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Hi Folks

Customer satisfaction is passé. It is customer delight now. Every supplier / service provider tries every trick in the book and even outside the book to ensure that a customer is delighted with his product / service and stays with him. The ‘Thank You’ comes in various avataars and forms and languages including language of discounts and enticing, irresistible offers. While I am not one to be swayed by such offers and communications, I was delighted when I received the following message on whatsapp along with a picture of my garden from my gardener :

“Madam thank you very much from PRAJWAL GARDEN LANDSCAPE ONE 1 YEAR IS REMEMBER WE WOULD LIKE TO BE WITH U FOREVER”.

I can find many language and grammar errors in this simple statement but there is no error for sure in the sentiment behind this genuine ‘thank you’ message. Don’t you agree ? I was touched to receive this exactly a year after my garden was transformed by Murali, my gardener who used both face book and whatsapp to convey his gratitude to the garden make-over and maintenance work given to him. A simple gesture but a great impact. I loved it. Just loved the thought behind it and the simplicity in execution. As they say, ‘if you feel it, say it’. Of course I can vouch for his work too. Mere empty words not backed by quality service do not delight a customer.

As I reflect, let me take you from a feeling of delight to a feeling of gratitude for …………?? Love it or hate it, you cannot ignore it. That is the ever changing, fluid, dynamic, unsettled, unsettling Companies Act, 2013 that constantly keeps ‘teasing’ & ‘provoking’ us…..many a times ‘shocking’ & ‘shaking’ up the corporate world too. A stark contrast to its solid, stodgy, stoic earlier avatar of Companies Act, 1956 which was finally buried legally (read repealed) on Martyr’s Day i.e. 30th January, 2019, except for a few remnants. R.I.P CA1956 ! Having started with it as a student and for most part of my professional life, I do have fond memories of the well drafted, tightly-knit law which has stood the test of time for 63 long years and still serves as the backbone of the current law. Strange that at times we develop a bonding with inanimate things like furniture, house, car, roads, mountains…..and even a piece of legislation and ruminate over the separation or loss !! Wondering to whom do I pay condolences to now ? ☺ Nay, may be better to pay respects and gratitude to the Companies Act, 1956 which has served as my ‘anna-daata’ for over 2 decades, as it may have for several professionals of my generation.

This 206th issue of Samhita highlights the revamped Significant Beneficial Ownership Rules effective from 8th February, 2019, a 6 page summary of the GST updates (so many notifications that we have had to carry as an attachment), budget updates (which have paled in comparison to the other regulatory changes) etc. 7th article from the Mediation expert on ‘Myths of Mediation’ is very lucidly explained. Fortnight after fortnight, there seems to be no dearth of content for our newsletter. For any previous issues of Samhita and the readers feedback, please visit https://sharadasc.com/resource-center/

Happy Reading
MCA updates :
R.I.P CA, 1956

Companies Act, 1956 and the Companies (Sikkim) Act, 1961 have been repealed w.e.f 30th January, 2019. However, provisions of the CA, 1956 w.r.t the following shall be applicable as if the said Act has not been repealed:

  • Producer companies Part IXA
  • Transfer of all matters proceedings or cases to the Tribunal w.r.t jurisdiction, powers, authority and functions of the Board of Company Law Administration and court u/s 434(1)
  • Provisions relating to CA 1956 contained under u/s 67 of the LLP Act

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In India, Mediation is at a very nascent stage and there are now a few legislations which mandate mediation as a first step in the dispute resolution process. For Mediation to become one of the preferred methods of dispute resolution, there is a need for dissemination of information as well as removing some myths or misconceptions associated with…Read more

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Significant Beneficial Ownership 2.0

In order to identify individuals hiding behind the corporate veil/shield of companies, the MCA has amended the Companies Act, 2013 (CA, 2013) and introduced a set of corresponding rules called The Companies (Significant Beneficial Owners) Rules, 2018. Since the stakeholders faced difficulties in complying with the said rules, MCA issued a circular deferring certain aspects of the rules and further made amendments to the rules.

The following are the highlights to The Companies (Significant Beneficial Owners) Amendment Rules, 2019:
  1. Rule 2 which consists of definitions has been amended to bring in new definitions:
    1. Majority Stake w.r.t equity share capital, voting rights, distributable profits
    2. Partnership Entity which includes a partnership firm registered under the Indian Partnership Act, 1932 or a LLP registered under the LLP Act, 2008
    3. Reporting Company
  2. The term Significant Beneficial Owner (SBO) has undergone a massive change to give clarity as to who qualifies to be a SBO – Rule 2(h). The change has removed the difficulties the stakeholders had with regard to identifying its SBOs including reference to “senior managing officials of the company”. This is a welcome move.
  3. Changes have been made to all the forms under the above rules, making it easier for the SBO to give declarations as well as for the reporting company to report. The following are the forms which have undergone changes:
    1. Form BEN 1- Declaration by SBO of his significant beneficial interest in the reporting company
    2. Form BEN 2 – Return filed by the reporting company to the RoC in terms of Form BEN 1 received by it
    3. Form BEN 3 – Register of beneficial owners holding significant beneficial interest
    4. Form BEN 4 – Notice issued by a reporting company to a person who the former believes to be a SBO but has not disclosed such holding to the Company
  4. 4.As per the amended rules, if the reporting company does not receive any disclosures pursuant to its notice or finds that the disclosures are not satisfactory, they may approach the NCLT to place restrictions on the shares of such members.
  5. 5.Rule 8 lists the companies which are exempted from reporting. Earlier, only pooled investment vehicles/investment funds such as Mutual Funds, Alterative Investment Funds (AIFs), Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (lnvlTs) regulated under SEBI Act holding shares in companies or bodies corporate were exempt from the required reporting were included. Post the amendment the following have also been included in the exempt list:
    1. The authority constituted for the administration of IEPF
    2. Holding reporting company, provided that the details of such holding reporting company has been reported in Form No. BEN-2
    3. The Central Government, State Government or any local Authority
    4. A reporting company or a body corporate, or an entity controlled by the Central Government or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments
SEBI updates :
Recognition to PCS under SEBI LODR – Compulsory Secretarial Audit

Securities and Exchange Board of India (SEBI) has inserted a new Regulation 24A in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 providing for Secretarial Audit and Secretarial Compliance Report by a Practicing Company Secretary (PCS), which is an additional compliance.

  • The Regulation states that all listed companies and its material unlisted subsidiaries shall undertake a Secretarial Audit and a report given by a PCS shall be annexed to the company’s Annual Report. MR 3 issued under CA 2013 is to be used.
  • Additionally Annual Secretarial Compliance Report to check compliance with all applicable SEBI regulations and circulars/ guidelines is to be issued by a PCS and filed within 60 days from the end of the FY with the Stock Exchanges by the listed entity. Details of unlisted subsidiaries are not required in the annual compliance report.
Reporting for AI & ML used by MIIs

Any set of applications / software / programs / executable / systems where Artificial Intelligence / Machine learning is used by Market Infrastructure Institutions to carry out compliance or management purposes is required to be reported to SEBI in the reporting form specified in Annexure B of this Circular on a quarterly basis within 15 days of the expiry of the quarter, with effect from quarter ending March 31, 2019.

Technologies that are considered to be categorized as AI and ML technologies in the scope of this circular, are explained in Annexure A.
Furnishing of PAN for transfer of listed Equity Shares by NRI / OCI – relaxed

NRIs (Non Resident Indians) / OCIs (Overseas Citizens of India) need not furnish PAN for transfer of listed equity shares held by them subject to the following conditions:

  • Transfers executed after 01.01.2016
  • Non–commercial transactions i.e., by way of gift among immediate relatives
  • NRI / OCI to provide an alternative ID and Non-Resident status

RBI Updates :
Ombudsman Scheme for Digital Transactions, 2019

System Participants defined under the Ombudsman Scheme for Digital Transactions, 2019 shall comply with the provisions of the said scheme, with effect from 31st Jan, 2019 as notified by RBI.

‘System Participant’ means any person other than a bank participating in a payment system as defined under Section 2 of the Payment and Settlement Systems Act, 2007 excluding a ‘System Provider’

‘System Provider’ means and includes a person who operates an authorised payment system as defined under Section 2 of the Payment and Settlement Systems Act, 2007.

ECB breather for Resolution Applicants

RBI has relaxed the end-use restrictions for resolution applicants under the Corporate Insolvency Resolution Process (CIRP). They are allowed to raise ECBs from the recognised lenders, except the branches/ overseas subsidiaries of Indian banks, for repayment of Rupee term loans of the target company under the approval route. All other provisions of the ECB policy are applicable.

Budget Updates on Income Tax
  • Full Tax rebate for Individuals and HUFs on income upto Rs. 5,00,000
  • Standard Deduction for salaried person increased from Rs. 40,000 to Rs. 50,000
  • TDS threshold u/s 194A – on rental income increased from Rs. 1,80,000 to Rs. 2,40,000
  • Gratuity limit increased from Rs. 30 lakh to Rs. 40 Lakh
  • Capital Gains Tax benefits u/s 54 has been increased from one residential house to two residential houses.
  • Benefit u/s 80 IB has been extended for one more year i.e. 2020
  • Benefit for real estate developers have been given for unsold inventory. The calculation of notional rent for the purpose of tax has increased from 1 year to 2 years starting from the completion of the project.

GST updates :
Mr. R Krishnamurthy, CA says ……

“Plethora of amendments never ends. A country driven by notifications and confusion for all. We don’t get it right the first time, do we?? From another angle, as a country we have never been innovative with products and the reason is the same. We never get it right.So, what are we good at ? Soul searching will be a good thing to do!”

As you do this you may also like to read the six page brief summary of the changes to the GST Law which includes major amendments to CGST Rules, 2017.

Note: The contents of this Newsletter are only a summary and has not dealt with any issue in detail. Any action taken or proposed to be taken must be in consultation with professionals and not merely based on the articles / news updates. S. C. Sharada & Associates disclaims all liability on action taken without professional advice.

S. C. Sharada & Associates,

Company Secretaries. #405, 7th Cross, IV Block, Koramangala, Bangalore – 560 034.
sharadasc.com Phone : +91 80 25534374 , +91 80 25536618 Email: [email protected]