JUL 30, 2016

Key Highlights of Amendments in Rules related to Incorporation and Accounts Chapter.

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Amendment in the rules related to Incorporation Chapter

MCA vide notification dated 27th July, 2016 has amended the Companies(Incorporation),  Rules 2014 by way of Companies (Incorporation) Third Amendment Rules 2016.

Key highlights of the amendments are given below:

  1. A natural person may be member of a One Person Company and at same point of time, said person may also be a nominee in one other One Person Company. However, if such person becomes a member in another OPC by virtue of his being a nominee in that company, then, he shall transfer his share(s) or convert one person company into private/ public company within a period of 180 days to meet the eligibility criteria that he can’t be member of more than one OPC at the same time.
  2. Word ‘Financial Corporation’ and the like words and combinations thereof, shall not be used in the name of a company, in English or any of the languages depicting the same meaning unless the previous approval of the Central Government has been obtained for the use of such word or expression.
  3. Following key changes in the incorporation process are made
    1. For the purpose of signing of Memorandum and Articles of Association of the Company, the type written or printed particulars of the subscribers and witnesses shall be allowed as if it is written by the subscriber and witness respectively so long as the subscriber and the witness as the case may be appends his or her signature or thumb impression, as the case may be.
    2. No proof of identity and residence of the Subscriber are not required to be filed with the ROC at the time of filling of application incorporation of the Company, where the subscriber is already holding a valid DIN and the particulars provided therein have been updated as on the date of application for the Incorporation of the Company.
    3. Requirement of INC-10 has been dispensed with
  4. Partnership firm can’t be a subscriber to the Memorandum.
  5. Every Company which has a website for conducting online business or otherwise, shall disclose/publish its name, address of its registered office, the Corporate Identity Number, Telephone number, fax number if any, email and the name of the person who may be contacted in case of any queries or grievances on the landing/home page of the said website. Further, the Central Government may as and when required, notify the other documents on which the name of the company shall be printed.
  6. Now a company which has not filed annual returns or financial statements due for filing with the Registrar or which has failed to pay or repay matured deposits or debentures or interest thereon, can also apply for change in name upon filing necessary documents or payment or repayment of matured deposits or debentures or interest thereon as the case may be. Further earlier application for change in name is also not allowed, where any document required to be filed with the Registrar has not been filed within the due time but the said restriction has been dispensed with.
  7. Changes with respect to shifting of registered office
    1. In case of shifting of registered office by a Registered Non Banking Company, from one state or union territory to another state, a copy of the No Objection Certificate from the Reserve Bank of India is required to be filled as an attachment to Form No. INC 23 with the Central Government.
    2. Requirement of submitting copy of the application to SEBi, in case of listed companies has been omitted.
    3. In case of companies against whom an inquiry or prosecution is pending, shifting of registered office of the Company from the jurisdiction of one Registrar of Companies to the jurisdiction of another Registrar of Companies, within the same state shall be allowed on completion of any previous inquiry, inspection or investigation, if any, as a consequence of which no prosecution is envisaged or no prosecution is pending.
    4. In case of companies against whom an inquiry or prosecution is pending, shifting of registered office from one state to another will be allowed on completion of such inquiry, inspection or investigation as a consequence of which no prosecution is envisaged or no prosecution is pending, shifting of registered office shall be allowed.
  8. Rule 37 has been introduced to the Companies (Incorporation) Rules, 2014 pertaining to Conversion of unlimited liability company with or without share capital into a limited liability company by shares or guarantee. The silent features of rule are stated as under:
    1. The unlimited company with or without share capital is required to pass Special resolution in a general meeting effecting such the conversion.
    2. An application in Form No. INC- 27 is required to fill with the ROC within 45 days of passing of said resolution.
    3. Said company shall within seven days from the date of passing of the special resolution , publish a notice, in Form No. INC-27A of such proposed conversion in two newspapers (one in English and one in vernacular language) in the district in which the registered office of the company is situate.
    4. Said notice shall also be placed on the website of the Company, if any, indicating clearly the proposal of conversion of the company into a company limited by shares or guarantee, and seeking objections if any, from the persons interested in its affairs to such conversion and cause a copy of such notice to be dispatched to its creditors and debentures holders made as on the date of notice of the general meeting by registered post or by speed post or through courier with proof of dispatch.
    5. Further, said notice shall also state that the objections, if any, may be intimated to the Registrar and to the company within twenty-one days of the date of publication of the notice, duly indicating nature of interest and grounds of opposition.
    6. The application for conversion shall be disposed within 30 days of receipt of application for such conversion.
    7. The company is required to comply with the following post conversion conditions:

      Explanation: For the purpose of this clause, past debts, liabilities, obligations or contracts do not include secured debts due to banks and financial institutions.

      1. Company shall not change its name for a period of one year from the date of such conversion.
      2. The company shall not declare or distribute any dividend without satisfying past debts, liabilities, obligations or contracts incurred or entered into before conversion.
    8. An Unlimited Liability Company shall not be eligible for conversion into a company limited by shares or guarantee in case-
      1. its networth is negative, or
      2. an application is pending under the provisions of the Companies Act 1956 or the Companies Act, 2013 for striking off its name, or
      3. the company is in default of any of its Annual Returns or financial statements under the provisions of the Companies Act, 1956 or the Companies Act, 2013, or
      4. a petition for winding up is pending against the company, or
      5. the company has not received amount due on calls in arrears, from its directors, for a period of not less than six months from the due date; or
      6. an inquiry, inspection or investigation is pending against the company.

Click here to download the Notification

Amendment in the rules related to Accounts Chapter

MCA vide notification dated 27th July, 2016 has amended the Companies (Accounts), Rules 2014 by way of Companies (Accounts) Amendment Rules, 2016.
Key highlights of the amendments are given below:

  1. The requirement of preparing consolidated statement has been dispensed for a companywhich meets the following conditions :-
    1. it is a wholly-owned subsidiary, or is a partially-owned subsidiary of another company  and all its other members, including those not otherwise entitled to vote, having been intimated in writing and for which the proof of delivery of such intimation is available with the company, do not object to the company not presenting consolidated financial statements;
    2. it is a company whose securities are not listed or are not in the process of listing on any stock exchange, whether in India or outside India; and
    3. its ultimate or any intermediate holding company files consolidated financial statements with the Registrar which are in compliance with the applicable Accounting Standards.
  2. Pursuant to change in the requirement of preparing consolidated financial statement, new format of form AOC-1 has been provided.
  3. Body Corporate can also be appointed as an internal auditor. Further Chartered Accountant or Cost Accountant who are not in practice can also be appointed as internal auditor
  4. New format has been provided for form AOC-4 has been provided .

Click here to download the Notification