Newly implement sections in Companies Act 2013 MCA Notification dated June 1, 2016

Newly implement sections in Companies Act 2013

MCA Notification dated June 1, 2016

---------------------------------------------------------------------------------------------

The Ministry of Corporate Affairs through its notifications dated June 1, 2016 has notified the following sections:

Sr No	Notified Sec (NS)	Details of notified Sec
1	Under Sec 7 – Incorporation of Companies NS.Sub-Sec (7) of Sec 7 [except clause (c) and (d)]	Power of Tribunal: In the event of any company being incorporated on providing false/ incorrect information or on suppressing any material facts or information, the tribunal on receiving an application and based on the situation may: a.    Pass such orders as it deems fit, in the public interest and in the interest of the company b.    To direct the liability of the members to be unlimited or c.    To remove the name of the company from the register of companies This Sec is being passed as a relaxation to the provision of Sec 7 (6), which says, when a company has been incorporated in the before said manner, then the promoters, the persons named as the first directors are liable for action under Sec 447 (Punishment for Fraud)
2	Sec 14 – Alteration of Articles NS. Second proviso to sub-Sec (1) of Sec 14	While converting a company from private to public or from public to private a special resolution has to be passed and the articles has to be amended accordingly. Pursuant to the second proviso to Sec 14 (1) the conversion of a company from public to private shall not be effective unless the approval of the Tribunal is obtained.
3	NS. Sub-Sec (2) of Sec 14	The company has to file the respective form with the ROC within 15 days from the date of receipt of the amended articles as required in Sec 14 (1) and on receipt of the approval of the Tribunal for conversion of the company from public to private.
4	Sec 55 – Issue and Redemption of preference shares. NS.Sub-Sec (3) of Sec 55	As per Sec 55 (1) A limited company can issue only redeemable preference shares that are redeemed over a period of time. Sec 55 (3) – in the event of the company being unable to redeem the share or pay dividend then, the company with the approval of the shareholders and the tribunal can issue further redeemable preference shares equal to the amount due (in respect of dividend) and it shall be considered that the unredeemed preference shares had been redeemed. However, if any shareholder does not give his/ her consent for further issue of redeemable preference shares then the tribunal shall order the company to redeem their shares.
5	Sec 61 - Power of limited company to alter its share capital. NS. Proviso to Clause (b) of sub- Sec (1) of Sec 61	If the articles of a limited company having share capital permits the company to amend its memorandum with regard to consolidation and division of share capital into shares of larger value than the existing ones  resulting in changes in the voting rights of the shareholders then, it can do so only after obtaining the approval of the tribunal .
6	Sec 62 – Further issue of share capital NS.Sub-Sec (4) to (6) of Sec 62	Pursuant to Sec 62(4) In the public interest the government to whom the company had issued debentures or from whom it has obtained loan, can direct the company to convert such debentures or loan into shares of the company based on certain terms and conditions. In the event of the company being dissatisfied with the terms, it can make an appeal to the tribunal within 60 days from the date of communication of such order. Although Sec 62 (4) provides a relief to the company to approach the tribunal in the event of dissatisfaction, Sec 62 (6) clearly confiscates such relief stating that, if the Tribunal does not prefer any appeal then the company shall be forced to follow the given government orders.
7	Sec 71 – Debentures NS.Sub-Sec (9) to (11) of Sec 71	Sec 71 (9) If the debenture trustee concludes that the assets of the company are likely to be insufficient to discharge the principal amount then it shall file a petition with the Tribunal to restrict the company from incurring further liability Further, if the company fails to redeem the debentures or pay interest on its maturity then the tribunal shall order the company to pay the interest and redeem the debentures.  Sec 71 (10) (Query: what will a company do if it is genuinely not in a position to do either of it?) On the company failing to carry out the orders said by the tribunal every officer who is in default shall be punishable with: -          imprisonment < 3 yrs or / and -          with fine 2 lac – 5 Lac
8	NS.Sec 75 – Damages for fraud	If the company fails to repay the deposits or part or interest said in Sec 74 (Repayment of deposits, etc., accepted before commencement of this Act.), then every officer who is responsible for acceptance of such deposit shall be personally liable without any limitation of liability.
9	NS.Sec 97 - Power of Tribunal to call annual general meeting.	In the event of any default in holding the AGM of the company, the Tribunal on receipt of an application from a member for calling or directing the calling of an AGM, shall direct the company to hold the AGM. In such a scenario it may even direct that one member of the company present in person or proxy shall be deemed to constitute a meeting.
10	NS.Sec 98 - Power of Tribunal to call meetings of members, etc.	The Tribunal either suo moto or on receipt of an application from any director or member shall call for a meeting giving such directions as it thinks expedient in calling and conducting the meeting.
11	NS. Sec 99 Punishment for default in complying with provisions Of Sec 96 to 98.	The company and every officer of the company who is in default shall be punishable with: -           fine < = 1 Lac and -          Rs. 5000 every day (if the default continues)
12	Sec 119 –  Inspection of minute-books of general meeting. NS.Sub-Sec (4) of Sec 119	If the company refuses to furnish the minutes books for inspection then the Tribunal on receipt of an application may order to send a copy of the minutes book immediately to the person who is requiring it.
13	NS. Sec 130 - Re-opening of accounts on court’s or Tribunal’s orders.	A company in generally shall not re-open its books of account and shall not recast its financial statements. However, they shall be re-opened if the court or tribunal orders for the same based on receipt of an application from any statutory regulatory body, if it is satisfied that : (i) the accounts were prepared in a fraudulent manner; or (ii) the affairs of the company were mismanaged during the relevant period, casting a doubt on the reliability of financial statements.
14	NS.Sec 131 - Voluntary revision of financial statements or Board’s report.	If the directors feel that the accounts and the directors report is not prepared in compliance with the provisions of act then on obtaining Tribunal’s approval the financials can be revised for the 3 preceding financial years and the reasons for the revision to be specified in the board’s report. A copy of the Tribunal’s approval/ order to be filed with the registrar.
15	Sec 140 - Removal, resignation of auditor and giving of special notice. NS. Second proviso to sub-Sec (4) and sub-Sec (5) of Sec 140	Pursuant to Sec 140 the auditors of the company shall be removed from his office before the expiry of his term only on passing a special resolution after obtain prior approval of the C. Government in the prescribed format. Pursuant to Sec 140 (4) while appointing an auditor the company shall send a copy of the representation to every member. In the event of any delay in the company in sending the representation then: -          The company shall file a copy of the same with the registrar. -          The auditor may ask for reading out the representation at the meeting. However if the tribunal on receiving an application is satisfied that the auditor has abused his powers under this Sub Sec then a copy of the representation need not be sent nor read at the meeting. Pursuant to Sec 140 (5) if the tribunal is satisfied that the auditor has acted in a fraudulent manner then: -          The tribunal may direct the company to change the auditor -          The auditor who has acted fraudulently shall not be eligible from being appointed as an auditor of any company for a period of 5 yrs from the date of passing the order
16	Sec 169 – Removal of directors. NS.Sub-Sec (4) of Sec 169	While giving a notice for passing a resolution for removal of a director, the company shall if time permit: -          State the facts of representation in the notice and -          To send a copy of the representation to every member. In the event of any delay in the company in sending the representation then the director may ask for reading out the representation at the meeting. However, if the tribunal is satisfied that the director has abused his right to secure needless publicity from defamatory matters then it may order the director to pay the company’s cost on application.
17	NS.Sec 213 – Investigation into company’s affairs in other cases.	Proceedings of Tribunal Investigation into the affairs of the Company
18	Sec 216 - Investigation of ownership of company. NS.Sub-Sec (2) of Sec 216	The central government shall appoint one or more inspectors to investigate into the affairs of the Company if the Tribunal in the course of the proceedings order for the same.
19	NS. Sec 218 - Protection of Employees during investigation.	During the course of any investigation of the affairs of the body corporate or during the pendency of any proceedings against any person, the company shall obtain prior approval of the tribunal before proceeding against any employee. If the tribunal has not responded within 30 days of receipt of application then the body corporate shall proceed to take action against any employee.
20	NS. Sec 221 - Freezing of assets of company on inquiry and investigation.	The tribunal on having a reasonable ground to believe either in connection with an inquiry or investigation into the affairs of the company or on a compliant made by a member shall, freeze the removal, transfer or disposal of funds, assets or property of the company for a maximum period of 3 year. In the event of any violation of this Sec the company and the officers shall be punishable as follows: Company: Fine  - 1 lac to 25 lac Officer in default : Imprisonment >= 3 yrs  or/ and Fine – 50k – 5 lac
21	NS. Sec 222 - Imposition of restrictions upon Securities.	When relevant facts about the Securities issued are not found the tribunal shall impose certain restrictions as it deems fit for a maximum period of 3 yrs as may be specified in the order. In the event of any violation of this Sec the company and the officers shall be punishable as follows: Company: Fine  - 1 lac to 25 lac Officer in default : Imprisonment >= 6 months or/ and Fine – 25k  – 5 lac
22	Sec 224 - Actions to be taken in pursuance of inspector’s report. NS. Sub-Sec (5) of Sec 224	The C. government on receipt of a report from the inspector  detailing the fraud taken place in the company and the undue advantage enjoyed by the director, key managerial persons and other officers of the company shall, file an application with the tribunal for taking appropriate orders.
23	Sec 241 - Application to Tribunal for relief in cases of oppression, etc. Sec 242 - Powers of Tribunal. Sec 243 - Consequence of termination or modification of certain agreements. Sec 244 - Right to apply under Sec 241. Sec 245 - Class action. NS. Sec 241, 242 [except clause (b) of sub-Sec (1), clause (c) & (g) of subSec (2)], 243, 244,245	Almost all the Sec relevant to prevention of oppression and mismanagement has been notified.
24	Sec  399 - Inspection, Production and evidence of documents kept by Registrar. NS.Reference of word ‘Tribunal’ in sub-Sec (2) of Sec 399	No process for compelling the production of any document kept by the Registrar shall issue from any court or the Tribunal except with the leave of that court or the Tribunal and any such process, if issued, shall bear thereon a statement that it is issued with the leave of the court or the Tribunal
25	NS. Sec 415 to Sec. 433	Provisions relating to NCLT- Constitution, appointment, resignation, removal of members, salary, Benches of Tribunal, Appeal, to NCLAT & Supreme Court,  Procedure before Tribunal, etc
26	Sec 434 - Transfer of certain pending proceedings. NS. Sub-Sec (1)(a) and (b) of Sec 434 &  Sub-Sec (2) of Sec 434	Transfer of Proceedings from CLB to NCLT
27	NS. Sec 441 - Compounding of certain offences.	Compounding of certain offences punishable under this act either before or after institution of any prosecution
28	NS. Sec 466 - Dissolution of Company Law Board and consequential provisions.	Dissolution of Company Law Board on constitution of the Tribunal and the Appellate Tribunal

National Company Law Tribunal and National Company Law Appellate Tribunal

---------------------------------------------------------------------------------------------

-          The Ministry of Corporate Affairs through its notifications dated June 1, 2016 has also constituted the following tribunals as said above:

o   National Company Law Tribunal to exercise and discharge its powers and functions as may be conferred on it by or under the act w.e.f June 1, 2016 and

o   The National Company Law Appellate Tribunal for hearing the appeals as against the National Company Law Tribunal w.e.f June 1, 2016

-          has constituted certain benches of National Company Law Tribunal (NCLT) at various places to exercise jurisdiction over certain areas. 

-          Further, w.e.f June 1, 2016 all the pending matters, proceedings or cases of Company Law Administration (Company Law Board) had been transferred to the National Company Law Tribunal.

The Tribunal shall dispose of the pending matters, proceedings or cases in accordance with the provisions of Companies Act 2013 or the Companies Act 1956.