Company Law Update: Relaxation on levy of additional fees till August 31, 2021

1. Ministry of Corporate Affairs (MCA) has provided relaxation to Companies/ LLPs on levy of additional fees till August 31, 2021 for the form filings (other than Charges related forms) under the Companies Act, 2013 and LLP Act, 2008 respectively, for the forms which were due to file during April 1, 2021 to July 31, 2021.

2. Ministry of Corporate Affairs (MCA) has provided relaxation to Companies on levy of additional fees till August 31, 2021 for the form filings relating to Charges, till August 1, 2021.

SEBI Update: Key Amendments relating to Independent Directors, payment mechanism for IPO & more

✓ SEBI in its Meeting held on June 29, 2021 approved key proposals, including following:

✓ Provisions related to Independent Directors

- These amendments shall be applicable with effect from Jan 01, 2022.

- SEBI approved amendments to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) pertaining to regulatory provisions related to Independent Directors (IDs), which include the following: 

1. Appointment/Re-appointment and Removal of IDs

o Appointment/Re-appointment and Removal of IDs shall be through a special resolution of shareholders for all listed entities.

o The process to be followed by Nomination and Remuneration Committee (NRC), while selecting candidates for appointment as IDs, has been elaborated and made more transparent including enhanced disclosures regarding the skills required for appointment as an ID and how the proposed candidate fits into that skillset.

o The composition of NRC has been modified to include 2/3rd IDs instead of existing requirement of majority of IDs.

o Shareholder approval for appointment of all directors including IDs shall be taken at the next general meeting, or within three months of the appointment on the Board, whichever is earlier. 

2. Eligibility requirement

o A cooling off period of three years has been introduced for Key Managerial Personnel (and their relatives) or employees of the promoter group

companies, for appointment as an ID.

o Relatives of employees of the company, its holding, subsidiary or associate company have been permitted to become IDs, without the requirement of a cooling off period, in line with Companies Act, 2013. 

3. Resignation of IDs

o The entire resignation letter of an ID shall be disclosed along with a list of her/his present directorships and membership in board committees.

o A cooling-off period of one year has been introduced for an ID transitioning

to a whole-time director in the same company/ holding/ subsidiary/ associate company or any company belonging to the promoter group.

4. Audit Committee - At least 2/3rd of the members of the audit committee shall be independent directors and all related party transactions shall be approved by only Independent Directors on the Audit Committee.

5. Directors and Officers insurance - The requirement of undertaking Directors and Officers insurance has been extended to the top 1000 companies (by market capitalization). 

- SEBI also agreed to make a reference to the Ministry of Corporate Affairs (MCA), for giving greater flexibility to companies while deciding the remuneration for all directors (including IDs), which may include profit linked commissions, sitting fees, ESOPs, etc., within the overall prescribed limit specified under Companies Act, 2013.

✓ Amendment to SEBI (Bankers to an Issue) Regulations, 1994

- To provide easy access to investors to participate in Public/Rights issues by using various payment avenues, it has approved the proposal of amending the SEBI (Bankers to an Issue) Regulations, 1994 by way of permitting such other banks, other than scheduled banks, as may be specified by SEBI from time to time, to register as a Banker to an Issue.

✓ Amendments to the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015.

- With a view to streamlining the process of reward payment and to enhance the quantum of reward under the informant mechanism, it has considered and approved certain amendments to SEBI (Prohibition of Insider Trading) Regulations, 2015. 

1. The maximum amount of reward has been increased from Rupees 1 Crore, at present, to Rupees 10 Crore. 

2. If the total reward payable to the informant is less than or equal to Rupees 1 Crore, then the reward may be granted by SEBI, after the final order is  

issued.

3. If the total reward payable to the informant is more than Rupees One Crore, then an interim reward not exceeding Rupees 1 Crore may be granted by

SEBI, after the final order is issued. The remaining reward amount will be granted only upon receipt of the monetary sanctions amounting to at least twice the balance of the reward amount payable by SEBI.

✓ Other decisions include following:

✓ Introduction of Framework for Accredited Investors in securities market

✓ Amendments to SEBI (Infrastructure Investment Trusts) Regulations, 2014

- The minimum number of unit holders, other than sponsor, its related parties and its associates shall be five together holding not less than 25% of the total unit capital of the InvIT.

✓ Permitting Resident Indian fund managers to be constituents of FPIs

✓ Amendment to SEBI (Mutual Funds) Regulations, 1996

- To provide for investment of a minimum amount as skin in the game in the Mutual Fund (MF) schemes by Asset Management Companies (AMCs) based on the risk associated with the scheme, instead of the current requirement of one percent of the amount raised in New Fund Offer or an amount of INR fifty lacs, whichever is less.

✓ Amendment to SEBI (Credit Rating Agencies) Regulations, 1999

- To define a Credit Rating Agency (CRA) in terms of rating of securities that are listed or proposed to be listed on a recognized stock exchange, and to provide for an explanation in clause (f) of Regulation 9 specifying that ratings undertaken by a CRA under the respective guidelines of a financial sector regulator or authority shall be under the purview of the concerned financial sector regulator or authority.

NSE Update: Clarification regarding compliance of Listing Regulations

✓ NSE issued clarification (as presented below) on due date for compliance requirements under various regulations which were amended under SEBI (Lisitng Obligations and Disclosure Requirements) Regulations, 2015, on May 5, 2021. 

Company Law Update: Companies can hold EGM virtually till December 31, 2021.

✓ Ministry of Corporate Affairs (MCA) has allowed to conduct extra-ordinary general meeting (EGM) through Video conferencing or other audio visual means till December 31, 2021.

✓ To conduct EGM through Video conferencing or other audio visual means one may refer MCA General Circular no. 14/2020, 17/2020, 22/2020.

Company Law Update: In case of delay, how to register/renew name of individual in Independent Directors' databank

✓ Ministry of Corporate Affairs (MCA) by notification has issued Companies (Creation and Maintenance of databank of Independent Directors) Amendment Rules, 2021 on June 18, 2021.

✓ Amendment:

By virtue of these Rules, an individual in case of delay allowed, for inclusion of his/her name under sub-rule (7) of Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019, in the data bank or in case of delay in filing an application for renewal thereof under Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014 after payment one thousand rupees on account of such delay.

✓ Impact:

In case of delay, by paying late fees of INR 1,000 an individual allowed to register his/her name or renew their registration in the databank of Independent Director, under Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014 .

✓ To read MCA Notification, please click here

SEBI Update: Automated Continual Disclosures to include debt securities of equity listed Company

✓ SEBI, vide circular dated June 16, 2021, mandated to include the listed debt securities of equity listed companies under the purview of System Driven Disclosures for member(s) of promoter group and designated person(s) in  addition to the promoter(s) and director(s) of Company. 

✓ System Driven Disclosures has been implemented for member(s) of promoter group and designated person(s) in  addition to the promoter(s) and director(s) of company under Regulation 7(2) of PIT Regulations pertaining to trading in equity shares and equity derivative instruments i.e. Futures and Options of the listed company (wherever applicable) by the entities. The disclosures for  Equity and Equity Derivative segments are being displayed on the exchange Website under ‘System Driven Disclosures’.

✓Further, the procedure for mplementationn of System Driven Disclosures as provided in SEBI circular no. SEBI/HO/ISD/ISD/CIR/P/2020/168 dated September 09, 2020, shall also be

applicable for the listed Debt Securities.

✓ The Depositories and Stock Exchanges directed to make necessary arrangements such that the disclosures pertaining to listed Debt Securities along with equity shares and equity derivative instruments are disseminated on the websites of respective stock exchanges with effect from July 01, 2021.

✓ To refer SEBI Circular, please click here.

Company Law Update: Restricted items can be dealt by BOD, through Board Meeting via video-conferencing

✓ Relevant Rule: Rule 4 of The Companies (Meeting of Board and its Powers) Rules, 2014

✓ Amendment: Companies (Meetings of Board and it's Power) Amendment Rules, 2021 - Matters Not to be Dealt With in a Meeting Through Video Conferencing or Other Audio Visual Means - Omitted

✓ Impact: Restriction on agenda items to be transacted only at physical meeting of Board of Directors are done away with. Hence, Board may consider any item for approval virtually through video-conferencing meeting.

✓ Now, following resolution can be passed through Video Conference mode:

(i) the approval of the Annual Financial Statements;

(ii) the approval of the Board’s Report;

(iii) the approval of the Prospectus;

(iv) the Audit Committee Meetings for consideration of financial statement including consolidated financial statement, if any, to be approved by the Board under sub-section (1) of section 134 of the Act; and

(v) the approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.

Filing Update: Guidelines for filing to stock exchange by listed companies

✓ National Stock Exchange of India Limited (NSE) has issued guidelines with respect to various communications/ filing made by the listed companies under SEBI Regulations.

✓ Key Point: The company shall ensure that no price-sensitive information is disclosed unless the same has been first disclosed to the stock exchanges.

✓ For further details, please refer below:

Company Law Update: Amendment in form relating to Incorporation of Company

✓ Ministry of Corporate Affairs (MCA) has issued Companies (Incorporation) (Fourth Amendment) Rules, 2021, to be effective from the date of publishing in Official Gazette.

✓ Brief Summary:

- Form No. INC-35 AGILE PRO S  to be launched; which will substitute existing e-form No. INC-35 AGILE PRO.

- Shops and Establishment Registration is made mandatory.

✓ Text of Amendment:

The Companies (Incorporation) Rules, 2014, in rule 38A,

(i) in the marginal heading, for the words, “and Opening of Bank Account”, the words, “,Opening of Bank Account and Shops and Establishment Registration”,shall be substituted;

(ii) in the opening portion, for the letters “AGILE-PRO”, the letters “AGILE-PRO-S” shall be substituted;

(iii) for clauses “(c) and (d)” relating to “Profession Tax Registration and Opening of Bank Account”, the following clauses shall be substituted, namely:- 

“(d) Profession Tax Registration with effect from the 23rd February, 2020;

(e) Opening Bank Account with effect from the 23rd February, 2020;

*(f) Shops and Establishment Registration.”

✓ To refer MCA Notification, please click here