I Ministry of Corporate Affairs (MCA)
- Extension of date for filing of Form CSR-2 (Report on Corporate Social Responsibility)
In order to stringent compliances on the reporting of CSR activities done by a Company, the MCA had introduced filing of web-Form CSR-2 with the Registrar from the financial year 2020-21, and onwards, as an addendum to Form AOC-4, AOC-4 XBRL or AOC-4 NBFC (Ind AS), as the case may be. The last date for filing of the said form for the financial year 2020-21 was March 31, 2022. However, the MCA vide its notification dated March 31, 2022, has extended the last date of filing of Form CSR-2 till May 31, 2022.
- Companies (Management and Administration) Amendment Rules, 2022
Vide its notification bearing no. GSR 279(E) dated April 6, 2022, the MCA has introduced Companies (Management and Administration) Amendment Rules 2022 where by the MCA has notified amendments to the Companies (Management and Administration) Rules 2014. By virtue of these Rules, provisions have been introduced whereby following particulars in respect of members of a Company maintained in the register or index or return of a Company shall be subjected to confidentiality and below listed particulars in respect of members of a Company will not be available for inspection or for taking extracts or copies:
- Address or registered address (in case of a body corporate)
- E-mail ID
- Unique Identification Number
- PAN Number
- Companies (Share Capital and Debenture) Amendment Rules, 2022
MCA vide its notification dated May 4, 2022 has amended the Companies (Share Capital and Debenture) Amendment Rules, 2022, by virtue of the said amendment, Form SH-4 (i.e. Share Transfer Form) has been revised to include following declarations:
- No government approval is required under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 prior to the transfer of shares; or
- Transferee is required to obtain the government approval prior to the transfer of shares, the same has been obtained and enclosed herewith.
- Clarification on passing of Ordinary and Special Resolutions by Companies under the Companies Act, 2013 read with rules made thereunder on account of COVID-19
In continuation of previous circulars dealing with the subject matter hereof, vide a General Circular No. 3/2022 dated May 5, 2022, the MCA has clarified that the relaxation accorded to companies to convene an EGM though Video Conferencing and/or other Audio-Visual means, also use of postal ballot to transact business in ordinary course, shall stand extended till December 31, 2022. Prior to issuance of present circular, the relaxation was applicable till June 30, 2022.
- Clarification on holding of Annual General Meeting (AGM) through Video Conferencing (VC) or other Audio-Visual Means (OAVM)
In continuation of previous circulars dealing with the subject matter hereof, vide a General Circular No. 2/2022 dated May 5, 2022, the MCA has further allowed to convene the AGM for the year 2022 though Video Conferencing and/or other Audio-Visual means, on or before December 31, 2022. It is also clarified that the said extension shall not be construed as conferring any extension of time for holding AGMs by the Companies under the Companies Act, 2013.
Insolvency & Bankruptcy Code, 2016 (IBC)
- Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) (Amendment) Regulations, 2022
The Insolvency & Bankruptcy Board of India (“IBBI”) vide its notification dated April 5, 2022, has further amend the IBBI (Voluntary Liquidation Process) Regulations, 2017 .
Below is the summary of comparison between the earlier regulations and the amendments introduced:
|S. No.||Regulation||Particulars||Earlier Provision||Revised Provision|
|1.||30(2)||Preparation of list of creditors by the Liquidator||The Liquidator is required to prepare the list of creditors within forty-five (45) days of the last date of receipt of claims from the creditors of the Corporate Debtor.||In case no claims from the creditors have been received till the last date for receipt of the claims, then the liquidator shall prepare the list of stakeholders within fifteen days (15) from the last date for receipt of claims.|
|2.||35(1)||Distribution of amount received from realisation of the assets of the Corporate Person||The Liquidator was required to distribute the proceeds from realisation of the assets of the Corporate Debtor within six (6) months from the receipt of the amount to the stakeholders.||The liquidator shall distribute the proceeds from realization of the assets of the Corporate Person within thirty days (30) from the receipt of the amount to the stakeholders.|
|3.||37(1)||Completion of Liquidation process||The Liquidator was required to complete the liquidation process within twelve (12) months from the liquidation commencement date.||Now, by virtue of the latest amendment, the liquidator is required to complete the liquidation process of the corporate person within two hundred and seventy (270) days from the liquidation commencement date, where the creditors have approved the resolution under section 59(3)(c) or regulation 3(1)(c), and ninety days from the liquidation commencement date in all other cases.|
|4.||38(3)||Final report of Liquidation Process||Earlier, the Liquidator was required to submit the final report only along with the liquidation application.||Now, in addition to the filing of final report and application, a compliance certificate in Form H is also required to be submitted with the Adjudicating Authority.|
These amendments have been introduced to fast-track the liquidation/dissolution process and to facilitate expeditious disposal of applications by the Adjudicating Authority.
- Withdrawal of circular dated 26th August, 2019 regarding applicability of the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019 notified on 25th July, 2019, Circular No. IBBI/LIQ/2/2022 dated May 6, 2022
The IBBI vide its notification no. IBBI/2019-20/GN/REG047 dated August 26, 2019 had amended the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 which were applicable to liquidation processes that had commenced on or after July 25, 2019.
Further, the IBBI has notified the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2022 on April 28, 2022 to clarify that only the provisions of regulations 2A (Contributions to Liquidation Costs), 21A (Presumption of Security Interest), 31A (Stakeholders’ Consultation Committee) and 44 (Specifying reduced time for completion of Liquidation process) as amended/ inserted by the Amended Regulations 2019 apply only to the liquidation processes commencing on or after July 25, 2019.
The IBBI after conducting the de novo examination of the Amended Regulations in the light of evolving jurisprudence, has decided to withdraw the circular dated August 26, 2019, with immediate effect.
II Securities Exchange Board of India (“SEBI”)
- SEBI (Alternative Investment Funds) (Second Amendment), Regulations, 2022
SEBI vide its notification dated March 16, 2022 has further amended the Alternative Investment Funds Regulations, 2022. By virtue of the said notification, the erstwhile Regulation 15(d)(1) with respect to Category III Alternate Investment Funds (“AIF” or “AIFs”) has been substituted with an amended provisions. The comparative analysis between the two is as under:
|S. No.||Basis of Comparison||Prior to the Amendment||Post Amendment|
|1.||Investment in listed equity in investee company||Category AIFs cannot invest more than 10% of the net asset value in listed equity of an investee company.||Category III Alternative Investment Funds shall invest not more than ten per cent of the investable funds in an investee company, directly or through investment in units of other AIFs.|
|2.||Investment of large value funds||Large value funds for accredited investors of Category III AIFs cannot invest more than 20% of the net asset value in listed equity of an investee company.||Large value funds for accredited investors of Category III AIFs may invest up to twenty per cent of the investable funds in an Investee Company, directly or through investment in units of other AIFs|
|3.||Investment of investable funds in an investee company||Category III AIFs shall invest not more than 10% of the investable funds in securities other than listed equity of an investee company, directly or through investment in units of other AIFs.||Category III AIFs may invest not more than 10% of their investible funds in an investee company, directly or through investment in units of other AIFs.|
|4.||Direct or indirect investment of large value funds||Large value funds for accredited investors of Category III AIFs shall invest not more than 20% of the investable funds in securities other than listed equity of an investee company, directly or through investment in units of other AIFs.||Large value funds for accredited investors of Category III AIFs may invest not more than 10% of their investible funds in an investee company, directly or through investment in units of other AIFs.|
- Clarification on applicability of Regulation 23(4) read with Regulation 23(3)(e) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 in relation to Related Party Transactions (“RPT” or “RPTs”)
SEBI has issued a clarification dated April 8, 2022 with regard to the validity of omnibus approval granted by the shareholders for material RPTs as required under Regulation 23(4). As per the said clarification, it is stated that omnibus approval obtained from the shareholders for any material RPT in the Annual General Meeting (“AGM”) shall be valid up to the date of following AGM, and not exceeding the period of more than fifteen (15) months. In case the said approval is obtained in any general meeting (other than the AGM), then such omnibus approval shall be valid for a period of one (1) year.
III Foreign Exchange Management Act (“FEMA”)
- Foreign Exchange Management (Non-debt Instruments) Amendment Rules, 2022
The Ministry of Finance vide its Notification dated April 12, 2022 bearing no. S.O. 1802(E) has amended FEMA (Non-debt Instruments) Rules, 2019 (NDI Rules) in order to align the same with the Foreign Direct Investment (FDI) policy. The brief summary of some pertinent amendments introduced, is as under:
- Period of conversion of Convertible Note issued by Start-ups into Equity Shares has been increased from five (5) years to ten (10) years.
- Definition of the ‘Indian Company’ has been amended by including the word body corporates. As a result of the said amendment, body corporates established or constituted by or under any Central or State act will also be covered under the definition of Indian Company.
- The concept of “Share based employee benefit” has been introduced. Therefore, now the Indian Company can also issue the Share-based employee benefits under Foreign Exchange Management (Non-Debt Instruments) Rules, 2019.
- Educational institutions, recreational facilities, city and regional level infrastructure, townships, real estate broking services shall not be considered as the real estate business. Earlier no such exclusions were provided.
- In align with the new FDI policy, the government has made amendment in the NDI Rules and allowed 20% FDI in Life Insurance Corporation of India through Automatic Route.
IV Case Laws
- Sunil Kumar Jain vs Sundaresh Bhatt & Others, in the Supreme Court of India, Civil Appellate Jurisdiction, Civil Appeal No. 5910 OF 2019, April 19, 2022
The present appeal had been preferred arising from order dated May 31, 2019 passed by the Hon’ble National Company Law Appellate Tribunal, New Delhi. The present appeal was filed by some of the employees/ workmen of the Corporate Debtor working at Dahej Yard and Mumbai Head Office who were regularly working with the Corporate Debtor during the Corporate Insolvency Resolution Process (“CIRP”) period and has not paid any wages/ salaries including pension, gratuity and provident during the said period. The Corporate Debtor was managed as a going concern in accordance with Section 21 of the IBC.
The issue before Hon’ble Supreme Court is with respect to wages/salaries of the workmen/employees during the CIRP period and the amount due and payable to the respective workmen/employees towards Pension Fund, Gratuity Fund and Provident Fund.
The Hon’ble Supreme Court vide its judgment has partially allowed the appeal and held as under:
- that the wages/salaries of the workmen/employees of the Corporate Debtor for the period during CIRP can be included in the CIRP costs provided it is established and proved that the Interim Resolution Professional/Resolution Professional managed the operations of the corporate debtor as a going concern during the CIRP and that the concerned workmen/employees of the corporate debtor actually worked during the CIRP and in such an eventuality, the wages/salaries of those workmen/employees who actually worked during the CIRP period when the resolution professional managed the operations of the corporate debtor as a going concern, shall be paid treating it and/or considering it as part of CIRP costs and the same shall be payable in full first as per Section 53(1)(a) of the IBC;
- considering Section 36(4) of the IBC and when the provident fund, gratuity fund and pension fund are kept out of the liquidation estate assets, the share of the workmen dues shall be kept outside the liquidation process and the concerned workmen/employees shall have to be paid the same out of such provident fund, gratuity fund and pension fund, if any, available and the Liquidator shall not have any claim over such funds.
- Mr. Mukund Choudhary & Anr. Vs. Mr. Subhash Kumar Kundra (Resolution
Professional for CLC Industries Ltd.), Company Appeal (AT) (Insolvency) No. 452 of 2021, April 18, 2022
The Resolution Professional (“RP”) of the Corporate Debtor had requested the suspended directors to sign the financial statements of the Company but no response has been received by the RP from the suspended directors and accordingly the RP filed an application under Section 19(2) of the IBC, 2016 with the Hon’ble National Company Law Tribunal, Principal Bench, New Delhi (“Tribunal”). The Hon’ble Tribunal vide its order dated June 1, 2021, directed the suspended directors to co-operate with the RP and sign the financial statements of the Corporate Debtor. Aggrieved by the said order passed by the Hon’ble Tribunal, the suspended directors had filed an appeal with the Hon’ble National Company Law Appellate Tribunal (“Appellate Tribunal”).
The Hon’ble Appellate Tribunal stated that appointment of Interim RP/RP during the CIRP is done to entrust the responsibility of managing the affairs of the company on to said professional. The Hon’ble Appellate Tribunal clarified that the IBC regime does not discharge directors of the Corporate Debtor from their duties during continuation of CIRP, but only suspends their power as directors.
The Hon’ble Appellate Tribunal while considering the above view retain the order passed by the Hon’ble Tribunal and held that the obligation to sign the financial statements of the Corporate Debtor will continue to vest with the directors of Corporate Debtor during CIRP, and that the directors will continue to be duty bound to do the same.
The Hon’ble Appellate Tribunal also stated that the circular issued by the MCA provides only for the procedure of filing the Forms with the ROC and does not anywhere specify that the financial statement are not to be signed by the directors, as required under the Companies Act, 2013.
- Mr. Mahendra Kumar Janodia etc. vs. State Bank of India, Stressed Asset Management Branch, Civil Appeal No(s) 1871-1872 of 2022, May 6, 2022
State Bank of India (“SBI”), Stressed Asset Management Branch filed an application under Section 95(1) of the Code with the Kolkata Bench of Hon’ble National Company Law Tribunal (“Tribunal”) seeking CIRP against the Corporate Guarantor. The same was rejected by the Hon’ble Tribunal vide its order dated October 5, 2021 stating that no CIRP proceedings has been initiated against the Corporate Debtor of the Guarantor.
An Appeal was filed by the SBI against the said order with the Hon’ble Appellate Tribunal and the Hon’ble Appellate Tribunal vide its order dated January 27, 2022, set aside the order passed by the Hon’ble Tribunal by stating that the Application filed by the Appellant was fully maintainable and there is no bar or prohibition against insolvency and bankruptcy proceedings being instituted against a Corporate Guarantor or Personal Guarantor in the absence of proceedings against the Corporate Debtor.
Thereafter, an Appeal was filed by the Appellant with the Hon’ble Supreme Court of India challenging the order dated January 27, 2022 passed by the Hon’ble Appellate Tribunal.
The Hon’ble Supreme Court vide its judgement dated March 21, 2022, firstly stayed the impugned order passed by the Hon’ble Appellate Tribunal and thereafter stated that it does not want to interfere in the order passed by the Hon’ble Appellate Tribunal and dismissed the appeal filed by the Appellant.
–Dhruv Gandhi, Partner and Anshul Chhabra, Sr. Associate
Disclaimer: The contents of the above publication are based on understanding of applicable laws and updates in law, within the knowledge of authors. Readers should take steps to ascertain the current developments given the everyday changes that may be occurring in India on internationally on the subject covered hereinabove. These are personal views of authors and do not constitute a legal opinion, analysis or interpretation. This is an initiative to share developments in the world of law or as may be relevant for a reader. No reader should act on the basis of any statement made above without seeking professional and up-to-date legal advice.
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