Legal & Industry Updates - September 2018
Amendment to the Companies (Prospectus & Allotment of Securities) Rules, 2014
The Ministry of Corporate Affairs on 10th September, 2018 has notified the Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2018 to insert Rule 9A, Issue of securities in dematerialized form by unlisted public companies, making the dematerialization of securities of an unlisted public company mandatory and also facilitate dematerialization of all its existing securities as per provisions of the Depositories Act, 1996. The measure is expected to significantly enhance the Corporate Governance standards in the country.
Amendment to the Companies Act, 2013
The Ministry of Corporate Affairs on 12th September, 2018 has notified the amendments to the following parts of Schedule V of the Companies Act, 2013:
In Part I (Conditions to be fulfilled for the appointment of a managing, or whole time director or a manager (“Managerial Personnel”) without the approval of the central government appointments) by an amendment, a new insertion has been added to include the incorporation of the Insolvency and Bankruptcy Code, 2016, the Goods and Services Tax Act, 2017 and the Fugitive Economic Offenders Act, 2018 in order for the Managerial Personnel to satisfy the conditions under the acts stated above for their appointment.
In Part II, Section II, item (A) (Remuneration payable by companies having no profit or inadequate profit), where during the currency or tenure of a managerial person, a company has had no profits or its profits are inadequate, the company could pay double the remuneration to the managerial person, subject to the remuneration limits prescribed as per the capital of a company, through a special resolution passed by the shareholders. As per the present amendment, a company can pay in excess of the remuneration limits prescribed, through a special resolution passed by the shareholders, without the restriction being limited to double of the remuneration cap.
Part II, Section III (Remuneration payable by companies having no profit or inadequate profit in certain special circumstances), Clause (d), there was a bar in paying the remuneration above Rs. 2.4 Crore to managerial persons, by a company in a Special Economic Zone. This restriction has been withdrawn, now any company in a Special Economic Zone can pay any amount of remuneration to its managerial person.
Amendment to Limited Liability Partnership Rules, 2009
The Ministry of Corporate Affairs on 18th September, 2018 has notified the Limited Liability Partnership (Second Amendment) Rules, 2018 to insert under rule 3, Forms, a sub rule (3) which introduces various forms namely RUN-LLP (Reserve Unique Name-Limited Liability Partnership), Form FiLLiP (Form for incorporation of Limited Liability Partnership), Form 5 (Notice for change of name), Form 17 (Application and Statement for conversion of firm into LLP) and Form 18 (Application and Statement for conversion of private company/unlisted company into LLP) to be processed by the Centralized Registration Centre (CRC). The reason for insertion of these forms is to ease the registration of LLPs in India. Also, to make it more effective, the authority for registration has been shifted to CRC.
Constitution of Competition Law Review Committee for Review of Competition Act
The Ministry of Finance on 30th September, 2018 has constituted a nine-member Competition Law Review Committee to review the Competition Act in order to ensure that the legislation is in sync with the changing business environment. The committee will review the competition regulations in view of changing business environment and bring necessary changes, if required and also look into international best practices in competition field, especially anti-trust laws, merger guidelines and handling cross border competition issues.
Issuance of Revised Know Your Customer (KYC) Norms for Foreign Portfolios Investors (FPI)
Securities and Exchange Board of India on 21st September, 2018 issued two circulars pertaining to:
KYC requirements which outlines the identification and verification of Beneficial Owners and
Eligibility conditions for FPIs wherein Non-Resident Indians (NRI), Overseas Citizens of India (OCI) and Resident Indians (RI) have been permitted to hold non-controlling stake in FPIs which shall:- a) not exceed 25% of the FPIs corpus from a single NRIs/ OCIs/ RIs; and b) 50% of the FPIs corpus from aggregate of such investments by NRIs/ OCIs/ RIs.
Disclaimer: The updates provided in this document is not a legal opinion and does not claim to capture all legal developments related to the subject matter stated herein. It is advisable to seek legal advice for accurate applicability, prior to relying on the updates for any legal matter.