DIR-3-KYC extension

MCA has vide its notification dated 20th September, 2018 given a limited time exemption to file form DIR-3-KYC for all DIN holders albeit with a reduced fee of Rs.500/-. This window is open from 21st October, 2018 to 5th October, 2018 after which the filing fees of Rs.5000/- will become applicable.

I think they should have continued with the fees of Rs.500/- only throughout instead of hiking it to Rs.5000/- from 6th October, 2018 onwards. 

Personal Injuries

Personal Injuries is a legal thriller from Scott Turow. Robbie Feaver is  a personal injury lawyer in Kindle County and he is being used by FBI to go undercover and ferret out other judges to whom regular paybacks take place in order to deliver favourable orders. There is a whole of emotional drama to this story, with his wife dying of ALS, a female agent attached to him, his best friend in his firm whom he wants to protect at any cost. The story appears to be on weak ground at many places, though it started off very well. The narrative of Scott Turow, however is extremely good. Goodreads 3/5 

strike off companies - no business

MCA has been striking off companies for not filing its annual returns and annual financial statements for a period of 3 years consecutively. Also lately it has been issuing show cause notices to companies who have not done any business for the last two years, to strike their names off from the register of companies. While there is a provision in the companies act, 2013 in section 248 for issuing of such show cause notices, the moot question to ask is whether it is just to send show cause notices to companies just because they have no business income for the last 2 years. According to me it is grossly unfair because businesses have upturns and downturns and when there is downturn, it could last lot more years, sometimes half a decade also. When there is general recession, then businesses fail, like in the real estate industry there is a recession for so many years. Shipping industry has its worst over woes for nearly a decade or so. Businesses suffered huge setback due to the ill advised demonetisation and there was disruption in the business due to the GST rollout. Plus industry itself goes through one crises after another, there could be technological changes taking place rapidly, disruption etc. which could all affect the business in one way or another. Industries are starved of bank funds due to which they are unable to do capex or even meet working capital requirements. Therefore in light of the above, what is the justification for issuing strike off show cause notices to companies just because they have no business income for two consecutive years. Especially when the companies have been doing the compliance all properly all along - appointing auditors, filing the statutory annual forms and event based forms etc. 

LLP registration

MCA has vide its notification dated 18th September, 2018 streamlined the process of incorporation of Limited Liability Partnerships (LLP) in India. Hitherto, for more than 10 months, the LLP incorporation had come to a standstill as MCA had stopped issuing stand-alone Director Identification Number (DIN) to individuals.

1) Now name reservation for a LLP can be done by a web service called LLP-RUN. Unfortunate part is that this RUN will be governed by their Central Reservation Centre (CRC) which is a retrograde step, in my view. That section is manned by totally incompetent people who have no idea at all about business incorporation.

2) Form 2 for incorporation of LLP will be replaced by FiLLiP which will carry the DIN allotment process also. So this is good move.

3) Similarly minor amendments have been made to Addendum to Form 2 (which will be known as Addendum to Form FiLLiP, form 5 (notice for change of name), form 17 (conversion of general partnership firm into LLP) and form 18 (conversion of a private company/ unlisted public company into LLP) consequent to the above amendments. It would be interesting to note form 18 amendments as with the proposed mandatory demat of securities of unlisted public limited companies from 2nd October onwards, many unlisted public companies will seek to convert themselves into LLPs / private companies to avoid that compliance. They might seek to convert themselves into private companies but there is always a lurking fear the mandatory demat of securities could be extended to private companies as well, in the future.

All these changes will take effect from 2nd October, 2018.  

Registration of satisfaction of charges

MCA has vide its notification dated 5th July, 2018 amended the Companies (Registration of Charges), Rules, 2014 wherein it has now allowed the satisfaction of charges to be filed within a period of 300 days from the date of satisfaction/ date of payment.

Hitherto, this period was 30 days from the date of satisfaction and if filed beyond that date, then company had to approach the Regional Director with an application for condonation of delay beyond 30 days, pay fine related to that in the RD order and then the satisfaction would take effect.

Of course, any filing beyond 30 days from the date of satisfaction would attract the additional filing fee as specified in the relevant Rules.

This is a good move by the government as an Ease of Doing Business. 

annual KYC by all Directors

MCA has vide its notification dated 5th July, 2018 amended the Companies (Appointment and Qualification of Directors) Rules, 2014 wherein it has added a Rule 11(2) which gives powers to the Central Government or Regional Director (Northern region) to deactivate the DIN of any individual who does not file the newly created form DIR-3-KYC within the stipulated time.

The de-activated DIN can be activated only after the form DIR-3-KYC is filed along with the requisite fee as prescribed.

A Rule 12A has been added which provides that every individual who has been allotted a DIN as on 31st March of a financial year shall submit form DIR-3-KYC within 30th April of the immediate next financial year.

In the interim for the first year, all those individuals who are allotted a DIN shall file DIR-3-KYC within 31st August, 2018

The form DIR-3-KYC is given in the amendment, but not released yet. On a cursory glance at the form, it requires personal mobile no. and personal e-mail id of the Director to be indicated. The documents required are proof of identity and proof of residence. Not sure whether any specific proof is required for the mobile no. or e-mail id. That will be know only when the form is released and we go through the help file of the form.

This amendment has been made effective from 10th July, 2018 so the form DIR-3-KYC will also be released on that date at the MCA portal. 

RBI - FIRMS

RBI has vide its circular dated 27th june, 2018 introduced a concept of Single Master Form for reporting of all foreign investments into India. As a first step entities who have foreign investments have to create an entity master in an online interface called FIRMS.

Gist of RBI circular given below:

In order to implement this announcement, the Reserve Bank is introducing an online application, FIRMS (Foreign Investment Reporting and Management System), which would provide for the SMF. FIRMS would be made online in two phases. In the first phase, the first module viz., the Entity Master, would be made available online. Instructions in this regard were already issued through A. P. Dir. Series Circular No. 30 dated June 07, 2018.

1.3 In the second phase, the second module containing 9 reports would be made available with effect from August 01, 2018. With the implementation of SMF, the reporting of FDI, which is presently a two-step procedure viz., ARF and FC-GPR would be merged into a single revised FC-GPR. The SMF also introduces reporting of indirect foreign investment through form DI and reporting of inflows in investment vehicles through Form InVi. Further, the reporting in FC-TRS, LLP-I, LLP-II, ESOP, DRR and CN would also be made in SMF only. The finalized structure of SMF and operational instructions thereof would be made available in the Master Direction on Reporting under FEMA, 1999.

1.4 The first module will be available to the public for data entry between June 28 (at 1:00 pm) and July 12, 2018. It would provide an interface for Indian entities [as defined in Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2017 dated November 07, 2017 and as amended from time to time] to input their existing foreign investment (including indirect foreign investment) data. Entities shall provide data with respect to all foreign investments received, irrespective of the fact that the regulatory reporting to the Reserve Bank for the same has been made or not and whether the same has been acknowledged or not.

1.5 Indian entities not complying with these instructions will not be able to receive foreign investment (including indirect foreign investment) and will be treated as non-compliant with Foreign Exchange Management Act, 1999 (FEMA) and regulations made thereunder and liable for action as laid in FEMA or the regulations made thereunder.

Detailed instructions for creating a entity master are given in the circular as per link below. The entity master needs to be created on or before July 12, 2018. 

https://rbi.org.in/Scripts/femaview.aspx?femaid=64