Fast track Exit Mode under CA 2013

Ministry of Corporate affairs vide notification dated 26.12.2016 has notified following sections:

           

Sr. No	Section No	Particulars
1.	248	Power of Registrar to Remove Name of Company from Register of Companies
2.	249	Restrictions on Making Application Under section 248 in Certain Situations
3.	250	Effect of Company Notified as Dissolved
4.	251	Fraudulent Application for Removal of Name
5.	252	Appeal to Tribunal

Notification can be downloaded from following link:
http://www.mca.gov.in/Ministry/pdf/Notificatiion_28122016.pdf

Rules for same can be downloaded from following link:
http://www.mca.gov.in/Ministry/pdf/Rules_28122016.pdf

Foreign Investment in Other Financial Services Sector

In the Notification of Reserve Bank of India, Foreign Exchange Department Notification No.FEMA.375/2016-RB, dated 9 September 2016, there is amendment to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, (Notification No. FEMA 20/2000-RB dated 3rd May 2000), in Schedule 1, in Annex B, Paragraph F.8 relating to Non-Banking Finance Companies (NBFC) in following manner:

1. Financial Services activities regulated by financial sector regulators, viz., RBI, SEBI, IRDA, PFRDA, NHB or any other financial sector regulator as may be notified by the Government of India are allowed under 100% Automatic Route.
2. The other financial services sectors are subject to some conditions, which are laid down by the concerned financial regulators.
3. Any activity which is specifically regulated by an Act, the foreign investment limits will be restricted to those levels/limit that may be specified in that Act, if so mentioned.
4. The financial services which are not regulated by any of the regulators as mentioned above may be allowed up to 100% under government approval route.
5. Downstream investments by any of the entities in Other Financial Services will be subject to extant sectoral regulations and notification as amended from time to time.

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Actio Personalis Moritur Cum Persona means a personal action dies with the person

In the matter of Sakthi Finance Limited (hereinafter referred as 'SFL') SEBI was evaluating

alleged violation done by the promoters and Person Acting in Concert ('PAC') of SFL. In

adjudication process it was brought to the notice of adjudication ofcer that one of the PAC

(late Mr. N Mahalingam) had passed away.

Question was arisen whether in such cases right to sue will survive against the

representative of the deceased person?

Adjudication ofcer noted that in the case of Girijandini vs. Bijendra Narain (AIR 1967

SC 2110), the Hon'ble Supreme Court, inter-alia observed that in case of personal action,

i.e. the actions where the relief sought is personal to the deceased, the right to sue will not

survive to or against the representatives, and in such cases, the maxim actio personalis

moritur cum persona (personal action dies with the death of the person) would apply.

By taking note of the above referred judgement, since the proceedings were initiated

against the personal acts and omission of a person who is not alive to face the penalty, the

matter in respect of Mr. N. Mahalingam disposed off without going into merits of the case.

Publication of Details on Website

Pursuant to amendment in Companies (Incorporation) Rules, 2014, every Company should publish/dislcose the following details on Landing/Home page of website, if any:

1. Name and address of its registered office;
2. Corporate Identity Number(CIN);
3. Telephone number;
4. Fax number, if any;
5. Email id and the name of the person who may be contacted in case of any queries or grievances

Implications of Trademark under recent Companies (Incorporation) Third Amendment Rules, 2016- Part I

Ministry of Corporate Affairs (MCA) on July 27, 2016 has notified Companies (Incorporation) Third Amendment Rules, 2016 wherein a few changes have been brought in.

One minor change that can be easily overlooked is regarding application for name availability, for a name that is registered as or applied for Trade Mark. With regards to the same, the Amendment Rule states as follows:

In the principal rules, in rule 8,- (a) in sub-rule (2)for clause(ii), the following shall be substituted namely:-

The name shall be considered undesirable, if-

“(ii) it includes the name of a trade mark registered or a trade mark which is subject of an application for registration under the Trade Marks Act, 1999 and the rules framed thereunder unless the consent of the owner or applicant for registration, of the trade mark, as the case may be, has been obtained and produced by the promoters.”

In the Principle Rules, the words “registration under the Trade Marks Act, 1999 and the rules framed thereunder” did not appear.

In the above context, in this article, let us understand the concept of registered Trade Mark.

• What is meant by the term “Registered Trade Mark”?

Trade Marks Act, 1999 (The Act) defines Registered Trade Mark as a trade mark which is actually on the register and remaining in force.

Explanation:

A Trade Mark that is recorded in the Register of Trade Mark, which is maintained by the Trade Marks Registry (Trade marks Registry established under the Trade and Merchandise Marks Act, 1958 shall be the Trade Marks Registry under this Act) which is kept at the head office of the Trade Marks Registry and continues to be in existence shall be a registered Trade Mark. 

  

• Is registration of trade mark mandatory under the Trade Marks Act, 1999?

         No, the registration of trade mark is not mandatory under the Act.

Explanation:

A logo or a word mark or any design, device, symbol which is capable of distinguishing the goods or services of one person from those of others can be used by any person without registration. However, such Trade mark is not recognized under the Trademarks Act, 1999 and accordingly, the protection under the said act is not available.

• Whether Trade Marks registered under Trade and Merchandise Marks Act, 1958 (erstwhile Act) will be covered in the term “Registered Trade Mark”?

As per the Act, existing registered Trade Mark means a trade mark registered under the Trade and Merchandise Act, 1958 immediately before the commencement of this Act.

Explanation:

A Trade Mark that was registered under the erstwhile Act shall be covered under the term “Registered Trade Mark” under this Act.

However, since the Act has been in existence for seventeen years and the validity period of the registration under erstwhile Act was only seven years, the Trade Marks registered under the erstwhile Act, post renewal on the expiration of term under the provisions of the Act, shall be covered under the term “Registered Trade Mark”.

Insolvency and Bankruptcy Code, 2016

Ministry of Corporate Affairs has given effect to few sections giving certain authority to Central Government and Insolvency and Bankruptcy Board to make rule, regulations, to delegate, to appoint members, officers and to fix salary and terms and conditions. The list of sections effective from 19th August, 2016 are as follows:

(1) Section 3 – Definitions of following terms:

(i) clause (1) – Board 

(ii) clause (5) - Chairperson

(iii) clause (22) – Notification

(iv) clause (26) –Prescribed

(v) clause (28) – regulations

(vi) clause (37) – Words and expressions not defined in code 

(2) Section 221 – Grants by the Central Governments 

(3) Section 222 – Board’s Fund 

(4) Section 225 – Power of central government to issue directions 

(5) Section 226 – Power of central government to supersede Board 

(6) Section 230 - Delegation 

(7) Section 232 - Members, officers and employees of Board to the public servants 

(8) Section 233 – Protection of action taken in good faith 

(9) Sub-section (1) and clause (zd) of sub-section (2) of section 239 – Power of central government to make rules and the to make rules w.r.t salaries and allowances payable to and other terms and conditions of service of the chairperson and members of the board 

(10) Sub-section (1) and clause (zt) of sub-section (2) of section 240 – Power of Board to make regulations and the power to appoint other officers and employees 

(11) Section 241- Rules and regulations to be laid before parliament 

(12) Section 242 – Power to Central government to remove difficulties.

Insolvency and Bankruptcy Board of India

In India, the legal and institutional machinery for dealing with debt default has not been in line with global standards. The existing laws either don’t have desired outcomes or are almost century old. This has hampered the confidence of the lender.  Therefore the need was felt to consolidate and amend law relating to insolvency and consequently the Parliament passed Insolvency and Bankruptcy Code, 2016 

The Code aims to promote entrepreneurship, availability of credit and balance the interest of all the stakeholders and to establish Insolvency and Bankruptcy Board of India and for matters connected therewith.

Ministry of Corporate Affairs vide notification dated 5 August, 2016 has made section 188 to 194 of Insolvency and Bankruptcy Code, 2016 (both inclusive, provisions relate to Establishment/ incorporation/  constitution of Insolvency and Bankruptcy Board, Powers of Chairman, Meetings of Board, Vacancies) effective from 5 August, 2016

Amendment under Accounts Rules – Highlights

The Ministry of Corporate Affairs (MCA) amended the Companies (Accounts) Rules, 2014 vide notification dated 27^th July, 2016 by the Companies (Accounts) Rules, 2016. The summary of same is as under:

1.   Intermediate subsidiary is not required to consolidate accounts of its subsidiary if the following conditions are fulfilled:

a.   The shareholders  i.e, equity and preferences shareholders of subsidiary company has been informed in writing and the proof of delivery of such intimation is maintained by the Company;

b.   The subsidiary company is neither listed nor intends to be listed either in India or abroad and

c.   The ultimate or any intermediate holding company files consolidated financial statements with the Registrar

2.   The Board report to contain the highlights of performance of subsidiaries associates and joint venture companies and their contribution to the overall performance of the company during the period under report

3.    An individual or a partnership firm or a body corporate of ‘Chartered Accountant" or "Cost Accountant' can be appointed as the internal auditor.

The said notification can be downloaded from the following link:

http://www.mca.gov.in/Ministry/pdf/CompaniesAccountsAmendmentRules_28072016.pdf

Amendment in Companies (Share Capital and Debentures) Rules - Highlights

The Ministry of Corporate Affairs (MCA) amended Companies (Share Capital and Debentures) Rules, 2014 vide notification dated 19^th July, 2016 by the Companies (Share Capital and Debentures) Third Amendment Rules, 2016. The summary of same is as under:

1.  Now shares with differential rights can be issued after 5 years once the default is made good.

2.  Exemptions to start up :

a.  Sweat Equity Shares can be issued upto  50% of paid up capital upto 5 years from the date of registration/incorporation

b.  ESOP can be issued to the promoters and to director who directly or indirectly, holds more than 10% percent of the outstanding equity shares of the company

3.    Preferential offer of shares can now be partly paid up shares instead of fully paid shares

4.    Preferential offer of convertible securities – Price to be determined

a.  Either at the time of offer of convertible securities or

b.  Not earlier than 30 days from the date holder becomes entitled to apply for shares on the basis of valuation report given not earlier than 60 days from the date holder becomes entitled to apply for shares

 However the decision to be taken at the time of offer itself

5.  SH-7 is required to be filed with ROC for increase in members also

6.  In case of secured debentures, charge can be created on the assets of the company, or its subsidiaries or its holding company or its associates companies

7.  DRR is to be created for outstanding value of debentures

The said notification can be downloaded from the following link :

http://www.mca.gov.in/Ministry/pdf/Rules_19072016.pdf

Amendment under Cost Records and Audit Rules – Highlights

The Ministry of Corporate Affairs (MCA) amended the Companies (Cost Records and Audit) Rules, 2014 vide notification dated 14^th July, 2016 by the Companies (Cost Records and Audit) Rules, 2016. The highlight of same is as under:

Points	Prior	Amendment
Definition	“Cost Audit Report” means the report duly audited and signed by the cost auditor including attachment, annexure, qualifications or observations etc. to cost audit report;	Cost Audit Report” means the duly signed cost auditor’s report on the cost records examined and cost statements which are prepared as per these rules, including attachment, annexure, qualifications or observations attached with or included in such report
Application   of Cost Records	Rule 3 prescribes lndustry / Sector/ Product/ Services for which cost records are applicable. The products and services are divided into Regulated (Table A) and Non Regulated Sector (Table B)	Rule 3 is modified thereby making changes in the Regulated and Non Regulated Sector Regulated Sector (Table A) Inclusion: 1.  Telecommunication Services made available to users  Included-  Activities which requires authorisation or license issued by the Dept. Of Telecommunication, Government of India under Indian Telegraph Act, 1885 (13 of 1885) 2.  Petroleum Products: Included activities regulated by Petroleum and Natural Gas Regulatory Board Deletion : 1.   Company engaged in generation of electricity for captive consumption through captive generation plant. Non-Regulated Sector (Table B) Inclusion: 1.Explosives 2.Iron 3.Mechanical Appliances
Appointment of cost Auditor	Classes of Companies prescribed in Rule 6 should appoint cost auditor within prescribed period	The Cost auditor should provide following before appointment: 1.  Written consent 2.  A certificate to the effect of the following- ·          Eligible and not disqualified for appointment under Companies Act, 2013 and the Costs and Works Accountant Act, 1959 and rules and regulations made thereunder ·         Satisfies the Criteria provided in Section 141 of the Companies Act, 2013; ·         Appointment is within limit as prescribed by the act; List of proceedings pending with respect to professional matters of conduct against auditor as disclosed in certificate is true and correct;
Removal of  Auditor	No such Provision	Proviso inserted for removal of Auditor: Removal of Auditor before expiry of his term By Board Resolution After giving a reasonable opportunity of being heard to the cost auditor After recording the reasons of such removal in writing 2nd Proviso Inserted: ·         Intimation of Removal of Auditor to be filed with Registrar along with intimation of  appointment of another auditor in Form CRA-2 (Copy of Board Resolution for Removal of Auditor to be enclosed)
Approval of Board on annexures of Cost audit report	Not required earlier.	The cost statements including other statements to be annexed to Cost Audit Report shall be approved by the Board before signing by directors on behalf of Board, for submission to the cost auditor for his report thereon.
Cost Audit Report	Submission of Cost audit report by the auditor to the Board of Directors for their Consideration and examination	Submission of duly signed cost audit report to the Board of directors for their consideration and examination
Filing of Cost Audit Report	Submission of cost audit report with the Central Government in form CRA-4	Submission of Cost audit report in Form CRA-4 in Extensible Business Reporting Language Format (XBRL).

Summary:

1. Certain additions/Deletion in industry/Sector/Product/Services for which maintenance of cost records is mandatory

2. Cost Auditor needs to give eligibility certificate at the time of appointment similar to the statutory auditor

3. Board of Directors can remove Cost Auditor before the expiry of his term by passing board resolution after giving reasonable opportunity of being heard and recording the reasons of such removal in writing

4. Cost Audit report alongwith annexures/attachments is required to be approved in the Board meeting

5. Cost Auditor shall forward duly signed report to the Board within 180 days from the close of financial year

6. Cost Audit Report in CRA-4 in now to be filed in XBRL Mode

The said notification can be downloaded from the following link:

http://www.mca.gov.in/Ministry/pdf/Rules_15072016.pdf