Proposed Amendments in COMPANIES (MANAGEMENT AND ADMINISTRATION) RULES, 2014

Register of members, etc.

7.1 Rule 3 of the Companies (Management and Administration) Rules, 2014 provides that every company limited by shares shall, from the date of its registration, maintain a register of its members in Form No. MGT-1. It also provides that in the case of existing companies, registered under the 1956 Act, particulars shall be compiled within six months from the date of commencement of these Rules. The Committee noted that the companies, which have been in existence for several years, may not have the relevant details of the shareholders, which are now required to be included in the Register of Members and it may be impractical for such companies to procure the required details from all its existing shareholders, given that some of them may not even be traceable. In view of this, the Committee recommended that for the companies incorporated prior to 1 April 2014, the members’ particulars as available under the 1956 Act should be allowed to be transferred to Register of Members under the 2013 Act. Further, it was recommended that particulars as are required to be captured in Form MGT-1 shall be mandatorily maintained in respect of all persons becoming members after 1 April 2014. Finally, , the Committee also recommended incorporation of additional fields in the transfer form SH-4 for obtaining the requisite particulars in MGT-1 for enabling compliance with Rule 3.

7.2 As per Rule 5(2) of the Companies (Management and Administration) Rules, 2014, the registers shall be maintained at the registered office of the company unless a special resolution is passed at a general meeting authorising the keeping of the register at any other place within the city, town or village in which the registered office is situated or any other place in India in which more than one-tenth of the total members entered in the register of members reside. The Committee felts that as this is a safeguard for members, which has been in place since the 1956 Act, no amendment is required for the purpose.

7.3 As per Rule 8 of the Companies (Management and Administration) Rules, 2014, every entry in the register maintained under Section 88 of the Act and index included therein is required to be authenticated by the Company Secretary or by any other person authorised by the Board along with the date of board resolution authorising the same. It was pointed out that in respect of listed companies, there are huge transactions almost on daily basis and that the share transfer register and members register are maintained electronically, in most cases by Registrar and Transfer Agent (RTA) who is an outside agency, and that the RTA may be obligated to maintain the said registers and indexes in electronic form. The Committee felt that the Rule 8 already gives the powers to Board, and no change is required.

Declaration in respect of beneficial interest in any share

7.4 Section 89 read with Rule 9(1) of the Rules provides that a person whose name is entered in the register of members of a company as the holder of shares in that company but who does not hold the beneficial interest in such shares (hereinafter referred to as “the registered owner”), shall file with the company, a declaration to that effect in Form No. MGT-4 in duplicate, within a period of thirty days from the date on which his name is entered in the register of members of such company. Further, Form MGT-5 is prescribed for declaration to be given by beneficial owner whose name is not entered in the Register of members in duplicate. The concerned company, upon receipt of Forms MGT-4 and MGT-5, is required to file Form MGT-6 with the ROC electronically after attaching the scanned copies of Forms MGT-4 and MGT-5. The Committee recommended that the requirement of filing of Form MGT-4 and Form MGT-5 in duplicate may be done away with as original copies are not required to be filed with the ROC and only scanned copies of the said forms are required to be attached to Form MGT-6. However, the suggestion to consolidate the information in Forms MGT-4 and MGT-5 into one form was not found to be acceptable as purposes for these two forms are different.

Annual Return

7.5 Section 92(1) read with Rule 11(1) prescribes that the annual return shall be in Form no. MGT-7. The Committee noted that Form MGT-7 requires furnishing of specific information which is already captured in the Board’s report such as CSR spend, remuneration of directors, details of turnover and net worth etc. The Committee further noted that the Ministry vide its notification dated November 16, 2015 has substituted a new Form MGT-7 through the Companies (Management and Administration) Third Amendment Rules, 2015 removing the duplication and excess information issues. However, the Committee recommended that the Annual Return may be further simplified by avoiding asking for repetitive information which may be available in other documents filed with ROC such as Financial Statements, Board’s Report etc. and making disclosures more relevant. Further the suggestions for exempting the disclosure of certain particulars in the Annual Return for companies with less than twenty shareholders was not accepted as it was felt that it may lead to too many classifications of companies and consequently lead to lack of clarity. The Committee, however, was of the opinion that a simpler Annual Return form for OPCs and small companies could, be prescribed.

7.6 Section 92(2) read with Rule 11(2) prescribes that an annual return, filed by a listed company or a company having paid-up share capital of ten crore rupees or more or turnover of fifty crore rupees or more, shall be certified by a Company Secretary in practice in Form no. MGT-8. The Committee considered the suggestions to expand the scope of certification of annual return and agreed that Company Secretaries in employment should be allowed to certify annual returns.

7.7 Section 92(3) read with Rule 12 requires that an extract of annual return in form MGT-9 be attached to the board’s report. As noted elsewhere also, deletion of this requirement without providing the information contained therein to the members may not be appropriate. The Committee recommended that after including pertinent information as a disclosure requirement under section 134, Form MGT-9 may be omitted (Paragraph 9.11 of Part I of the Report).

Return to be filed with Registrar in case promoters’ stake changes

7.8 Section 93 read with Rule 13 requires every listed company to file with the Registrar, a return in Form no. MGT-10 along with fee with respect to changes relating to either increase or decrease of two percent or more in the shareholding position of promoters and top ten shareholders of the company on each occasion, within fifteen days of such change. The Committee has recommended for omission of section 93 (Paragraph 7.6 of Part I of the Report). Consequential changes in the Rules would be required.

Calling of extraordinary general meeting

7.9 Explanation to Rule 17(2) provides that requistionists should convene the extraordinary meeting at the registered office or in the same city or town where it is situated and such meeting should be convened on a working day. It was suggested that the explanation should be modified to allow holding of EGMs by requisition on a day which is not a national holiday and the Committee agreed with the same as the AGMs are also allowed to be convened on any day which is not a national holiday as per Section 96(2).

Postal Ballot

7.10 Rule 22(7) provides that if a resolution is assented to by the requisite majority of the shareholders by means of postal ballot including voting by electronic means, it shall be deemed to have been duly passed at a general meeting convened in that behalf. Similarly, Section 110(2) also provides that if a resolution is assented to by the requisite majority of the shareholders by means of postal ballot, it shall be deemed to have been duly passed at a general meeting convened in that behalf. The Committee recommended that since these two provisions lead to repetition, the Rule 22(7) may be deleted. Also Rule 22(14) provides that the resolution shall be deemed to be passed on the date of a meeting convened in that behalf. This is also provided for in Section 110(2), hence the Committee recommended that the same may be omitted from the Rules.

7.11 The Committee noted that there is a contradiction in the provision relating to maintenance of minutes book of general meetings, as provided in Rule 25 and section 119. While Rule 25(1)(e) permits that the minutes book of general meetings can be kept at either the registered office or such other place as may be approved by the Board, if the company desires not to keep the same in the registered office, Section 119 specifically provides that the general meeting minute book shall be kept only at the ‘registered office’ and does not allow any other option. It would be appropriate that the minutes book for general meeting is maintained at the registered office only. Therefore, the Committee recommended that Rule 25(1)(e) may be made consistent with Section 119.

7.12 It was suggested, with respect to Section 120 of the Act, that a new form should be introduced by MCA to which extracts of all statutory registers and minute books for each financial year should be enclosed a which would be accessible only to the MCA officials and not to the public. Further, suggestions were also made to do away with pre-certification requirements on forms (without specifying the forms numbers) and discontinuing STP approvals, prescribed for certain forms. However, in the absence of any justifications behind these suggestions, the Committee did not agree to these suggestions.