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GLIMPSES OF REPORT OF THE COMPANIES LAW COMMITTEE PART II

Corporate Laws / Banking / SEBI / LLP - By: - Mr. M. GOVINDARAJAN - Dated:- 6-2-2016 - CHAPTER VII - MANAGEMENT AND ADMINISTRATION Section 89 - Declaration in respect of beneficial interest in any share - The Committee recommended to amend the act to mandate the following: To provide a definition of beneficial interest in a share and beneficial ownership in a company. The existing definition under SEBI Circular/Guidelines and the Prevention of Money Laundering Act may be used as a basis for the .....

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the beneficial interests subject to adequate safeguards; Companies would also be mandated to maintain registered of beneficial owners and provide the information to the registry (MCA 21). Periodic updating may also be mandated. Data privacy concerns may be addressed by making only part of the field information available to be public; Companies not complying with the requirements may be liable to fine and criminal prosecution. Section 92 - Annual Return - The Committee recommended that prescript .....

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on 134 requirements; The Committee recommended to omit the requirements under Section 93 to file a return with the Registrar with respect to change in the number of shares held by promoters and top ten shareholders of such company within 15 days of such change; Section 94 - Place of keeping and Inspection of registers, returns etc., - The Committee suggested that personal information of shareholders may not be made available publicly; The Committee recommended the requirement of providing the Re .....

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l nexus; The Committee recommended to allow private companies and wholly owned subsidiaries of unlisted companies to convene AGMs at any place in India provided approval of 100% shareholders is obtained in advance. This requires amendment to Section 96(2) so that exemption can be provided to such class of companies; Section 101 - Notice of Meeting - The Committee recommended that the requirement of 95% of votes exercisable for a general meeting at a short notice be applicable only to the EGM. Se .....

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endations on proxies because of apprehensions about their possible misuse; Section 110 - Postal Ballot - The Committee decided to amend Section 110, 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 Meeting too; Section 117 - Resolutions and agreements to be filed - The Committee recommended that while the filing requirement ought to c .....

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lf. The Committee recommended that a clarification to this effect be issued; The Committee considered the suggestion that providing information by banks may violate their confidentiality obligations towards their customers, and recommended that an exemption be considered for banks; Section 118 (10) - Secretarial Standards - The Committee recommended that ICSI should re-examine and revise the Secretarial Standards in consultation with all the stakeholders. The issues received from stakeholders sh .....

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account and the same could be declared anytime up to convening of AGM for the said financial year; CHAPTER IX - ACCOUNTS OF COMPANIES Section 129 - Financial Statements - The Committee recommended that where a Consolidated Financial Statement was statutorily required to be prepared as per the law of the jurisdiction in which the overseas subsidiary is established and is placed on the website in the statutory format, there should be no requirement for standalone financial statements of the step d .....

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Committee felt that providing some clarity on the auditors reporting requirement (with respect to reporting on the Internal Financial Controls and CARO and for overseas subsidiaries), for the convenience of stakeholders, in the form of guidance from ICAI to its members should be helpful; Section 130 - Re-opening of accounts - The Committee felt that while a Court/Tribunal always had the inherent power to call/give notice to any concerned party in the process, it would be appropriate if a provisi .....

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ority - The Committee recommended that NFRA should be established early; Section 134 - Financial Statement, Board s report etc., - The Committee noted that since the appointment of a managing Director was not mandatory for all companies, the words if any may be inserted after the words managing director in Section 134 (1); The Committee felt that while some of the disclosures in the Board s Report under the Companies Act, 1956 was insufficient and had become redundant, there was a need to fine-t .....

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lient points. Disclosures with regard to loans or investments under section 186 and particulars of contracts with related parties under section 188, if provided in the financial statements, may be only referred, and salient points discussed, in the Board s Report. Disclosure requirements under Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 may be pruned. For small companies, separate format for the Board s Report may be prescribed.; The Committee recommended that it .....

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may be replaced by preceding financial year ; The Committee felt that the requirement with respect to CSR are new provisions, all companies should be given the required flexibility for a reasonable period, say five years, to experience the implementation of this provision; The Committee decided not to recommend for exemption of Section 8 companies from the CSR provisions of the Act; Section 136 - Right of member to copies of financial statement - The Committee recommended that the requirement o .....

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f giving five year term to the auditors and further this would remove the inconsistency in the Act; The Committee felt that if the auditor was unwilling to continue at any stage before completion of his five year term it should be treated as a case of resignation and the provisions of Section 139(8) for the filling up such casual vacancy arising due to resignation should apply. This may be made explicit in the section itself; Rotation of auditors - The Committee felt that Rule 6 ought to provide .....

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commended a change in the first proviso to Section 143 (1) to provide that the auditor of a holding company to have a right to access to the accounts and records of the associate company and joint venture company, whose accounts are required to be consolidated; The Committee recommended that the reporting obligations of auditors should be with reference to the financial statements; Reporting Fraud by auditor - The Committee noted that the form ADT - 4 which specified the manner of reporting frau .....

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impact the independence of an individual to be an independent director may be introduced; Section161 - The Committee felt that a definition of nominee director should specifically be included as a definition clause; The Committee recommended that in case of appointment of independent directors and directors recommended by the Nomination and Remuneration Committee, the requirements of Section 160 ought to be dispensed with; The Committee recommended that there should be a prohibition in the Act .....

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tee recommended that a disqualification under Section 164 (2) be only applicable to a person who was a director at the time of the non compliance, and in case of a continuing non compliance, there should be a period of six months time allowed for a new Director to make the company compliant; CHAPTER XII - MEETINGS OF BOARD AND ITS DIRECTORS Section 173 - Meeting of Board - The Committee recommended providing flexibility to allow participation of Director through video conferencing, subject to su .....

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recommended that as provided in SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 related party transactions between a holding company and its wholly owned subsidiary companies need not require the approval of the Audit Committee for the transactions not requiring Board approval under Section 188 and Section 177 be amended accordingly; The Committee recommended review of the existing thresholds, and thereafter consider granting exemptions under Section 462, if required; Sec .....

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tor; Loan to Directors - The Committee recommended that it may be considered to allow companies to advance a loan to any other person in whom director is interested subject to prior approval of the company by a special resolution. The loans extended to persons, including subsidiaries, falling within the restrictive purview of Section 185 should be used by the subsidiary for its principal business activity only, and not for further investment or grant of loan; The Committee recommended that the r .....

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itself and consequential changes in the Rules may also be made; The Committee recommended for the insertion of an explanation to clarify the exclusion of employees from the requirement of Section 186 (2); The Committee recommended that the Removal of Difficulty Order for Section 186 (11) with regard to Insurance and Housing finance companies, etc., issued in January 2015, subject to legal clarification, may be included in the sub section itself through an amendment. The language of Section 372A .....

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