Legislation UpdatesNotifications

S.O. 4638(E)— In exercise of the powers conferred by Section 10A of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Central Government hereby notifies further period of three months from the 25-12-2020, for the purposes of the said section.


Ministry of Corporate Affairs

[Notification dt. 22-12-2020]

Legislation UpdatesNotifications

S.O. 4646(E).—In exercise of the powers conferred by Section 1 (2) of the Companies (Amendment) Act, 2020 (29 of 2020), the Central Government hereby appoints the 21-12-2020 as the date on which the following provisions of the said Act shall come into force, namely:-

S. No. Sections
1. Section 1;

 

2 Section 3;

 

3 Sections 6 to 10 (both inclusive);

 

4 Sections 12 to 17 (both inclusive);

 

5 Clauses (a) and (b) of section 18;

 

6 Sections 19 to 21 (both inclusive);

 

7 Clause (i) of section 22;

 

8 Section 24;

 

9 Section 26;

 

10 Sections 28 to 31 (both inclusive);

 

11 Sections 33 to 39 (both inclusive);

 

12 Sections 41 to 44 (both inclusive);

 

13 Sections 46 to 51 (both inclusive);

 

14 Section 54;

 

15 Section 57;

 

16 Section 61; and

 

17 Section 63.

 


Ministry of Corporate Affairs

[Notification dt. 21-12-2020]

Compliance Checklist
OP. ED.Practical Lawyer Archives

Minutes are summary of the proceedings of a meeting. According to the provisions of Section 118 of the Companies Act, 2013 (“Act”), every company shall maintain minutes prepare and maintain minutes of the proceedings of every general meeting of any class of shareholders or creditors, and every resolution passed by postal ballot and every Board meeting or committee meeting. Under the Act, the minutes of the meeting shall be evidence of the proceedings recorded therein. Where the minutes have been kept in accordance with the provisions of the Act, until the contrary is proved, the meeting shall be deemed to have been duly called and held, and all proceedings thereat to have duly taken place, and the resolutions passed, all appointments of Directors, key managerial personnel, auditors or company secretary in practice, shall be deemed to be valid.

In Yamuna Reddy v. B. Sivaraman[1]  Madras High Court observed that:

 “A cursory perusal of Section 195[2] regarding the presumption to be drawn where minutes of the company duly drawn and signed, clearly proves that the presumption arising in this section is a rebuttable one by adducing contrary evidence; that if a proper minutes book is kept and proceedings of meetings are duly recorded, it shall be deemed that the meeting has been duly called, held and all proceedings thereat have duly taken place and the consequent appointment of Director or Directors has been validly made. If the minutes are not recorded or signed within the prescribed period, then it is to be presumed that it is not properly kept and it will not be receivable in evidence. However, the onus to rebut the presumption under Section 195 (of Companies Act, 1956) is on the person who challenges the resolution or the entering of the minutes on the ground of malpractice or misdeed. ”

Taking into account Covid-19 situation that requires social distancing with necessary precautions, Ministry of Corporate Affairs (MCA) allowed companies to conduct shareholders meeting through
Videoconferencing/Other Audio-Visual Means (VC/OAVM). This article is a checklist for preparation, signing and maintenance of minutes of annual general meeting (AGM) conducted through VC/OAVM under the relevant provisions. The listed entities shall ensure compliance with the relevant provisions of Securities and Exchange Board of India (SEBI) (Listing Obligations and Disclosure Requirements) Regulations, 2015.

  1. Applicability.—The provisions of Section 118 of the Act, read with the Rules and circulars issued by the MCA (w.r.t. general meeting through VC/OAVM) are applicable to all companies —private companies, public companies (listed and unlisted companies).
  2. Content to be included in Minutes of AGM through VC.—The minutes of AGM through VC shall provide a fair and correct summary of the proceedings of the meeting. All appointments (i.e. Chairman, Director appointment, retire-by-rotation, reappointment of independent Director, statutory auditors, cost auditors, etc.) made at AGM shall be included in the minutes of the meeting. There shall not be included in the minutes, any matter which, in the opinion of the Chairman of the meeting: (a) is or could reasonably be regarded as defamatory of any person; or (b) is irrelevant or immaterial to the proceedings; or (c) is detrimental to the interests of the company. The Chairman shall exercise absolute discretion in regard to the inclusion or non-inclusion of any matter in the minutes of meeting. In relation to the circulars issued the MCA, the minutes of the AGM conducted through VC/OAVM may include the following:

(a) The notice of the meeting, financial statements of the company were sent to all stakeholders concerned through electronic mode.

(b) Summary of instructions read out by the Chairman of the meeting conducted through VC/OAVM.

(c) The facility for joining the meeting was kept open at least 15 minutes before the time scheduled to start the meeting and was not closed till the expiry of 15 minutes after such scheduled time.

(d) Manner of appointment of Chairman of the meeting.

(e) Name and designation of the invitees present at the meeting i.e. statutory auditors, secretarial auditors, independent directors, chairpersons of the Audit Committee, Nomination and Remuneration Committee and Stakeholders Relationship Committee.

(f) The fact that before the actual date of the meeting, the facility of remote e-voting was provided in accordance with the Act and the Rules (if remote e-voting provisions are applicable).

(g) Number of members present for the meeting. The attendance of members through VC/OAVM shall be counted for the purpose of reckoning the quorum.

(h) Manner of voting i.e. show of hands or voting by poll.

(i) The fact that various documents and registers were available for inspection in accordance with the provisions of Companies Act and MCA circulars.

(j) Depending upon the provisions of the articles of association of the company, the name of proposer and seconder of the specific resolution shall also be included in the minutes of the meeting.

  1. Minutes Book.—A company may maintain a distinct minute book for each type of meeting, namely: (i) general meetings of the members; (ii) meetings of the creditors; (iii) meetings of the Board of Directors; and (iv) meetings of each of the committees.
  2. Date of Entry.—The minutes of proceedings of each meeting shall be entered in the books maintained for that purpose along with the date of such entry within 30 days of the conclusion of the meeting.
  3. Signing and Initials of Minutes of Meeting.—For general meeting, each page of every minutes book shall be initialled or signed and the last page of the record of proceedings of each meeting in such books shall be dated and signed by the Chairman of the same meeting within the period of 30 days or in the event of the death or inability of that Chairman within that period, by a Director duly authorised by the Board of Directors for the purpose.
  4. Place of Maintenance of Minutes of General Meeting.—The minute books of general meetings shall be kept at the registered office of the company. The same shall be preserved permanently and kept in the custody of the Company Secretary or any director duly authorised by the Board.
  5. Inspection of Minutes of General Meeting.—The minute books of general meeting shall be kept open, during business hours, to the inspection by any member without charge. Such right is subject to such reasonable restrictions as the company may, by its articles of association or in general meeting, impose. Any member shall be entitled to be furnished, within 7 working days after he has made a request in that behalf to the company, and on payment of such prescribed fees with a copy of minutes of meeting. A member who has made a request for provision of soft copy in respect of minutes of any previous general meetings held during a period immediately preceding 3 financial years shall be entitled to be furnished, with the same free of cost.
  6. Compliance with Secretarial Standards issued by Institute of Company Secretaries of India.—Every company shall observe secretarial standards with respect to general and Board meetings specified by the ICSI, and approved by Central Government.

Taking into consideration the importance of minutes of general meeting, it’s evidentiary value, inspection rights of the members of the company, the minutes for the AGM conducted in the year 2020 shall be prepared in accordance with the provisions of the Act, Rules and MCA circulars (Circular No. 14 of 2020 dated 8-4-2020 and Circular No. 17 of 2020 dated 13-4-2020). It is necessary to ensure that all relevant and important points are included in the minutes of meeting. This may include question and answer session during the AGM of the company. In certain closely held companies, the members may conduct a roll-call of members, such facts shall also be included in the minutes of the meeting.


*Gaurav N Pingle, Practising Company Secretary, Pune. He can be reached at gp@csgauravpingle.com

[1] 1992 SCC OnLine Mad 400 : (1992) 75 Comp Cas 199.

[2]  Of the Companies Act, 1956, corresponding to S. 118 of the Companies Act, 2013.

COVID 19Hot Off The PressNews

General order for extension of time to hold AGM for FY 2019-20

A big relief is given by the Ministry of Corporate Affairs (MCA) to around 12 lakhs companies today by extending the timeline for holding Annual General Meeting till December 31st from September 30th.

MCA issued directions to RoCs to issue orders without the filing of formal application and payment of fee. Even applications already filed but not approved or rejected are also covered for this relief.

MCA is extending this timeline due to COVID-19 and Meeting the demand from various associations for extending time to hold AGM. This is for the first time that such relief generally is given to all companies.


Ministry of Corporate Affairs

[Press Release dt. 08-09-2020]

Op EdsOP. ED.

In today’s corporate world mired in corporate frauds and misdeeds, independent professionals are feeling increasingly uncomfortable and unenthusiastic to act as independent directors and non-executive directors in India. This discomfort stems out of fear of penal proceedings for the defaults committed by the company without their knowledge/involvement in the default.

Not stopping at that, this sense of fear has also developed into a recent phenomenon of resignations spree by independent directors/non-executive directors—this could lead to shortage of qualified/skilled professionals in the independent directors/non-executive directors’ ecosystem.

Paying heed to the concerns expressed by professionals and corporates alike and to ease the fear from the minds of independent/non-executive directors, the Ministry of Corporate Affairs (MCA) has issued a recent directive.

This directive has been rolled out via Circular dated 2-3-2020 dealing with prosecution of independent directors, non-promoters, non-KMP and non-executive directors. It stipulates that no civil/criminal proceedings should be initiated against the independent/non-executive directors without adequate evidence in relation to the involvement of such independent/non-executive directors in any default committed by a company.

The Companies Act, 2013 expressly provides under different provisions that any legal proceedings will be instigated against the officer in default for the company contravention of law. In general, day-to-day affairs of any company are carried out, monitored and processed by the Whole-Time Director (WTD)/Key Managerial Person (KMP) (who are authorised for it by the company’s byelaws and/or with express authority through specific board/shareholders resolutions or power of attorney).

Therefore, typically, a WTD/KMP would be liable for company violation of law as such person regulates the day-to-day affairs of the company. Accordingly, in majority of the corporate defaults, the liability for such default would be imposed on the WTD/KMP due to his direct involvement in the company business management.

In the absence of WTD/KMP, the liability for default of a company would be imposed on a director who (pursuant to e-form GNL-3 filed with the Registrar of Companies) agrees in writing to undertake such liability.

In certain cases, the law will inflict the liability on a specific managerial person/officer in charge of a specific assignment/function—accordingly, penal action should be initiated against such managerial person/officer only.

However, in practice, we see that many a times, even independent directors are caught in the crossfire between the regulatory/enforcement authorities and the company’s management. This causes unnecessary burden and stress on the independent directors. They have to defend themselves from allegations of misdeeds, lapses and frauds they may not even be aware of—deviating their attention from their own business/profession and resulting in a loss of repute, time, energy and money for them.

It is much better that in order to ascertain the respective contribution of any independent director and non-executive director/KMP/promoter in any default committed by the company—regulatory authorities evaluate records pertaining to such independent director and non-executive director/KMP/promoter available on the MCA portal.

If regulatory authorities have any queries in relation to initiation of penal proceedings against independent director and non-executive director/KMP/promoter for the defaults of the company, such authorities may look up to MCA to seek guidance in this regard. In such cases any course of action will be initiated by the regulatory authorities following the receipt of nod from the MCA.

The crux of Section 149 of the Companies Act, 2013 is that independent/non-executive director (other than promoter/KMP) will incur liability for the defaults of the company provided such default has occurred with such independent/non-executive director knowledge/consent/involvement in such default.

It is evident from the aforesaid provision no legal action can be initiated against independent/non-executive director unless it is established that they are involved/consented for the default committed by the company.

Nature of the default is another crucial variant in influencing the prospects of default proceedings against any person/company.

Under the law, primarily it is the responsibility of the WTD/KMP to comply with certain statutory/regulatory requirements in relation to company business.

In exceptional cases only, independent director/non-KMP/non-executive director should be held accountable to monitor the compliance aspects of certain specific subject-matters as stipulated under the law.

Prior to initiating any legal action against any independent director/non-KMP/non-executive director— the regulatory authorities must verify the documents connected with the default to ascertain the involvement of independent director/non-KMP/non-executive director in the default.

During the verification, if it is established to the satisfaction of the regulatory authorities that such independent director/non-KMP/non-executive director has been actually and actively involved in the default, then only the regulatory authorities should take proper course of legal action against such independent director/non-KMP/non-executive director.

Otherwise, shooting random notices to independent director/non-KMP/non-executive director without substantiating the connection of independent director/non-KMP/non-executive director with the default would cause damage in two folds:

(a) Force the existing professionals to quit from their designations; and

(b) slay the enthusiasm of skilled/qualified professionals to take up position of independent director/non-KMP/non-executive director.

MCA has directed the regulatory authorities to adopt the procedures established under the law to the point in relation to the existing cases against the independent directors, non-promoter/KMP/executive directors.

If regulatory authorities fail to establish a connection amid the independent directors/non-promoter/non-KMP/non-executive directors with the default committed by the company as stipulated under the law, then such existing cases may be forwarded for further course of action to the MCA.

Besides independent directors’ fraternity, the job of non-promoter/KMP/executive director would subsist in the following scenarios:

(a) Nomination of the directors in the public sector undertakings by the Government;

(b) nomination of the directors by public sector financial institutions or banks with a equity stake in a company; and

(c) appointment of directors by the regulatory authorities pursuant to the legal requirements.

MCAs new directives are well timed as the “quit corporate” movement is getting impetus among independent professionals who are queueing up to resign from directorships. The monetary and reputational risk involved with an independent directorship outweighs the perks of the office many a times in today’s corporate environment in India.

The new directives may provide a breathing space to independent directors, non-promoter/KMP/executive directors and may salvage them from unwanted exposure to legal/penal proceedings.

At the same time it will provide clear-cut guidance to the regulatory authorities in handling the cases related to independent directors, non-promoter/KMP/executive directors and will make the regulatory authorities more accountable/responsible for their acts.


* Bhumesh Verma is Managing Partner at Corp Comm Legal and can be contacted at bhumesh.verma@corpcommlegal.in.

**Paruchuri Baswanth Mohan, Research Associate, Corp Comm Legal.

Business NewsNews

A formal Memorandum of Understanding (MOU) was signed between the Ministry of Corporate Affairs (MCA), Government of India and the Securities and Exchange Board of India (SEBI) today for data exchange between the two regulatory organizations. The MoU was signed by Shri KVR Murty, Joint Secretary, MCA and Smt. Madhabi Puri Buch, Whole Time Member, SEBI in the presence of senior officers from both the organizations.

The MoU comes in the wake of increasing need for surveillance in the context of Corporate Frauds affecting important sectors of the economy. As the private sector plays an increasingly vital role in economic growth, the need for a robust Corporate Governance mechanism becomes the need of the hour.

The MoU will facilitate the sharing of data and information between SEBI and MCA on an automatic and regular basis. It will enable sharing of specific information such as details of suspended companies, delisted companies, shareholding pattern from SEBI and financial statements filed with the Registrar by corporates, returns of allotment of shares, audit reports relating to corporates. The MoU will ensure that both MCA and SEBI have seamless linkage for regulatory purposes. In addition to regular exchange of data, SEBI and MCA will also exchange with each other, on request, any information available in their respective databases, for the purpose of carrying out scrutiny, inspection, investigation and prosecution.

The MoU comes into force from the date it was signed and is an ongoing initiative of MCA and SEBI, who are already collaborating through various existing mechanisms. A Data Exchange Steering Group also has been constituted for the initiative, which will meet periodically to review the data exchange status and take steps to further improve the effectiveness of the data sharing mechanism.

The MoU marks the beginning of a new era of cooperation and synergy between the two regulators.


[Press Release dt. 07-06-2019]

Securities Exchange Board of India

Appointments & TransfersNews

S.O. 1512(E)— In exercise of powers conferred by Section 4(4) read with Section 4(1) of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Central Government hereby nominates Shri K.V.R. Murty, Joint Secretary, Ministry of Corporate Affairs as Member of the Securities and Exchange Board of India (SEBI) vice Shri Injeti Srinivas, Secretary, Ministry of Corporate Affairs with immediate effect and until further orders.

[F. No. 2/23/2006-RE]

[Notification dt. 01-04-2019]

Ministry of Finance