20 April, 2019
Amendments to the Companies (Adjudication of Penalties) Rules, 2014
Pursuant to the amendment notified by the Ministry of Corporate Affairs (‘MCA’), on February 19, 2019, to the Companies (Adjudication of Penalties) Rules, 2014 (‘Adjudication Rules’), Rule 3 relating to adjudging penalties under the provisions of the Companies Act, 2013 (‘CompaniesAct’), has been amended. The key changes introduced, inter alia, include: (i) amended timelines and process for responding to show cause notices by the recipient (which, in addition to the company and every officer in default, can now be any person in the company); (ii) requirement for show cause notice to include the nature of non-compliance, relevant penal provisions under the Companies Act and the maximum penalty that may be imposed; (iii) provision for e–filing to be made once the e-adjudication platform is created; and (iv) timelines within which the adjudicating officer has to pass an order.
The amendments to the Adjudication Rules further provide that: (i) while adjudging the quantum of penalty, certain additional factors must now be taken into consideration such as the size of the company, nature of business, injury to public interest, and nature of the default; and (ii) the penalty imposed cannot be less than the minimum penalty, if any, prescribed under the relevant section of the Companies Act, and if the Companies Act provides a fixed penalty for a default, then the adjudicating officer must impose such fixed penalty.
Non-applicability of Rule 9A of Companies (Prospectus and Allotment of Securities) Rules, 2014 to Certain Companies
In September 2018, Rule 9A was introduced into the Companies (Prospectus and Allotment of Securities) Rules, 2014 (‘Allotment Rules ’), whereby all issuances of securities by public unlisted companies were required to be made in dematerialized form. By way of a notification dated (and effective from) January 22, 2019, the MCA has, amended Rule 9A by introducing a new sub-rule (11) thereunder, pursuant to which: (i) a Nidhi company; (ii) a Government company; and (iii) a wholly owned subsidiary, are exempted from the scope of Rule 9A .
Amendment to the Companies (Incorporation) Rules, 2014
MCA has, by way of a notification dated March 29, 2019, amended the Companies (Incorporation) Rules, 2014 (‘Incorporation Rules), by inserting a new Rule 38A in the Incorporation Rules. Pursuant to Rule 38A, a new e-form AGILE ( INC-35) needs to be filed alongwith the application for incorporation. This e-form AGILE is effectively a consolidated application for registration of goods and service tax identification number, registration with the Employees’ State Insurance Corporation and registration with the Employees’ Provident Fund Organisation, with the aim of facilitating applicants to easily obtain the aforementioned registrations alongwith the incorporation certificate.
New E-Form Active Notified to Curb Shell Companies
As part of its efforts to curb shell companies, the MCA has notified a new electronic form ACTIVE (Active Company Tagging Identities and Verification) (‘Form INC-22A ’) through Rule 25A of the Incorporation Rules, with effect from February 25, 2019. Form INC-22A , inter alia , requires companies to furnish details of the registered office, including the photo of the registered office showing at least one director/ key managerial personnel who has affixed his Digital Signature to Form INC-22A and geographical coordinates of the registered office. Rule 25A requires every company incorporated on or before December 31, 2017 (subject to a few exceptions) to file the Form INC-22A on or before April 25, 2019. Please refer to our Client Alert dated March 7, 2019 available at https://www.azbpartners.com/bank/new-e-form-active-notified-to-curbshell-companies, for more details.
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
