21 July, 2015
- Several changes to the Companies Act, 2013 (‘Companies Act’) have been brought about by the passing of the Companies (Amendment Act), 2015, which has received Presidential assent on May 25, 2015. Further, the Ministry of Corporate Affairs (‘MCA’) has, by way of a notification dated June 5, 2015 prescribed several exemptions for private companies under various sections of the Companies Act. The changes to the Companies Act brought about by the Companies (Amendment Act), 2015 and the exemptions prescribed for private companies will be covered under a Special Issue of Inter Alia.
- With a view to simplify the process of incorporation of a company in India, MCA has, by way of notification dated May 1, 2015, amended the Companies (Incorporation) Rules, 2014 (‘In- corporation Rules’). The key amendments are as follows:
(a) a single integrated form has been introduced, which takes care of 3 separate in- corporation related processes in a single form i.e. application and allotment of a director identification number, application for name approval and application for incorporation of company. However, it may be noted that whereas the earlier forms provided for 6 name options, only 1 name can be applied for approval in the new form. There appears to be no mention of the requirement of obtaining a digital signature, so it may be presumed that the process of obtaining a digital signature is still a mandatory step before filing this new form;
(b) a two-fold requirement has now been stipulated for conversion of a private com- pany to a one person company. Earlier, the requirement to convert was for the company to have either a paid up share capital of a maximum of ¤5 million or an average annual turnover of a maximum of ¤20 million. Pursuant to the amend- ment, a private company is required to satisfy both the aforesaid requirements; and
(c) the maximum penalty has been halved to ¤5,000 for any offence and to ¤500 for each day of contravention after the occurrence of the first offence committed by a one person company or any of its officers.
- The MCA has, by way of notification dated May 29, 2015, amended the Companies (Declara- tion and Payment of Dividend) Rules, 2014 whereby Rule 3(5), which specified that a company can only declare dividend when it has carried over previous losses and depreciation not pro- vided in previous year or years are set off against the profit of the company of the current year, has been deleted.
- The MCA has, by way of notification dated April 10, 2015, issued the Companies (Auditor’s Report) Order, 2015 (‘Order’), which sets out the requirement for the auditors of certain compa- nies to include in its report (required to be prepared under Section 143 of the Companies Act) certain details as set out therein. The Order is applicable to every company including a foreign company, with the exception of: (i) banking and insurance companies, (ii) charitable compa- nies, (iii) one person companies and (iv) private limited companies having paid up capital and reserves not exceeding ¤5 million and which do not have loan outstanding exceeding ¤5 million from any bank or financial institution and do not have a turnover exceeding ¤50 million at any point of time during the financial year. The Order further specifies that where the answers to any of the questions required to be specified in the auditor’s report are unfavourable or unqualified, the reasons for the same should be specified and where the auditor is unable to express any opinion in answer to a par- ticular question, the report should indicate such fact together with reasons as to why it is not possible for the auditor to opine as aforesaid.
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
