News Summary

Vignettes from the law and Practice relating to Meetings of the Board and Committees constituted by it

CS. Ramaswamy Kalidas, an eminent Company Secretary and author of the book “The Law and Practice relating to Company Meetings” has analysed the provisions w.r.t. Law and practices relating to company meeting. Part I of the 2-part article titled “Vignettes from the Law and Practice relating to Company Meetings”, was carried in last issue of Samhita. As a continuation, Part II is carried in the attached article. The article contains an analysis of various topics including first Board Meeting of the company within 30 days of incorporation, relevance of 7 clear days’ notice for Board Meetings, whether a director can waive the notice for a meeting etc.

The article is packed with insights and detailed analysis of many crucial aspects relating to Board and committee meetings. Happy reading!

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MSME updates

Trading included in MSME definition

Ministry of MSME vide its Office Memorandum dated 02.07.2021 has revised the definition of MSME to include Retail and Wholesale trade for the limited purpose of Priority Sector Lending and registration on Udyam Registration Portal. Accordingly, RBI vide circular dated 07.07.2021 has allowed following activities to be eligible for Priority Sector Lending:

  • Wholesale and retail trade and repair of motor vehicles and motorcycles

  • Wholesale trade except of motor vehicles and motorcycles

  • Retail trade except of motor vehicles and motorcycles

Earlier only enterprises engaged in the business of manufacture of goods or rendering of services were permitted UAM registration. With the widening of the definition to include trading, bank lending schemes will now cover MSME traders also.

Open Office Memorandum 02.07.2021

Open Circular No. RBI/2021-2022/67 dtd. 07.07.2021
RBI updates

Extended time for Udyam Registration

The Ministry of MSMEs vide Notification dated 16.06.2021 notified that all existing Entrepreneurs Memorandum (EM) Part II and Udyog Aadhaar Memorandum (UAMs) registrations obtained till 30.06.2020 shall remain valid till 31.12.2021.

RBI vide its circular dated 25.06.2021 has aligned its provisions accordingly to recognise the existing registrations.

Open Circular No. RBI/2021-2022/63 dtd. 25.06.2021

Declaration of dividends by NBFCs

To infuse greater transparency and uniformity in practice of declaration of dividends by NBFCs, RBI has prescribed guidelines for the same vide Circular dated 24.06.2021. The guidelines shall be applicable for declaration of dividend from the profits of the financial year ending 31.03.2022 onwards. The Circular includes guidelines under following headings:

  • Board oversight – total dividend proposed for the financial year should not exceed the ceilings specified in these guidelines.

  • Eligibility criteria- minimum prudential requirements.

  • Quantum of dividend payable- proposed dividend shall include both dividend on equity shares and compulsorily convertible preference shares.

  • Reporting system – to be done within fortnight of dividend declaration.

Open Circular No. RBI/2021-22/59 dtd. 24.06.2021
DGFT Updates

Extended due date – IEC updation for FY 2021-22

Currently, every IEC holder is required to update their details electronically every year between April and June. If there are no changes in the details the same is also required to be confirmed online.

Vide Notification dated 01.07.2021, DGFT has granted extension till 31.07.2021 to update such details without levy of any fee for the month of July.

Open Notification No. 11/2015-2020 dtd. 01.07.2021

Issue of benefits / scrips on hold

Vide Trade Notice dated 08.07.2021, DGFT has notified that issuance of benefits / scrips under MEIS (Merchandise Exports from India Scheme), SEIS (Service Exports from India Scheme), ROSL (Rebate of State Levies) and ROSCTL (Rebate of State & Central Taxes and Levies) Schemes shall be on hold temporarily due to change in allocation procedure. No fresh applications would be allowed to be submitted online during this period.

Open Trade Notice No. 08/2020-21 dtd. 08.07.2021
SEBI Updates

Additional disclosure to SE by Cos undergoing CIRP

National Stock Exchange in consultation with SEBI released a Guidance Note on 09.07.2021, listing following additional disclosures to be made by companies undergoing Corporate Insolvency Resolution Process (CIRP) under LODR Regulations:

  1. Atleast 2 working days prior intimation about the date of hearing where NCLT would be considering the Resolution Plan.
  2. Disclosure of the approval of resolution plan to be made to the Exchange on oral pronouncement or otherwise of the Order on immediate basis and not later than 30 minutes.
  3. The Resolution Professional shall inform through the Exchange platform any impact on the existing holders / investors of listed securities on areas such as status of listing, the value of holding of existing holders, write off/ cancellation/ extinguishment of existing equity shares/ preference shares/ debentures, etc. without any payment to such holders, where applicable.
Open Guidance Note
IT Updates

Capital gains on Goodwill with depreciation

CBDT, through Income tax Amendment (19th Amendment), Rules, 2021 has inserted a new Rule 8AC in the Income-tax Rules, 1962 to prescribe the Rules for Computation of short term capital gains and written down value under section 50 where depreciation on Goodwill has been obtained.

Finance Act 2021 amended the provisions of Income Tax Act, 1961 (“Act”) to disallow depreciation on the goodwill of a business or a profession. Depreciation of self-generated goodwill is not allowed under the Income Tax Act. With this amendment, depreciation on acquired or purchased Goodwill of a business or profession cannot be claimed from 01.02.2021. Goodwill is expressly excluded from the block of ‘Intangible Assets’. Further, a deduction for the amount paid for acquiring Goodwill shall be allowed on sale of Goodwill.

As per the amendments, depreciation will not be available on Goodwill from AY 2021-22. On sale or transfer of Goodwill, capital gain income will arise and the amount paid for acquiring the goodwill will be allowed as deduction. Further, the WDV as on 01.04.2020 will be the cost of acquisition of the Goodwill in case depreciation is claimed thereon by the assessee. Hence, the depreciation already claimed and allowed on Goodwill will not be reversed or requires any adjustment.

Open Notification no. 77/2021 dtd. 07.07.2021

Guidelines u/s 45 and 9B of IT Act

Guidelines under section 9B (taxation of stock in trade received from partner of firm) and sub-section (4) of section 45 of the Income-tax Act, 1961 (taxation of capital gains of firm in certain circumstances) have been issued. Please refer to the circular for details.

Open Circular No. 14 of 2021 dtd. 02.07.2021