Regulatory Updates: Company Law, Foreign Exchange, Bankruptcy Law

Sharda Balaji
Sharda Balaji, Founder
Posted on Tue, 27 September 2016

Company Law

  1. Ministry of Corporate Affairs has notified Companies (Mediation and Conciliation) Rules, 2016. The Rules provides details of eligibility, qualifications for empanelling experts as mediators or conciliators. It is believed that the time limit for completion or mediation or conciliation (ie. 3 months) goes a long way in quick disposal of disputes.
  1. Amendment to Schedule V of Companies Act, 2013 In exercise of the power conferred by sub-sections (1) and (2) of section 467 of the Companies Act, 2013 (18 of 2013), the Central Government has made the following amendments with respect to Schedule V of the Companies Act 2013, which deals withremuneration payable by companies having no profit or inadequate profit without Central Government approval.

Through the MCA notification of 12 September 2016, the following amendments have been made to Schedule V of the Companies Act 2013, with respect to Managerial Remuneration. The said notification will take effect from the date of its publication in the official gazette. Accordingly, the remuneration to managerial person payable by companies having no profit or inadequate profit without Central Government approval cannot exceed the limits under (A) and (B) given below:

  • Limits of yearly remuneration depending on effective capital i.e Capital plus reserves:
S.No Where Effective Capital is Limit of yearly remuneration payable shall not exceed (Rupees)
1 Negative or less than 5 crores 60 lacs
2 5 crores or above but less than 100 crores 84 lac
3 100 crores and above but less than 250 crores 120 lacs
4 250 crores and above 120 lacs plus 0.01% of the effective capital in excess of Rs.250 crores

  Further the above limits shall be doubled if the resolution passed by the shareholders is a special resolution. For a period less than one year, the limits shall be pro-rated. Further no approval is required if all the conditions mentioned below are fulfilled:

  • A managerial person is functioning in a professional capacity
  • Managerial person is not having any interest in the capital of the company or its holding company or any of its subsidiaries directly or indirectly or through any other statutory structures
  • Not having any, direct or indirect interest or related to the directors or promoters of the company at any time during the last two years before or on or after the date of appointment
  • Managerial person possesses graduate level qualification with expertise and specialized knowledge in the field in which the company operates and other conditions as contemplated in the notification.

It may be noted that, the said notification does not affect private companies since private companies are outside the purview of the provisions of section 196 of Companies Act 2013

  1. Relaxation in additional fees for filing Form IEPF-1: The Form 1- INV (e-form relating to transfer of any unclaimed dividend and other sums due to shareholders to IEPF account) as prescribed under the Companies Act, 1956 was not available for filing on the MCA21 portal since 25thMarch,2016. In place of the Form 1- INV, Form IEPF-1 was notified after the notification of Investor Education and Protection Fund (Accounting, Audit, Transfer and Refund) Rules,2016 [IEPF (AATR).

Due to the non-availability of the Form IEPF-1 for a long time, Companies were unable to file the said form 1- INV or form IEPF-1 In the view of inconvenience caused by the stakeholder the MCA vide General Circular No 10/2016 dated 7th September 2016 relaxed the additional fee payable by the stakeholders if the said Form IEPF-1 id filed on or before 6th October 2016.

  1. Insolvency and Bankruptcylaw

Government of India notifies sections 188 to 194 of the Insolvency and Bankruptcy Code, 2016 which came into force with effect from 5thAugust, 2016 vide SO 2618(E) dated 5th August 2016. The aforementioned section deals with establishment and incorporation of Board, Constitution of Board and the proceedings and appointment of Chairperson and his powers under the Act

  1. Securitisation Law / Recovery of Debts

Ministry of Finance in exercise of the powers conferred by sub-section (2) of section 1 of certain provisions of Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 notifies 1st September, 2016 as the date on which the provisions of the act would come into force. This Act further amended the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Recovery of Debts due to Banks and Financial Institutions Act, 1993, the Indian Stamp Act, 1899, and the Depositories Act, 1996, and for matters connected therewith or incidental thereto.

  1. Foreign Exchange Management Law

The cabinet approved simplification and liberalisation of the Foreign Direct Investment Policy, 2016 in various sectors as contemplated in the press release dated 31st August 2016 issued by PIB. The Union Cabinet chaired by the Prime Minister Shri. Narendra Modi has given its ex-post-facto approval for the FDI policy amendments announced by the Government on 20thJune, 2016. The proposed liberation was shares in our previous news letter

  1. DIPP

Ministry of Commerce and Industry provided clarification whether the internet broadcasting companies come under the purview of statutory licensing as per provisions of section 31D of the Copyright Act, 1957 According to the Office Memorandum F. NO. 14-35/2015-CRB/LU (IPR VII) dated the 5thSeptember 2016 issued by DIPP,representations have been received from various Stakeholders as to whether the internet broadcasting companies come under the purview of statutory licensing as per provisions of section 31D of the Copyright Act, 1957. These representations were examined in consultation with concerned ministries/ departments. According to Section 31D internet broadcasting companies come under the purview of Statutory Licensing.

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