Statutory ammendments to company law
January 14, 2004
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Statutory Ammendments to Companies Act

Recent Notifications:

Date : July 4th, 2003

STATUTORY AMENDMENTS

COMPANIES ACT

1. AMENDMENT TO COMPANIES RULES AND FORMS :

The Department of Company Affairs has issued notification No. GSR 5(E), dated 3-1-2003 amending Companies (Central Government’s) General Rules and Forms, 1956 by substituting the existing Form 25-A which relates to Application for approval of appointment / re-appointment and remuneration payable to managing /whole time director or manager. Form 26 is also substituted with the new Form 26 which relates to application for increase in remuneration of managing /whole time director / manager. One may refer to above citation for further details and for the form.

Ref: 41 SCL [St.] 419 CITC April 03

2. RE-OPENING /REVISION OF ANNUAL ACCOUNTS AFTER ADOPTION IN ANNUAL GENERAL MEETING :

The Department of Companies Affairs has issued Circular No. 1 / 2003, dated 13-1-2003 to enable insurance companies to revise their accounts as required by the Insurance Regulatory and Development Authority to reopen their accounts. It is now clarified that such companies can reopen and revise their accounts and thereafter adopt them in the Extraordinary General Meeting or subsequent Annual General Meeting and file the same with Register of Companies thereafter.

Ref: 41 SCL [St] 453 CITC April 03

3. COST AUDITORS PRESENCE IN MEETINGS OF AUDIT COMMITTEE

The Department of Company Affairs has issued Circular No. 2/ 2003 dated 9-1- 2003 clarifying the issue as to whether Cost Auditor under section 233B of the Companies Act, 1956 could or should be invited to the Audit Committee constituted in compliance with section 292 A.

It is clarified that the intention of providing for attending the meetings by auditors and internal auditors is to give an opportunity to audit the committee to hear their views. The cost auditor in his capacity as internal auditor can similarly participate in the meetings of the audit committee. However, it has come to the notice of the Department that an interpretation is being made that cost auditor can be a member of the audit committee. It is reiterated that the cost auditor cannot become a member of audit committee and whenever appointed, can only attend and

participate in the meetings without voting rights. Any other interpretation will be
outside the purview of section 292 A and incorrect.

Ref: 41 SCL [St.] 453 CITC April 03

4. DISQUALIFICATION OF DIRECTOR UNDER SECTION 274(1) (G)

The Department of Company Affairs have issued Circular No. 5/2003 dated 14-1-2003 clarifying that default of privately placed bonds / debentures / debt instruments by public financial institutions will not be considered as default to disqualify directors under section 274 (1) (g) of the Companies Act, 1956.

Ref: 41 SCL [St] 455 CITC April 03

5. REFUND OF EXCESS REGISTRATION FEES DEPOSITED BY COMPANIES FOR FORM NO. 5

The Department of Company Affairs have issued Circular No. 7 / 2003 dated 27-1-2003 clarifying that companies may seek refund by making a fresh request to the concerned Registrar of Companies with proof of excess payment. It is further clarified that only the actual excess registration fees and interest, if any, charged by the ROC on late filing of Form No. 5 would be refundable. The companies will not claim any cost and interest. The refund shall be the difference between the fees payable on nominal share capital on the date of filing the notice and the amount of fees that would have been payable on the amount of nominal capital immediately prior to the increase in the nominal capital. One may refer to the above citation for further detail.

Ref: 41 SCL [St.] 481 CITC April 03

6. SUBMISSION OF SOFT COPY OF COST AUDIT REPORT

The Department of Company Affairs have issued Circular No. 52/22/CAB- 2000 dated 26-11-2002 in the matter of submission of the Cost Audit Reports by the Cost Auditors and for the sake of convenience of management of data contained in these reports, the soft copy of the report shall henceforth be submitted in non-re-writable CD-ROM containing two files / parts.

Ref: 41 SCL [St.] 483 CITC April 03

7. DIRECTORS RELATIVES (OFFICE OR PLACE OF PROFIT) RULES, 2003

The Department of Company Affairs has issued Notification No. GSR 89 (E) dated 21-2-2003 notifying the above Rules. The Rules relate to approval of Central

Government in case of appointment of relatives, etc. of directors and also notifying procedure for examination of such application.

Ref: 41 SCL (A –1) STOP PRESS CITC April 03

8. NOTIFIED DATE FOR COMPANIES (AMENDMENT) ACT, 2002

The Department of Company Affairs has issued Notification No. SO. 135(E), dated 5-2-2003 notifying February 6, 2003 as the date on which provisions of the Companies (Amendment) Act, 2002 shall come into force.

Ref: 41 SCL (A-2) STOP PRESS CITC April 03

9. ALTENATIVE BASIS OF PROVIDING DEPRECIATION

The Department of Company Affairs has issued Circular No. 12/2003, dated 21-2-2003 in relation to proposal of companies engaged in production of steel to prescribe an appropriate method, to make provision for deprecation based on unit of production rather than straight line or written down value method. The Department of Company Affairs has considered this proposal and found it not workable. Hence, the Department of Company Affairs has clarified that companies may depreciate the assets on “Straight Line Method” or “Written Down Value” but may not follow “Unit Production Method”.

Ref: 42 SCL [St.] 89 CITC April 03

OTHERS

1. PREVENTION OF MONEY-LAUNDERING ACT, 2002

The Government has notified the Prevention of Money-Laundering Act, 2002 on
17-1-2003. The Act is enacted to prevent money laundering, to provide for confiscation of property derived from or involved in money laundering. One may refer to the above citation for full copy of the Act.

Ref: 41 SCL [St.] 378 CITC April 03

2. CEILING OF RATE OF INTEREST FOR NBFCs

The Department of Non – Banking Supervision has issued Circular No. CC. No./02.01 / 2002-2003 dated 3-3-2003 revising the maximum interest payable on Public Deposits of NBFCs to 11% p.a. on and from 4th March 2003. The new rate is applicable to fresh Public Deposits as also to deposits accepted / renewed by Miscellaneous Non – Banking Companies (Chit Fund Companies) as per the Directions prescribed by RBI.

Ref: 42 SCL [St.] 90 CITC April 03

COMPANIES ACT

1. COMMENCEMENT OF THE PROVISIONS OF SECTIONS 2 AND 6 OF THE COMPANIES (SECOND AMENDMENT) ACT, 2002 (11 OF 2003) WITH EFFECT FROM 1-4-2003 – TEXT OF PRESS NOTE NO. 2/2003 DATED 4-4-2003 ISSUED BY THE DEPARTMENT OF COMPANY AFFAIRS.

The Companies (Second Amendment) Act, 2002 (11 of 2003) received the assent of the President of India on 13-1-2003. The Government has decided to bring into force the provisions of Sections 2 and 6 of the Companies (Second Amendment) Act, 2002 (11 of 2003) with effect from 1-4-2003. Notification has been published in the official Gazette dated 31-3-2003 as S.O. 344 (E). This has been notified to enable the Government to initiate necessary steps to establish the National Company Law Tribunal and make it operational.

Ref.: BCAJ No. (14) June 2003

MISCELLANEOUS

8 % INTEREST ON PPF – TEXT OF NOTIFICATION NO. S. O. 250 (E) DATED 1-3-2003.

In pursuance of section 5 of the Public Provident Fund Act, 1968 (23 of 1968) the Central Government hereby notifies the rate of interest applicable on the subscriptions made to the Fund on, or after the 1st day of March, 2003 and for that purpose makes the following amendments in the notification of the Government of India in the erstwhile Ministry of Finance (Department of Economic Affairs) number S.O. 48(E), dated the 15th January 2000, namely:

In the said notification:

(a) In the third proviso, for the words, figures and letters the 1st day of March, 2002 but before the 1st day of March, 2003 shall be substituted:
(b) After the third proviso, the proviso shall be inserted, namely
“Provided also that the subscription made to the Fund on or after 1st day of March, 2003 and balances at the credit of the subscriber shall bear interest at the rate of 8% per annum .”

Ref.: BCAJ No. (15) June 2003

DIRECT TAXES

IT RETURN – DATE EXTENDED FOR RETURNS TO BE FILED ELECTRONICALLY – TEXT OF ORDER UNDER SECTION 119 (2) (a) OF THE INCOME – TAX ACT, 1961

In exercise of the powers conferred under clause (a) of sub-section (2) of section 119 of the Income – tax Act, 1961, the Central Board of Direct Taxes, hereby order that:

In the case of persons filing their returns of income for assessment year 2003-04
Electronically under section 139 (1B) of the Income – tax Act, 1961, the due date
For filing of returns of income shall stand extended to 30th day of September,
2003.

Ref.: BCAJ NO.(18) JUNE 2003

CORPORATE LAWS

1. CEILING ON NUMBER OF COMPANIES FOR WHICH COMPLIANCE CERTIFICATE CAN BE ISSUED BY CS.

The Institute of Companies Secretaries of India has issued Notification
No. 1001/1/DR, dated 27-2-2003 specifying that a Company Secretary in practice can issue Compliance Certificate u/s. 383 – A (1) of the Companies Act. 1956 to not more than 50 Companies in a calendar year commencing on 1st January 2003. Violation shall be deemed to be professional misconduct. It is clarified that in case of a firm of Company Secretaries the ceiling would apply per partner. The notification will become operative for Compliance Certificate signed on or after 1-1-2003.

Ref.: WICA 42 SCL. [St.] 85

2. ALTERNATIVE BASIS OF PROGIDING DEPRECIATION

The Department of Company Affairs has issued Circular No. 12/2003, dated 21-2-2003 in relation to proposal of companies engaged in production of steel to prescribe and appropriate method, to make provision for depreciation based on unit of production rather than straight line or written down value method. The Department of Company Affairs has considered this proposal of Company Affairs has clarified that companies may depreciate the assets on “Straight Line Method” or “ Written Down Value” but may not follow “Unit Production Method”.

Ref.: WICA 42 SCL [St.] 89

INOCME TAX

1. CHANGE IN DEPRECIATION RATES FOR AIR POLLUTION EQUIPMENTS

The rate of depreciation for the Air Pollution – Water Pollution and Solid Waste Control equipments was 80% vide Income Tax (Twenty Forth Amendment) Rules, 2003 vide Notification No. 291/2002 dated 24-9-2002.

The Notification No. 75/2003 dated 1-4-2003 gives Income Tax (Forth Amendment) Rules, 2003. It amends the rate of depreciation for equipments specified in entry 3(VII) (IX) (X) under the heading “MACHINERY AND PLANT” in part A relating to “TANGIBLE ASSETS” in the table to appendix I of the Income Tax rules 1962. The rate of depreciation is changed from 80% to 100% w.e.f. 1st April 2003.

In short, the rate of depreciation is changed from 80% to 100% w.e.f. 1st April, 2003 in case of following equipments.

a) Air Pollution Control Equipment
b) Water Pollution Control Equipment
c) Solid Waste Control Equipment

Ref.: WICA 128 Taxman [St.] 10/181 CTR [St.] 12

2. DUE DATE FOR FILING TDS RETURNS EXTGENDED FOR PREVIOUS YEAR 2002-03

The central Board of Direct Taxes vide order No. 385/30/2003 – I.T.(B) dated 28-4-2003 extends the last date for filing of all TDS return in respect of previous year 2002-03 to 30th September,2003.

Ref.: WICA 128 [St.] 76

3. NAYA SARAL – A NEW FORM OF RETURN IN INCOME IN FORM-2E

The CBDT vide notification No. 130/2003 dated 14-5-2003 amends rule 12 of the Income Tax Rule 1962 by inserting Form 2E in Appendix II.

The option of filling the return in Form 2E – Naya Saral applies to following:
a) It applies to resident in India.
b) It applies to individual and Hindu Undivided Family.
c) It applies were the total income does not include income chargeable under head profit & gain of business or profession or capital gain or agriculture income.

Ref.: WICA 129 Taxman Part 1

4. The Notification Nos. S.O. 279 (S) dated 12-5-2003 u/s. 118 notifies that Transfer Pricing Officer referred to in the Explanation to section 92 CA shall be subordinate to the Director of Income – Tax and Director of Income- Tax shall be subordinate to the Director – General of Income-Tax.
[Notification Nos. 50/2003/F.No. 500/18/2002-FTD]

Ref.: WICA 261 ITR [St.] 33

FEMA

1. REPATRIATION OF SALE PROCEEDS IMMOVABLE PROPERTY IN INDIA ACQUIRED BY NRIS/PIOS

In terms of Regulation 8 of Notification No. Fema 4/ 2000 – RB dated 3rd May, 2000, NRIs / PIOs can avail of housing loan facilities from Authorised Dealers or housing finance institutions in India approved by NHB for acquiring residential accommodations in India, subject to conditions mentioned therein.

This circular provides that if the repayment of such rupee loans is in foreign exchange viz., Remitting funds from abroad or by debit to their NRE/FCNR accounts, Authorised Dealers can allow repatriation of sale proceeds of residential accommodation purchased by the NRIs / PIOs out of such loan funds to the extent of repayment of such loans from foreign inward remittances or debit to NRE / FCNR accounts.

Ref.: WICA Circular No. 101 dated May 5, 2003

3. INTERNATIONAL CREDIT CARDS – LIBERALIZATION OF FACILITIES FOR RESIDENTS.

This Circular is an extension to Circular No. 73 dated January 24, 2003 relating to the use International Credit Cards.

Through this circular, resident individuals maintaining foreign currency account with an authorized dealer in India or a bank abroad as permissible under the Foreign Exchange regulations are allowed to obtain International Credit Cards issued by overseas banks or reputed agencies. The charges incurred against the card either in India or abroad can be met out of funds held in foreign currency accounts of the cardholder or through remittances from India from a bank where the cardholder has a current or savings accounts. The

remittance should be made to the card issuing agencies abroad and not to a third party.

It is also clarified that the applicable credit limit will be the limit fixed by the card issuing banks and no monetary ceilings fixed by the RBI for remittance under the facility.

It is also clarified that the present restrictions on use of ICCs by residents will be applicable.

Ref.: Circular No. 103 dated May 21,2003.

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