Of all the Deepavali messages I liked this one “Most difficult cleaning…..let’s attempt this Diwali”. Very aptly titled on this picture which shows cobwebs being cleared out from the mind as part of festival cleaning. We generally focus on cleaning our surroundings, houses, offices, shops, factories, restaurants and even our bodies, treating ourselves to a good facial or a massage. All to look good and feel good. All an ‘outside-inside’ effort. Why not an inner clean up ? An ‘inside-outside’ attempt to feel good and hence look good ? Whether it is with food and exercise or thoughts and emotions, if you feel good, you are bound to look good and radiate the glow from within. This is what yoga does. Pranayama does. Meditation does. Travel does. Music does. Sports does. Doing whatever you like best does.
Many of you must have been inspired by this widely circulated image (see banner) with the right caption of cleaning the mind. You will agree this is the toughest cleaning because firstly you don’t know what the dirt is, where it lies in the mind, whether it is dirt at all or not and secondly if identified how to clean it, how much to clean, how long to clean and thirdly how to prevent its accumulation in future. Dirt and scum lining our mind could be unwanted thoughts piled over the years, rusted brain with no activity, negative emotions like anger, greed, ego, pride, arrogance, excessive desires, jealousy, frustration, despondency, cynicism etc. collected through adulthood whether by nature or upbringing or experiences. Can we attempt to clear this out ? Can we become like a child with a curious mind which absorbs everything like a sponge ? Can we learn to unlearn ? Can we adopt a ‘thought purging process’ ? Can we learn to forgive and forget ? Can we learn to move forward without looking back ? Can we create room for positivity, hope, happiness, compassion, giving and fresh learning ? If we can do this, then and only then we can invite light into ourselves to remove the darkness. To illuminate our surroundings. It is tough but not impossible. This is not Diwali-specific cleaning but a life-long cleansing and detox process that helps us stay young, fresh, vibrant and alive.
A seemingly simple yet profound challenge thrown at us ……….Take it up as you scroll down to check out on the regulatory updates. MCA has been quite active this fortnight with 5-6 notifications that are carried in this 223rd issue of Samhita. Most controversial is the ‘proficiency test’ for Independent Directors which requires them to take a formal test on certain laws and score atleast 60% marks in any number of attempts, to be empanelled as an ID on the Government portal. Reminding us of the traditional exam and marks system of assessing a person’s competency for a role ! I wonder how relevant this is today when corporates have started hiring not on the basis of a formal qualification and marks but on other parameters that reflect a person’s readiness. If high scorers were to be successful then only bright students in academics would have been successful in life – alas, this is far from truth and reality ! Rather than push an exam system, Government could have made it mandatory for a structured financial literacy orientation programme to be undergone by each ID aspirant. There is resistance to the exam system but this is the law today for both existing and new IDs of corporate India !!
Another important notification is where powers of RBI has been shifted to the Central Government (Ministry of Finance) w.r.t Foreign Direct Investment (FDI) matters covered under the erstwhile FEMA notification of 2017. While the gazetted notification is carried in this issue under RBI updates, we will attempt an analysis in the next issue.
MCA has notified the Companies (Creation and maintenance of databank of Independent Directors) Rules, 2019 and the Companies (Appointment and Qualification of Directors) Rules, 2014 and Companies (Accounts) Amendment Rules, 2019, effective from 1st December, 2019. Highlights are:
Indian Institute of Corporate affairs (IICA) has been notified as the institute to maintain an online data bank of qualified persons with all their details, who are willing to be appointed as Independent Directors (ID). Companies can source profiles from the data bank for their ID requirements after payment of prescribed fee to IICA.
IDs shall disclose their personal details, professional qualifications, experience as well as their directorships in other companies and partnerships in LLPs.
IDs enlisted on the data bank shall keep their information updated through IICA’s portal and also pay a prescribed fee to IICA. They can restrict their personal information on the data bank.
IICA shall conduct an online proficiency self-assessment test covering company law, securities law and such other areas relevant to the functioning of an individual acting as ID and also prepare study materials etc. for their reference for taking the said tests. A 10 member panel shall be constituted by the Central Government for approving the outline of the courses and study material to prepared by IICA.
Taking a proficiency test and updating details on data bank will be applicable for all existing IDs if they wish to continue as such. While they have 3 months’ time from 1st December, 2019 to update the details on the data bank, they have 1 year time to pass take the online examination. Exemption is provided for individuals having at least 10 years’ experience as directors on Boards or as KMP of certain companies.
Every listed company and every other public company having a paid up share capital of Rs. 25 crores or more calculated at the end of the preceding FY shall include in the Board’s Report a statement regarding the Boards’ opinion on the integrity, expertise and experience and proficiency of the IDs appointed during the year.
While the whole examination system in India is being questioned and learning is moving towards ‘formal unschooling’ and ‘no examination method’, IDs are now required to go back to ‘classes’ and ‘tests’. Not only that, IDs who are supposed to deliberate on topics such as competition, markets, strategy, direction etc. at corporate boards are now required to get a ‘1st class’ i.e. 60% marks in the tests. Facility of 1st attempt, 2nd attempt in the exams is being provided.☺
Cost Audit Report in Form CRA-4
1.Revised Cost Audit Report The Companies (cost records and audit) Amendment Rules, 2019 effective retrospectively from 1st April, 2018 have been notified, incorporating certain changes in CRA-1 and CRA-3 on account of introduction of GST. It is also clarified that companies who have filed the Cost Audit Report in Form CRA-4 for FY 18-19 need not file the form once again consequent to this revision.
2.Extension of time for filing CRA-4 The due date for filing Cost Audit report in Form CRA-4 for FY18-19 has been extended till 31st December, 2019, without payment of additional fees. The extension covers the entire process of preparation of annexures to CRA-4, submission of the Cost Audit Report by the Cost Auditor to the company and filing the same with the ROC.
Company Incorporation Rules amended
1.Changes in name availability provisions Currently before applying for name availability for a new company, a search is conducted on the Trade Mark registry also to find out if the name is already registered as a Trade mark or applied for by any other person. If yes, the consent of owner of such TM or applicant for registration is to be obtained. Vide Companies (Incorporation) Eighth Amendment Rules, 2019, the words “applicant for registration” are deleted, thereby requiring consent only from the TM owner and not from applicants.
2.Changes in ACTIVE form provisions Certain forms cannot be filed by a company if ACTIVE form INC-22A has not been filed, which includes Form DIR-12 except in case of cessation of a director. This threw up a few practical difficulties which have been addressed suitably by way of amendment to the Companies (Incorporation) Rules, 2014, which are additional exceptions as below:
Appointment of directors where the number of directors has fallen below the minimum number, due to disqualification of directors.
Appointment of any directors where the DIN of all or any of company’s directors has been deactivated.
Appointment of directors as part of implementation of order passed by a Tribunal/ Appellate Tribunal under the Companies Act, 2013 or IBC, 2016.
In a nutshell, in all the above cases, DIR-12 can be filed even if INC-22A has not been filed.
3.Shifting of registered office within the same state
In order to make approval for shifting of registered office from one place to another within the same state, a time bound activity, henceforth the Regional director (RD) shall dispose of the matter within 15 days of receiving the complete application for shifting, by either approving or rejecting, without any hearing.
RD’s order approving the alteration of MOA for transfer of registered office of the company within the same State shall be filed in Form INC-28 with the Registrar of the State within 30 days of receipt of the certified copy.
Extension of due dates – Annual filing
The MCA has extended the due dates for filing forms AOC-4 (Financial statements) and MGT-7 (Annual Return) without the payment of additional fees, as per details below:
Previous due date
Extended due date
AOC-4, AOC-4 XBRL and AOC-4(CFS)
Filing beyond the extended due date will attract additional fee of Rs. 100 per day and is also likely to be adjudicated by the ROC for penalty.
Extension of due dates – IEPF filing
MCA has extended the due dates for filing forms IEPF-1A to 30.12.2019 and IEPF-2 (for the purpose of filing Statement of unclaimed and unpaid amounts) to 30.11.2019 without the payment of additional fees.
RBI updates :
FEM (Non-debt Instruments) Rules, 2019
In supersession of the Foreign Exchange Management (Transfer of Issue of Security by a Person Resident outside India) Regulations, 2017 and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018, the Central Government has notified the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. This takes effect from 17th October, 2019 and replaces the old FEMA notification 20R dated 7th November, 2017 which governed the FDI in India. Interestingly powers of the RBI under these regulations have been shifted to the Central Government.
Detailed analysis of the new rules will be carried in the next issue of Samhita.
DGFT updates :
Export liabilities information to NCLT
A new para has been added in Chapter 2 of Foreign Trade Policy 2015-20 for operational modalities to be followed for the cases referred to the National Company Law Tribunal.
Any firm / company coming under the NCLT proceedings shall submit details of outstanding export obligations/ liabilities, duty saved amounts and applicable interest till the date of start of NCLT proceedings, any penalty imposed under FTD&R Act, any other dues etc., to the RA concerned and NCLT. All such amounts shall be treated as amount due to the government.
Mis-declaration of import goods
DGFT has directed importers to classify import goods under the correct ITC(HS) 8 digit code and not under “others” category in a casual manner, failing which it will be treated as wilful mis-declaration.
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.