2 October, 2018
Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2018
On September 12, 2018, the MCA issued the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2018 further to amend the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 pursuant to which Form MR-2 (for application to the Central Government for approval of appointment of managing director or whole time director or manager) shall be substituted with a new Form MR-2.
Notification of certain sections of the Companies (Amendment) Act, 2017
On September 12, 2018, the MCA issued a circular notifying section 66 to 70 (both sections included) of the Companies (Amendment) Act, 2017 and appointed September 12, 2018 as the date on which the provisions of sections 66 to 70 (both inclusive) of the said Act shall come into force. Section 66 to 70 of the Companies (Amendment) Act 2017 amends the following sections of the existing Companies Act, 2013:
a) Section 196 – relating to the appointment of managing director, whole-time director or manager;
b) Section 197 – relating to the overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits;
c) Section 198 – relating to calculation of profits;
d) Section 200 – relating to Central Government or company to fix limit with regard to remuneration;
and
e) Section 201 – relating to forms of, and procedure in relation to, certain applications.
Amendment of Schedule V of the Companies Act, 2013
On September 12, 2018, the MCA issued a circular amending Schedule V of the Companies Act, 2013.
Schedule V relates to section 197 and 197 of the Companies Act, 2013 regarding the conditions to be fulfilled for the appointment of a managing or wholetime director or a manager without the approval of the central government. The following changes have been made vide this amendment:
a) In Schedule V of the Companies Act, 2013 in Part l, under title "appointments" the following items shall be inserted namely:- the Insolvency and Bankruptcy Code, 2016; the Goods and Services Tax Act, 2017 and the Fugitive Economic Offenders Act, 2018;
b) Certain words have been omitted or substituted in Part II, under the heading "remuneration", in Section II (relating to the remuneration payable by companies having no profit or inadequate profifit without Central Government approval) and Section III (relating to the remuneration payable by companies having no profifit or inadequate pfirofit without Central Government approval in certain special circumstances).
Companies (Prospectus and Allotment of Securities) Third Amendment Rules 2018
On September 10, 2018, the MCA notified the Companies (Prospectus and Allotment of Securities)
Third Amendment Rules 2018 thereby adding a new Rule 9A which provides for the issue of securities in dematerialized form by unlisted public companies. The amendment provides that the amended rules would come into force from October 2, 2018. Further to the Ministry of Corporate Affairs (MCA) notifying the Companies (Prospectus and Allotment of Securities) Third Amendment Rules 2018, the MCA has released a press release clarifying that with effect from October 2 2018, issue of further shares and transfer of all shares by unlisted public companies shall be in dematerialised form only.
Review of the penal provisions of the Companies Act, 2013
On August 27, 2018, the committee constituted by the Government of India in July 2018 to review the existing framework dealing with offences under the Companies Act , 2013 and related matters and make recommendations to promote better corporate compliance, submitted its report. The Committee undertook a detailed analysis of all penal provisions, which were then broken down into eight categories based on the nature of offences.
The Committee recommended that the existing rigour of the law should continue for serious offences, covering six categories, whereas for lapses that are essentially technical or procedural in nature, mainly falling under two categories may be shifted to in-house adjudication process. The Committee observed that this would serve the twin purposes promoting of ease of doing business
and better corporate compliance. It would also reduce the number of prosecutions filed in the Special Courts, which would, in turn, facilitate speedier disposal of serious offences and bring serious offenders to book.
The cross-cutting liability under section 447, which deals with corporate fraud, would continue to apply wherever fraud is found. The report, inter alia, makes recommendations for de-clogging the National Company Law Tribunal (NCLT) through significant reduction in compounding cases before the Tribunal. In addition, the report also touches upon certain essential elements related to corporate governance such as declaration of commencement of business, maintenance of a registered office, protection of depositors' interests, registration and management of charges, declaration of significant beneficial ownership, and independence of independent directors.
Some visibility on Crèche facilities under the Maternity Benefit Act, 1961 for establishments in Karnataka and Haryana The Maternity Benefit Act, 1961 was amended vide the Maternity Benefit (Amendment) Act, 2017 which prescribed that every establishment having 50 or more employees shall have the facility of crèche within such distance as may be prescribed, either separately or along with common facilities.
However, in the absence of rules or clarifications on the logistics of setting of crèche facilities, employers were left in lurch as to the legislative clarity on various issues such as the distance within which the crèche facilities are to be located, the age group of children for whom crèche facilities need to be maintained and the duration of visits allowed for visits to such crèche facilities.
In this regard, please note that Government of Karnataka has released draft Karnataka Maternity
Benefit Rules, 2018 ("Karnataka Rules") which have been released for stakeholder comments.
Furthermore, the state of Haryana has issued a press release for crèche facilities under the Maternity Benefit Act, 1961 dated 2 August 2018 ("Haryana Rules").
Since the official notification of Haryana Rules is not available, it cannot be ascertained whether these rules have come in force as on date.
In addition to providing specifications on infrastructure, food and medical facilities in a crèche, the above rules shed some clarity on the above issues such as both the rules prescribe that the crèche facilities should be located at a maximum distance of 500 metres from the entrance gate of the establishment. While both rules limit the age group of children for whom the crèche facilities need to be provided to 6 years, however the Karnataka rules stipulate an additional requirement of having one crèche for a group of 30 children and the requirement of an outdoor playing area.
These requirements may increase the practical difficulties for employers. However these rules have not yet clarified or touched upon a very important concern in relation to cost bearing of the crèche facilities and to what extent such costs can be passed on to the employees.
Disclosure regarding constitution of POSH committee in the Board of Directors report
The Ministry of Corporate Affairs on July 31, 2018 has notified the Companies (Accounts) Amendment Rules, 2018 ('Amendment Rules'). Amongst other things, these Amendment Rules specify that the directors are now required to include a statement in the Board report specifying that the company has complied with the provisions relating to the constitution of Internal Committee ('IC') under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("POSH Act").
It is relevant to note that the POSH Act casts an obligation on the employer to make prescribed disclosures in the annual report of the organization, which disclosure includes number of cases filed, if any, and details of their disposal, although there is no direct statement on the constitution of IC. For a corporate employer, it is the board of directors who have to ultimately discharge the duties of an employer and make prescribed disclosures as per the POSH Act, in the annual directors report prepared under the Companies Act, 2013. In effect this new requirement under the Amendment Rules reiterates the employer's obligation to constitute an IC in terms of the POSH Act.
While failure to constitute a IC under POSH Act is a serious contravention punishable under POSH Act, a failure to make appropriate disclosures in the director's report would be also become punishable under the Companies Act, 2013.
Operation of drones in India
On August 27, 2018, the Ministry of Civil Aviation issued the Requirements for Operation of Civil
Remotely Piloted Aircraft System (RPAS) for operation of drones in India and announced the effective date for these requirements as December 1, 2018.
These requirements are for a Remotely Piloted Aircraft (RPA), autonomous aircraft which are the various sub-sets of unmanned aircraft. Unmanned aircraft system (UAS) is an aircraft and its associated elements, which are operated with no pilot on board. Remotely piloted aircraft (RPA) is an unmanned aircraft, which is piloted from a remote pilot station. A remotely piloted aircraft, its associated remote pilot station(s), command and control links and any other components forms a Remotely Piloted Aircraft System (RPAS).
This Civil Aviation Requirement (CAR) is issued under the provisions of Rule 15A and Rule 133A of the Aircraft Rules, 1937 and lays down requirements for obtaining Unique Identification Number (UIN), Unmanned Aircraft Operator Permit (UAOP) and other operational requirements for civil Remotely Piloted Aircraft System (RPAS).
For further information, please contact:
Vineet Aneja, Partner, Clasis Law
vineet.aneja@clasislaw.com
