Clarification regarding filing of Form DPT4 & 23C

MCA vide circular no 27/2014 dated 30th June 2014 has extended the time for filing form no DPT-4 by 2 months i.e. up to 31-08-2014 without any additional fee in terms of section 403 of the Act. As per section 74 the last date of filing the said form was 30th June 2014.

Amendment in chapter III rules

MCA vide notification dated 30th June 2014 has amended the Companies (Prospectus and Allotment of Securities) Rules 2014

By way amendment a third proviso is inserted after rule no 14(2)(a) second proviso

“Provided also that in case of an offer or invitation for non-convertible debentures referred to in the second proviso, made within a period of six months from the date of commencement of these rules, the special resolution referred to in the second proviso may be passed within the said period of six months from the date of commencement of these rules.”.

Relevant text of existing rule 14(2)(a) is given below :

“(2) A company shall not make a private placement of its securities unless –

(a) the proposed offer of securities or invitation to subscribe securities has been previously approved by the shareholders of the company, by a Special Resolution, for each of the Offers or Invitations:

Provided that in the explanatory statement annexed to the notice for the general meeting the basis or justification for the price (including premium, if any) at which the offer or invitation is being made shall be disclosed:

Provided further that in case of offer or invitation for non- convertible debentures, it shall be sufficient if the company passes a previous special resolution only once in a year for all the offers or invitation for such debentures during the year.”

 

Cost Audit Rules

MCA vide notification dated 30th June 2014 has issued the much awaited rules regarding the cost audit i.e. the Companies (cost records and audit) Rules, 2014.

Key highlights of the rules are given below:

Applicability of cost records:

The following class of companies, including Foreign Companies defined in sub-section (42) of section 2 of the Act, shall be required to include cost records in their books of account, namely:-

1. Companies engaged in the production of following goods in strategic sectors having the net worth of the company is Rs 500 crore or more or the turnover is Rs 500 crore or more.
   1. machinery and mechanical appliances used in defence, space and atomic energy sectors excluding any ancillary item or items;
   2. turbo jets and turbo propellers;
   3. arms and ammunitions;
   4. propellant powders; prepared explosives, (other than propellant powders); safety fuses; detonating fuses; percussion or detonating caps; igniters; electric detonators;
   5. radar apparatus, radio navigational aid apparatus and radio remote control apparatus;
   6. tanks and other armoured fighting vehicles, motorised, whether or not fitted with weapons and parts of such vehicles, that are funded (investment made in the company) to the extent of ninety per cent. or more by the Government or Government Agencies;
2. Companies engaged in an industry regulated by a Sectoral Regulator or a Ministry or Department of Central Government:
   1. Port services of stevedoring, pilotage, hauling, mooring, re-mooring, hooking, measuring, loading and unloading services rendered by a Port in relation to a vessel or goods regulated by the Tariff Authority for Major Ports under section 111 of the Major Port Trusts Act, 1963(38 of 1963);
   2. Aeronautical services of air traffic management, aircraft operations, ground safety services, ground handling, cargo facilities and supplying fuel rendered by airports and regulated by the Airports Economic Regulatory Authority under the Airports Economic Regulatory Authority of India Act, 2008 (27 of 2008);
   3. Telecommunication services made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature (other than broadcasting services) and regulated by  the  Telecom  Regulatory  Authority  of  India  under  the  Telecom Regulatory Authority of India Act, 1997 (24 of 1997);
   4. Generation,  transmission,  distribution  and  supply  of  electricity regulated by the relevant regulatory body or authority under the Electricity Act, 2003 (36 of 2003), other than for captive generation (as defined under the Electricity Rules 2005);
   5. Steel;
   6. Roads and other infrastructure projects;
   7. Drugs and Pharmaceuticals;
   8. Fertilisers;
   9. Sugar and industrial alcohol;
   10. Petroleum products regulated by the Petroleum and Natural Gas
   11. Regulatory Board under the Petroleum and Natural Gas Regulatory Board Act, 2006(19 of 2006);
   12. Rubber and allied products being regulated by the Rubber Board.

   Provided that the company aforesaid must fulfill the below given limits:
    

   1. in the case of a multi-product or a multi services company (i.e. a company producing more than one product or service), any product or a service for which the individual turnover (from such specific product or such specific service) is Rs 50 crore or more;
   2. in the case of a company, producing any one specific product or service, if the net worth of the company is Rs 150 crore or more or the turnover is Rs 25 crore or more.

      Moreover in the case of companies engaged in an industry regulated by a sectoral regulator, the requirements of sectoral regulator regarding cost records shall be taken into account.

3. Companies operating in areas involving public interest such as:
   1. Railway or tramway locomotives, rolling stock, railway or tramway  fixtures and fittings, mechanical (including electro mechanical) traffic signalling equipment’s of all kind;
   2. Mineral products including cement;
   3. Ores;
   4. Mineral fuels (other than Petroleum), mineral oils etc.;
   5. Base metals;
   6. Inorganic chemicals, organic or inorganic compounds of precious  metals, rare-earth metals of radioactive elements or isotopes, and Organic Chemicals;
   7. Jute and Jute Products;
   8. Edible Oil under Administrative Price Mechanism;
   9. Construction Industry;
   10. Companies engaged in health services viz. functioning as or running  hospitals, diagnostic centres, clinical centres or test laboratories;
   11. Companies engaged in education services, other than such similar services falling under philanthropy or as part of social spend which do not form part of any business.

   Provided that the company aforesaid must fulfill the below given limits:
    

   1. in the case of a multi-product or a multi services company (i.e. a company producing more than one product or service), any product or a service for which the individual turnover (from such specific product or such specific service) is Rs 50 crore or more;
   2. in the case of a company producing any one specific product or service, if the net worth of the company is Rs 150 crore or more or the turnover is Rs 25 crore or more.
4. Companies (including foreign companies other than those having only liaison offices) engaged in the production, import and supply or trading of following medical devices, namely:-
   1. Cardiac Stents;
   2. Drug Eluting Stents;
   3. Catheters;
   4. Intra Ocular Lenses;
   5. Bone Cements;
   6. Heart Valves;
   7. Orthopaedic Implants;
   8. Internal Prosthetic Replacements;
   9. Scalp Vein Set;
   10. Deep Brain Stimulator;
   11. Ventricular peripheral Shud;
   12. Spinal Implants;
   13. Automatic Impalpable Cardiac Deflobillator;
   14. Pacemaker (temporary and permanent);
   15. patent ductus arteriosus, atrial septal defect and ventricular septal defect closure device;
   16. Cardiac Re-synchronize Therapy ;
   17. Urethra Spinicture Devices;
   18. Sling male or female;
   19. Prostate occlusion device; and
   20. Urethral Stents.

   Provided that the aforesaid industries will be covered:
    

   1. in the case of a company engaged in multiple products, any product or device for which the individual turnover (from such specific product or device) is Rs 10 crore or more, or 1/3rd of the turnover, whichever is less.
   2. in the case of a company engaged in one specific product or device, if it has net worth of Rs 150 crore or more or the turnover is Rs 25 crores or more;

   (Rule no 3)

Applicability of cost audit:

1. Every company engaged in a strategic industry which meets the requirement of turnover, networth as the case may be shall be required to get its cost records audited in accordance with these rules.
2.  In the case of a multi-product or a multi services company engaged in an industry regulated by a Sectoral Regulator or a Ministry or Department of Central Government or operating in areas involving public interest the requirement for cost audit shall apply to a product or a service for which the individual turnover (from such specific product or such specific service) is Rs 100 crore or more;
3. In the case of company engaged in an industry regulated by a Sectoral Regulator or a Ministry or Department of Central Government or operating in areas involving public interest and producing any one specific product or providing services specified therein , the requirement for cost audit shall apply if the net worth of the company is Rs 500 crore or more or the turnover from such product or such service is Rs 100 crore or more.
4. In the case of a company engaged in medical products or devices and which has multiple products or devices (i.e. a company producing, importing and supplying or trading in more than one medical device or product), the requirement for cost audit shall apply to a medical device or product for which the individual turnover (from such specific medical device or product) is Rs 10 crore or more, or one third of the turnover, whichever is less;
5. In the case of a company engaged in medical products or devices which has only one product or device (i.e. a company producing, importing and supplying or trading one medical device or product), the requirement for cost audit shall apply if the net worth of the company is Rs 150 crores or more or the turnover is Rs 25 crores or more.

(Rule no 4)

Maintenance of records.

Every company under these rules including all units and branches thereof, shall, in respect of each of its financial year commencing on or after the 1st day of April, 2014, maintain cost records in form CRA-1. (Rule no 5)

Cost Audit:

The category of companies required to get cost audit done shall within 180 days of the commencement of every financial year, appoint a cost auditor. (Rule no 6(1))

Company to file a notice of such appointment with the Central Government within a period of 30 days of the Board meeting in which such appointment is made or within a period of 180 of the commencement of the financial year, whichever is earlier, in form CRA-2. (Rule no 6(2))

Cost auditor, shall submit the cost audit report along with his or its reservations or qualifications or observations or suggestions, if any, in form CRA-3. (Rule no 6(4))

Copy of report to Central Government:

Furnish the Central Government the cost audit report alongwith full information and explanation on every reservation or qualification contained therein, in form CRA-4 within a period of 30 days of receipt of report. (Rule no 6(6))

Rules not to apply in certain cases :

The requirement for cost audit under these rules shall not be applicable to a company which is covered under rule 3, and,
(i) whose revenue from exports, in foreign exchange, exceeds 75% per cent of its total revenue or
(ii)  which is operating from a special economic zone. (Rule no