Companies (Management & Administration) Rules Amendment

MCA has vide its notification dated 13th June, 2018 amended the Companies (Management and Administration) Rules, 2014 as follows:

1) Rule 13 has been deleted - Rule 13 pertained to return of changes in the shareholding position of promoters and top 10 shareholders for listed companies. They were required to intimate changes of 2% or more in their shareholdings within 15 days of such change. A form MGT-10 was required to be filed for this purpose.

This has been done away with which is good

2) Rule 15(6) has been omitted. - Rule 15 pertains to preservation of register of members and annual return etc. Rule 15(6) specified that the special resolution which is proposed to be filed under section 94(1) should be filed one day before the general meeting of the company. Section 94(1) says that the registers and returns are to be kept at the registered office of the company. Proviso to section 94(1) says that such registers or returns can also be kept at any other city where more than 1/10th of the members reside, provided special resolution has been passed at a general meeting of the company.

So its a kind of a roundabout provision, which has been done away with. It should not have been in the statute books in the first place.

3) Explanation after Rule 18(3)(ix) has been omitted. - Rule 18 pertained to notice of meeting and how it can be sent via electronic route and the precautions to be taken thereunder and electronic records to be maintained. The explanation below Rule 18(3)(ix) said that "for the purpose of this rule, it is hereby declared that the extra ordinary general meeting shall be held in India". This is a totally redundant explanation which should not have been there in the first place.

So now extra-ordinary general meeting can be held anywhere in India. That was the provision in the 1956 Act, but somehow this explanation got mischievously embedded in the aforesaid Rules.

4) Amendment to Rule 22 - Rule 22 pertains to procedure to be followed for conducting business through postal ballot. Rule 22(16) gives a list of items for which business shall be transacted only by means of voting through postal ballot. Now a proviso has been added below this Rule 22(16) and this proviso now stipulates that these items of business which is mandatorily required to be transacted only through postal ballot may be transacted by e-voting also.

It is not clear whether companies should give both options i.e. postal ballot and e-voting or one to the exclusion of another.

I guess one more amendment will be required for that!! Sigh!!

Secretarial standard on General meetings

Salient features of Revised Secretarial Standards for General Meetings – SS2

1)     Applies to a section 8 company also but all other provisions of the Act relating to the General meetings are still applicable to a section 8 company;

2)    In case of a nidhi company, general meeting notice need to be served individually only on members holding shares of face value of more than Rs.1000 or more than 1% of the paid up share capital of the company, whichever is less. For other members, notice is by way of a newspaper notice in a newspaper circulated in the place where registered office is situated and on the notice board of the company;

3)     In case of companies having a website, the notice shall simultaneously be hosted on the website till the conclusion of the meeting. In case of a private company, the notice shall be hosted on the website of the company, if any, unless otherwise provided in the articles. This is an additional compliance even for small private companies which have websites. Nowadays every small company has a website for its promotion etc. The word used here is “shall” instead of “may” so this mandates compliance by all companies having websites. This is an unnecessary burden on the private companies to comply with this requirement. The only alternative they have is to amend the articles to provide that the notice need not be hosted on the website of the company. 

4)    Route map of AGM is not necessary for a closely held private company, where only the Directors and their family members are the shareholders or a wholly owned subsidiary company. This is a welcome relief for the small private companies. The whole purpose of putting route map in the notice was infructuous.

5)    Notice of the annual general meeting shall also specify the serial number of the meeting. By serial number I am assuming the no. of annual general meetings held in a company since its inception.

6)   Consent for shorter notice for the general meeting can be received any time before the meeting commences. It means that consent can be received 10 minutes before the meeting starts also. Government is toting this as “ease of doing business” 

7)   The authority letter from corporates for the annual general meeting shall,

(a)          in case of remote e-voting, be received before close of e-voting;

(b)          in case of postal ballot, shall be received alongwith the postal ballot form; and

(c)          if he is attending the meeting, then the letter should be sent before the commencement of the meeting.

8)   Nidhi companies are not required to provide e-voting facilities to their members;

9)   In case of Nidhi, no member shall exercise voting rights on a poll in excess of 5% of the total voting rights of the equity shareholders;

10)In case of a private company, a member who is a related party is entitled to vote on such resolution. This was always the case under the earlier Companies Act, 1956 also, only it has now been codified in the Standards.

11) The results of the voting at the general meeting needs to be displayed for at least three days at the notice board of the company at its registered office and also its Head Office and Corporate Office wherever it is situated. This is over and above displaying of the results at the company’s website, if any.  Before amendment, the three days’ time limit was not specified. This is another example of compliance overreach.

12) At a poll at the general meeting, it is not necessary that one of the scrutinizer shall be the member of the company.

13) Minutes of the meeting can be maintained in electronic form and it need not have a timestamp.

14) Minutes if they are maintained in loose leaf form, shall be bound periodically, at least once in every three years.

15) Minutes Book shall be kept only at the registered office of the company, not at any other place.

16) No need for minutes to state the conclusion time of the meeting;

17) Most of the other amendments are either rectification of the drafting errors or aligning the standards to be in line with the Act and/ or Rules thereof.