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Monthly Updates for Corporates - August, 2018

I am writing this update letter to give you an idea about various compliance and regulatory requirements you and your company have to do in coming few months. Hope this will help you to organize the things are your end. DIR 3 KYC This is presently the talk of the town. As a measure to implement more transparent and effective Governance systems and to cultivate more effective Corporate culture in the Country the Central Government had introduced a new eform (DIR 3 KYC) to capture the personal details of all the Directors of all the companies by making it mandatory for them to update their Digital Signatures in line with PAN base, Aadhar, Personal mobile number and email address. The said details must have to be very accurate and a professional such as CS/CA/CMA has to certify the same as correct. It is an annual form and the same should be filed by the individual director in his personal capacity. It is not a company based eform and hence the responsibility of the same falls on the shoulders of the individuals who are directors of the company. The Government had mandated to update the records on or before 31st of August, 2018, failing of which the concerned person’s DIN shall be deactivated. The same can be activated by paying a penalty of Rs. 5000/- only. If a DIN is deactivated, the annual flings of the company will not be possible and the company will face serious issues from compliance angle. So you may please look into the matter in its due seriousness and advice your directors to take necessary steps to update their KYC within the specified time limits Default Notices from MCA for non filing of the Annual Returns. This month we can expect default notices from the Office of Registrar of Companies if you have not filed the annual returns of the company for the previous financial year(s). It is not recommended to keep the compliances on back burner considering the proactive steps taken by the Ministry and bureaucracy. In order to clean up and streamline the systems, they are regularly and effectively monitoring the filings of the companies and taking measures to issue prosecution notices to defaulters. If a company fails to file its annual financial statement or annual returns for any continuous period of 3 years, then all the directors of the company shall be declared as disqualified. As per the recently amended provisions of the Companies Act, if a person is disqualified to act as director, the office of the Director shall become vacant in all the Companies, other than the company which is in default. Inorder to avoid such situation, it is very much recommended to file the returns on time. Annual General Meeting We are approaching the time for holding the annual general meeting. The last date to convene the AGM is on 30th September, 2018. Well before calling the AGM, the company have to place the draft accounts before a duly convened board meeting, get it audited by the Statutory Auditors and despatch the notice of the meeting either by email or by registered post or by email to all the shareholders along with required documents. So please ensure that the required meetings are getting convened and all necessary approvals are obtained. Rs. 100/- per day penalty for delay. Section 403 of the Companies Act, 2013 has got amended recently. As per said amendment, annual financial statement(AOC 4) and Annual returns(MGT 7), if not filed within the due date the company shall have to pay Rs.100/- per day per form. If there is default on 2 or more occasion, the fine shall be increased to Rs. 200/- per day per form. The amount mentioned can be further increased based on the type of the companies. So you are requested to submit the financial statements on or before 30th September, 2018 after placing it before the AGM. Requirement to publish the audited financial statements in the website of the company.

Now it is mandatory on the part of all the companies to publish the copy of the annual return of the company on the website, if any, and the weblink of the same to be disclosed in the annual return. So if your company has a website, please make sure that the annual return is uploaded to the same.

Acceptance of loans from Shareholders This is one of the most complicated and confusing areas of the Act, which can be easily violated by the promoters. Whether it is a public company or a private company, it cannot accept any money from shareholders beyond prescribed limits. If you crossed that limit by inadvertence or otherwise, the consequence shall be devastating. Even if the borrowings are well within the limits, the company has to file some returns to ROC after due compliance. There are of course certain relaxations or exemptions to certain category of the companies. So before you borrow any money from any shareholder or outsider (other than loans from Banks/FI’s ), you have to be more vigil and cautious. Loan to Directors. The newly amended provisions of the Act has relaxed the stringent restrictive clauses with respect to the loans providing to the directors. Earlier, there was a total ban of giving loan to directors who are not Managing Directors. The new amendment is permitting the loan to directors after certain compliances such as approval of shareholders by way of Special resolution. Insolvency and Bankruptcy The law is moving forward in a very fast manner and there is more awareness about the implications of the same among Corporate Community. It is very very important for the high level management to have a clear idea about the said provisions. Please remember that, the ignorance of law is no more a valid excuse to loose control over your company. Thanking You BIJOY.P.PULIPRA


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