Jonathan Swift, author of Gulliver’s Travels (1790), noted that “laws are like cobwebs, which may catch small flies but let wasps and hornets break through.” Unbelievable that somethings don’t change. Even after centuries. I would say rather than laws it is the law enforcers who use laws like cobwebs. It is a little premature to comment whether MCA will catch flies or capture wasps and hornets, but corporates – be prepared to receive Show Cause Notices from the ROC (for seemingly simple non-compliances) through the newly launched MCAMS (Ministry of Corporate Affairs Monitoring System) which is an AI driven compliance monitoring platform – both to issue notices and receive responses from you.
I also heard that the 3rd round of company-strike-off has started with many shell / non-operative companies being struck off for non-filing of audited accounts and annual returns. This exercise has started achieving its goal of ensuring basic compliance hygiene which was missing for decades in India Inc. It has rattled a lot of people, big and small who are directors of such companies, got High Courts to give their verdicts on director disqualification and fundamentally awakened people about responsibilities of directors and companies alike. With per day fine and heavy penalty being levied for late filing of returns, none can take this basic annual compliance as a mere ritual anymore that can be completed anytime they want.
In the Labour Law series, Samhita 224th issue carries an interesting analysis on “Employment contracts” by Mr. Vittal Rao, Labour law expert. Do read the Dos and Dont’s and subtle nuances in drafting employment contracts, critically examined through years of his vast experience.
For a change, the editorial has flipped topics. News updates first and then my Musings ! If you thought my take on something of interest in life has been missed out in this issue, don’t be disappointed. Read on. While the economy is taking a nose dive, corporate performances are shaky, businesses are unable to stay afloat, regulators are getting ingenuously resourceful by the day to find ways to fill the tax kitty, do your bit as a corporate citizen but also find time to enjoy life. The beautiful pink-hued sunset chosen for this issue is not a stock picture of some exotic locale in an unknown land. It is on the banks of our very own Godavari river clicked on a normal camera, ouch….I mean mobile ! Enjoy the splash of colour in the sky as well as its reflection on the vast expanse of the revered river at Rajahmundry. To see this same sun set, many a times we pay a bomb at a foreign location and applaud in awe, thanks to the clever tourism marketed by that country. While we can blame governments for either overdoing the PR for tourism or not doing at all, can we as ordinary citizens become ambassadors of our own cities, towns, villages & monuments ? This struck me as I got talking to a beautiful lady that we met at a resort recently on the banks of the Godavari. Hailing from Rajahmundry (in Andhra Pradesh) but settled in Chennai, she looked gorgeous in a simple, green Uppada cotton saree (handloom from AP) teamed up with a bright, colourful mirror-worked choli from Gujarat. As she posed for pictures, she passionately spoke about the city, the grandeur of the river, the richness of its soil, the bountiful paddy-harvest, prosperity of its people, the stores to shop, food to eat, temples to visit etc. while bemoaning that Kerala is overrated when compared to her beautiful hometown. I was thoroughly impressed with her knowledge, passion and pride. Why then did the dumb people manning the reception at the resort not even know why the river ride was cancelled recently thanks to an overloaded boat capsizing ? Why then did they not direct us to the many interesting places that she shared ? Because they lacked the passion and interest to learn and present. They were merely carrying out instructions (sometimes not even capable of that). They had no love for serving people. Perhaps they weren’t trained enough. Well, my thoughts wandered all over about a wide array of topics but rested in the assuring cocoon of thoughts that Aha ! there is hope as long as there are positive, enthusiastic people like the lady in the lovely green saree. We are the best ambassadors for our country. Lets do our best alongside what the Goverments do or not do !!
MCA has launched Ministry of Corporate Affairs – Compliance Monitoring System” (MCACMS) which will start issuing Show Cause Notices digitally to companies and its directors in case of non-compliances detected under the Companies Act, 2013. This is the beginning of e-adjudication system using Artificial Intelligence. The whole process of replying to the Show Cause Notice and receiving adjudication order from the regulators will be handled by MCACMS through https://mcacms.gov.in/#/
Companies and directors are cautioned to keep their e-mails updated and check regularly since only 15days time is available to send the defence reply to the Show Cause Notice received. Do expect penalties to be levied if reply is not satisfactory. While this is a transparent monitoring system without any human intervention, it is also a clear indication to India Inc. to “Comply or Perish”!!
All Corporates engage people suitable to any position based on Technical and soft skills with expertise in respective areas. The engagement is based on an “Employment Contract” normally captioned as “Letter of Appointment”. The Employment Contract may be a simple one or may incorporate certain conditions like – non-compete, non-solicitation, non-disclosure of technical knowhow, stipulated number of years of service etc. Other conditions are also included like un-liquidated or liquidated damages in case of any breach by either party, to guard Intellectual Property rights. Perceptibly, any Employment Contract must stand the test of Law at any time; otherwise, it is a futile one. From the time of recruitment of the candidate till his exit from the organization, the various terms and conditions…Read more
Changes in jurisdiction over companies in UT of Jammu and Kashmir and Ladakh
With the formation of Union territory (UT) of Jammu and Kashmir and Union territory of Ladakh, following changes have been made w.r.t jurisdiction over companies situated therein:
W.e.f 30.10.2019, Registrar of Companies-cum‑Official Liquidator, Jammu has Jurisdiction for Adjudication of Penalties under Companies (Adjudication of Penalties) Rules, 2014.
W.e.f 31.10.2019 the Registrar of Companies, Jammu has jurisdiction for the purpose of registration of companies and discharging the functions under the aforesaid Act.
W.e.f 31.10.2019 the Regional Director, New Delhi has jurisdiction over UT of J&K and Ladakh in addition to other States and UTs in the NRC region.
FEM (Non-debt Instruments) Rules, 2019
Ratnamala Hegde, Principal Associate of our firm has attempted a short write up on the new FDI rules issued by the Ministry of Finance that was carried in the 223rd issue of Samhita. Small but important changes that reflects on the thinking of the Government on FDI matters.
Enhanced Due Diligence for Dematerialization of Physical Securities
Transfer of securities held in physical mode is not permitted w.e.f. April 01, 2019. Standardised norms with respect to documentation / procedure for transfer of physical securities were issued by SEBI on November 06, 2018. Now SEBI has directed Depositories and Listed Companies/ RTAs to implement a due-diligence process (as detailed in the notification) for processing the request for physical shares to be converted into DMAT form.
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.