Amendments in the Companies Act, 2013
Amendments in the Companies Act, 2013 during the calendar year 2023
1. Applicability of section 14(1) of Insolvency and Bankruptcy Code, 2016
On October 03, 2023, MCA notified an amendment under Section 14(3)(a) of the Insolvency and Bankruptcy Code, 2016 (“IBC”), exempting the applicability of Section 14(1) of the IBC to transactions, arrangements or agreements relating to aircraft, aircraft engines, airframes and helicopters.
This amendment is considering that India being a signatory to and having acceded the Convention on International Interests in Mobile Equipment (“Convention”) and the Protocol to the Convention on International Interests in Mobile Equipment on Matters specific to Aircraft Equipment (“Protocol”) under the joint auspices of International Civil Aviation Organization and the International Institute for the Unification of Private Law concluded at Cape Town on 16th November, 2001 and having acceded the Convention and the Protocol by depositing with the International Institute for the Unification of Private Law the instruments of accession on 31 March,2008.
This may affect Go First Insolvency Resolution Proceedings.
The link to the aforesaid Notification is as follows:
https://egazette.gov.in/WriteReadData/2023/249132.pdf
2. The Companies (Incorporation) Third Amendment Rules, 2023
On October 20, 2023, MCA notified the Companies (Incorporation) Third Amendment Rules, 2023, which shall come into force with effect from October 21, 2023.
In Rule 30(9) of the Companies (Incorporation) Rules, 2014 relating to shifting of the registered office of a company from one state or union territory to another state, following new proviso has been inserted after the existing proviso stating that:
“When the company’s management undergoes a change due to a Resolution Plan sanctioned under section 31 of the Insolvency and Bankruptcy Code, 2016, and the new management wishes to relocate the registered office, it may be allowed if :
- there is no pending appeal against the approved Resolution Plan in any Court or Tribunal.
- there is no ongoing or initiated inquiry, inspection, or investigation subsequent to the approval of Resolution Plan.”
This will benefit companies to shift the Registered Office after the Resolution Applicant take over the Company.
The link to the aforesaid Notification is as follows:
https://www.mca.gov.in/bin/dms/getdocument?mds=uqnggXxHARXXjysr4uSRjQ%253D%253D&type=open
3. The Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023
On October 27, 2023, MCA notified the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023 ( “ Amended Rules”), which has been effective from the same date.
Following are the amendments made in the Companies (Prospectus and Allotment of Securities) Rules, 2014:
1. In Rule (9) relating to the Dematerialization of Securities, a new sub-rule 2 has been inserted
Every public company that had issued share warrants prior to the commencement of the Companies Act, 2013 and has not converted them into equity shares shall:
- inform the Registrar of Companies within 3 monthsof the commencement of these Amended Rules, about the details of such warrants in Form PAS-7; and
- within a period of 6 months of the commencement of these Amended Rules require the bearers of the share warrants to surrender such warrants to the Company and get the shares dematerialized in their account and for this purpose the Company shall place a notice for the bearers of share warrants in Form PAS-8 on the website of the Company, if any and shall also publish the same in a newspaper in the vernacular language which is in circulation in the district and in English language in an English newspaper, widely circulated in the State in which the registered office of the Company is situated.
- In case the bearer of the share warrant does not surrender the share warrants within the period referred as above, the Company shall convert such share warrants into dematerialized form and transfer the same to the Investor Education and Protection Fundestablished under section 125 of the Act.
2. New Rule 9B has been inserted with respect to the ‘Issue of securities in dematerialized form by private companies’
- Every Private Company (excluding *small companies, which is defined below) is required after the period as mentioned below in (ii) , to Issue securitiessolely in dematerialized form and facilitate dematerialization of all its securities in accordance with provisions of the Depositories Act, 1996, and regulations made thereunder.
- A private company, which as on the last day of a financial year, ending on or after 31st March 2023, is not a small company as per audited financial statements for such financial year, shall, within 18 months of closure of such financial year, comply with the provisions of this rule
- Every private company as mentioned above in (ii) making any offer for the issue of any securities or buyback of securities or issue of bonus shares or rights offer, after the date when it is required to comply with this rule, shall ensure that before making such offer, entire holding of securities of its promoters, directors, key managerial personnel has been dematerialized in accordance with the provisions of the Depositories Act, 1996 and regulations made thereunder.
- Every holder of securities of the private company referred to in (ii) above :
- who intends to transfer such securitieson or after the date when the company is required to comply with this rule shall get such securities dematerialized before the transfer; or
- who subscribes to any securitiesof the concerned private company whether by way of private placement or bonus shares or rights offer on or after the date when the company is required to comply with this rule shall ensure that all his securities are held in dematerialized form before such subscription.
3. Government Company is exempted from the application of these Amended Rule
4. Formats of Form PAS-7 (Details of pending share warrants) and Form PAS-8 (Notice for bearers of pending share warrants) have been added.
- Definition of Small Company
*small company is a company that is not a public company and has:- A paid-up share capital equal to or below Rs.4 crore or such a higher amount specified not exceeding more than Rs.10 crores; and
- A turnover equal to or below Rs.40 crore or such a higher amount specified not exceeding more than Rs.100 crore.
- And further following companies are not considered as a Small Company
- A holding or a subsidiary company.
- A company registered under section 8 of the Companies Act.
- A body corporate or company governed by any special act.
Every Private Limited Company is required to issue or approve any transfer of shares in Demat Form after specified period (which is 18 months from 31 March 2023 or any FY when it does not remain a small company). For most of the private limited companies which is not small company as defined under the Companies Act, 2013 such period will be 30 September 2024.
The link to the aforesaid Notification is as follows:
https://egazette.gov.in/WriteReadData/2023/249772.pdf
4. The Limited Liability Partnership (Third Amendment) Rules, 2023
- Every LLP, from the date of its incorporation, is required to maintain a register of its partners in Form 4A. Existing LLPs must comply within 30 days from the commencement of the Amended Rules.
- The register of partners shall in respect of each partner contain the name of the partner; address (registered office address in case the member is a body corporate); e-mail address; Permanent Account Number or Corporate Identification Number; Unique Identification Number, if any; father or mother or spouse’s name; occupation; status; Nationality; name and address of nominee; date of becoming a partner; date of cessation; amount and nature of the contribution with monetary value; and any other interest, if any.
- Entries in the register must be updated within 7 days pursuant to any change made in the contribution amount, or in the name and details of the partners in the LLP Agreement, or in cases of cessation of partnership interest.
- Rectifications made pursuant to orders by competent authorities must be recorded.
- A person whose name is entered in the register of partners of an LLP but does not hold any beneficial interest fully or partly in contribution, such person shall file with the LLP a declaration in Form 4B within 30 days from the date of entry of his name in the register of partners specifying the name and other particulars of the person who actually holds any beneficial interest in such contribution. If any change occurs in the beneficial interest in such contribution, the registered partner shall, within 30 days from the date of such change, make a declaration of such change to the LLP in Form 4B.
- Every person who holds/ acquires a beneficial interest in the contribution of LLP but whose name is not registered in the register of partners shall file with LLP a declaration disclosing such interest in Form 4C within 30 daysfrom acquiring such beneficial interest in the contribution of the LLP specifying the nature of his interest, particulars of the partner in whose name the contribution stand registered in the books of the LLP. If any change occurs in the beneficial interest in such contribution, the beneficial partner shall within 30 days from the date of such change, make a declaration of such change to the LLP in Form 4C.
5. The Companies (Management and Administration) Second Amendment Rules, 2023
On October 27, 2023, MCA notified the Companies (Management and Administration) Second Amendment Rules, 2023 ( Amended Rules), which has been effective from the same date.
In Rule 9 , following new sub-rules (4) to (8) have been inserted after sub-rule (3) relating to Declaration in respect of a beneficial interest in any shares:
Designation of Responsible Persons: Rule 9(4) mandates that every company must designate a person responsible for providing information to the Registrar or any authorized officer regarding beneficial interests in the company’s shares.
Options for Designation: Rule 9(5) mandates designating a responsible person like a company secretary, key managerial personnel (other than the company secretary), or every director if there is no company secretary or key managerial personnel.
Deemed Designation: Rule 9(6) states that until a person is officially designated as per sub-rule (4), the company secretary, Managing Director, or Manager or every director as the case may be shall be deemed to be designated person.
Annual Disclosure: Rule 9(7) mandates that every company must inform the details of the designated person in its Annual Return, ensuring transparency and compliance.
Change in Designated Person: Rule 9(8) states that if a company decides to change its designated person at any time, it must inform the Registrar by submitting an e-form GNL-2 as per the Companies (Registration Offices and Fees) Rules, 2014.
The link to the aforesaid Notification is as follows:
https://www.mca.gov.in/bin/dms/getdocument?mds=lVo7Nz8E9SMEBo5r07okJw%253D%253D&type=open
6. The Companies (Amendment) Act, 2020 (CAA, 2020)
On October 30, 2023 MCA notified Section 5 of the Companies Amendment Act 2020 (which is Section 23(3) and (4) of the Companies Act, 2013 relating to Public Offer and Private Placement). This notification has been made effective from the same date.
The amended Section 23 is as follows:
“(3) Such class of public companies may issue such class of securities for the purposes of listing on permitted stock exchanges in permissible foreign jurisdictions or such other jurisdictions, as may be prescribed.
(4) The Central Government may, by notification, exempt any class or classes of public companies referred to in sub-section (3) from any of the provisions of Chapter III on Prospectus and Allotment of Securities, Chapter IV on Share Capital and Debentures, section 89 on Declaration in respect of Beneficial Interest in any Shares, section 90 on Register of Significant Beneficial Owner in a Company or section 127 on Punishment for failure to distribute dividends and a copy of every such notification shall, as soon as may be after it is issued, be laid before both Houses of Parliament.”
With this Notification, SEBI and RBI need to amend or prescribe new Rules for listing of securities by Indian Companies in Foreign Jurisdiction.
The link for the aforesaid Notification is as below:
https://www.mca.gov.in/bin/dms/getdocument?mds=%252FonnIDkZCRt3QRtb3bARJw%253D%253D&type=open