News from the Ministry of Corporate Affairs
The Ministry of Corporate Affairs during the last week came out with various updations and clarifications to make the process under the Companies Act, 1956 more Investor friendly and growth oriented. A gist of the said updations is provided herewith for your reference:-
Notification dated 02nd June 2011 and Circular No. 32/2011 regarding Digital Signatures on DIN Form
The Ministry of Corporate Affairs have yet again amended the Companies (Director Identification Number) Rules, 2006 through notification dated 02.06.2011. These rules shall come into force on 12.06.2011. The earlier amendment dated 27.03.2011 which gives the right to applicant to apply DIN using his digital signatures has been withdrawn and now only PCS/PCA/PCWA/Company Secretary in whole time employment are allowed to sign the DIN application digitally.
For the text of the Circular click here
For the text of the Notification click here
General Circular No. 35/2011 dated 06th June 2011 regarding meetings through video conferencing
The Ministry has issued clarification regarding participation in meetings by Shareholders and Directors vide General Circular No. 35/2011 dated 6th June 2011. As per the circular, itâ€™s not mandatory for companies to provide its Directors, the facility to attend meetings through video conferencing, however for Shareholdersâ€™ meetings to be held after Financial year 2011-12, video conferencing facility for shareholders is mandatory for all listed companies. Further for e-voting in general meetings, only NSDL and CDS(I)L are authorized as agencies for providing and supervising electronic voting subject to the conditions that they obtain a certificate from Standardization Testing and Quality Certification (STQC) Directorate, Department of Information Technology, Ministry of Communication and IT, Government of India, New Delhi.
For the text of the Circular click here:-
General Circular No. 36/2011 dated 07th June 2011 regarding Fast Track Exit Mode
The Ministry of Corporate Affairs, has, time and again, launched Easy Exist Scheme for dormant companies and there was always duration of the schemes. Now it has come out with the guidelines for Fast Track Exit (FTE) mode for defunct companies under Section 560 of the Companies Act, 1956 vide General Circular No. 36/2011 dated 07th June 2011.
The scheme shall be operative w.e.f. 03rd July 2011. In this the existing procedure of making application through Form 61 has been modified and new Form FTE is prescribed. The process is more or less the same as was prescribed under earlier schemes.
The salient features of these guidelines are:
- A company which has nil asset and liability and has not commenced any business activity or operation since incorporation; or is not carrying over any business activity or operation for last one year can make application for getting its name struck off from the Register of Companies.
- These guidelines are not applicable on the following companies:
- Listed companies;
- Companies that have been De-listed due to non-compliance of Listing Agreement or any other statutory Laws;
- Companies registered under section 25 of the Companies Act, 1956;
- Vanishing companies;
- Companies where inspection or investigation is ordered and being carried out or yet to be taken up or where completed prosecutions arising out of such inspection or investigation are pending in the court;
- Companies where order under section 234 of the Companies Act, 1956 has been issued by the Registrar and reply thereto is pending or where prosecution if any, is pending in the court;
- Companies against which prosecution for a non compoundable offence is pending in court;
- Companies accepted public deposits which are either outstanding or the company is in default in repayment of the same;
- Company having secured loan;
- Company having management dispute;
- Company in respect of which filing of documents have been stayed by court or Company Law Board (CLB) or Central Government or any other competent authority;
- Company having dues towards income tax or sales tax or central excise or banks and financial institutions or any other Central Government or State Government Departments or authorities or any local authorities.
- If there are pending prosecutions which relate to only for non-filing of Annual Returns under section 159 and Balance Sheet under section 220 of the Companies Act, 1956, such application may be accepted provided the applicants have already filed the compounding application. However, steps for final strike off the name of the company will be taken only after disposal of compounding application by the competent authority.
- Form FTE shall be accompanied by an affidavit which should be sworn by each of the existing director(s) of the company before a First Class Judicial Magistrate or Executive Magistrate or Oath Commissioner or Notary, to the effect that the company has not carried on any business since incorporation or that the company did some business for a period up to a date (which should be specified) and then discontinued its operations, as the case may be;
- Form FTE shall further be accompanied by an Indemnity Bond, duly notarized, to be given by every director individually or collectively, to the effect that any losses, claim and liabilities on the company, will be met in full by every director individually or collectively, even after the name of the company is struck off the register of Companies;
- In case of foreign nationals and NRIs, Indemnity Bond and Affidavit may be notarized as per their respective countryâ€™s law.
- The Company shall also file a Statement of Account prepared as on date not prior to more than one month preceding the date of filing of application in Form FTE, duly certified by a statutory auditor or Chartered Accountant in whole time practice, as the case may be.
- The Registrar of Companies, on receipt of the application, shall examine the same and if found in order, shall give a notice to the company under section 560(3) of the Companies Act, 1956 by email on its e-mail address intimated in the Form, giving thirty days time, stating that unless cause is shown to the contrary, its name be struck off from the Register and the company will be dissolved.
- The Registrar of companies shall put the name of applicant(s) and date of making the application(s) under fast track exit mode, on daily basis, on the MCA portal www.mca.gov.in, giving thirty days time for raising objection, if any, by the stakeholders to the concerned Registrar.
- The Registrar of Companies immediately after passing of time given above and on being satisfied that the case is otherwise in order, shall strike its name off the Register and shall send notice under sub-section (5) of section 560 of the Companies Act, 1956 for publication in the Official Gazette and the applicant company shall stand dissolved from the date of publication of the notice in the Official Gazette.
For the text of the Circular click here:-
General Circular No. 37/2011 dated 07th June 2011 on XBRL Taxonomy:
The Ministry of Corporate Affairs, in supersession of its earlier circular No. 9/2011 dated 31.03.2011, has mandated for following companies to file Balance sheet and Profit and loss Account along with Directorsâ€™ and Auditorsâ€™ Report for the year 2010Â·11 onwards by using XBRL taxonomy:
- All companies listed in India and their Indian subsidiaries;
- All companies having a paid up capital of Rs. 5 Crore and above:
- All companies having a turnover of Rs 100 Crore and above.
However banking companies, insurance companies, power companies and Non Banking Financial Companies (NBFCs) are exempted for XBRL filing, till further orders.
All companies falling above, the Balance Sheets of which are adopted in the Annual General Meeting held before 30.09.2011 permitted to file upto 30-09-2011 without any additional filing fee. However, where companies hold the Annual General Meeting in the month of September 2011, they will file the Balance Sheet within 30 days from the date of adoption in the General Meeting as per section 220 of the Companies Act, 1956. Thus, the main benefit of this is reaching out to companies whose AGM would be held latest by August 2011.
For other details on the same and for FAQs on the Circular click here:-
General Circular dated 03rd June 2011 on Settlement of Prosecution cases
To reduce the quantum of cases under prosecution and to ascertain the legal cases wherein the companies and their officers in default are inclined to get the offences compounded on payment of compounding fees, the Ministry has initiated the process of organizing Lok Adalats.
For this purpose, Lok Adalats would be organized on 9th,16th,23rd & 30th June by RDs in the offices of concerned ROCs within your jurisdiction between 10.00 AM to 1.00 P.M by giving an advance advertisement in the local Newspapers to this effect and in subsequent months two Lok Adalats would be organized in each month. The professional institutes as well as advertisements would be used as a mode to spread publicity in the matter and provide information in such reference.
Operational instructions are further issued to Registrar of Companies in such reference so that all cases falling under the category are identified and properly disposed off.
For complete text of circular click here:-
Notification dated 03rd June 2011 on new Cost Audit Report Rules
The Ministry of Corporate Affairs has notified new set of rules for Cost Audit Report which will supersede the existing Cost Audit Report Rules, 2001. The new rules may be called The Companies (Cost Audit Report) Rules, 2011.
These rules shall apply to every company in respect of which an audit of the cost records has been ordered by the Central Government under sub-section (1) of section 233B of the Act.
The new rules are different from the old rules in the following manner:
- Earlier thereâ€™s only a single form for cost audit report and now 3 forms â€“ Form I, Form II and Form III are introduced.
- Form II is the form of the cost auditorsâ€™ report which is to be filed electronically with the Central Government by attaching it in Form I. However audit reports which are to be submitted before April 01, 2012 shall be as per the format given in Companies (Cost Audit Report) Rules, 2001
- Form III is format of the performance appraisal report which needs to attach with Form II.
- The term â€˜productâ€™ is defined and also a new term â€˜Product Groupâ€™ is introduced.
- Product: means any tangible or intangible good, material, substance, article, idea, know-how, method, information, object, service, etc. that is the result of human, mechanical, industrial, chemical, or natural act, process, procedure, function, operation, technique, or treatment and is intended for use, consumption, sale, transport, store, delivery or disposal.
- Product Group: in relation to tangible products means a group of homogenous and alike products, produced from same raw materials and by using similar or same production process, having similar physical or chemical characteristics and common unit of measurement, and having same or similar usage or application; and in relation to intangible products means a group of homogenous and alike products or services, produced by using similar or same process or inputs, having similar characteristics and common unit of measurement, and having same or similar usage or application;
- Application to appoint cost auditor to be filed with the Central Government electronically within 90 days of the commencement of financial year.
- The Cost Auditor to inform his appointment within 30 days from the receipt of letter of appointment
- Every Company shall keep and maintain cost details, statements, schedules etc. for each unit and each product or activity comprised in each product group, duly authenticated by at least two Directors of the company and the cost auditor.
- The cost details, statements, schedules, etc. of every company, relating to a period of not less than eight financial years immediately preceding a financial year, or where the company had been in existence for a period less than eight years, in respect of all the preceding years shall be kept in good order:
- Every cost auditor, who submits a report, shall also furnish performance appraisal report, duly authenticated by him, to the Board/Audit Committee of the company in form III.
For complete text of notification click here:-
Notification dated 03rd June 2011 on new Cost Accounting Records Rules
The Ministry of Corporate Affairs has notified new set of rules for Cost Audit Report which may be called as The Companies (Cost Accounting Records) Rules, 2011. The salient features of these rules are given herein below:
- These rules shall apply to every company:
- Which is engaged in the production, processing, manufacturing, or mining activities
- wherein, the aggregate value of net worth as on the date of balance sheet exceeds Rs. 5 Crore;
- wherein, the aggregate value of the turnover made by the Company as on the date of balance sheet exceeds Rs. 20 Crore;
- wherein, the companyâ€™s equity or debt securities are listed or are in the process of listing on any stock exchange, whether in India or outside India.
- The Rules shall not apply to a company governed by any special Act or special activities or products.
- Every company including all units and branches thereof shall from 01.04.2011, keep cost records on regular basis to calculate per unit cost of production or cost of operations, cost of sales and margin for each of its products and activities for every financial year on monthly/quarterly/half-yearly/annual basis.
- The cost records shall be maintained in accordance with the generally accepted cost accounting principles and cost accounting standards.
- All such cost records and cost statements shall be reconciled with the audited financial statements for the financial year and the variations, if any, shall be clearly indicated and explained.
- All such cost records, cost statements and reconciliation statements, maintained under these rules, relating to a period of not less than eight financial years immediately preceding a financial year or where the company had been in existence for a period less than eight years, in respect of all the preceding years shall be kept in good order.
- It shall be the duty of every person, referred to in sub-section (6) and (7) of section 209 of the Companies Act, 1956 (1 of 1956), to take all reasonable steps to secure compliance by the company with the provisions of these rules in the same manner as he is liable to maintain accounts required under sub-section (1) of section 209 of the said Act.
- Every company shall submit a compliance report along with annexures duly certified by a cost accountant in respect of each financial year commencing from 2011-12, to the Central Government in the form A within 180 days from the close of financial year.
- The Annexure prescribed with the compliance report shall be approved by the Board of Directors before submitting the same to the Central Government by the company.
For complete text of notification click here:-