August 4, 2014
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1. Notification with regard to Section 203(1) of the Companies Act, 2013: In exercise of the powers conferred by the second proviso to sub-section (1) of section 203 of the Companies Act, 2013, the Central Government has notified that public companies having paid-up share capital of rupees one hundred crore or more and annual turnover of rupees one thousand crore or more which are engaged in multiple businesses and have appointed Chief Executive Officer for each such business shall be the class of companies for the purposes of the second proviso to sub-section (1) of section 203 of the said Act. 2. Clarification with regard to applicability of provisions of Section 139(5) and 139(7) of the Companies Act, 2013. Sections 139(5) and 139(7) of the Companies Act, 2013 (New Act), deals with appointment of auditors by Comptroller and Auditor General of India (C&AG), to 'deemed Government Companies' referred to in section 619B of the Companies Act 1956 (Old Act) i.e., companies where ownership or control lies with two or more Government companies or corporations. However, the New Act does not contain specific provisions about 'deemed Government companies' on the lines of section 619B of the Old Act. Clarification has been sought whether, under the new Act, such deemed Government companies would be subject to audit by the C&AG in the same manner as Government Companies. ' MCA has now vide its circular No. 33/2014 dated 31/07/2014 clarified that the new Act does not alter the position with regard to audit of such deemed Government 'companies through C&AG and thus such companies are covered under subsection (5) and (7) of section 139 of the New Act. Also, the information about incorporation of a company subject to audit by an auditor to be appointed by the C&AG is to be communicated to the C&AG for the purpose of appointment of first auditors under section 139(7) of the New Act. Such responsibility rests with both, the Government concerned and the relevant company. However, the primarily responsibility will be of the company concerned to intimate to the C&AG about its incorporation along with name, location, registered of the company, capital structure of such a company immediately on its incorporation. 3. Clarification on transitional period for resolutions passed under the Companies Act, 1956. Many companies have passed resolutions during financial year 20l3-14 under the relevant provisions of the Companies Act, 1956 (Old Act) which are/were at different stages of implementation after coming into force of corresponding provisions of the new Companies Act, 2013 (New Act). Clarifications have been sought with regard to the validity of these resolutions MCA has vide its circular No. 32/2014 dated 23/07/2014 clarified that resolutions approved or passed by companies under relevant applicable provisions of the Old Act during the period from 1st September, 2013 to 31st March, 2014, can be implemented, in accordance with provisions of the Old Act, notwithstanding the repeal of the relevant provision subject to the conditions:
- that the implementation of the resolution actually commenced before 1st April, 2014 and
- that this transitional arrangement will be available upto expiry of one year from the passing of the resolution or six months from the commencement of the corresponding provision in Companies Act, 2013 whichever is later. It is also clarified that any amendment of the resolution must be in accordance with the relevant provision of the Companies Act, 2013.
- Scope of second proviso to Section 188(1) – As per second proviso, no member who is a related party shall vote on special resolution to approve contract or arrangement. It is clarified that ‘related party’ has to be construed only with reference to that contract/ arrangement for which special resolution is being passed.
- Applicability of Section 188 to corporate restructuring, amalgamations etc – It is clarified that transactions arising out of compromises, arrangements, etc will not be attracted.
- Requirement of fresh approvals for past contracts under Section 188 – Contracts which already came into force before commencement of Section 188 of Companies Act, 2013 will not require fresh approval but if any modifications are made on or after 1st April, 2014 then requirements of Section 188 will have to be complied with.