Saturday, 8 April 2017

MANUAL OF MINISTRY OF CORPORATE AFFAIRS RELEASED

New Corporate Laws Treatise - News Bulletin 

MANUAL OF MINISTRY OF CORPORATE AFFAIRS RELEASED


For the purpose of providing effective service to the stakeholders, the Ministry
of Corporate Affairs has put in place a well- defined Citizens’/Clients’ Charter. The
Ministry has also prescribed a strong decision making procedure in accordance with
the rules and regulations prescribed by the Central Government. Particulars of the
Ministry are publicized in the form of Induction Material and the Mandatory
Disclosures in pursuance of Section 4(1)(b) of the Right to Information Act, 2005.

Nonetheless, with the objective to make available the information about
Ministry of Corporate Affairs at one-stop-shop to the stakeholders, this unified Manual
is presented as per the guidelines issued by the Department of Administrative
Reforms of Public Grievances. The manual, inter-alia, contains vision, mission,
description of the organization; objectives of the Ministry, duties of various
functionaries, channel of submissions and level of disposal, Acts, Rules and
Regulations pertaining to the organization, supervision and control system,
recruitment and training of the officials, monitoring and inspection of field offices in
desired detail.
News update by New Corporate Laws Treatise www.nclt.in All rights reserved.  
Email us:  cs@nclt.in

Sunday, 2 April 2017

Companies (Audit and Auditors) Amendment Rules, 2017

Ministry of Corporate Affairs vide its Notifications No. G.S.R. 307(E) dated 30th March, 2017 has made amendment in Companies (Audit and Auditors) Rules, 2014 to seek disclosure in the Auditors Report relating to the following:

whether the company had provided requisite disclosures in its financial statements as to holdings as well as dealings in Specified Bank Notes during the period from 8th November, 2016 to 30th December, 2016 and if so, whether these are in accordance with the books of accounts maintained by the company.

Rule 11 of the Companies (Audit and Auditors) Rules, 2014 reads as follows:
11. Other Matters to be included in Auditors Report

The auditor’s report shall also include their views and comments on the following matters, namely:-

(a) whether the company has disclosed the impact, if any, of pending litigations on its financial position in its financial statement;

(b) whether the company has made provision, as required under any law or accounting standards, for material foreseeable losses, if any, on long term contracts including derivative contracts;

(c) whether there has been any delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the company.

(d) whether the company had provided requisite disclosures in its financial statements as to holdings as well as dealings in Specified Bank Notes during the period from 8th November, 2016 to 30th December, 2016 and if so, whether these are in accordance with the books of accounts maintained by the company.

As the amendment was notified on March 30, 2017, it seems it will effect all Auditors Report signed post this date more particularly the financial statements for
F.Y. 2016-17.



G.S.R. 307(E) text reads as follows:

G.S.R. 307(E).—In exercise of powers conferred by section 143 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Audit and Auditors) Rules, 2014, namely:— 1. (1) These rules may be called the Companies (Audit and Auditors) Amendment Rules, 2017. (2) They shall come into force on the date of their publication in the Official Gazette.

In the Companies (Audit and Auditors) Rules, 2014, in rule 11, after clause (c), the following clause shall be inserted, namely:—

“(d) whether the company had provided requisite disclosures in its financial statements as to holdings as well as dealings in Specified Bank Notes during the period from 8th November, 2016 to 30th December, 2016 and if so, whether these are in accordance with the books of accounts maintained by the company.”.

Note : The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 246(E), dated the 31st March, 2014, subsequently amended vide G.S.R. 722(E), dated the 14th October, 2014 and vide G.S.R. 972(E), dated the 14th December, 2015.

Click here to view Notification No. G.S.R. 307(E) dated 30-03-2017
New Corporate Laws Treatise www.nclt.in . All rights reserved.

Tuesday, 17 January 2017

National Company Law Tribunal holds shareholders meeting mandatory for approval of amalgamation scheme of unlisted company, under the Companies Act, 2013

National Company Law Tribunal holds shareholders meeting mandatory for approval of amalgamation scheme of unlisted company, under the Companies Act, 2013

The provisions of Corporate Restructuring i.e. section 230  except sub-section (11) and (12) of 230; 231-233 and sections 235 - 240 was notified on December 7, 2016 vide notification S.O. 3677(E) and were made effective from December 15, 2016.  However the provisions related to cross border merger involving Indian and foreign companies under section 234 are yet to be made effective under the Companies Act, 2013. 

MCA also notified the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 on December 14, 2016 vide notification no. GSR 1134(E) [F.No.2/31/CAA/2013/-CL-V] effective from 15.12.2016. 

National Company Law Tribunal has the power to entertain the compromise or arrangement petitions based on the territorial jurisdiction over the place of the registered office of the applicant/ petitioner companies to the corporate restructuring exercise. 

It is pertinent to note that the Companies Act, 2013 now facilitates compromise/ arrangement schemes between (a) small companies; or (b) holding company and its wholly owned subsidiary company, without the approval of the Hon’ble National Company Law Tribunal in a bid to save time and costs for the companies generally considered as closely held within the group or in situation where public interest is largely not affected.

In a first of its kind order pronounced by the Hon’ble National Company Law Tribunal, Principal Bench, New Delhi (“Tribunal”) under the newly notified compromise and arrangement provisions under the Companies Act, 2013 the Hon’ble Tribunal disallowed dispensation to the meetings of shareholders of the Companies basis the consents provided by them after duly considering the provisions of the Companies Act, 2013 and related rules.  

·         
  • Filing of joint application is allowed instead of filing separate multiple applications by each of the Companies to the compromise/ arrangement scheme.
  • Change in capital structure from the date of last financials till the date of filing of application to be disclosed.  
  • Share exchange ratio shall also be disclosed in the application along with rationale for merger
  • Application to be inter-alia accompanied with list of shareholders and secured and unsecured creditors of the Companies (including debenture and deposit holders) along with their MOA, AOA, audited balance sheet, latest financial position etc.

While passing an order the Hon’ble Tribunal did not allowed dispensation of the meeting of the Shareholders and Creditors of the Companies and held that although the Tribunal may dispense with calling of the meeting of creditors or class of creditors where such creditors or class of creditors, having at least 90% (ninety percent) value, agree and confirm, by way of affidavit, to the scheme of compromise and arrangement.  However the provisions of section 230(9) does not provide for the dispensation of the meetings of the members. 

The Tribunal also observed that the (Compromise, Arrangements and Amalgamations) Rules, 2016 more specifically Rule 5 which provides for directions to be issued by the Tribunal discloses:
  • ·     For determining the class or classes of creditors or of members meeting or meetings have to be held for considering the proposed compromise or arrangement; or

  • ·     For dispensing with the meeting or meetings for any class of classes of creditors in terms of sub-section (9) of section 230. 


The Tribunal held that keeping in view of the above provisions, dispensation of the meeting of members of the Company cannot be entertained.  Further the Tribunal passed order directing the separate meetings of the all the shareholders, secured creditors and the unsecured creditors of the Transferor Company and the Transferee Company.

Conclusion: 

The aforesaid order passed by the Hon’ble Tribunal, division bench, New Delhi in Re: JVA Trading Private Limited may likely be followed by other benches of the Hon’ble Tribunal and thus affect the timelines for merger involving unlisted companies which were generally allowed dispensations basis the consents from their shareholders under the erstwhile provisions of the Companies Act 1956 administered by the Hon’ble High Courts.  Companies may also appeal the order of the Tribunal before the Hon’ble National Company Law Appellate Tribunal basis the merits of the case.   

For more information contact the author Mr Pankaj Jain at pankaj.jain@vedalegal.in  

New Corporate Laws Treatise www.nclt.in . All rights reserved.

     


Saturday, 7 January 2017

COMPULSORY LICENSING UNDER INDIAN PATENTS ACT,1970:

COMPULSORY LICENSING UNDER INDIAN PATENTS ACT,1970:
 Compulsory  Licenses are  government authorizations which allow a third party to make, use, or sell a patented product without the consent of the patent owner.
 Provisions regarding compulsory licensing are provided for under both the Indian Patent Act, 1970, as well as the TRIPS (Trade Related aspects of Intellectual Property Rights) Agreement in the international level. Compulsory licenses are granted for a variety of reasons such as prevention of abuse of the patent to form a monopoly, addressing public health concerns, etc. Compulsory licensing has for long been a subject of controversy, and despite the existence of statutory provisions, compulsory licenses have not been issued liberally.
In India, compulsory licenses are dealt with under Chapter XVI of the Indian Patent Act, 1970. The conditions which need to be fulfilled in order for a compulsory license to be granted are laid down under Sections 84 and 92 of the Act.
As per Section 84, any person who is interested or already the holder of the license under the patent can make a request to the Controller for grant of Compulsory License on patent after three years from the date of grant of that patent, on the existence of the following conditions:
·        The reasonable requirements of the public with respect to the patented invention have not been satisfied
·        The patented invention is not available to the public at a reasonably affordable price
·        The patented invention is not worked in the territory of India.
The Controller, while granting compulsory license, is required to take into account factors such as the nature of the invention, measures already taken by the patentees or any licencee to make full use of the invention, ability of the applicant to work the invention to the public advantage, time elapsed since the grant of the patent, and so on.
According to Section 92 of the Act, compulsory licences can also be issued suo motu by the Controller of Patents pursuant to a notification issued by the Central Government if there is either a “national emergency” or “extreme urgency” or in cases of “public non-commercial use”. The mechanism under this provision is set in motion by the Central Government when it notifies in the Official Gazette that extra-ordinary circumstances have dictated the grant of compulsory licences in relation to patents which help to address the exigency. However, Section 92(2) still requires a person interested to apply to the Controller for grant of a compulsory licence.

 

Instances of Compulsory Licensing in India thus Far

India’s first and only compulsory licence till date was granted by the Patent Office on March 9, 2012, to Natco Pharma, an Indian company, for the generic production of Bayer Corporation’s Nexavar, a drug used for the treatment of Liver and Kidney cancer. The three grounds mentioned under Section 84 of the Indian Patent Act were all met, i.e. Bayer’s drug left the reasonable requirements of the public were unsatisfied, it was not available to the public at a reasonably affordable price, and the patented invention was not being worked in the territory of India. While Bayer offered the drug at the cost of Rs. 2.8 lakh for a month’s therapy, Natco Pharma had offered to sell the medicine at merely a fraction of that cost (Rs. 8,800).  The decision of this case indicated that as opposed to maintaining an extremely strict patent protection regime, the interest of public at large would be given more importance by the government. However, the decision also invited harsh criticisms from the large group of multinational companies, who felt that the issue of compulsory licences ought to be exercised in an even more stringent manner.

More recently, Mumbai-based BDR Pharmaceuticals has been seeking the grant of compulsory licence for the generic production of US drug maker Bristol-Myers Squibb’s anticancer drug Dasatinib, sold under the brand name Sprycel. The Patent Office rejected BDR’s application on the grounds that the company did not make enough efforts to obtain a voluntary licence for the drug. While this rejection was lauded by the international community and the multinational companies in particular, it seems that the issue of a compulsory licence for the drug may very well be on the cards, as citing the emergency of a public health crisis under Section 92 of the Patent Act, the Health Ministry has reportedly sought a waiver of patent rights for Dasatinib. Through a letter to the Department of Industrial Policy and Promotion (DIPP), the Health Ministry has allegedly stated that the cost of producing the drug will be met through government schemes, and that around half-a-dozen schemes will be initiated to fund the cost of making the drugs available to patients for public non-commercial use.


MCA allows Exemption to Specified IFSC Public Company u/s 462 of the Companies Act, 2013

MCA carves out special privileges under the Companies Act, 2013 for unlisted public company which is licensed to operate by the Reserve Bank of India or the Securities and Exchange Board of India or the Insurance Regulatory and Development Authority of India from the International Financial Services Centre located in an approved multi services Special Economic Zone set-up under the Special Economic Zones Act, 2005 (28 of 2005) read with the Special Economic Zones Rules, 2006 (herein after referred to as “Specified IFSC Public Company”)


In exercise of the powers conferred by clauses (a) and (b) of sub-section (1) of Section 462 and in pursuance of sub-section (2) of the said section of the Companies Act,2013 (18 of 2013), the Central Government, in the interest of public, hereby directs that certain provisions of the Companies Act, 2013 (18 of 2013), as specified in column (2) of the Table, shall not apply or shall apply with such exceptions, modifications and adaptations as specified in column (3) of the said Table, to an unlisted public company which is licensed to operate by the Reserve Bank of India or the Securities and Exchange Board of India or the Insurance Regulatory and Development Authority of India from the International Financial Services Centre located in an approved multi services Special Economic Zone set-up under the Special Economic Zones Act, 2005 (28 of 2005) read with the Special Economic Zones Rules, 2006 (herein after referred to as “Specified IFSC Public Company”), namely:-

Serial Number
Provisions of the Companies Act, 2013 (18 of 2013)
Exceptions/Modifications/Adaptations
(1)
(2)
(3)
1.
Clause (41) of section 2
In Clause (41), after the second proviso, the following proviso shall be inserted, namely :-
“Provided also that in case of a Specified IFSC public company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required.”.
2.
Sub-clause (viii) of clause (76) of section 2
Shall not apply with respect to section 188.
3.
Sub-section (2) of section 3
In sub-section (2), the following proviso shall be inserted, namely:-
“Provided that a Specified IFSC public company shall be formed only as a company limited by shares.”.
4.
Clause (a) of subsection (1) of section 4
In clause (a) of sub-section (1), after the proviso, the following proviso shall be inserted, namely:-
“Provided further that a Specified IFSC public company shall have the suffix “International Financial Service Company” or “IFSC” as part of its name.”.
5.
Clause (c) of subsection (1) of section 4
In clause (c) of sub-section (1) of section 4, the following proviso shall be inserted, namely:-
“Provided that a Specified IFSC public company shall state its objects to do financial services activities, as permitted under the Special Economic Zones Act, 2005 (28 of 2005) read with the Special Economic Zones Rules, 2006 and any matter considered necessary in furtherance thereof, in accordance with license to operate, from International Financial Services Centre located in an approved multi services Special Economic Zone, granted by the Reserve Bank of India or the Securities and Exchange Board of India or the Insurance Regulatory and Development Authority of India.”.
6.
Sub-section (1) of section 12
In sub-section (1), the following proviso shall be inserted, namely:-
“Provided that a Specified IFSC public company shall have its registered office at the International Financial Services Centre located in the approved multi services Special Economic Zone set-up under the Special Economic Zones Act, 2005 read with the Special Economic Zones Rules, 2006, where it is licensed to operate, at all times.”.
7.
Sub-section (2) of section 12
For the words “thirty days” read as “sixty days”.
8.
Sub-section (4) of section 12
For the words “fifteen days” read as “sixty days”.
9.
Sub-section (5) of section 12
For sub-section (5), the following sub-section shall be substituted, namely:-
“(5) Except on the authority of a resolution passed by the Board of Directors, the registered office of the Specified IFSC public company shall not be changed from one place to another within the International Financial Services Centre:
Provided that the Specified IFSC public company shall not change the place of its registered office to any other place outside the said International Financial Services Centre.”.
10.
Section 21
For the words “an officer” read as “an officer or any other person”.
11.
Sub-sections (3) and (7) of section 42
Shall not apply.
12.
Sub-section (6) of section 42
For the words “sixty days” read as “ninety days”.
13.
Section 43
Shall not apply to a Specified IFSC public company, where memorandum of association or articles of association of such company provides for it.
14.
Section 47
Shall not apply to a Specified IFSC public company, where memorandum of association or articles of association of such company provides for it.
15.
Clause (c) of subsection (1) of section 54
Shall not apply.
16.
Sub-section (4) of section 56
In sub-section (4), after the proviso, the following proviso shall be inserted, namely:-
“Provided further that a Specified IFSC public company shall deliver the certificates of all securities to subscribers after incorporation, allotment, transfer or transmission within a period of sixty days.”.
17.
Clause (a) of subsection (1) of section 62
In clause (a) of sub-section (1), the following proviso shall be inserted, namely:-
“Provided that notwithstanding anything contained in sub-clause (i), in case of a Specified IFSC public company, the periods lesser than those specified in the said sub-clause shall apply if ninety per cent. of the members have given their consent in writing or in electronic mode.”.
18.
Clause (b) of subsection (1) of section 62
For the words “special resolution” read as “ordinary resolution”.
19.
Section 67
Shall not apply to a Specified IFSC public company-
(a) in whose share capital no other body corporate has invested any money;
(b) if the borrowings of such company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower; and
(c) such a company is not in default in repayment of such borrowings subsisting at the time of making transactions under this section.
20.
Clauses (a) to (e) of subsection (2) of section 73
Shall not apply to a Specified IFSC public company which accepts from its members, monies not exceeding one hundred per cent. of aggregate of the paid up share capital and free reserves, and such company shall file the details of monies so accepted to the Registrar in such manner as may be specified.
21.
Sub-section (1) of section 82
In sub-section (1), the following proviso shall be inserted, namely:-
“Provided that in case of a Specified IFSC public company, the Registrar may, on an application by the company, allow such registration to be made within a period of three hundred days of such creation on payment of such additional fees as may be prescribed.”.
22.
Sub-section (6) of section 89
For the words “thirty days” read as “sixty days”.
23.
Sub-section (3) of section 92
Shall not apply.
24.
Sub-section (1) of section 100
In sub-section (1), the following proviso shall be inserted, namely:-
“Provided that in case of a Specified IFSC public company, the Board may subject to the consent of all the shareholders, convene its extraordinary general meeting at any place within or outside India.”.
25.
Sections 101 to 107 and section 109
Shall apply in case of a Specified IFSC public company, unless otherwise specified in the articles of the company.
26.
Sub-section (1) of section 117
For the words “thirty days” read as “sixty days”.
27.
Clause (g) of sub-section (3) of section 117
Shall not apply.
28.
Sub-section (1) of section 118
In sub-section (1), the following proviso shall be inserted, namely:-
“Provided that in case of a Specified IFSC public company, the minutes of every meeting of its Board of Directors or of every committee of the Board, to be prepared and signed in the manner as may be prescribed under sub-section (1) at or before the next Board meeting or committee meeting, as the case may be and kept in the books kept for that purpose.”.
29.
Sub-section (10) of section 118
Shall not apply.
30.
Sub-section (3) of section 134
In sub-section (3), following proviso shall be inserted, namely:-
“Provided that in case of a Specified IFSC public company, if any information listed in this sub-section is provided in the financial statement, the company may not include such information in the report of the Board of Directors.”.
31.
Section 135
Shall not apply for a period of five years from the commencement of business of a Specified IFSC public company.
32.
Section 138
Shall apply if the articles of the company provides for the same.
33.
Fourth proviso to sub section (1) of section 139
For the words “ fifteen days” read as “ thirty days”.
34.
All provisos to subsection (2) of section 139
Shall not apply.
35.
Sub-section (1) of section 140
In sub-section (1) after the proviso, the following proviso shall be inserted, namely:-
“Provided further that in case of a Specified IFSC public company, where, within a period of sixty days from the date of submission of the application to the Central Government under this sub-section, no decision is communicated by the Central Government to the company, it would be deemed that the Central Government has approved the application and the company shall appoint new auditor at a general meeting convened within three months from the date of expiry of sixty days period.”.
36.
Second proviso to subsection (1) of section 149
Shall not apply.
37.
Sub- section (3) of section 149
In sub-section (3), the following proviso shall be inserted, namely:-
“Provided that this sub-section shall apply to a Specified IFSC public company in respect of financial years other than the first financial year from the date of its incorporation.”.
38.
Sub- sections (4) to (11), clause (i) of subsection (12) and sub-section (13) of section 149
Shall not apply.
39.
Sub-section (5) of section 152
For the words “thirty days” read as “sixty days”.
40.
Sub-sections (6) and (7) of section 152
Shall not apply.
41.
Section 160
Shall apply as per the articles framed by the company.
42.
Sub-section (3) of section 161
In sub-section (3), the following proviso shall be inserted, namely:-
“Provided that in case of a Specified IFSC public company, the Board may appoint, any person nominated by any institution or company or body corporate as a director in pursuance of the provisions of any law for the time being in force or of any agreement or by the Central Government or the State Government by virtue of its shareholding in a Government company.”.
43.
Section 162
Shall not apply.
44.
Proviso to sub-section (1) of section 168
For the word “shall” read as “may”.
45.
Sub-section (2) of section 170
For the words “thirty days” at both places read as “sixty days”.
46.
Sub-section (1) of section 173
In sub-section (1), after the proviso, the following proviso shall be inserted, namely:-
“Provided further that a Specified IFSC public company shall hold the first meeting of the Board of Directors within sixty days of its incorporation and thereafter hold atleast one meeting of the Board of Directors in each half of a calendar year.”.
47.
Sub-section (3) of section 174
Shall apply with the exception that interested director may participate in such meeting provided the disclosure of his interest is made by the concerned director either prior or at the meeting.
48.
Section 177
Shall not apply.
49.
Section 178
Shall not apply.
50.
Sub-section (3) of section 179
In sub-section (3), after the second proviso, the following proviso shall be inserted, namely:-
“Provided also that in case of a Specified IFSC public company, the Board can exercise powers by means of resolutions passed at the meetings of the Board or through resolutions passed by circulation.”.
51.
Section 180
Shall apply in case of a Specified IFSC public company, unless the articles of the company provides otherwise.
52.
Sub-section (2) of section 184
Shall apply with the exception that interested director may participate in such meeting provided the disclosure of his interest is made by the concerned director either prior or at the meeting.
53.
Sub-section (1) of section 185
In the Explanation, for clause (c), the following clause shall be substituted, namely:-
“(c) any private company of which any such director is a director or member in which director of the lending company do not have direct or indirect shareholding through themselves or through their relatives and a special resolution is passed to this effect;”.
54.
Sub-section (1) of section 186
Shall not apply.
55.
Sub-sections (2) and (3) of section 186
Shall not apply if a company passes a resolution either at meeting of the Board of Directors or by circulation.
56.
Sub-section (5) of section 186
In sub-section (5), after the proviso, the following proviso shall be inserted, namely:-
“Provided further that in case of a Specified IFSC public company, the Board can exercise powers under this sub-section by means of resolutions passed at meetings of the Board of Directors or through resolutions passed by circulation.”.
57.
Second proviso to subsection (1) of section 188
Shall not apply.
58.
Sub-section (4) of section 196
Shall not apply.
59.
Section 197
Shall not apply.

2. A copy of this notification has been laid in draft before both Houses of the Parliament as required by sub-section (2) of section 462 of the Companies Act, 2013 (18 of 2013).


For more information please visit New Corporate Laws Treatise www.nclt.in  All rights reserved.