CS Ramaswami Kalidas, an expert in Company Law and a special editor of the latest edition of A.Ramaiya’s Companies Act has critically analysed the provisions relating to payment of remuneration to Directors rendering professional services, including Independent Directors. He has delved deep to explain the meaning of several terms such as professional services, ordinary course of business, arm’s length, related party transactions, office of place of profit, etc. The article is rich in its content with reliance being placed on dictionary meaning and decided case laws to throw light on the topic.

All the sections of the Companies (Amendment) Act, 2020 w.r.t decriminalisation of offences have been made effective from 21st December, 2020. Please refer to our Article titled “Decriminalisation of offences under Companies (Amendment) Act, 2020” carried in the 245th issue of Samhita for details, where the reference is to the Section numbers in Companies Act, 2013.

MCA Notification No. S.O. 4646(E) dtd 21.12.2020 has notified the corresponding sections of CA, 2020.

Effective 26th January, 2021 the Companies (Incorporation) Third Amendment Rules, 2020 makes the following changes w.r.t Name Reservation which is valid for 20 days:

Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2020 has been notified, providing for the following changes w.r.t appointment of Independent Directors (ID):

• The qualifying score in the online proficiency self-assessment test has been reduced from 60% to 50%
• The time available for clearing the above test has been increased from 1 year to 2 years from the date of inclusion of the ID’s name in the Data Bank.
• Exemption to individuals from passing the above test if they have served for a period of 3 years from the date of inclusion of the ID’s name in the data bank as below:
  • Director / KMP in certain type of Companies / Body Corporates / Statutory Corporations;
  • In the pay scale of Director or above in certain ministries of GOI with experience in corporate laws;
  • Chief General Manager or above in the RBI / IRDA / Pension Regulatory Fund / SEBI with experience in corporate laws.
• Earlier the tenure was prescribed as 10 years and the type of organizations served was limited to 3 i.e., listed company / unlisted public company with 10 Cr paid up share capital / body corporate listed on a recognized stock exchange. Now the list has expanded and the expected experience has shortened.

New e-form SH-7 for Alteration in Share Capital has been notified which shall take effect from the date of official publication in the Gazette.

Applicability of Companies (Auditor’s Report), 2020 has been deferred to all statutory audits commencing on or after 1st April, 2021 from the earlier date of 1st April, 2020, giving a breather both to the auditors and the companies subject to audit w.r.t several disclosures expected in the auditor’s report.

Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 has been amended vide the above Second Amendment Rules, 2020 wherein:

• “Corporate Action” has been defined to mean any action taken by the Company relating to transfer of shares and all the benefits accruing on such share namely bonus shares, split, consolidation, fraction shares and right issue to the acquirer.
• Rule 26A has been inserted detailing the procedure for purchase of minority shareholding held in DEMAT form.

The above changes will become effective from the date of publication in the official Gazette.

SEBI has issued a Master Circular on Scheme of Arrangements by Listed Entities which is a collation of all the Circulars and Directions issued from 10th March, 2017 to 3rd November, 2020.

MCA has further extended suspension of Insolvency and Bankruptcy Code, 2016 (IBC) by a period of 3 months from 25th December, 2020. Earlier, IBC was suspended initially upto 25th September, 2020 and later upto 25th December, 2020. This is the 3rd such extension of suspension in view of the COVID-19 pandemic.

Vide Public Notice dtd 24th December, 2020, DGFT has enabled modification of IEC in case of change in constitution of a PAN based IEC by way of merger, acquisition, liquidation, inheritance, etc. IEC can be availed against the new PAN and simultaneously previous IECs can also be operationally linked to the PAN / IEC of the new entity.

As always the Government has extended certain IT due dates as below, after keeping all of us on tenterhooks guessing and waiting (an irresponsible and unprofessional practice that needs to change !) :

Income Tax Returns Last Date for Tax Audit Assessees – 15th February, 2021

Income Tax Returns Last Date for Non Tax Audit Assessees – 10th January, 2021

Tax Audit Report Last Date – 15th January, 2021

Vivad Se Viswas Last Date – 31st January, 2021

Vide the Finance Act, 2020, Government had proposed various amendments in the Central Goods and Services Tax, 2017 (CGST Act). However, many of these amendments were not made effective till date. Central Board of Indirect Taxes and Customs (CBIC) has now issued Notification 92/2020 dated 22.12.2020 making such amendments effective from 1 January 2021.

CGST Rules, 2017 have also been amended effective from 22.12.2020.

Our associate CA R. Krishnamurthy has summarized both the notifications.