscription thereof or listing of securities in the IFSC).

MCA notifies Companies (Specification of definitions details) Third Amendment Rules, 2021 vide Notification No. G.S.R. 539(E) dated 5th August, 2021 (The purpose of this amendment is to exclude from the definition of foreign company u/s 2(42) of the Act, the electronic presence of a foreign company by the means of- electronic based offering of securities, subscription thereof or listing of securities in the IFSC.)

There is no definition of the term “Shell Company” in the Companies Act. It normally refers to a company without active business operation or significant assets, which in some cases are used for illegal purpose such as tax evasion, money laundering, obscuring ownership, benami properties etc. This was stated by Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply to a question in Rajya Sabha today.

On the identification shell companies, the Minister stated that the Special Task Force set up by the Government to look into the issue of “Shell Companies” has inter-alia recommended the use of certain red flag indicators as alerts for identification of Shell Companies.

Giving more details, the Minister stated that the Government has undertaken a Special Drive for identification and strike off of Companies by invoking the provisions of section 248 (1) of the Act by which the Registrar of Companies (RoC) struck off those companies after following the due process of law from the Register of companies when RoC has reasonable cause to believe that those companies are not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455.

The Minister listed the total number of companies struck off u/s 248 State/Union Territory-wise as under:

Sate/ UT-wise

2018-19

2019-20

2020-21

Gujarat

6398

2494

257

Andaman

24

15

2

Karnataka

4171

5568

1038

UT of Chandigarh

3514

893

501

Tamil Nadu and Coimbatore

9107

3214

1322

Orissa

2907

719

78

NCT of Delhi and Haryana

30544

12653

2396

Kerala

2801

5339

977

Goa

250

311

36

Madhya Pradesh

3386

1168

111

Himachal Pradesh

481

176

201

Telangana

16364

2686

730

Rajasthan

4038

4466

507

Jammu and Kashmir

255

138

0

Jharkhand

1306

403

139

Uttar Pradesh

7589

5821

1936

West Bengal

8390

6627

5

Maharashtra (Mumbai and Pune)

47575

7824

2298

Bihar

2540

1956

185

UT of Puducherry

37

117

35

Assam, Tripura, Arunachal Pradesh, Nagaland, Mizoram, Meghalaya, Manipur, and Sikkim

372

796

88

Uttarakhand

476

79

0

Andhra Pradesh

3864

958

0

Chhattisgarh

539

347

47

Grand Total

156928

64768

12889

Ministry of Corporate Affairs Press Release dated 03 August 2021

In the insolvency of real estate companies, 212 applications pertaining to real estate sector were admitted for Corporate Insolvency Resolution Plan (CIRP) under the Insolvency & Bankruptcy Code (IBC), of these, 8 cases were resolved, 65 cases have been settled or withdrawn and 23 cases were ordered for liquidation and for rest, process is ongoing. This was stated by Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply to a question in Lok Sabha today.

The Minister further said that the insolvency resolution process is market driven and the outcome depends on market forces.

The Minister stated that Insolvency and Bankruptcy Code (the Code) was enacted on 28th May, 2016 and the Insolvency and Bankruptcy Board of India was established on 1st October, 2016 to exercise regulatory functions under the Code. Further, the provisions for corporate insolvency resolution process (CIRP) were notified w.e.f. 1st December, 2016.

Ministry of Corporate Affairs Press Release dated 27 July 2021

There is no definition of the term “Shell Company” in the Companies Act and it normally refers to a company without active business operation or significant assets, which in some cases are used for illegal purpose such as tax evasion, money laundering, obscuring ownership, benami properties etc. This was stated by Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply to a question in Rajya Sabha today.

The Minister further stated that the Special Task Force set up by the Government to look into the issue of “Shell Companies” has inter-alia recommended the use of certain red flag indicators as alerts for identification of Shell Companies.

The Government has undertaken a Special Drive for identification and striking off Shell Companies during the last three years, the Minister stated.

The Minister tabled a list of the total number of companies struck off u/s 248 State/ Union Territory-wise as under:

Name of the State/ UT

No. of Struck off Companies

2018 to June 2021

RoC-Ahmedabad

9243

RoC-Andaman

41

RoC-Bangalore

11185

RoC-Chandigarh

4908

RoC-Chennai

11217

RoC-Chhattisgarh

947

RoC-Coimbatore

2992

RoC-Cuttack

3731

RoC-Delhi

45595

RoC-Ernakulam

9189

RoC-Goa

597

RoC-Gwalior

4920

RoC-HimachalPradesh

858

RoC-Hyderabad

20488

RoC-Jaipur

9222

RoC-Jammu

393

RoC-Jharkhand

1848

RoC-Kanpur

15803

RoC-Kolkata

15022

RoC-Mumbai

52869

RoC-Patna

4683

RoC-Pondicherry

191

RoC-Pune

5552

RoC-Shillong

1256

RoC-Uttarakhand

555

RoC-Vijayawada

4918

Total

238223

Ministry of Corporate Affairs Press Release dated 27 July 2021

A total of 320 foreign companies registered in the country during the last three years. This was stated by Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply to a question in Rajya Sabha today.

Giving more details, the Minister stated that “Foreign Company” is defined under section 2 (42) of the Companies Act, 2013 (the Act) as any company or body corporate incorporated outside India which (a) has a place of business in India by itself or through an agent, physically or thorough electronic mode and (b) conducts any business activity in India in any other manner.

The Minister tabled a state-wise breakup of details of the number of foreign companies registered in the country during each of the last three years as under:

Refer

https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1739581&RegID=3&LID=1

Dear Sir,

Please find below YouTube video link on MCA new rule for change of name u/s 16(3) of the Companies Act, 2013 II MCA Notification dated 22 July 2021

Regards,
Bipul Kumar

The Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2016 on 14^th July, 2021.

The amendment regulations enhance the discipline, transparency, and accountability in corporate insolvency proceedings:

1. A corporate debtor (CD) may have changed its name or registered office address prior to commencement of insolvency. The stakeholders may find it difficult to relate to the new name or registered office address and consequently fail to participate in the CIRP. The amendment requires an insolvency professional (IP) conducting CIRP to disclose all former names and registered office address(es) so changed in the two years preceding the commencement of insolvency along with the current name and registered office address of the CD, in all its communications and records.

2. The interim resolution professional (IRP) or resolution professional (RP) may appoint any professional, including registered valuers, to assist him in discharge of his duties in conduct of the CIRP. The amendment provides that the IRP/RP may appoint a professional, other than registered valuers, if he is of the opinion that the services of such professional are required and such services are not available with the CD. Such appointments shall be made on an arm’s length basis following an objective and transparent process. The invoice for fee shall be raised in the name of the professional and be paid into his bank account.

3. The RP is duty bound to find out if a CD has been subject to avoidance transactions, namely, preferential transactions, undervalued transactions, extortionate credit transactions, fraudulent trading and wrongful trading, and file applications with the Adjudicating Authority seeking appropriate relief. This not only claws back the value lost in such transactions increasing the possibility of reorganisation of the CD through a resolution plan, but also disincentivises such transactions preventing stress to the CD. For effective monitoring, the amendment requires the RP to file Form CIRP 8 on the electronic platform of the Board, intimating details of his opinion and determination in respect of avoidance transactions. The IBBI has specified the format of CIRP 8 through a Circular issued yesterday. This Form needs to be filed in respect of every CIRP ongoing or commencing on or after 14^th July, 2021.

The amended regulations are effective from 14^th July, 2021. These are available at http://www.mca.gov.in and www.ibbi.gov.in.

****

Ministry of Corporate Affairs Press Release dated 21 July 2021