Amendments in Companies Act 2013

Amendment in Companies (Accounts) Rules, 2014

• Rule 12(1B) has been inserted requiring companies covered under section 135(1) of the 2013 Act to furnish a report on Corporate Social Responsibility (CSR) in Form CSR-2 to the Registrar for the financial year (2020-2021) and onwards as an addendum to Form AOC-4 as applicable;
• As per the proviso to rule 3(1) of the Companies (Accounts) Rules, 2014, as amended, for the financial year commencing on or after April 01, 2023 every company shall use such accounting software for maintaining its books of account, having feature of recording audit trail of each and every transaction, creating an edit log of each change made in the books of account along with the respective dates and ensure that the audit trail cannot be disabled.
• Amendments in the certain provisions of Rule 3 of the Companies (Accounts) Rules, 2014 are as follows:
  a) Rule 3(1) now provides that such books of account and other relevant books and papers should be accessible in India, at all times;
  b) Rule 3(5) provides that the back-up of the books of account and other books and papers of the company, including at any place outside India, if any, shall be kept in servers physically located in India on a daily basis instead of periodic basis; and
  c) Rule 3(6) has been amended to provide the name and address of the person in control of the books of account and
  other books and papers in India, where service provider is located outside India to ROC.

Amendments issued on Indian Accounting Standards

The Ministry of Corporate Affairs (MCA) vide notification dated March 23, 2022, has notified certain amendments to Indian Accounting Standards (Ind AS) effective from April 01, 2022. Most of these amendments have been made to keep the Ind AS converged with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) except for an amendment to Ind AS 16, Property, Plant and Equipment (PPE).

IND AS 37 (Provisions, Contingent Liabilities and Contingent Assets)

The following costs can be included as ‘costs of fulfilling a contract’ while assessing whether a contract is onerous

• The incremental costs of fulfilling that contract—for example, direct Labour and materials; and
• An allocation of other costs that relate directly to fulfilling contracts— for example, an allocation of the depreciation for an item of PPE used in fulfilling that contract among others.

Transition: At the date of initial application, the cumulative effect of initially applying the amendments is recognised as an opening balance adjustment to retained earnings or other component of equity, as appropriate without restating the comparatives.

Ind AS 103 (Business Combinations)

The amendments have given reference of Conceptual Framework for Financial Reporting under Ind AS for definition of assets and liabilities without changing the accounting requirements for business combinations.

Ind AS 16 (Property, Plant and Equipment (PPE))

Clarification has been provided that excess of net sale proceeds of items produced over the cost of testing, if any, during a trial run, shall not be recognised in the statement of profit or loss, but deducted from the directly attributable costs considered as part of cost of an item of PPE.

Ind AS 101, First-time Adoption of Indian Accounting Standards

As per the amendment, if a subsidiary adopts Ind AS later than its parent and applies Ind AS 101.D16(a), then a subsidiary may elect to measure cumulative translation differences for all foreign operations at amounts included in the consolidated financial statements of the parent, based on the parent’s date of transition to Ind AS. A similar election is available to an associate or joint venture that uses the exemption in paragraph D16(a).

Ind AS 109 (Financial Instruments)

This amendment clarifies that for the purpose of performing the ‘10% test’ for derecognition of financial liabilities – in determining those fees paid net of fees received, a borrower includes only fees paid or received between the borrower and the lender, including the fees paid or received by either the borrower or lender on the other’s behalf.

Ind AS 41 (Agriculture)

The amendment removes the requirement to exclude cash flows for taxation when measuring fair value, thereby aligning the fair value measurement requirements in Ind AS 41 with those in Ind AS 113, Fair Value Measurement.

Amendments in Companies (Registration of Charges) Rules, 2014

• Rule 3(5) has been inserted providing that Rule 3 for creation or modification of charge, shall not apply to any charge
  required to be created or modified by a banking company under Section 77 in favour of the Reserve Bank of India (RBI) when any loan or advance has been made to it under Section 17 of the RBI Act, 1934.
• Rule 13 has been inserted for signing of charge e-forms by insolvency resolution professional or resolution professional or liquidator for companies under resolution or liquidation and filed with Registrar. Amendments in Companies (Prospectus and Allotment of Securities) Rules, 2014:
• A new proviso under Rule 14(1) has been inserted providing that a company shall not make any offer or invitation of any securities to a body corporate incorporated in, or a national of, a country which shares a land border with India, unless such body corporate or the national have obtained government approval under Foreign Exchange Management (Non-debt Instruments) Rules, 2019 and have attached the same with the private placement offer cum application letter (Form PAS-4).

Amendments in Companies (Incorporation) Rules, 2014

• Form INC-9 related to declaration by Subscribers and First Directors has been amended to include compliance of government’s approval under the Foreign Exchange Management (Non-debt instruments) Rules, 2019, where applicable.
• In Form No. INC-32 (SPICe+), in Part-B, in declaration to be given by Professional, the following has been inserted: – “I, on behalf of the proposed directors, hereby declare that person seeking appointment is a national of a country which shares a land border with India, necessary security clearance from Ministry of Home Affairs, GOI shall be attached with the consent”.
• In the Companies (Incorporation) Rules, 2014, Rule 25B has been inserted requiring the Registrar based on the information or documents available on MCA 21 portal, to visit at the address of the registered office in presence of two independent witnesses of the locality in which the said registered office is situated and can also seek the assistance of the local police for the same. A notice should be issued to the company and its directors for removal of the name of the company from the register of companies in accordance with the provisions of the 2013 Act in case ROC concludes that the company is not capable of receiving and acknowledging communications and notices. The amendment also prescribes the format of the physical verification report.

Amendments in Companies (Appointment and Qualifications of Directors) Rules, 2014

• A new proviso to Rule 8 and Rule 10(1) has been inserted requiring a security clearance from the Ministry of Home Affairs, Government of India should be attached along with the consent for the person seeking appointment as a director or an independent director being a national of a country which shares land border with India. Also, no DIN will be allotted until the above stated security clearance has been attached along with the application for DIN. The consequent amendments to Form DIR-2 has also been issued.
• A new Rule 6(5) has been inserted which provides that any individual whose name has been removed from the databank of independent directors may apply for restoration of his/ her name on payment of the prescribed fees, subject to the following conditions

a) The name shall be shown in a separate restored category for a period of one year from the date of restoration within which, the person shall be required to pass the online proficiency self-assessment test and thereafter his/her name shall be included in the databank; and

b) In case the person fails to pass the online proficiency self-assessment test within one year from the date of restoration, his/her name shall be removed from the data bank, and he/she shall be required to apply afresh for inclusion of his/her name in the databank.

Amendments in Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016

• A new sub-rule 4(4) has been inserted which provides that:

– After the RoC, on examination of the application made in Form No. STK-2, finds it necessary to call for further information or finds the application defective or incomplete in any respect, he/ she shall inform the applicant to remove such defects and re-submit the application within 15 days from the date of such information.

– After the company has re-submitted the application, if the RoC finds that it is still defective or incomplete in any respect, he/she shall give further time of 15 days to remove such defects or complete the application.

• Amendment in the forms to be filed in case the company is not carrying on any business or operation as per the physical
  verification conducted in accordance with Section 12(9) of the 2013 Act:
  – Form SKT-1: Notice by registrar for removal of the name of the company
  – Form SKT-5 and Form SKT-5A: Public Notice for removal of the name of the company

Amendments in Companies (Corporate Social Responsibility Policy) Rules, 2014

• A new proviso under Rule 3(1) has been inserted stating that a Company that has any amount outstanding in its unspent CSR account, then such company has to constitute a CSR committee and comply with the relevant provisions of Section 135 of the 2013 Act.
• Rule 3(4) of the CSR Rules has been amended to provide that CSR activities can now be undertaken by a registered public trust or a registered society exempted under sub-clauses (iv), (v), (vi) or (via) of Section 10(23C) of the Income Tax Act, 1961. Further, an explanation has been added to clarify the meaning of the term ‘entity’ to mean a statutory body constituted under an Act of Parliament or State legislature to undertake activities covered in Schedule VII of the 2013 Act.
• Rule 8(3) of the CSR Rules has been amended to provide that the limit to book expenditure towards impact assessment has now been amended to 2% of the total CSR expenditure for that financial year or H 50 lakhs, whichever is higher.
• A revised format has been prescribed for the annual report on CSR activities which is to be attached to the board’s report for the financial year. Key revisions are:
  – Provide an executive summary along with the weblinks of impact assessment of CSR projects carried out;
  – Disclose only the total amount spent on on-going and other CSR projects; and
  – Disclose the balance amount in unspent CSR account, and deficiency, if any, in accordance with Section 135(6) of the 2013 Act.
• It has been clarified that spending of funds towards the ‘Har Ghar Tiranga’ campaign would be considered as an eligible CSR activity.

Amendments in Companies (Specification of definition details) Rules, 2014

• Definition of a ‘small company’ under the 2013 Act has been revised, as under : A small company means a company, other than a public company, which meets both the given conditions:
  – Its paid-up share capital does not exceed H 4 crores or such higher amount specified not exceeding H 10 crores; and
  – Its turnover for the immediately preceding financial year does not exceed H 40 crores or such higher amount specified not exceeding H 100 crores.

Amendments in Companies (Acceptance of Deposits) Rules, 2014 (Deposit Rules)

Rule 16 of the deposit rules has been amended requiring the statutory auditor of the company should additionally submit
a declaration, certifying the information pertaining to the particulars of deposit and particulars of liquid assets in Form
DPT-3.

Amendment in Companies (Prospectus and Allotment of Securities) Rules, 2014 dated January 20, 2023

Requirement of attaching a copy of resolution passed in general meeting authorizing bonus issue, along with Form PAS-3,
has been omitted.