filing of resolutions

MCA has amended section 117(2) of the Companies Act, 2013 vide Companies Ordinance 2019 which has been gazetted on 12th January, 2019.

The amended section 117(2) reads as follows:

"(2) If any company fails to file the resolution or agreement under sub-section (1) before the expiry of the period specified therein, such company shall be liable to a penalty of Rs.100,000 and in case of continuing failure, with a further penalty of Rs.500 for each day after the first during which such failure continues subject to a maximum of Rs.25 lakhs and every officer of the company including the liquidator of the company, if any, shall be liable to a penalty of Rs.50,000/- and in case of continuing failure, with a further penalty of Rs.500 for each day after the first during which such failure continues subject to a maximum of Rs.5 lakhs."

What has changed is that earlier the phrase was "shall be punishable with fine", now it is replaced with "shall be liable to penalty". There must be some implications for this change.

Earlier the penalty on the company was ranging from Rs.1 lakh to Rs.25 lakhs, now it is fixed as Rs.100,000/-. The provision of continuing failure penalty has been brought in, which was not there earlier.

Similarly, the penalty for the officer in default was ranging from Rs.50,000/- to Rs.5 lakhs, but now it has been fixed at Rs.50,000/- and here also the continuing failure provision has been introduced.

Section 117 pertains to filing of special resolutions and agreements which is required for key important matters such as special resolutions passed in general meetings, Board resolution for appointment, re-appointment, or renewal of appointment or variation in terms of appointment of managing director. Resolution which requires the company to be would up voluntarily and resolutions passed in pursuance to section 179(3) - these are Board resolutions for important items such as borrowings, buy-back, issue of securities, making calls on shareholders, investment, grant loans or give guarantee or provide security in respect of loans, approve financial statement & Board report, diversify the business, amalgamation, merger, reconstruction, take over etc.

These resolutions are filed in form MGT-14 and the normal time for filing the same is 30 days from the date of passing the resolutions.  

Companies Amendment Act 2018 -

MCA has vide its notification dated 13th June, 2018 allowed commencement of amendment to five sections of the Companies Act, 2013, vide Companies (Amendment) Act, 2018. These amendments come into effect from 13th June, 2018. These are:

section 90: this section has been substituted by a new section in toto. This deals with significant beneficial ownership for which separate rules have been notified also. This section is basically to find out who is the actual owner of shares on which beneficial interest lies not with the person whose name is entered in the register of members but with somebody else. This is important from the point of view of compliance thereto in respect of individuals or one or two individuals who are having beneficial interest in shares of the company.

section 93: Deletion of this section. This section required promoters to give details of shares held by them and top ten promoters and any change made therein to the extent of two percent or more shareholding to be reported to the Ministry in the prescribed format. This was a cumbersome section and rightly done away with.

section 94: this section deals with place of keeping and inspection of registers & records etc. There was a proviso which said that the annual returns may also be kept at a place other than the registered office in India in a city where more than 1/10th of the total number of members reside, if approved by a special resolution passed at a general meeting. There was a requirement that the ROC be given an advance copy of the proposed special resolution. This requirement of providing advance copy of the special resolution to the ROC has been done away with. 

Sub-Section (3) of section 94 provided that any member, debenture holder, other security holder or beneficial owner or any other person may (a) take extracts from any register or index or return without payment of fee, or (b) require a copy of such register or entries thereon or return on payment of such fees as may be prescribed.

Now a proviso has been added to this sub-section which says that - such particulars of the register or index or return as may be prescribed shall not be available for inspection under sub-section (2) or taking extracts or copies under this sub-section. 

Section 96- This section pertains to annual general meeting. Now a provision has been added in sub-section (2) that the annual general meeting of an unlisted company may be held at any place in India, provided consent is given in writing or by electronic mail by all the members in advance. 

So, this is is a liberalised move to allow private companies and unlisted public companies to hold annual general meeting at any place in India, provided consent is taken thereof in advance.

Section 216: This section pertains to investigation of ownership of the company. Pursuant to the enactment of the new section 90 regarding significant beneficial ownership, a clause has been added empowering central government to appoint one or more inspectors to investigate and report on matters relating to the company or persons "who have or had beneficial interest in shares of a company or who are or have been beneficial owners or significant beneficial owner of a company"

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!!