MCA vide its notification no S.O 1459(E) dated 6th June 2014 has notified the remaining provisions of section 74 (Repayment of deposits etc., accepted before the commencement of this Act ) i.e. Sub-section (2) & (3)
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Sub-section (2) deal with making application to the Tribunal for extension in time for payment of deposit or part thereof under this section &(3) deal with penal provisions.
Since the sub-section (2) has been notified but as the Tribunal has not been constituted yet , therefore MCA has also issued a removal of difficulty order.
The Companies (Removal of Difficulties) Fourth Order, 2014
MCA vide its notification no S.O. 1430(E) dated 6th June 2014 has issued a fourth ROD whereby it is provided that until a date is notified by the Central Government under sub-section (1) of Section 434 of the Companies Act, 2013 (18 of 2013), the Company Law Board constituted in pursuance of sub-section (1) of Section 10E of the Companies Act, 1956 (1 of 1956) shall exercise the jurisdiction, powers, authority and functions of the Tribunal under sub-section (2) of Section 74 of the said Act.
Clarification related to Independent Directors
MCA after receiving the various representations from Industry Chambers, Professional Institutes and other stakeholders about appointment of Independent Directors (IDs) under the relevant provisions of the Companies Act, 2013 (Act) read with relevant rules with effect from 1st April, 2014 has issued followings clarificationsvide circular no 14/2014 dated 9th June 2013
- Section 149(6)(c): “pecuniary interest in certain transactions” :- This provision inter alia requires that an ‘ID’ should have no ‘pecuniary relationship’ with the company concerned or its holding/ subsidiary/ associate company and certain other categories specified therein during the current and last 2 preceding financial years. Clarifications have been sought whether a transaction entered into by an ‘ID’ with the company concerned at par with any member of the general public and at the same price as is payable/ paid by such member of public would attract the bar of ‘pecuniary relationship’ under section 149(6)(c).
It is hereby clarified that in view of the provisions of section 188 (Related Party Transactions) which take away transactions in the ordinary course of business at arm’s length price from the purview of related party transactions, an ‘ID’ will not be said to have ‘pecuniary relationship’ under section 149(6)(c) in such cases i.e. where the transaction is entered in the ordinary course of business at arm’s length price.
- Receipt of remuneration by ID : whether receipt ofremuneration, (in accordance with the provisions of the Act) by an 'ID’ from a company would be considered as having pecuniary interest while considering his appointment in the holding company, subsidiary company or associate company of such company.
It is clarified that ‘pecuniary relationship’ provided in section 149(6)(c) of the Act does not include receipt of remuneration, from one or more companies, by way of fee provided under sub-section (5) of section 197 i.e. sitting fees, reimbursement of expenses for participation in the Board and other meetings and profit related commission approved by the members, in accordance with the provisions of the Act.
- Section 149: Appointment of 'IDs’ : Clarification has been sought if IDs’ appointed prior to April 1, 2014 may continue and complete their remaining tenure, under the provisions of the Companies Act, 1956 or they should demit office and be re-appointed (should the company so decide) in accordance with the provisions of the new Act.
In the light of the relevant provisions of the Act, particularly section 149(5) and 149(10) & (11). Explanation to section 149(11) clearly provides that any tenure of an 'ID’ on the date of commencement of the Act shall not be counted for his appointment/holding office of director under the Act. In view of the transitional period of one year provided under section 149(5), it is hereby clarified that it would be necessary that if it is intended to appoint existing ‘IDs’ under the new Act, such appointment shall be made expressly under section 149(10)/(11) read with Schedule IV of the Act within one year from 1st April, 2014, subject to compliance with eligibility and other prescribed conditions.
- Section 149(10) /(11) – Appointment of 'IPs’ for less than 5 years:- Clarification has been sought as to whether it would be possible to appoint an individual as an IP for a period less than 5 years.
It is clarified that section 149(10) of the Act provides for a term of “upto five consecutive years” for an ‘IP’. As such while appointment of an ‘IP’ for a term of less than five years would be permissible, appointment for any term (whether for five years or less) is to be treated as a one term under section 149(10) of the Act. Further, under section 149(11) of the Act, no person can hold office of ‘IP’ for more than ‘two consecutive terms’. Such a person shall have to demit office after two consecutive terms even if the total number of years of his appointment in such two consecutive terms is less than 10 years. In such a case the person completing ‘consecutive terms of less than ten years’ shall be eligible for appointment only after the expiry of the requisite cooling-off period of 3 years.
- Appointment of ‘IDs’ through letter of appointment:- With reference to Para IV(4) of Schedule IV of the Act (Code for IDs) which requires appointment of 'IDs’ to be formalized through a letter of appointment, clarification has been sought if such requirement would also be applicable for appointment of existing ‘IDs’?
The matter has been examined. In view of the specific provisions of Schedule IV, appointment of IDs’ under the new Act would need to be formalized through a letter of appointment.
Amendment of the Companies (Acceptance of Deposit) Rules 2014
MCA vide its notification no G.S.R 386(E) dated 6th June 2014 has amended the Companies (Acceptance of Deposit) Rules 2014
By way of amendment, MCA has provided an extension to the requirement of accepting deposits with deposit insurance contract till the31st March, 2015.
The Companies (Removal of Difficulties) Third Order, 2014
MCA vide its notification no S.O. 1429(E) dated 2nd June 2014 has issued a third ROD whereby it is provided that until the National Company Law Tribunal is constituted under section 408 of the Companies Act, 2013 (18 of 2013), the Board of Company Law Administration constituted in pursuance of sub-section (1) of Section 10E of the Companies Act, 1956 ( 1 of 1956) shall exercise the jurisdiction, powers, authority and functions under the first proviso to clause (41) of Section 2 (definition of Financial Year) of the Companies Act, 2013 (18 of 2013).
Proviso to section 2(41) provides that an application may be made by a company or body corporate which is holding company or a subsidiary of a company incorporated outside India and is required to a follow a different financial year for consolidation of its accounts outside India, to the Tribunal for allowing any period as its financial year, whether or not the period is a year
The Companies (Removal of Difficulties) Second Order, 2014
MCA vide its notification no S.O. 1428(E) dated 2nd June 2014 has issued a second ROD whereby it is provided that until the National Company Law Tribunal is constituted under section 408 of the Companies Act, 2013 (18 of 2013), the Board of Company Law Administration constituted in pursuance of sub-section (1) of Section 10E of the Companies Act, 1956 ( 1 of 1956) shall exercise the jurisdiction, powers, authority and functions under the sub-section (4) of Section 73 (Prohibition on acceptance of deposits from public) of the Companies Act, 2013 (18 of 2013).
Section 73(4) provides that where a company fails to repay the deposit or part thereof or any interest thereon under sub-section (3), the depositor concerned may apply to the Tribunal for an order directing the company to pay the sum due or for any loss or damage incurred by him as a result of such non-payment and for such other orders as the Tribunal may deem fit.