- MCA clarifies applicability of Section 186 on tax-free bonds
Section 186 (7) of the Companies Act, 2013 states that no loan shall be given under this section at a rate of interest lower than the prevailing yield of one year, three year, five year or ten year Government Security closest to the tenor of the loan. The Ministry of Corporate Affairs has now clarified vide General Circular No. 6/2015 dated 9th April, 2015 that in cases where the effective yield for the tax free bonds is greater than the yield on the one, three, five, ten year Government security, there shall be no violation of the Section 186 of Companies Act, 2013.
- The Central Government has notified the Companies (Auditor's Report) Order, 2015 dated 10th April, 2015 specifying the matters required to be specified in the Auditor’s Report for the financial year ending 31st March, 2015. CARO shall apply to every company including a foreign company as defined under section 2(42) of Companies Act, 2013. Exemptions from applicability of CARO has been granted to:
- banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949
- insurance company as defined under the Insurance Act,1938
- company licensed to operate under section 8 of the Companies Act
- One Person Company as defined under clause (62) of section 2 of the Companies Act
- Small company as defined under clause (85) of section 2 of the Companies Act
- Private limited company with a paid up capital and reserves not more than rupees fifty lakh; and which does not have loan outstanding exceeding rupees twenty five lakh from any bank or financial institution; and does not have a turnover exceeding rupees five crore at any point of time during the financial year.
As compared to CARO-2003, the reporting requirements under the CARO-2015 have been reduced considerably ( i.e. from 21 clauses to 12 clauses)
- The DIPP has vide Press Note No. 4 dated 24th April, 2015 decided to permit Foreign Direct Investment in the Pension Sector up to 49% (of which Automatic up to 26% and Government route beyond 26% and up to 49%). FDI in the Pension Funds is allowed as per the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013. Foreign Investment in Pension Funds will be subject to the condition that entities bringing in foreign equity investment as per Section 24 of the PFRDA Act shall obtain necessary registration from the PFRDA and comply with other requirements as per the PFRDA Act, 2013 and Rules and Regulations framed under it for so participating in Pension Fund Management activities in India. Wherever such foreign equity investment involves control or ownership by the foreign investor or, transfer of control or ownership of an existing pension fund from resident Indian citizens and/ or Indian companies owned and controlled by resident Indian citizens to such foreign investing entities as a consequence of the investment, including through transfer of shares and / or fresh issue of shares to Non-Resident entities through acquisition, amalgamation, merger, etc., it would require FIPB approval in consultation with the Department of Financial Services, PFRDA and other entities concerned and the onus of compliance to these conditions will be on investee Indian pension fund company. The meaning of ownership and control would be as per the Foreign Direct Investment policy.
- The initial validity of Industrial License for Defense Sector, as per Press Note 5 (2014 series) and Press Note 9 (2014 series), is presently three years, extendable up to seven years. In partial modification of the above mentioned Press Notes, the initial validity of Industrial License for Defence Sector is being revised vide Press Note 5 (2015 series) dated 27th April, 2015 to seven years, further extendable up to three years for existing as well as future Licenses. This is being done as a measure to further promote ease of doing business, in view of the long gestation period of Defence Contracts to mature.
- The Reserve Bank of India has amended the mechanism for identification of willful defaulters. Previously, except in very rare cases, a non-whole time director should not be considered as a willful defaulter unless it is conclusively established that he was aware of the fact of willful default by the borrower by virtue of any proceedings recorded in the Minutes of the Board or a Committee of the Board and has not recorded his objection to the same in the Minutes, or, the willful default had taken place with his consent or connivance. After the amendment, the above exception will not apply to a promoter director even if he is not a whole time director.
- It has been clarified by the Ministry of Corporate Affairs that that a managerial person may continue to receive remuneration for his remaining term in accordance with terms and conditions approved by company as per relevant provisions of Schedule XIII of earlier Act even if the part of his/her tenure falls after 1st April, 2014.
- The Institute of Company Secretaries of India (ICSI) has issued the Secretarial Standard-1 for Meetings of Board of Directors and Secretarial Standard-2 on General Meetings to be effective from 1st July 2015.
- The Ministry of Corporate Affairs ministry will from May 1 have an integrated incorporation form to make compliance and reporting easier and convenient for corporates. “Name availability, allotment of Director Identification Number (DIN), company incorporation and commencement of business will now be possible through a single form. The new form, called INC 29, will be available on the ministry's website.
Currently, entrepreneurs seeking to register a new company are mandatorily required to fill eight forms to complete the incorporation, a process which, besides being cumbersome, also takes a lot of time. This is part of the government's drive to improve India's ranking on the globally tracked parameter of ease of doing business.