MCA amends the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016:

MCA, by exercising the powers conferred by sub-sections (1), (2) and (4) of Section 248 read with Section 469 of the Companies Act, 2013, has introduced further rules to amend the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, namely:-

In the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 (hereafter referred to as the principal rules), the following provisos have been inserted in sub-rule (1) of Rule 4:

“Provided that the company shall not file an application unless it has filed overdue financial statements under section 137 and overdue annual returns under section 92, up to the end of the financial year in which the company ceased to carry its business operations: Provided further that in case a company intends to file the application after the action under subsection (1) of section 248 has been initiated by the Registrar, it shall file all pending financial statements under section 137 and all pending annual returns under section 92, before filing the application: Provided also that once notice under sub-section (5) of section 248 has been issued by the Registrar for publication pursuant to the action initiated under sub-section (1) of section 248, a company shall not be allowed to file the application under this sub-rule.”

Notification under Section 14 of the Insolvency and Bankruptcy Code, 2016 :

In exercise of its powers conferred by clause (a) of sub-section (3) of section 14 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), the Ministry of Corporate Affairs (“MCA”) notified that the provisions of sub-section (1) of section 14 of IBC, shall not apply where the corporate debtor has entered into any of the following transactions, arrangements or agreements, namely: –

1. the Production Sharing Contracts, Revenue Sharing Contracts, Exploration Licenses and Mining Leases made under the Oilfields (Regulation and Development) Act, 1948 and rules made thereunder; and
2. any transactions, arrangements or agreements, including Joint Operating Agreement, connected or ancillary to the transactions, arrangements or agreements referred to in clause (i).

Government Expands the Scope of PMLA – Introduces amendments for stronger money laundering measures

The Ministry of Finance , by using the authority granted u/s 2(1)(sa)(vi) of the Prevention of Money Laundering Act, 2002 (“PMLA”) has notified that certain activities, when carried out on behalf of or for another person in the course of business, will be regarded as activities for the purpose of this sub-clause.

These activities are as follows –

1. Acting as a formation agent of companies and LLPs;
2. Acting as (or arranging for another person to act as) a director or secretary of a company, a partner of a firm or a similar position in relation to other companies and LLPs;
3. Providing a registered office, business address or accommodation, correspondence or administrative address for a company or a LLP or a trust;
4. Acting as (or arranging for another person to act as) a trustee of an express trust or performing the equivalent function for another type of trust; and
5. Acting as (or arranging for another person to act as) a nominee shareholder for another person.

This amendment expands the coverage of PMLA to include individuals acting as formation agents of companies and limited liability partnerships. This means that all individuals involved in the process of incorporating and forming a company or LLP will now be subject to the provisions of PMLA.

However, the term “formation agent” is unclear, making it uncertain whether consultants who assist with company incorporation without formal authority or certification would be subject to the obligations under PMLA.

It is to be noted that advocates, chartered accountants, cost accountants and company secretaries in practice, who are engaged in the formation of the company to the extent of only filing a declaration form are exempted from the purview of PMLA.

The provisions of PMLA will now apply to a person acting as a director or secretary of a company, a partner of a firm or a similar position in relation to other companies and LLPs, necessitating their compliance with various obligations such as maintaining records of financial transactions, identifying and verifying clients, and reporting suspicious transactions to the financial intelligence unit.

A person providing a registered office, business address, accommodation, correspondence or administrative address for a company, LLPs or a trust has been included in the reporting entity under PMLA. This means that any person that provides such services to a company, LLPs or trust will have to comply with the reporting requirements as outlined under PMLA. However, any activity carried out as part of an agreement of lease, sub-lease, tenancy or any other agreement or arrangement for the use of land or building or any space and where the consideration is subject to deduction of income tax would be exempt from the purview of PMLA.

This amendment also includes persons acting as trustees of an express trust or performing equivalent functions for other types of trust. It increases the level of scrutiny on persons who are involved in managing trusts. The trustees will need to ensure that they have adequate systems in place to monitor and report on their activities, including any transactions that may be considered suspicious. This could result in increased compliance costs for trustees and potential reputational damage if they fail to comply with reporting requirements.

A nominee shareholder is the registered owner of shares held for the benefit of another person (the beneficial owner). The beneficial owner may choose to appoint a nominee because they do not wish to have the shares registered in their own name, or they may be required to appoint a nominee. The reporting requirements under PMLA require companies to disclose the identity of the ultimate beneficial owner (UBO) of the shares held by a nominee shareholder. This means that companies must identify the person who actually owns or controls the shares, even if they are not listed as registered shareholders.

These amendments introduced in the PMLA has increased the compliances that one has to undertake under the Companies Act, the LLP Act as well as the Indian Trust Act.

MCA extends the time for filing of e-form DIR-3-KYC and web-form DIR-3-KYC-WEB, without fee

MCA vide its notification dated September 28, 2022 has extended the time for filing of e-form DIR-3-KYC (to be filed by every DIN holder who is filing his KYC details for the first time with MCA and any DIN holder who wants to update any information of his KYC details) and web-form DIR-3-KYC-WEB (to filed mandatorily by every DIN holder who has already submitted e-form DIR-3 KYC in any of the previous financial year and who is allotted DIN as on 31st March of a financial year, on or before 30th September of the immediately next financial year), without filing fee upto 15th October, 2022.

MCA clarifies the mandating Companies to round off figures appearing in Financial Statements

MCA vide an update dated September 26, 2022, clarifies the following:

“CLARIFICATION: Amendment to Schedule III to the Companies Act, 2013 vide MCA Notification GSR. 207(E) dated March 24, 2021 mandates companies to round off the figures appearing in the Financial Statements depending upon their total income. However, if the companies provide absolute figures in e-forms ie. AOC-4, the same shall not be treated as incorrect certification by the Professionals.”

MCA amends the Companies (Corporate Social Responsibility Policy) Rules, 2014

MCA vide its notification dated September 20, 2022 amended the Companies (Corporate Social Responsibility Policy) Rules, 2014 (hereinafter referred to as “the said rules”) and called it the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022 (“the said amendment”). In the said amendment:

• In rule 3, sub-rule (1) of the said rules, after the proviso, the following proviso is inserted:
• “Provided further that a company having any amount in its Unspent Corporate Social Responsibility Account as per sub-section (6) of section 135 shall constitute a CSR Committee and comply with the provisions contained in sub-sections (2) to (6) of the said section.”
• The sub-rule (2) of rule 3 of the said rules is omitted.
• In the said rules, in rule 4, for sub-rule (1), the following sub-rule is substituted by:
• “(1) The Board shall ensure that the CSR activities are undertaken by the company itself or through, –
  • (a) a company established under section 8 of the Act, or a registered public trust or a registered society, exempted under sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10 or registered under section 12A and approved under 80 G of the Income Tax Act, 1961 (43 of 1961), established by the company, either singly or along with any other company; or
  • (b) a company established under section 8 of the Act or a registered trust or a registered society, established by the Central Government or State Government; or
  • (c) any entity established under an Act of Parliament or a State legislature; or
  • (d) a company established under section 8 of the Act, or a registered public trust or a registered society, exempted under sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10 or registered under section 12A and approved under 80 G of the Income Tax Act, 1961, and having an established track record of at least three years in undertaking similar activities.
  • Explanation– For the purpose of clause (c), the term “entity” shall mean a statutory body constituted under an Act of Parliament or State legislature to undertake activities covered in Schedule VII of the Act.”

• In the said rules, in rule 8, in sub-rule (3), in clause (c),
  (i) the words “five percent” is substituted by the words “two per cent.”;
  (ii) the words “whichever is less” is substituted by the words “whichever is higher”
• In the said rules, the Annexure-II is substituted as provided in the said amendment.
• In the said rules, in the e-form CSR–1, for serial number 1 and the entries relating thereto, the following serial number is substituted:
  “1. *Nature of the entity
• Company established under section 8, exempted under sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10 and approved under section 80G of the Income Tax Act, 1961.
• Company established under section 8, registered under section 12A and approved under section 80G of the Income Tax Act, 1961.
• Registered public trust, exempted under sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10 and approved under section 80G of the Income Tax Act, 1961
• Registered public trust, registered under section 12A and approved under section 80G of the Income Tax Act, 1961.
• Registered society, exempted under sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10 and approved under section 80G of the Income Tax Act, 1961.
• Registered society, registered under section 12A and approved under section 80G of the Income Tax Act, 1961.
• Company established under section 8 or registered Trust or registered Society established by the Central Government or State Government.
• Entity established under an Act of Parliament or State Legislature.”

MCA amends the Companies (Specification of Definition Details) Rules, 2014

MCA vide its notification dated September 15, 2022 amends the Companies (Specification of definition details) Rules, 2014 and called it the Companies (Specification of definition details) Amendment Rules, 2022. In the Companies (Specification of definition details) Rules, 2014, in rule 2, in sub-rule (1), for clause (t), the following clause is substituted:

“(t) For the purposes of sub-clause (i) and sub-clause (ii) of clause (85) of section 2 of the Act, paid up capital and turnover of the small company shall not exceed rupees four crore and rupees forty crore respectively.”

MCA amends the notification of the GOI, notifying Corporate Debtors competent to make an application for fast track Corporate Insolvency Resolution Process

MCA vide its notification dated August 30, 2022 amended the notification of the Government of India, in the Ministry of Corporate Affairs, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), vide S.O. 1911(E), dated June 14, 2017 (“said notification”). In the said notification, clause (b) is substituted by the following:

“(b) a Startup (other than the partnership firm) as defined in the notification of the Government of India in the Ministry of Commerce and Industry number G.S.R. 127(E), dated the 19th February, 2019, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), dated the 19th February, 2019 and as amended from time to time; or”

MCA amends the Companies (Acceptance of Deposits) Rules, 2014

MCA vide its notification dated August 29, 2022 amended the Companies (Acceptance of Deposits) Rules, 2014 and called it the Companies (Acceptance of Deposits) Amendment Rules, 2022 (“the said amendment”). In the Companies (Acceptance of Deposits) Rules, 2014:

• • • In rule 16, after the words “auditor of the company“, the words, letters and figure “and declaration to that effect shall be submitted by the auditor in Form DPT-3” is inserted.
    • In the Annexure, Form DPT-3 and Form DPT-4 are substituted by the forms as provided in the said amendment.

MCA amends the Companies (Appointment and Qualification of Directors) Rules, 2014

MCA vide its notification dated August 29, 2022 amended the Companies (Appointment and Qualification of Directors) Rules, 2014 and called it the Companies (Appointment and Qualification of Directors) Third Amendment Rules, 2022 (“the said amendment”).

In the Companies (Appointment and Qualification of Directors) Rules, 2014, in the Annexure, e-form DIR-3-KYC and web-form DIR-3-KYC-WEB are substituted by the forms as provided in the said amendment.

MCA amends the Companies (Registration of Charges) Rules, 2014

MCA vide its notification dated August 29, 2022 amended the Companies (Registration of Charges) Rules, 2014 and called it the Companies (Registration of Charges) Second Amendment Rules, 2014.

• • • In the Companies (Registration of Charges) Rules, 2014 (“the said amendment”), after rule 12, the following rule is inserted:
    • “13. Signing of charge e-forms by insolvency resolution professional or resolution professional or liquidator for companies under resolution or liquidation-
    • The Form No.CHG-1, CHG-4, CHG-8 and CHG-9 shall be signed by Insolvency resolution professional or resolution professional or liquidator for companies under resolution or liquidation, as the case may be and filed with the Registrar.”
    • In the said rules, Form No. CHG-1 is substituted by the form as provided in the said amendment.

MCA amends the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016

MCA vide its notification dated August 24, 2022 amended the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 and called it the Companies (Removal of Names of Companies from the Register of Companies) Second Amendment Rules, 2022. In the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016:

• • • In Form No. STK-1, in paragraph (1), for the brackets and words “(tick whichever is applicable)”, the following is substituted:
    • “the company is not carrying on any business or operations, as revealed after the physical verification carried out under sub-section (9) of section 12.
      (tick whichever is applicable)”;
    • In Form STK-5, in paragraph 1, after sub-paragraph (iii) and before the long line, the following is inserted:
    • “(iv) the following companies are not carrying on any business or operations, as revealed after the physical verification carried out under sub-section (9) of section 12.M/s__________ (indicate names of companies”
    • In Form No. STK-5A, in paragraph 1, for the brackets and words “[Strike off whichever is not applicable]”, the following is inserted:
    • “(iv) are not carrying on any business or operations, as revealed after the physical verification carried out under sub-section (9) of section 12.[Strike off whichever is not applicable]”.

MCA amends the Companies (Incorporation) Rules, 2014

MCA vide its notification dated August 18, 2022 amended the Companies (Incorporation) Rules, 2014 and called it the Companies (Incorporation) Third Amendment Rules, 2022. In the Companies (Incorporation) Rules, 2014, after rule 25A, the following rule is inserted:

25B. Physical verification of the Registered Office of the company.

(1) The Registrar, based upon the information or documents made available on MCA 21, shall visit at the address of the registered office of the company and may cause the physical verification of the said registered office for the purposes of sub-section (9) of section 12, in presence of two independent witness of the locality in which the said registered office is situated and may also seek assistance of the local police for such verification, if required.

(2) The Registrar shall carry the documents as filed on MCA 21 in support of the address of the registered office of the company for the purposes of physical verification and to check the authenticity of the same by cross verification with the copies of supporting documents of such address collected during the said physical verification, duly authenticated from the occupant of the property whereat the said registered office is situated.

(3) The Registrar shall take a photograph of the registered office of the company while causing physical verification of the same.

(4) The report of the physical verification shall be prepared in the following format as provided in the notification.

(5) Where the registered office of the company is found to be not capable of receiving and acknowledging all communications and notices, the Registrar shall send a notice to the company and all the directors of the company, of his intention to remove the name of the company from the register of companies and requesting them to send their representations along with copies of relevant documents, if any, within a period of thirty days from the date of the notice before taking further actions in accordance with the provisions of section 248 of the Act.

As a result of this amendment, the companies which do not provide genuine address of their registered office, may run the risk of their name getting struck off from the ROC records.

MCA amends the Companies (Accounts) Rules, 2014

MCA vide its notification dated August 05, 2022 makes rules further to amend the Companies (Accounts) Rules, 2014 and called them the Companies (Accounts) Fourth Amendment Rules, 2022. In the Companies (Accounts) Rules, 2014, in rule 3:

• • • in sub-rule (1), the words “accessible in India“, is substituted by the words “accessible in India, at all times“;
    • in sub-rule (5), in the proviso, the words “periodic basis“, is substituted by the words “daily basis“;
    • in sub-rule (6), after clause (d), the following clause is inserted:
      “(e) where the service provider is located outside India, the name and address of the person in control of the books of account and other books and papers in India.“

MCA amends the Companies (Appointment and Qualification of Directors) Rules, 2014

MCA vide its notification dated June 10, 2022 amends the Companies (Appointment and Qualification of Directors) Rules, 2014 and called it the Companies (Appointment and Qualification of Directors) Second Amendment, Rules, 2022. In the Companies (Appointment and Qualification of Directors) Rules, 2014, in rule 6, after sub-rule (4), the following sub-rule is inserted:

“(5) Any individual whose name has been removed from the databank under sub-rule

(4), may apply for restoration of his name on payment of fees of one thousand rupee:

(i) his name shall be shown in a separate restored category for a period of one year from the date of restoration within which, he shall be required to pass the online proficiency self-assessment test and thereafter his name shall be included in the databank, only, if he passes the said online proficiency self-assessment test and in such case, the fees paid by him at the time of initial registration shall continue to be valid for the period for which the same was initially paid; and

(ii) in case he fails to pass the online proficiency self-assessment test within one year from the date of restoration, his name shall be removed from the data bank and he shall be required to apply afresh under sub-rule (1) for inclusion of his name in the databank.”

MCA amend the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2014

MCA vide its notification dated June 09, 2022 made amendment in Companies (Removal of Names of Companies from the Register of Companies) Rules, 2014 and called the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2022:

• In the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016, in rule 4, after sub-rule (3), the following sub-rule is inserted-
  • • “(4) (a) Where the Registrar, on examining the application made in Form STK-2, finds that it is necessary to call for further information or finds such application or any document annexed therewith is defective or incomplete in any respect, he shall inform to the applicant to remove the defects and re-submit the complete Form within fifteen days from the date of such information, failing which the Registrar shall treat the Form as invalid in the electronic record, and shall inform the applicant, accordingly.
    • (b) After the re-submission of the Form or document, if the Registrar finds that the Form or document is defective or incomplete in any respect, he shall give further time of fifteen days to remove such defects or complete the Form, failing which the Registrar shall treat the Form as invalid in the electronic record and shall inform the applicant, accordingly.
    • (c) Any re-submission of the application in Form STK-2 made prior to the commencement of the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2022 shall not be counted for the purposes of reckoning the maximum number of re-submissions of such Form.”
• Form No. STK 1, Form No. STK-5 and Form No. STK-5A are substituted.

MCA amends the Companies (Appointment and Qualification of Directors) Rules, 2014 in case of an individual who is a national of a country that shares a land border with India

MCA vide its notification dated June 01, 2022 amends the Companies (Appointment and Qualification of Directors) Rules, 2014, and called it the Companies (Appointment and Qualification of Directors) Amendment Rules, 2022, which mandated an individual who is a national of a country that shares a land border with India, to seek security clearance from the Ministry of Home Affairs, before making an application for Director Identification Number.

• • • In rule 8, after the proviso, the following proviso is inserted:
    • “Provided further that in case the person seeking appointment is a national of a country which shares land border with India, necessary security clearance from the Ministry of Home Affairs, Government of India shall also be attached along with the consent”
    • In rule 10, in sub-rule (1), the following proviso is inserted:
    • “Provided that no application number shall be generated in case of the person applying for Director Identification Number is a national of a country which shares land border with India, unless necessary security clearance from the Ministry of Home Affairs, Government of India has been attached along with application for Director Identification Number.”
    • In the Annexure,
    • (A) In Form DIR-2, under the heading Declaration, the existing paragraph, shall be numbered as paragraph (i) thereof and after the paragraph (i) as so numbered, the following is inserted:
    • “(ii) I further declare that – I am not required to obtain the security clearance from the Ministry of Home Affairs, Government of India before seeking appointment as director ; or
    • I am required to obtain the security clearance from the Ministry of Home Affairs, Government of India before seeking appointment as director and the same has been obtained and is attached
    • (B) In FORM NO. DIR-3, under the heading Verification, after serial number 3, the following serial number is inserted:
      “3A. I am not required to obtain the security clearance from the Ministry of Home Affairs, Government of India under sub-rule (1) of rule 10 before applying for director identification number; or
      I am required to obtain the security clearance from the Ministry of Home Affairs, Government of India under sub-rule (1) of rule 10 before applying for director identification number and the same has been obtained and is attached. ; and”

MCA amends the Companies (Accounts) Rules, 2014

MCA vide its notification dated May 31, 2022 amends the Companies (Accounts) Rules, 2014 and called it the Companies (Accounts) Third Amendment Rules, 2022. In the Companies (Accounts) Rules, 2014, in rule 12, in sub-rule (1B):

• • • For the figures, letters and word “31st May, 2022”, the figures, letters and word “30th June, 2022”, was substituted;
    • After the proviso, the following proviso was inserted:
    • “Provided further that for the financial year 2021-2022, Form CSR-2 shall be filed separately on or before 31st March, 2023 after filing Form AOC-4 or AOC-4 XBRL or AOC-4 NBFC (Ind AS), as the case may be”