Companies (Management and Administration) Amendment Rules, 2016

The Ministry of Corporate Affairs (MCA) has amended the Companies (Management and Administration) Rules, 2014 with the notification of ‘Companies (Management and Administration) Amendment Rules, 2016 [amendment rules]’

Date of notification: September 23, 2016.

Register of Members

Under Section 88 read with rule 3 every company (having share capital) was required to maintain a register of its members in Form MGT – 1 from the date of its incorporation and every company (not having share capital) to maintain certain information of each member. However, it was noted that many companies have not shifted their existing registered of members to MGT -1 (prescribed format for register of members).

Essence of the amendment rules:

1. Companies are mandatorily required to update MGT 1 with the information from the date of incorporation.
2. In case, some information which is not available with company can be updated once such information is received by the company. – There is no time barrier to this proviso.

Beneficial Interest

Under Section 89 read with rule 9 companies were required to file form MGT-4 (Declaration by the registered owner of shares who does not hold the beneficial interest in such shares) and MGT-5 (Declaration by the beneficial owner who holds or acquires beneficial interest in shares but whose name is not entered in the register of members) in duplicate.

Essence of the amendment rules:

There is no further requirement of filing the above forms in duplicate.

Change in shareholding positions

Under Section 93 read with rule 13 every listed company was required to file form MGT-10, in case there is a change in more than 2% (both increase and decrease) in the shareholding position of promoters and top 10 shareholders.

Here ambiguity was, if the said change was to be computed on the basis of (i) Individual shareholding of the promoter or (ii) Paid-up share capital of the Company

Essence of the amendment rules:

The change is required to be computed on the basis of change in the paid –up share capital of the company and not in respect of individual shareholding of Promoter and top 10 shareholders.

Example: Paid up share capital of a company is Rs. 1,00,000 and holding of a promoter is 1,000 (1%)

Promoter acquires 20 shares i.e. 2% of individual holding but 0.02% of paid-up share capital of the company. -  In this case, company is not required to file MGT 10.

Requisitionist extra ordinary general meeting

Section 100 read with rule 17(2) stated that the requisitionists of Extra Ordinary General Meeting (EGM) should convene the said meeting at the registered office of the company or in the same city or town where registered office is situated and such meeting should be convened on a working day (any day other than Sunday/Gazetted holiday/Statutory holiday).

Essence of the amendment rules:

Now, EGM called by requisitionists may be convened on any day except national holidays.

ANY DAY EXCEPT NATIONAL HOLIDAY: can be a Sunday also.

E – Voting Applicability

Section 108 read with rule 20 mandates a listed entity and a company having not less than 1000 shareholders to provide its shareholders to exercise their right to vote on resolutions proposed to be considered at general meetings by electronic means.

Essence of the amendment rules:

There is no change in applicability of rule 20, even after this amendment. Following companies are required to provide its shareholders to exercise their right to vote on resolutions proposed to be considered at general meetings by electronic means

1. Every company with equity share listed, and
2. Every company with not less than 1,000 members.

However, following companies are exempted from the mandate (one category is included):

1. Nidhi Company
2. an enterprise or institutional investor referred to in Chapter XB or Chapter XC of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009

Postal Ballot Procedure

Section 110(2)/Rule 22 (7)/Rule 22(14) states that if a resolution is duly passed by the requisite majority of the shareholders by means of postal ballot, it will be deemed to have been passed at a general meeting convened in that behalf.

Essence of the amendment rules:

In order to avoid needless duplications of the provisions, these amendment rules have deleted Rule 22 (7) and (14).

Place for minute books

Section 118 read with Rule 25 (1)(e) states that the minute books of General Meetings (includes both AGM & EGM, however does not talk about board meeting), should be kept at the registered office of the company (preserved permanently) and in the custody of the company secretary or any director duly authorised by the board or at such other place as may be approved by the Board.”

Essence of the amendment rules:

The words “or at such other place as may be approved by the Board” have been deleted by such amendment rules. Now, no company can maintain the minutes book at any place other than registered office of the company.

NOTE: If a company has both corporate office and registered office, then the Compliance Officers/Company Secretary shall sit in the registered office of the Company as minutes are to be kept in the custody of company secretary.

Form MGT – 6

Essence of the amendment rules:

New form MGT 6 (Return to the Registrar in respect of declaration under section 89 received by the company) substitutes earlier forms by these amendment rules.