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MANAGEMENT AND ADMINISTRATION - Proposed Amendments in the Companies Act 2013

News and Press Release - Dated:- 2-2-2016 - Beneficial Interest in Shares, Register of Beneficial Owners of a Company 7.1 Misuse of corporate vehicles for the purpose of evading tax or laundering money for corrupt or illegal purposes, including for terrorist activities has been a concern worldwide. Complex structures and chains of corporate vehicles are used to hide the real owner behind the transactions made using these structures. Realizing this, jurisdictions world over have been putting in p .....

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then, jurisdictions world over have taken significant steps on beneficial ownership provisions. Changes have been made by many jurisdictions, for example Russian Union and UK in their laws to bring in transparency in company ownership and control. The English Companies Act, 2006 was amended in 2015 to require certain companies and LLPs to create and maintain a Persons with Significant Control Register and make it available to public, as well as file the information with the UK Companies House. .....

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in a share as well as the legal owner to make a declaration to the company in respect of such beneficial interest. In view of the absence of a definition of beneficial interest in a share in a company, absence of any obligation on a company to collect information on beneficial ownership, the absence of the concept of beneficial ownership in a company, no enabling provisions to maintain a separate register on beneficial ownership, in the Act, the existing provisions are considered inadequate for .....

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beneficial ownership in a security, which can be used as a basis for the definition of beneficial interest in a share. b) Companies and individuals may be obligated to obtain information on beneficial ownership. In this regard, companies may be empowered to seek information from members and in case of failure to supply the required information, apply sanctions in the form of suspension of rights against the beneficial interests subject to adequate safeguards. c) Companies would also be mandated .....

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urn of a company in the prescribed form. 7.4 The Ministry of Corporate Affairs, through the Companies (Second) (Removal of Difficulties) Order, 2014, replaced the words paid up capital and turnover with the words paid up capital or turnover for the purposes of prescribing thresholds for companies other than listed ones that were required to get their annual return certified by a practising company secretary. The Committee took the view that such a change brought about by way of a Removal of Diff .....

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be made available on the website of the companies. The Committee recommended that this requirement may be omitted, and instead the web address/link of the Annual Return filed by the company and hosted on its website, if any, should be provided in the Board s Report and information with regard to shareholding pattern be provided as part of section 134 requirements. The matter has been further dealt with in paragraph 9.11 of Part I of this report. Filings in case promoters stake changes 7.6 Secti .....

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p share capital. This has led to an increase in the amount of filings being made under the Act. The Committee recommended that the requirement be omitted altogether. Place of keeping and inspection of registers, returns etc. 7.7 Section 94 of the Act pertains to the place of keeping of registers, required to be maintained by a company under Section 88. The register of members contained various personal details of shareholders, like their PAN card details, E-Mail ID, address of members, which oug .....

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1956, with respect to the changing of the place for keeping the registers. In this regard, the Committee recommended that the requirement of providing the Registrar with an advance copy of a proposed special resolution as required under Section 94(1) be done away with, since it did not serve any purpose, particularly because the special resolution was in any case to be filed as per the requirements of Section 117(3)(a). Holding of Annual General Meeting 7.9 Section 96(2) requires holding of Annu .....

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holly owned subsidiary companies was not agreed to as both i.e. WOS and holding company were separate legal entities. However, the suggestions to allow private limited companies and wholly owned subsidiaries of unlisted companies to convene the AGMs at any place in India provided approval of 100% shareholders is obtained in advance, is recommended by the Committee with a view to ease doing business. This would require amendment to Section 96(2) so that exemption can be provided to such class of .....

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entitled to vote at a meeting, especially at a short notice, could be difficult. The Committee also referred to a similar provision under the Companies Act, 1956 and recommended for the requirement of ninety-five percent of the votes exercisable at such a meeting to be applicable in the case of extraordinary general meetings only. The Committee while considering the suggestion to allow acceptance of proxy till the beginning of the general meeting referred to the Standing Committee s recommendat .....

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companies incorporated outside India and certain other cases. For these cases, authority may be given to prescribe exemptions through Rules. Such a mandatory provision may be preferably prescribed in the substantive section (section 100) and not in the Rule. Hence, the Committee recommended that the explanation to Rule 18(3) be deleted and an explanation be incorporated at the end of Section 100 mandating that EGM shall be held only in India, as well as provide for exemptions to wholly owned su .....

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nd Section 110 of the Act, such that Rule 22(16) of the Companies (Management and Administration) Rules, 2014 would provide that if a company is required to provide for electronic voting, then the same items could be covered in its General Meetings too. Filing of resolutions and agreements 7.13 Section 117 of the Act makes it mandatory for companies to file resolutions with the Registrar in respect of several matters. A concern was raised that the filing of Board resolutions as required under Se .....

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knowledging that sensitive information like business strategies, budgets, financing plans etc. if available publicly could hamper the business interest and that an amendment had already been made to ensure that these filings were not available for public inspection, the Committee recommended that while the filing requirement ought to continue, MCA may address the concerns of companies by adequately publicising the provisions in the MCA21 system to ensure confidentiality of such filed information .....

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