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Proposed Amendments in COMPANIES (ACCOUNTS) RULES, 2014

News and Press Release - Dated:- 2-2-2016 - Location of servers for keeping backup of books and papers 9.1 The proviso to Rule 3 (5) of the Companies (Accounts) Rules, 2014 states that the backup of books of account and other books and papers of company maintained in electronic mode, including at a place outside India, if any, shall be kept in servers physically located in India on a periodic basis. It has been argued that it may cause difficulties in compliance with the requirements where an In .....

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erritorial laws of various countries as the data protection or privacy laws in Europe and US impose many restrictions on cross border sharing, storing and revealing of data. On the other hand, there are several jurisdictions across the world, for example UK, Belgium and other European countries where accounting records are required to be maintained locally for inspection, and therefore might lead to regulatory concerns with regard to grant of access to data maintained outside the country. In vie .....

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Companies (Accounts) Rules, 2014 deals with manner of consolidation of accounts. The third proviso to Rule 6 states that this Rule shall not apply in respect of consolidation of financial statement by a company having subsidiary or subsidiaries incorporated outside India only for the financial year commencing on 1 April 2014 and ending 31 March 2015. The Committee deliberated on extending this exemption perpetually, as demanded, and decided that this exemption was only a facilitative provision .....

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ittee recommended that there is no justification in giving exemption, whatever the size of a company, wherever it has one or more subsidiaries etc. RBI suggested that the unhedged foreign exchange exposure of companies should either be disclosed in the annual financial systems, or captured through AOC-4. The Committee recommended for appropriate changes to capture the required information. Disclosures in the Director s Report 9.4 Rule 8(1) of the Companies (Accounts) Rules, 2014 requires the Boa .....

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ption etc. The Committee observed that as compared to the disclosure requirements of these items under the repealed rules i.e. Companies (Disclosure of particulars in the Reports of Board of Directors) Rules, 1988, there has been a substantial scaling down in these disclosures and hence, decided against dispensing with the same. Moreover, these disclosures are required for statistical purposes also. Hence, no amendment was recommended in this regard. Form AOC 2: Disclosure of Related Party Trans .....

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rement of disclosure also to material RPTs that are entered on arm s length basis, which goes beyond the requirements of the Act. The Committee has already recommended that Form AOC-2 may be omitted as long as the required disclosures are made in the Financial Statements. It has also been recommended that the Board s Report should specifically discuss and refer to these disclosures (paragraph 9.10 of Part I of report may also be referred to). Consequential changes in the Rules may be required. 9 .....

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ded that Rule 13 of the Companies (Accounts) Rules, 2014 be amended replacing the word a firm with the term an entity to avoid confusion. Disclosure of Remuneration of Directors and KMP 9.8 Sections 134(3)(a) and 92(3) of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014 requires the Board s Report of a company to include an Extract of Annual Return in Form MGT-9. The said Form, inter alia, requires companies to disclose remuneration of Directors and key Mana .....

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omission of MGT-9 requirements (paragraphs 7.5, 9.11 of Part I of the Report) In addition, the Committee recommended that the threshold of ₹ 60 lakh may be increased to Rupees One Hundred and Two lakh per annum, the requirements under the different Rules be harmonized. Compliance of all applicable laws referred to under Section 134(d)(f) 9.9 Section 134(5)(f) states that the Directors Responsibility Statement should state that the directors had devised proper systems to ensure compliance .....

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specific laws only would not be acceptable. Moreover, the requirement in Form MR 3 form is for the Secretarial Auditor to satisfy himself that the concerned company has proper systems and processes at the Board level to ascertain compliance of applicable laws and this is a reasonable requirement for the secretarial auditors to enquire into and report. Corporate Social Responsibility 9.10 Rule 6 of the Companies (CSR Policy) Rules, 2014 states that the CSR Policy of the company shall deal with/d .....

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