MCA amend Companies (Transfer of pending proceedings) Rule, 2014 and Section 434 of Cos. Act 2013 to include 'voluntary winding-up' provisions of former Act

Voluntary winding up

·         The rule 4 is substituted which deals with the pending proceedings relating to voluntary winding up.

Proceedings relating to voluntary winding up where notice of the resolution by advertisement has been given under section 485(1) of the companies act, 1956, but the company have been not dissolved before 1^st day of April, 2017 shall continue to be dealt with in accordance with provisions of the Companies Act, 1956.

·         Third proviso inserted in Section 434 of the companies Act, 2013

Provided also that proceedings relating to cases of voluntary winding up of a company where notice of the resolution by advertisement has been given under sub-section (1) of section 485 of the Companies Act, 1956 but the company has not been dissolved before the 1st April, 2017 shall continue to be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959.

Winding up on ground of inability to pay debts

·         The rule 5 is also substituted which deals with transfer of pending proceedings of winding up on the   ground of inability to pay debts.

Winding up petitions under clause (e) of section 433 of Companies Act, 1956, on ground of inability to pay debts pending before High Court mandates petitioner to file information, other than information forming part of the records transferred in accordance with the rule 7 required for admission of the petition under sections 7, 8 or 9 of the code as the case may be including details of the proposed insolvency professional to the tribunal upto July 15, 2017 failing which the petition shall stand abated. It also provides for filing fresh application under sections 7 or 8 or 9 of Insolvency code after 15^th July, 2017.

It also provides that petitions relating to winding up which have not been transferred to the Tribunal and remain with the High Court and where there is another petition under clause (e) of section 433 of the Act for winding up against the same company pending as on December 15, 2016, such other petition shall not be transferred to the Tribunal, even if the petition has not been served on the respondent:

            MCA vide Removal of Difficulties clarified that since the Insolvency and Bankruptcy Code provides for a substantially different framework for persons who may be appointed as liquidators and for making of an application for dissolution by the liquidator. Proceedings relating to cases of voluntary winding up of a company where notice of the resolution by advertisement has been given under sub-section (1) of section 485 of the Companies Act, 1956 but the company has not been dissolved before the 1st April, 2017 shall continue to be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959.

Strike off – Limited Liability Partnership

In case if the Limited Liability Partnership (LLP) wants to close down its business, it can make an application to the registrar for removing the name of the LLP from its registers of LLP’s.

Section 75 of Limited Liability Partnership Act, 2008 (LLP Act, 2008) read with Rule 37 of Limited Liability Partnership rules, 2009 deals with strike off of LLP.

·           LLP is not carrying on any business or operation for a period of two years or more and the Registrar has  reasonable cause to believe the same, for the purpose of taking suo-motu action for striking off the name of the LLP; or

·         LLP is not carrying on any business or operation for a period of one year or more and has made an application in Form 24 to the Registrar, with the consent of all partners of the limited liability partnership for striking off its name from the register

Striking off Name of LLP from the Register by way of an application to Registrar:

Conditions to be satisfied before making an application: 

·         Consent of all partners of LLP

·         Extinguishment of all liabilities

·         LLP desirous to make an application should file overdue returns up to end of the financial year in which LLP ceased to carry on its business or commercial operation.

o   Form 8 (Statement of account and solvency)

o   Form 11 (Annual return of LLP)

This condition is modified w.e.f. 20^th May, 2017 whereby all the returns are required to be filed by the LLP for making application for strike off.

The process for making application to registrar for strike off:

1.  File all overdue returns i.e. form 8 and form 11, if any (up to end of the financial year in which LLP ceased to carry on its business)

2.  Obtain consent of all partners of LLP

3.  Obtain approval of concerned regulatory authority, required if any

4.  Authorizing one partner to make application to Registrar

5.  Make Application to registrar in E- Form 24 with following attachments:

a.       Copy of consent of all partners

b.      Copy of authority to make application duly signed by all partners

c.       Copy of affidavit from all the designated partner  for striking off

d.      Copy of statements of Nil assets and liabilities duly certified by chartered accountant in practice not earlier than 30 days of the date of filing of Form 24

e.       Copy of acknowledgement of latest Income tax return

f.       Copy of the initial LLP agreement

6.  Application  made to be placed on the website of MCA for the information of general public for the period of one month

7.  On expiry of one month, if registrar is satisfied that the name should be struck off from the register, the registrar shall struck off and publish notice in official gazette.

The LLP can make application for strike off, if all the conditions mentioned above are satisfied. If either of the condition is not satisfied the LLP can proceed for winding up of LLP. However, the winding up of LLP is time driven process and complex and requires approval of High Court/NCLT.

SEBI Clarifies on applicability of Lock in period in case of unlisted CCDs issued by way of preferential allotment on private placement basis

SEBI issues informal guidance to PC Jewellers Limited (hereinafter referred to PCJ) under the Informal Guidance Scheme read with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (SEBI (ICDR) Regulations 2009), clarifies on the lock-in period applicable to the pre-preferential allotment shareholding for convertible securities allotted to DVI Fund (Mauritius) Ltd.

PCJ had proposed issue and allotment of 42,69,984 Compulsorily Convertible Debentures (CCDs) to DVI Fund (Mauritius) Ltd. by way of preferential allotment on private placement basis at a face value of Rs. 1000 each in accordance with Chapter VII of SEBI (ICDR) Regulations, 2009.

Regulation 78 of SEBI (ICDR) Regulations, 2009 deal with Lock-in of specified securities and pre-preferential allotment shareholding of the allottees, if any.

Regulation 2(1)(zj):

“specified securities” means equity shares and convertible securities.

Regulation 78(6) states that:

‘The entire pre-preferential allotment shareholding of the allottees, if any, shall be locked-in from the relevant date upto a period of six months from the date of trading approval.’ PCJ queried on the lock-in period applicable to pre-preferential allotment shareholding of DVI Fund (Mauritius) Ltd.

SEBI states that Regulation 78(6) of the ICDR Regulations provides that the entire pre-preferential allotment shareholding of the allottees, if any, shall be locked-in from the relevant date upto a period of six months from the date of trading approval.

SEBI has clarified, where the requirement of trading approval is not applicable to specified securities being CCDs in this case, lock-in period shall commence from the relevant date and end on the expiry of six months from the date of allotment of CCDs and not from the date of trading approval as the CCDs were not listed.

The same shall be applicable for any convertible security to be issued.

MCA Updates

·                               Amendment in Companies (Audit and Auditors) Rules, 2014

Ministry of Corporate Affairs (MCA) vide notification dated 22 June 2017, has made an amendment to the Companies (Audit and Auditors) Rules, 2014  

Pursuant to this notification, the limit of paid up share capital of “Rs.20 crores or more” has been revised to “Rs. 50 crores or more” subsequent to which the private companies having paid up share capital of less than Rs. 50 crores shall not be required to comply with the provisions of Section 139(2) of Companies Act, 2013 regarding the rotation of auditors.

·                            Surrender of Director Identification Number

E- Form DIR-5 (Application for surrender of Director Identification Number) has been deployed as an e-form for filing purposes w.e.f 21st June 2017. Stakeholders who wish to surrender DIN shall be required to file this e-form instead of it being filed as an attachment to form RD-1.

Exemption to Government Companies

Ministry of Corporate Affairs (MCA) vide Notification dated 13^th June, 2017 hereby amends its Notification no. G.S.R 463(E) dated 5^th June, 2015(Principal Notification).

The Government companies will not be eligible to claim the following exemptions alongwith those specified in Principal Notification, if they have defaulted in filing of financial statements or annual returns under section 137 and section 92 respectively with Registrar.

Section	Earlier	Amended
96(2)	Place of holding AGM Such other place as the Central Govt. may approve in this behalf	Place of holding AGM Such other place within the city, town or village in which the registered office of the company is situated or such other place as the Central Govt. may approve in this behalf
152(6) and (7)	Directors retiring by rotation- Shall not apply to:    Govt. Co in which entire paid up share capital is held by Central Govt.  or by State Govt. or by both Subsidiary of Govt. Co. referred above	Directors retiring by rotation- Shall not apply to: 1. Govt. Co which is Unlisted company; and > =51% of paid up capital is held by Central Govt.  or by State Govt. or by both 2. Subsidiary of Govt. Company referred above
230 to 232	The Tribunal had the powers under the following sections: S. 230 Compromise and Arrangements with creditors and members S 231. Power of tribunal to enforce compromise or arrangement S. 232 Merger and Amalgamation of companies	For the word “Tribunal”, wherever it occurs, the words “Central Government” shall be substituted in following sections: S. 230 Compromise and Arrangements with creditors and members S 231. Power of tribunal to enforce compromise or arrangement S. 232 Merger and Amalgamation of companies

Exemption to Section 8 companies

Ministry of Corporate Affairs (MCA) vide Notification dated 13^th June, 2017 hereby amends its Notification No. G.S.R 466(E) dated 5^th June, 2015 (Principal Notification).

The Section 8 companies will not be eligible to claim the following exemptions alongwith those specified in Principal Notification, if they have defaulted in filing of financial statements or annual returns under section 137 and section 92 respectively with Registrar.

Section	Earlier	Amended
Clause (b) and First proviso to 149(1)	Earlier criteria related to minimum and maximum no. of directors was exempted	Now Section 149(1)(b) and First proviso to Section 149(1) are not applicable. i.e. Only criteria related to minimum no. of directors are applicable as follows: For public company -  3 directors For private company – 2 directors
186(7)	No Such provision	Section 186(7) shall not apply to a company in which : 26% or more of paid up share capital is held by Central Govt./State Govt. Or both in respect of loans provided by such company for funding Industrial Research and Development project in furtherance of its objects as stated in MOA

Exemptions to Private Companies

Ministry of Corporate Affairs (MCA) vide Notification dated 13^th June, 2017 hereby amends its Notification no. G.S.R 464 (E) dated 5^th June, 2015 (Principal Notification).

The private companies will not be eligible to claim the following exemptions alongwith those specified in Principal Notification, if they have defaulted in filing of financial statements or annual returns under section 137 and section 92 respectively with Registrar.

Section	Earlier	Amended
2(40)	Cash Flow statement is not mandatory for: ·         One person Company ·         Small Company ·         Dormant Company	Cash flow statement is not mandatory for: ·         One person Company ·         Small Company ·         Dormant Company ·         Start-up Company (Private company)
Clause  (a) to (e) of Section 73(2)	Shall not apply to a Private company which accepts from its members monies not exceeding 100% of aggregate of paid up share capital and free reserves	Shall not apply to a Private company- (A)    which accepts from its members monies not exceeding 100% of aggregate of paid up share capital, free reserves and securities premium account’, or   (B)    which is a start up for 5 years from the date of its Incorporation or (C)    which fulfils all of the following conditions: (a)      which is not an associate or subsidiary company of any other company   (b)      If the borrowings of such a company from Banks or Financial institutions or any Body corporate is less than twice of its paid up share capital or 50 Crore rupees, whichever is lower; and (c)      Such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under this section Provided that the company referred to in clauses (A), (B) or (C) shall file the details of monies accepted to the Registrar in such manner as may be specified.".
92(1)(g)	Every company including small company requires to provide details of Remuneration of directors and Key Managerial Personnel in its Annual return.	Now, small companies are required to disclose the details of remuneration of directors only.
92(1)	In relation to One Person Company, small company, the annual return shall be signed by the Company Secretary and if there is no Company Secretary, by the Director of the company	Now in addition to One Person Company and  Small company, Private Company which is a start up , the annual return shall be signed by the Company Secretary and if there is no Company Secretary, by the Director of the company
143(3)(i)	The Auditors report shall also state: (i) whether the company has adequate Internal Financial Controls system in place and the operating effectiveness of such control	Clause (i) shall not be applicable to private companies which is: ·         One Person Company; or ·         Small Company; or ·         Having turnover less than 50 Crores as per latest audited financial statements; or ·         Having aggregate borrowings less than 25 crores from banks or financial institutions or any body corporate at any point of time during the financial year
173(5)	One Person Company (OPC) or Dormant Company or small company shall conduct at least one meeting of board of Directors in each half of the calendar year and the gap between the two meeting is not less than 90 days	Alongwith OPC, dormant and small company, this section shall also apply to Private company which is a start up
174(3)	Earlier the same provision is inserted in section 184(2)	Now the same has been inserted in Section 174(3) Interested director may also be counted towards quorum in such meeting after disclosure of his interest pursuant to section 184