MCA UPDATE - Amendment in LLP Rules, 2009

Ministry of Corporate Affairs (MCA) has taken a step further for ease of doing business. Starting a business in India has been made easier. MCA has re- engineered the process of Incorporation of Limited Liability Partnership. Following are the major changes:

Reservation of Name:

1. Form RUN-LLP is introduced for reserving name of proposed LLP and for conversion into LLP.
2. Form RUN-LLP can be re-submitted within 15 days from the date on which it is marked for re-submission

Incorporation of LLP

1. Application for incorporation of LLP is to be made in Form No. FiLLiP.
2. Applicants have an option of filing form for reservation of name. Applicant can either proceed with Form RUN-LLP or Form No. FiLLiP. 
3. Consent to act as Partner or Designated Partner shall be filed in Form FiLLiP
4. DIN/DPIN of the proposed 2 designated partners can be applied in Form FiLLiP
5. The 2 resubmissions are allowed for Form FiLLiP  and the period for re-submission of documents shall not exceed 30 days
6. The certificate of Incorporation of LLP will be issued by CRC in Form 16.

Changes in Rule 18 pertaining to name guidelines for LLP are as follows:

Rule 18(2)(viii) omitted​:​​  Abbreviated name of company based on the name of the promoter will be allowed.

Rule 18(2)(xiv) omitted​: There is no need to show the scope, scale of activity in the name of Company while incorporation and change in name.

Forms:

Form RUN-LLP, Form FiLLiP, Form 5, Form 17, Form 18 forms will be processed by Central Registration Centre for and on behalf of the jurisdictional registrar.

The above amendment will be effective from 2nd October, 2018

MCA Update – Ease in approval of Managerial Remuneration

Ministry of Corporate Affairs (MCA) vide notification dated 12th September, 2018 has made effective few more sections of Companies Amendment Act, 2017. The list of sections is mentioned below:

Sr. No.	Section of the Companies Act, 2017	Section of the Principal Act, 2013	Particulars
1.	66	196	Appointment of Managing Director, Whole-time Director or Manager
2.	67	197	Overall Maximum Managerial Remuneration and Managerial Remuneration in Case of Absence or Inadequacy of Profits
3.	68	198	Calculation of Profits
4.	69	200	Central Government or Company to Fix Limit with Regard to Remuneration
5.	70	201	Forms of, and Procedure in Relation to, Certain Applications

 The key highlights of the amendment are as follows:

1.  Any person who has completed the age of seventy years can be appointed as Managerial personnel by taking shareholders’ approval in the form of special resolution. However, if where no such special resolution is passed but votes cast in favour of the motion exceed the votes, if any, cast against the motion, the person can be appointed with the approval of Central Government. [Applicable to Private and Public Companies]     
2. In case of Public Companies,
1. Approval of Central Government is required for appointment of managerial personnel in case if the conditions specified in Part I of the Schedule V are not complied with.
2. Approval of Central Government is not required for the payment of remuneration exceeding 11% of the net Profit of the company subject to compliance of schedule V and by passing Special resolution in General Meeting.
3. Prior approval of following is required before obtaining the approval in the general meeting (for paying remuneration in excess of limits and in case of waiver of remuneration paid in excess of limits as mentioned section 197 read with schedule V)in case if the Company has defaulted in payment of dues from: 
1. Any Bank
2. Public Financial institutions     
3. Non-Convertible Debentures holders
4. Other secured creditors
3. The Auditor has to make statement in his audit report about the compliance of section 197 and schedule V
4.  4. All the applications which are pending with that Central Government shall stand abate, and the Companies shall obtain the approval in accordance with the revised provisions within a period of one year.

Further, to give effect to this notification, MCA has also amended the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and schedule V. 

Disclaimer:   The article is not intended to replace appropriate professional advice required before acting on any matter. MMJC assumes no responsibility in respect of anything done or omitted to be done by person in reliance on the contents of this article.  

MCA UPDATE-National Financial Reporting Authority Rules, 2018

The Ministry of Corporate Affairs (MCA) vide notification dated 13^th November, 2018 notified the National Financial Reporting Authority (NFRA) Rules, 2018.

Applicability of the rules:

NFRA Rules are applicable to the following companies and bodies corporate:

• Companies whose securities are listed on any stock exchange in India or outside India
• Unlisted public companies who have as on 31st March of immediately preceding financial year:
• Paid up capital of not less than Rs. 500 Cr. or
• Annual turnover of not less than Rs. 1000 Cr. Or
• Aggregate outstanding loans, deposits, debentures of not less than Rs. 500 Cr.
• Insurance companies
• Banking companies
• Companies engaged in the generation or supply of electricity
• Companies governed by any Special Act
• Bodies corporate incorporated by an Act in accordance with Section 1(4)(except companies incorporated under Companies Act, 2013 or any previous Companies Act)
• Any company, body corporate, person or class of bodies corporate or companies or persons referred by Central Government to NFRA in public interest
• Foreign subsidiary or associate company of an Indian Company or body corporate which is governed by these Rules, if the net worth OR income of such foreign subsidiary or associate company is  more than 20% of the consolidated income OR consolidated net worth of such Indian Company or body corporate.

Compliance to be done by Companies and Bodies Corporate (Indian & Foreign)

Particulars	Time period	Form No.
All existing Indian and foreign bodies corporate, other than companies, governed by these Rules	Within 30 days of commencement of these Rules	NFRA-1 (Particulars of Auditor as on the date of commencement of these Rules)*
Indian Bodies Corporate (other than companies) governed by these Rules	Within 15 days from the date of appointment of Auditor	NFRA-1 (Particulars of Auditor appointed)*
Foreign subsidiary or foreign associate company, of an Indian company or Indian body corporate, governed by these Rules (as per applicability criteria mentioned above)	Within 15 days from the date of appointment of Auditor	NFRA-1 (Particulars of Auditor appointed)*

*Auditor means individual, firm (including LLP) as appointed under Section 139(1) of the Companies Act, 2013 or under any Act in force

Other Highlights of the rules

Following are the other important highlights in the rules:

• Companies or bodies corporate which cease to meet the criteria for applicability of these rules, shall continue to be governed by the Rules for a period of 3 years after it ceases to be listed, or its paid up capital, turnover or aggregate deposits, debentures loans fall below the limits specified;
• The Rules also prescribe various functions and duties of the NFRA such as recommending accounting and auditing standards for approval of Central Government, overseeing the quality of Audit service and suggesting measures for improvement etc;
• Auditors of companies and bodies corporate governed by these Rules are required to file a Return with the NFRA in a form, on or before 30th April every year, in such form and in such manner as may be prescribed by the Central Government;
• The NFRA shall recommend accounting and auditing standards for the approval of Central Government;
• The Rules also prescribe guidelines to the NFRA for monitoring and enforcing compliance with accounting standards and auditing standards by companies and bodies corporate governed by these Rules;
• NFRA will have power to investigate either suo motu or by reference from Central Government, matters of non-compliance, professional or other misconduct in respect of companies and bodies corporate governed by these Rules;
• NFRA has power to investigate matters and initiate action against auditors for professional or other misconduct lies in respect of companies and bodies corporate governed by these Rules and such power in respect of such companies and bodies corporate shall lie only with the Authority and no other Institute or body;
• The Rules also prescribe procedure to conduct disciplinary proceedings, Manner of enforcement of orders passed in disciplinary proceedings, Punishment in case of non-compliance etc;
• NFRA can provide and receive assistance from foreign independent audit regulators in investigation of an auditor in accordance with Indian laws on such terms as it deems fit.

Notification can be downloaded from the following link:

http://www.mca.gov.in/Ministry/pdf/NFRARules2018_13112018.pdf

Penalties for non-compliance with certain provisions of SEBI LODR, 2015

SEBI vide circular dated 3 May, 2018 had specified penalties in case of non-compliance  of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements [LODR]) Regulations, 2015 (Listing Regulations). The main objective of SEBI for issuing this circular was to maintain consistency and to adopt a uniform approach in the matter of levy of fines for non-compliance of the certain provisions of the Listing Regulations. 

The circular was made effective for the compliance period ending on or after 30 September, 2018. Accordingly, any company to whom Listing Regulations are applicable incurs any non-compliance with the provisions of Listing Regulations as specified in the said SEBI circular, such company shall be liable for the prescribed penalty per day of non-compliance.

The below mentioned table provides penalties for non-compliance of certain provisions of Listing Regulations and consequences of frequent non-compliance are also mentioned. Since, the compliance period for which these penalties are applicable has been started now w.e.f 1^st October 2018, all Companies are advised to take appropriate action and ensure timely compliance to avoid per day penalty.

Regulation	Fine payable/other action to be taken in case of non-compliance	Fine prior to this circular
Regulation 6(1) Non-compliance with requirement to appoint a qualified company secretary as the compliance officer	₹1,000 per day	-
Regulation 7(1) Non-compliance with requirement to appoint share transfer agent	₹1,000 per day	-
Regulation 13(1)/ 13(3) Failure to ensure that adequate steps are taken for expeditious redressal of investor complaints Non-submission of the statement on shareholder complaints within the period prescribed under this regulation or under any circular issued in respect of redressal of investor grievances	₹1,000 per day	-
Regulation 17(1) Non-compliance with the requirements pertaining to the composition of the Board including failure to appoint woman director	₹5,000 per day	-
Regulation 18(1) Non-compliance with the constitution of audit committee	₹2,000 per day	-
Regulation 19(1)/ 19(2) Non-compliance with the constitution of nomination and remuneration committee	₹2,000 per day	-
Regulation 20(2) Non-compliance with the constitution of stakeholder relationship committee	₹2,000 per day	-
Regulation 21(2) Non-compliance with the constitution of risk management committee	₹2,000 per day	-
Regulation 27(2) Non-submission of the Corporate governance compliance report within the period provided under this regulation	₹2,000 per day	₹1,000 per day of non-compliance till the date of compliance (1st non-compliance) ₹2,000 per day of non-compliance till the date of compliance (subsequent non-compliance)
Regulation 29(2)/29(3) Delay in furnishing prior intimation about the meeting of the board of directors	₹10,000 per instance of non-compliance per item	-
Regulation 31 Non-submission of shareholding pattern within the period prescribed	₹2,000 per day	₹1,000 per day of non-compliance till the date of compliance and If non-compliance continues for more than 15    days, additional fine  of 0.1  %  of  paid up    capital of    the entity   or ₹1 crore, whichever is less (1st non-compliance) ₹2,000 per day of non-compliance till the date of compliance and If non-compliance continues for more than 15 days, additional fine of 0.1 % of paid  up  capital of the  entity or ₹1 crore, whichever is less. (subsequent non-compliance)
Regulation 32(1) Non-submission of deviations/ variations in utilization of issue proceeds	₹1,000 per day	-
Regulation 33 Non-submission of the financial results within the period prescribed under this regulation	₹5,000 per day	₹5,000 per day of non-compliance till the date of compliance and If non-compliance continues for more than 15    days, additional fine of 0.1% of Paid Up   capital of    the entity  or ₹1crore,whichever is less. (1st non-compliance) ₹10,000 per day of non-compliance till the date of compliance and If non-compliance continues for more than 15 days, additional fine of 0.1 % of Paid Up capital*of the  entity or ₹1 crore, whichever is less (subsequent non-compliance)
Regulation 34 Non-submission of the Annual Report within the period prescribed under this regulation	₹2,000 per day	If non-compliance continues for more than 5 days, ₹1,000 per day till the date of compliance (1st non-compliance) ₹2,000 per day of non-compliance till the date of compliance (subsequent non-compliance)
Regulation 39(3) Non-submission of information regarding loss of share certificates and issue of the duplicate certificates within the period prescribed under this regulation	₹1,000 per day	-
Regulation 42(2)/42(3)/ 42(4)/42(5) Delay in/ non-disclosure of record date/ dividend declaration or non-compliance with ensuring the prescribed time gap between two record dates/ book closure dates	₹10,000 per instance of non-compliance per item	-
Regulation 44(3) Non-submission of the voting results within the period provided under this regulation	₹10,000 per instance of non-compliance per item	-
Regulation 46 Non-compliance with norms pertaining to functional website	Advisory/warning letter per instance of non-compliance per item ₹10,000 per instance for every additional advisory/warning letter exceeding the four advisory/ warning letters in a financial year	-

COMPANIES WHO SURVIVE LONGER THAN 100 YEARS!

• How much do you think any Company can survive?
• Some of the oldest companies in India are as follows:

Sr. No.	Name of the Company	Started in	Years
1.	Bombay Dyeing	23/08/1879	139
2.	Shalimar Paints Ltd.	16/12/1902	116
3.	Tata Steel Limited	26/08/1907	111
4.	Britannia Industries Limited	21/03/1918	100
5.	TATA Power	18/09/1919	99
6.	Kirloskar Brothers Limited	15/01/1920	98
7.	Nestle India Limited	28/03/1959	59

•  All the Companies which have survived longer in India are listed.

•  One of the major reasons behind their long lasting period is that they are listed. Listing assures governance and sustainability

• If the Company is in listed format, chances of the survival of the company beyond the life of the promoter are higher.