MCA Amendment update summary for June 2021

Ministry of Corporate Affairs has caused myriad amendments in the Companies Act, 2013.

Amendment THROUGH NOTIFICATIONS

No Amendment through Notification in the Month of June, 2021.

Amendment THROUGH Circulars

Clarification on Holding of EGM through Video Conferencing till 31^st December, 2021:

The MCA vide below mentioned circulars first time allowed Companies to hold their Extra Ordinary General Meeting through Video Conferencing.

As per latest amendment of 23^rd June 2021 Ministry has allowed companies to hold their Extra Ordinary General Meeting through Video Conferencing till 31^st December 2021. A welcome Step from the Ministry of Corporate Affairs.

No other Amendment through Notification in the Month of June 2021.

Amendments in Rules 

Amendment in Companies (Incorporation) Fourth Amendment Rules, 2021:

[1]The Companies (Incorporation) Fourth Amendment, Rules 2021 passed on 07^th June 2021.

• This Rules came into effect from 07^th June 2021.

Effect of Amendment:

Ministry has made amendment in Rule 38A of Companies Incorporation Rules.

1. Name of form Agile – Pro has been changed as Agile – Pro – S.
2. Rule 38A covered the following Services:

Amendment in Companies (Meetings of Board and its Powers)) Amendment Rules, 2021:

[2]The Companies (Meetings of Board and its Powers) Amendment, Rules 2021 passed on 15^th June 2021.

This Rules came into effect from 15^th June 2021

Before these rules, there were restrictions on certain agenda items to be discussed in the Board meeting through Video Conferencing. Those were-

1. Approval of financial statements;
2. Approval of matter relating to merger/amalgamation;
3. Approval of matter relating to takeover/acquisition;
4. Approval of prospectus for issue of shares.

The provisions of Rule 4 of the Companies (Meeting of the Board and its powers) Rules, 2014 barred the Companies to conduct the Board meeting through Video Conferencing for the above mentioned agenda items. By this relaxation, now Companies can approve their financial statements or matter relating to merger/amalgamation/takeover in a meeting held through Video Conferencing. However, this relaxation is not obligatory but optional to the Companies. The Companies can still conduct meetings through physical mode.

Amendment in Companies (Indian Accounting Standards) Amendment Rules, 2021: 

[3]The Companies (Indian Accounting Standards) Amendment, Rules 2021 passed on 18^th June 2021.

This Rules came into effect from 18th June 2021

The Ministry of Corporate Affairs (MCA) vide Notification dated 18 June 2021 has issued new Companies (Indian Accounting Standard) Amendment Rules, 2021 in consultation with the National Financial Reporting Authority (NFRA).

The notification states that these rules shall be applicable with immediate effect from the date of the notification. This means that the amendments are effective for the financial year ended 31 March 2022 onwards and also for interim financial periods i.e. quarters ending 30 June 2021, 30 September 2021, 31 December 2021.

The amendments are intended to keep the Ind ASs aligned with the amendments made in IFRS. While, largely, the amendments are clarificatory or editorial in nature, there are significant amendments relating to the extension of COVID 19 related to practical expedient under Ind AS 116 for lease concessions and practical expedient due to the interbank offered rate (IBOR) interest rates for financial instruments.

The amendments to Ind ASs are in terms of insertion of certain paragraphs, substituting the definition of certain terms used in the standard along with aligning the bare text of Standards with Conceptual Framework of Financial reporting under Ind ASs.

Amendment in Companies (Creation and Maintenance of databank of Independent Directors)) Amendment Rules, 2021: 

The Companies (Creation and Maintenance of databank of Independent Directors) Amendment, Rules 2021 passed on 18th June 2021.

Effect of Amendment:

Now, after this amendment MCA allowed that:

• if an individual has not applied for entrance of his name in data bank, still such person can be appoint as Independent Director and such person can apply for inclusion of his name later on by paying extra fees of Rs. 1,000/-.
• if an individual fails to renew his registration in data bank within 30 days of expiry of registration, still such person can continue as Independent Director & his name shall not remove from the record of data bank. Only condition such person have to apply for renewal by paying extra fees of Rs. 1,000/-. 

Amendment in Companies (Accounting Standards) Amendment Rules, 2021: 

The Companies (Accounting Standards) Amendment, Rules 2021 passed on 23^rd June 2021.

This Rules came into effect from 23^rd June 2021

A lot of amendment has made in Accounting Standard by these rules. One of major amendment is, The ministry of corporate affairs (MCA) has raised the threshold turnover and borrowing limits in its definition of small and medium companies (SMCs) to align the applicable accounting standards rules with the latest definition as per the ministry of micro, small & medium enterprises.

New Definition:

The 388-page notification has defined small and medium companies as :

(i) whose equity or debt securities are not listed or are not in the process of listing on any stock exchange, whether in India or outside India;

(ii) which is not a bank, financial institution or an insurance company;

(iii) whose turnover (excluding other income) does not exceed rupees Two Hundred fifty crore in the immediately preceding accounting year;

(iv) which does not have borrowings (including public deposits) in excess of rupees Fifty crore at any time during the immediately preceding accounting year; and

(v) which is not a holding or subsidiary company of a company which is not a small and medium-sized company.

Explanation.- For the purposes of this clause, a company shall qualify as a Small and

Medium Sized Company, if the conditions mentioned therein are satisfied as at the end of the relevant accounting period.

*SMC which is a holding company or subsidiary company of a non-SMC will not qualify as a small and medium company,

Benefits of New Definition:

1. Less complexity in application of Accounting Standard in terms of the number of required disclosures
2. To promote ease of doing business.

Applicability of New Definition:

The notification also says that an existing company which was not a small and medium company previously but became so subsequently would not be able to avail of any exemptions in accounting standards.

“It can avail of these exemptions if it continues as a small and medium company for two consecutive accounting periods.”

Disclaimer: The entire contents of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.

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[1] https://www.mca.gov.in/bin/dms/getdocument?mds=sbRk0d1avtQVQZrw%252BKS2GA%253D%253D&type=open

[2] https://www.mca.gov.in/bin/dms/getdocument?mds=zwpAcIfQhKOgB8vwf%252FztbA%253D%253D&type=open

[3] https://www.mca.gov.in/bin/dms/getdocument?mds=WKw7cnmeWvFV%252BpCpYpqgrg%253D%253D&type=open