MCA vide various notifications has amended rules under the Companies Act 2013. The details of the amendment is outlined below:

 

Amendment in the Companies (Meetings of Board and its Powers) Rules, 2014

 

Vide Companies (Meetings of Board and its Powers) Amendment Rules, 2015, dated 18th March 2015, the following amendments has been made

 

Amendment in Rule 8 i.e. Powers of Board

 

Item numbers (3), (5), (6), (7), (8) and (9) and the entries relating thereto shall be omitted;

Impact of amendment on existing rule 8 is reproduced below:
8. Powers of Board.- In addition to the powers specified under sub-section (3) of section 179 of the Act, the following powers shall also be exercised by the Board of Directors only by means of resolutions passed at meetings of the Board.-

1. to make political contributions;
2. to appoint or remove key managerial personnel (KMP);
3. to take note of appointment(s) or removal(s) of one level below the Key Management Personnel; (Omitted)
4. to appoint internal auditors and secretarial auditor;
5. to take note of the disclosure of director’s interest and shareholding; (Omitted)
6. to buy, sell investments held by the company (other than trade investments),constituting five percent or more of the paid up share capital and free reserves of the investee company; (Omitted)
7. to invite or accept or renew public deposits and related matters; (Omitted)
8. to review or change the terms and conditions of public deposit; (Omitted)
9. to approve quarterly, half yearly and annual financial statements or financial results as the case may be. (Omitted)

Amendment in Rule 10 i.e. Loans to Director etc. under section 185

In the proviso, for the word principle’, the word ‘principal- shall be substituted.

Impact of amendment on existing rule 10 is reproduced below:

 

10. Loans to Director etc. under section 185.- (1) Any loan made by a holding company to its wholly owned subsidiary company or any guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company is exempted from the requirements under this section; and

 

(2) Any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company is exempted from the requirements under this section:

 

Provided that such loans made under sub-rule (1) and (2) are utilised by the subsidiary company for its principle [substituted by “principal”] business activities.

 

Amendment in Companies (Management and Administration) Rules, 2014

 

Vide Companies (Management and Administration) Amendment Rules, 2015, dated 19th March 2015, the Rule 20 has been substituted
Details of the new rule 20 is outlined below:
“20. Voting though electronic means.- (1) The provisions of this rule shall apply in respect of the general meetings for which notices are issued on or after the date of commencement of this rule.

 

2. Every company other than a company referred to in Chapter XB or Chapter XC of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 having its equity shares listed on a recognised stock exchange or a company having not less than one thousand members, shall provide to its members facility to exercise their right to vote on resolutions proposed to be considered at general meetings by electronic means.

   Explanation – For the purposes of this rule, the expression-

   1. “agency” means the National Securities Depository Limited, the Central Depository Services (India) Limited or any other entity approved by the Ministry of Corporate Affairs subject to the condition that the National Securities Depository Limited, the Central Depository Services (India) Limited or such other entity has obtained a certificate from the Standardisation Testing and Quality Certification Directorate, Department of Information Technology, Ministry of Communications and Information Technology, Government of India including with regard to compliance with parameters specified under Explanation (vi);
   2. “cut-off date” means a date not earlier than seven days before the date of general meeting for determining the eligibility to vote by electronic means or in the general meeting,
   3. “cyber security” means protecting information, equipment, devices, computer, computer resource, communication device and information stored therein from unauthorised access, use, disclosures, disruption, modification or destruction;
   4. “electronic voting system” means a secured system based process of display of electronic ballots, recording of votes of the members and the number of votes polled in favour or against, in such a manner that the entire voting exercised by way of electronic means gets registered and counted in an electronic registry in a centralised server with adequate cyber security;
   5. “remote e-voting” means the facility of casting votes by a member using an electronic voting system from a place other than venue of a general meeting;
   6. “secured system” means computer hardware, software, and procedure that –
      1. are reasonably secure from unauthorised access and misuse;
      2. provide a reasonable level of reliability and correct operation,
      3. are reasonably suited to performing the intended functions; and
      4. adhere to generally accepted security procedures;
   7. “voting by electronic means” includes “remote e-voting” and voting at the general meeting through an electronic voting system which may be the same as used for remote e-voting.
3. A member may exercise his right to vote through voting by electronic means on resolutions referred to in sub-rule (2) and the company shall pass such resolutions in accordance with the provisions of this rule.
4. A company which provides the facility to its members to exercise voting by electronic means shall comply with the following procedure, namely:-
   1. the notice of the meeting shall be sent to all the members, directors and auditors of the company either –
      1. by registered post or speed post; or
      2. through electronic means, namely, registered e-mail ID of the recipient; or
      3. by courier service;
   2. the notice shall also be placed on the website, if any, of the company and of the agency forthwith after it is sent to the members;
   3. the notice of the meeting shall clearly state –
      1. that the company is providing facility for voting by electronic means and the business may be transacted through such voting;
      2. that the facility for voting, either through electronic voting system or ballot or polling paper shall also be made available at the meeting and members attending the meeting who have not already cast their vote by remote e-voting shall be able to exercise their right at the meeting;
      3. that the members who have cast their vote by remote e-voting prior to the meeting may also attend the meeting but shall not be entitled to cast their vote again;
   4. the notice shall –
      1. indicate the process and manner for voting by electronic means ;
      2. indicate the time schedule including the time period during which the votes may be cast by remote e-voting;
      3. provide the details about the login ID;
      4. specify the process and manner for generating or receiving the password and (or casting of vote in a secure manner.
   5. the company shall cause a public notice by way of an advertisement to be published, immediately on completion of dispatch of notices for the meeting under clause (i) of sub-rule (4) but at least twenty-one days before the date of general meeting, at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and having a wide circulation in that district, and at least once in English language in an English newspaper having country-wide circulation, and specifying in the said advertisement, inter alia, the following matters, namely
      1. statement that the business may be transacted through voting by electronic means ,
      2. the date and time of commencement of remote e-voting;
      3. the date and time of end of remote e-voting;
      4. cut-off date;
      5. the manner in which persons who have acquired shares and become members of the company after the despatch of notice may obtain the login ID and password;
      6. the statement that –
         1. remote e-voting shall not be allowed beyond the said date and time;
         2. the manner in which the company shall provide for voting by members present at the meeting; and
         3. a member may participate in the general meeting even after exercising his right to vote through remote e-voting but shall not be allowed to vote again in the meeting; and
         4. a person whose name is recorded in the register of members or in the register of beneficial owners maintained by the depositories as on the cut-off date only shall be entitled to avail the facility of remote e-voting as well as voting in the general meeting;
      7. website address of the company, if any, and of the agency where notice of the meeting is displayed; and
      8. name, designation, address, email id and phone number of the person responsible to address the grievances connected with facility for voting by electronic means:

         Provided that the public notice shall be placed on the website of the company, if any, and of the agency;

   6. the facility for remote e-voting shall remain open for not less than three days and shall close at 5.00 p.m. on the date preceding the date of the general meeting;
   7. during the period when facility for remote e-voting is provided, the members of the company, holding shares either in physical form or in dematerialised form, as on the cut-off date, may opt for remote e-voting.

      Provided that once the vote on a resolution is cast by the member, he shall not be allowed to change it subsequently or cast the vote again:

      Provided further that a member may participate in the general meeting even after exercising his right to vote through remote e-voting but shall not be allowed to vote again;

   8. at the end of the remote e-voting period, the facility shall forthwith be blocked:

      Provided that if a company opts to provide the same electronic voting system as used during remote e-voting during the general meeting, the said facility shall be in operation till all the resolutions are considered and voted upon in the meeting and may be used for voting only by the members attending the meeting and who have not exercised their right to vote through remote e-voting.

   9. the Board of Directors shall appoint one or more scrutiniser, who may be Chartered Accountant in practice. Cost Accountant in practice, or Company Secretary in practice or an Advocate, or any other person who is not in employment of the company and is a person of repute who, in the opinion of the Board can scrutinise the voting and remote e-voting process in a (air and transparent manner:

      Provided that the scrutiniser so appointed may take assistance of a person who is not in employment of the company and who is well-versed with the electronic voting system,

   10. the scrutiniser shall be willing to be appointed and be available for the purpose of ascertaining the requisite majority;
   11. the Chairman shall, at the general meeting, at the end of discussion on the resolutions on which voting is to be held, allow voting, as provided in clauses (a) to (h) of sub-rule (1) of rule 21, as applicable, with the assistance of scrutiniser, by use of ballot or polling paper or by using an electronic voting system for all those members who are present at the general meeting but have not cast their votes by availing the remote e-voting facility.
   12. the scrutiniser shall, immediately after the conclusion of voting at the general meeting, first count the votes cast at the meeting, thereafter unblock the votes cast through remote e-voting in the presence of at least two witnesses not in the employment of the company and make, not later than three days of conclusion of the meeting, a consolidated scrutiniser’s report of the total votes cast in favour or against, if any, to the Chairman or a person authorised by him in writing who shall countersign the same:

       Provided that the Chairman or a person authorised by him in writing shall declare the result of the voting forthwith;

       Explanation.- It is hereby clarified that the manner in which members have cast their votes, that is, affirming or negating the resolution, shall remain secret and not available to the Chairman, Scrutiniser or any other person till the votes are cast in the meeting.

   13. For the purpose of ensuring that members who have cast their votes through remote e-voting do not vote again at the general meeting, the scrutiniser shall have access, after the closure of period for remote e-voting and before the start of general meeting, to details relating to members, such as their names, folios, number of shares held and such other information that the scrutiniser may require, who have cast votes through remote e-voting but not the manner in which they have cast their votes:
   14. the scrutiniser shall maintain a register either manually or electronically to record the assent or dissent received, mentioning the particulars of name, address, folio number or client ID of the members, number of shares held by them, nominal value of such shares and whether the shares have differential voting rights;
   15. the register and all other papers relating to voting by electronic means shall remain in the safe custody of the scrutiniser until the Chairman considers, approves and signs the minutes and thereafter, the scrutiniser shall hand over the register and other related papers to the company.
   16. the results declared along with the report of the scrutiniser shall be placed on the website of the company, if any, and on the website of the agency immediately after the result is declared by the Chairman :

       Provided that in case of companies whose equity shares are listed on a recognised stock exchange, the company shall, simultaneously, forward the results to the concerned stock exchange or exchanges where its equity shares are listed and such stock exchange or exchanges shall place the results on its or their website.

   17. subject to receipt of requisite number of votes, the resolution shall be deemed to be passed on the date of the relevant general meeting.

       Explanation.- For the purposes of this clause, the requisite number of votes shall be the votes required to pass the resolution as the ‘ordinary resolution’ or the ‘special resolution’, as the case may be, under section 114 of the Act.

   18. a resolution proposed to be considered through voting by electronic means shall not be withdrawn.”

Amendment in the Companies (Share Capital and Debentures) Rules, 2014

Vide Companies (Share Capital and Debentures) Amendment Rules, 2015, dated 18th March 2015, the following amendments has been made

Substitution of Rule 3 i.e. Application

The rule 3 stand substituted by the following
3. Application. – The provisions of these rules shall apply to –

1. all unlisted public companies;
2. all private companies; and
3. listed companies so far as they do not contradict or conflict with any other regulation framed in this regard by the Securities and Exchange Board of India;

Existing rule 3 is reproduced below:

3. Application. – The provisions of these rules shall apply to
   1. all unlisted public companies;
   2. all private companies; and
   3. listed companies,

      so far as they do not contradict or conflict with any other provision framed in this regard by the Securities and Exchange Board of India.

Amendment in Rule 5 i.e. Certificate of Shares
In rule 5, in sub-rule (3), in clause (b),

1. the first proviso shall be omitted;
2. in the second proviso for the words “provided further that”, the words “provided that” shall be substituted;
3. in the third proviso for the words “provided also that” the words “provided further that” shall be substituted;

Impact of amendment on existing rule 5(3) is reproduced below:
(3) Every share certificate shall be issued under the seal of the company, which shall be affixed in the presence of, and signed by-

1. two directors duly authorized by the Board of Directors of the company for the purpose or the committee of the Board, if so authorized by the Board; and
2. the secretary or any person authorised by the Board for the purpose:

   Provided that, in companies wherein a Company Secretary is appointed under the provisions of the Act, he shall deemed to be authorised for the purpose of this rule: [omitted]

“Provided further that” [substituted by “provided that”], if the composition of the Board permits of it, at least one of the aforesaid two directors shall be a person other than the managing or whole-time director:

“Provided also that” [substituted by “provided further that”], in case of a One Person Company, every share certificate shall be issued under the seal of the company, which shall be affixed in the presence of and signed by one director or a person authorized by the Board of Directors of the company for the purpose and the Company Secretary, or any other person authorized by the Board for the purpose.

Explanation.- For the purposes of this sub-rule, a director shall be deemed to have signed the share certificate if his signature is printed thereon as a facsimile signature by means of any machine, equipment or other mechanical means such as engraving in metal or lithography, or digitally signed, but not by means of a rubber stamp, provided that the director shall be personally responsible for permitting the affixation of his signature thus and the safe custody of any machine, equipment or other material used for the purpose.

 

Amendment in Rule 6 i.e. Issue of renewed or duplicate share certificate
In rule 6, in sub-rule (2), in clause (c), for the words “within fifteen days”, the words “within forty-five days” shall be substituted;

 

Impact of amendment on existing rule 6(2) is reproduced below:

 

(2)(a) The duplicate share certificate shall be not issued in lieu of those that are lost or destroyed, without the prior consent of the Board and without payment of such fees as the Board thinks fit, not exceeding rupees fifty per certificate and on such reasonable terms, such as furnishing supporting evidence and indemnity and the payment of out-of-pocket expenses incurred by the company in investigating the evidence produced:

 

(c) In case unlisted companies, the duplicate share certificates shall be issued within a period of three months and in case of listed companies such certificate shall be issued “within fifteen days” [substituted by “within forty five days”], from the date of submission of complete documents with the company respectively.

 

Amendment in Rule 12 i.e. Issue of employee stock options

 

In rule 12, in sub-rule (1), in the Explanation, in clause (c), the words “or of an associate company” shall be omitted;

 

Impact of amendment on existing rule 12(1) is reproduced below:

 

12. Issue of employee stock options.-

 

A company, other than a listed company, which is not required to comply with Securities and Exchange Board of India Employee Stock Option Scheme Guidelines shall not offer shares to its employees under a scheme of employees’ stock option (hereinafter referred to as “Employees Stock Option Scheme”), unless it complies with the following requirements, namely:-

 

(1) the issue of Employees Stock Option Scheme has been approved by the shareholders of the company by passing a special resolution.

 

Explanation: For the purposes of clause (b) of sub-section (1) of section 62 and this rule ‘‘Employee’’ means-

 

(c) an employee as defined in clauses (a) or (b) of a subsidiary, in India or outside India, or of a holding company of the company “or of an associate company” [stands omitted] but does not include-
(i) an employee who is a promoter or a person belonging to the promoter group; or
(ii) a director who either himself or through his relative or through any body corporate, directly or indirectly, holds more than ten percent of the outstanding equity shares of the company.

 

Amendment in Rule 13 i.e. Issue of shares on preferential basis

In rule 13, in sub-rule (1), –

1. in the proviso, for the words “provided that” the words “provided further that shall be substituted and before the proviso as so amended, the following proviso shall be inserted, namely:-

   Provided that in case of any preferential offer made by a company to one or more existing members only, the provisions of sub-rule (1) and proviso to sub-rule (3) of rule 14 of Companies (Prospectus and Allotment of Securities) Rules, 2014 shall not apply.”

Impact of amendment on existing rule 13(1) is reproduced below:

 

(1) For the purposes of clause (c) of sub-section (1) of section 62, If authorized by a special resolution passed in a general meeting, shares may be issued by any company in any manner whatsoever including by way of a preferential offer, to any persons whether or not those persons include the persons referred to in clause (a) or clause (b) of sub-section (1) of section 62 and such issue on preferential basis should also comply with conditions laid down in section 42 of the Act:

 

“Provided that in case of any preferential offer made by a company to one or more existing members only, the provisions of sub-rule (1) and proviso to sub-rule (3) of rule 14 of Companies (Prospectus and Allotment of Securities) Rules, 2014 shall not apply”  [newly inserted]

 

“Provided that” [substituted by “Provided further”] the price of shares to be issued on a preferential basis by a listed company shall not be required to be determined by the valuation report of a registered valuer.

 

Explanation.- For the purposes of this rule, (i) the expression ‘Preferential Offer’ means an issue of shares or other securities, by a company to any select person or group of persons on a preferential basis and does not include shares or other securities offered through a public issue, rights issue, employee stock option scheme, employee stock purchase scheme or an issue of sweat equity shares or bonus shares or depository receipts issued in a country outside India or foreign securities;

 

(ii) the expression, “shares or other securities” means equity shares, fully convertible debentures, partly convertible debentures or any other securities, which would be convertible into or exchanged with equity shares at a later date.

 

 

Amendment in Rule 18 i.e. Debentures

In rule 18 (1)-

1. in clause (d), for sub-clauses (i) and (ii), the following sub-clauses shall be substituted , namely: –
   1. any specific movable property of the company ; or
   2. any specific immovable property wherever situate, or any interest therein:

      Provided that in case of a non-banking financial company, the charge or mortgage under sub-clause (i) may be created on any movable property”

      (B) In clause (d), after sub-clause (ii), following proviso shall be inserted, namely: –

      “Provided further that in case of any issue of debentures by a Government company which is fully secured by the guarantee given by the Central Government or one or more State Government or by both, the requirement for creation of charge under this sub-rule shall not apply.”

      Provided also that in case of any loan taken by a subsidiary company from any bank or financial institution the charge or mortgage under this sub-rule may also be created on the properties or assets of the holding company;

Impact of amendment on existing rule 18(1) is reproduced below:

 

18. Debentures.-
(1) The company shall not issue secured debentures, unless it complies with the following conditions, namely:-

 

(a) An issue of secured debentures may be made, provided the date of its redemption shall not exceed ten years from the date of issue.

 

3Provided that the following classes of companies may issue secured debentures for a period exceeding ten years but not exceeding thirty years

1. Companies engaged in setting up of infrastructure projects;
2. ‘Infrastructure Finance Companies’ as defined in clause (viia) of sub-direction (1) of direction 2 of Non-Banking Financial (Non-deposit accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2007;
3. ‘Infrastructure Debt Fund Non-Banking Financial companies’ as defined in clause of (b) direction 3 of Infrastructure Debt Fund Non-Banking Financial Companies (Reserve Bank) Directions, 2011

(b) such an issue of debentures shall be secured by the creation of a charge, on the properties or assets of the company, having a value which is sufficient for the due repayment of the amount of debentures and interest thereon;

 

(c) the company shall appoint a debenture trustee before the issue of prospectus or letter of offer for subscription of its debentures and not later than sixty days after the allotment of the debentures, execute a debenture trust deed to protect the interest of the debenture holders ; and

 

(d) the security for the debentures by way of a charge or mortgage shall be created in favour of the debenture trustee on-

 

(i) “any specific movable property of the company (not being in the nature of pledge)” [substituted by “any specific movable property of the company”]; or
(ii) any specific immovable property wherever situate, or any interest therein .

“Provided that in case of a non-banking financial company, the charge or mortgage under sub-clause (i) may be created on any movable property” [Newly inserted”]

“Provided further that in case of any issue of debentures by a Government company which is fully secured by the guarantee given by the Central Government or one or more State Government or by both, the requirement for creation of charge under this sub-rule shall not apply.

 

Provided also that in case of any loan taken by a subsidiary company from any bank or financial institution the charge or mortgage under this sub-rule may also be created on the properties or assets of the holding company;” [Newly inserted”]

In rule 18(5)

For the words “within sixty days of allotment of debentures”, the words “within three months of closure of the issue or offer” shall be substituted;

Impact of amendment on existing rule 18(5) is reproduced below:

 

(5) For the purposes of sub-section (13) of section 71 and sub-rule (1) a trust deed in Form No.SH.12 or as near thereto as possible shall be executed by the company issuing debentures in favour of the debenture trustees “within sixty days of allotment of debentures” [substituted by “within three months of closure of the issue or offer”].

 

In rule 18(8)

After sub-rule (8), following sub-rule (9), shall be inserted, namely:-

“(9) Nothing contained in this rule shall apply to any amount received by a company against issue of commercial paper or any other similar instrument issued in accordance with the guidelines or regulations or notification issued by the Reserve Bank of India.

(10) In case of any offer of foreign currency convertible bonds or foreign currency bonds issued in accordance with the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 or regulations or directions issued by the Reserve Bank of India, the provisions of this rule shall not apply unless otherwise provided in such Scheme or regulations or directions.”

Amendment in rule 19 i.e. Nomination by securities holders

In rule 19 (11), for the word, letters and figures “Form No. SH- 14”, the word, letters and figures “Form SH-13” shall be substituted.

 

Impact of amendment on existing rule 19(11) is reproduced below:

 

(11) Where the nominee is a minor, the holder of the securities, making the nomination, may appoint a person in “Form No. SH.14” [substituted by “Form SH-13”] specified under sub-rule (1), who shall become entitled to the securities of the company, in the event of death of the nominee during his minority.

 

Substitution of form

In place of existing “Form SH-13” and “Form SH-14”, new forms are provided.