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In this edition, we will be seeing about the ICSI Auditing Standards. Considering the length of the Article, News Bites section will not be present in this edition.

 CS Saranya Deivasigamani,

CEO

ICSI Auditing Standards

The Institute of Company Secretaries of India (ICSI) has issued four Auditing Standards applicable on the Audit Engagements accepted by the Auditor on 28th September, 2020  which is now made mandatory w.e.f. 1st April, 2021.

The 4 standards are –

• CSAS-1 Auditing Standard on Audit Engagement
• CSAS-2 Auditing Standard on Audit Process and Documentation
• CSAS-3 Auditing Standard on Forming of Opinion
• CSAS-4 Auditing Standard on Secretarial Audit

The Company Secretaries has to perform various Audits, Reports, Certifications and Engage in various activities in Companies as required under the statutes.

The ICSI Audit Standards (CSAS) 1 to 3 deals with the Audits that shall be conducted under any standards and CSAS 4 deals exclusively for the Secretarial Audit to be Conducted as per the Companies Act, 2013 under Section 204 of the Act and rules made thereunder.

CSAS 4 should adhere to the Auditing Standards on – (a) Audit Engagement (CSAS-1); (b) Audit Process and Documentation (CSAS-2); and (c) Forming of Opinion (CSAS-3).

CSAS-1

Audit Engagement Process

Appointment

The appointment of Auditor shall be made in the manner prescribed in the applicable laws, act, rules, regulations, standards and guidelines or in case no such manner has been prescribed, such appointment shall be made in the manner determined by the Appointing Authority.

The Auditor shall submit a Certificate to the Appointing Authority confirming eligibility for appointment as Auditor.

The Auditor shall obtain an Audit Engagement Letter along with a copy of the resolution, if any, passed by the CSAS-1 – Auditing Standard on Audit Engagement and the Appointing Authority and shall provide acceptance to the Appointing Authority.

Communication to the Predecessor or Previous Auditor

As per the standards, the Auditor shall communicate in writing to the Predecessor or Previous Auditor, if any, before accepting the Audit Engagement.

Limits on Audit Engagements 

Limits as prescribed in the statute will be applicable to the Auditor.

Conflict of Interest

The Auditor shall not have any substantial conflict of interest with the Auditee. Any conflict of interest, other than substantial conflict of interest, must be disclosed by the Auditor before accepting the Audit Engagement or as soon as the Auditor becomes aware of the same, as the case may be.

Confidentiality

The Auditor shall not disclose the information obtained during the course of Audit without proper and specific authority or unless there is a legal obligation or duty to disclose.

The Auditor shall not use or share with any person any information obtained except for the purposes of audit.

The Auditor shall take all reasonable steps to ensure that employees, staff and other team members of the Auditor and persons engaged by the Auditor to provide advice or assistance during the conduct of audit, shall also adhere to the Auditor’s duty of confidentiality.

Changes in terms of engagement

The Auditor shall not agree to a change in the terms of the Audit Engagement where there is no reasonable justification for doing so.

If before completion of the assignment, the Auditor is requested by the Appointing Authority to change the scope of engagement, resulting in a lower level of assurance, the Auditor shall consider the appropriateness of carrying out the same.

If the terms of the Audit Engagement are changed, the Auditor and the Appointing Authority shall agree on the new terms of the engagement by way of a supplementary/revised engagement letter or any other suitable form in writing.

CSAS –2

Audit Planning

The Auditor shall make audit plan to conduct audit as per the terms of Audit Engagement.

Audit planning means establishing and developing an overall audit process, including but not limited to:

• Identification of broad audit areas;
• Seeking previous audit findings and observations from the Management and the Predecessor or Previous Auditor, in case of change of Auditor;
• Determination of subject matters and audit areas requiring special attention, when considered necessary;
• Risk Assessment and Materiality;
• Audit technique;
• Allocation of audit resources for the audit; and
• Preparation of audit schedule.

The audit shall be planned in a manner which ensures that qualitative audit is carried out in an efficient, effective and timely manner. Audit planning shall ensure that appropriate attention is accorded to crucial areas of audit and significant issues are identified in a timely manner.

The Auditor shall plan the audit with professional scepticism so that it is possible to exercise professional judgment in an objective manner.

The Auditor shall adhere to the audit plan. The audit plan may be modified, if circumstances so warrant.

Risk Assessment

Risk assessment of the Auditee with respect to and connected/relevant to the Audit Engagement shall be done considering industrial & business environment, organisational structure and compliance requirements.

The Auditor shall evaluate high risk areas and activities of the Auditee relating to: a. Internal control systems and processes of the Auditee for adherence to the constitutional documents, applicable laws, acts, rules, regulations and standards; b. Transparency, prudence and probity; and c. Changes or Attrition in the compliance team and frequency of such changes and attrition.

Information about the Auditee

The Auditor shall obtain sufficient information about the Auditee that is relevant for conduct of audit and forming an opinion and its expression.

Audit Check-lists

The Auditor shall use systematic and comprehensive audit check-lists for carrying out the audit and to verify the compliance requirements.

Collection and Verification of Audit Evidence

The Auditor shall verify compliance with applicable laws, act, rules, regulations and standards. Deviation, if any, shall be recorded and obtain complete, relevant and necessary evidence to support the opinion.

The process of gathering and evaluating evidence shall continue until the Auditor is satisfied that sufficient and appropriate evidence exists to provide a basis for formation of the Audit Opinion.

Third Party Confirmation

The Auditor shall obtain confirmations from third party(ies), wherever required, with respect to information which is related to such party(ies).

Analysis of Audit Evidence

The Auditor shall evaluate the Audit Evidence to arrive at the conclusion.

While evaluating evidence, if the Auditor finds that Audit Evidence is conflicting, the Auditor shall assess the extent and credibility of conflicting evidence in order to reach a conclusion or collect more evidence to resolve the conflict.

Documentation

The Auditor shall adequately document the Audit Evidence in working papers, including the basis and extent of planning, work performed and the findings of audit.

The Audit Documents shall contain sufficient information to enable an Auditor, having no previous connection with the audit, to ascertain from such documents, the significant findings and conclusions of the Auditor.

Audit Documents shall take place throughout the audit process. Working papers shall be complete and appropriately detailed to provide a clear trail of the audit. Audit Documentation shall be properly indexed, referenced with and supplemented by the set of working papers.

The Auditor shall also document discussions with the Management with respect to significant matters in respect of which written record is not available.

Record Keeping and Retention

The Auditor shall establish policies and procedures for retention of Audit Documents.

The Audit Documents shall be collated for records within a period of 45 days from the date of signing of Auditor’s Report.

The Audit Documents shall be maintained in physical or electronic form and retained for a period of 8 years from the date of signing of Auditor’s Report. 

CSAS-3

Process for forming of opinion

The Auditor shall consider Materiality while forming his opinion and adhere to: the principle of completeness, the principle of objectivity, the principle of timeliness and the principle of a contradictory process.

Judgment, Clarification and Conflicting Interpretation

The Auditor may consider various judgments, clarifications, opinion, conflicting interpretations while framing the opinion to the best of his professional acumen.

Precedence and Practices

The Auditor shall adhere to generally accepted precedence and practices in relation to forming of an opinion as may be available from historical perspective of any kind of audit.

Third Party Report or Opinion

The Auditor shall adhere to the following while forming an opinion based on Third Party reports or opinions:

• The Auditor shall indicate the fact of use of Third Party report or opinion and shall also record the circumstances necessitating the use of third party report or opinion;
• The Auditor shall indicate the fact if Third Party report or opinion is provided by the Auditee;
• The Auditor shall consider the important findings/ observation of Third Party;
• The Auditor shall, if necessary and feasible, carry out a supplemental test to check veracity of the Third Party report or opinion. 

Form of an Opinion

The opinion can be Unmodified Opinion or Modified Opinion. The Auditor shall express an unmodified opinion when based on Audit Evidence, the Auditor concludes that: a. there is due compliance with the applicable laws in terms of timelines and process; and b. the Records as relevant for the audit verified by him as a whole are free from Misstatement and maintained in accordance with the applicable laws.

The Auditor shall express modified opinion when the Auditor concludes that: (a) based on the Audit Evidence obtained, there is non-compliance with the applicable laws in terms of timelines or process; or (b) based on the Audit Evidence obtained, the Records as a whole are not free from Misstatement; or are not maintained in accordance with applicable laws; or (c) the Auditor is unable to obtain sufficient and appropriate Audit Evidence to conclude that there is due compliance with the applicable laws in terms of timelines and process; or (d) the Auditor is unable to obtain sufficient and appropriate Audit Evidence to conclude that the Records as a whole are free from Misstatement; or are maintained in accordance with applicable laws.

Whenever the Auditor expresses a modified opinion or disclaims an opinion, the text of the opinion shall be either in italics or bold letters.

Limitation

If, after accepting the Audit Engagement, the Appointing Authority imposes a limitation on the scope of the audit which, in the opinion of the Auditor, is likely to result in the need to express a modified opinion or to disclaim an opinion, the Auditor shall request the Appointing Authority to remove the limitation.

If the Appointing Authority refuses or fails to remove the limitation, the Auditor shall communicate the matter to the Management and determine on alternative procedures.

If the Auditor is unable to obtain sufficient and appropriate Audit Evidence, the Auditor shall determine the implications as follows: a. If the Auditor concludes that the possible effects of unavailable Audit Evidence could be non-material, the Auditor shall modify the opinion; or b. If the Auditor concludes that the possible effects of unavailable Audit Evidence could be material, the Auditor shall express disclaimer of opinion. 

Auditor’s Responsibility

The Auditor’s Report shall include a section with the heading “Auditor’s Responsibility”. Auditor’s Report shall state that the responsibility of the Auditor is to express opinion on the compliance with the applicable laws and maintenance of records based on audit.

Auditor’s Report shall state that due to the inherent limitations of an audit including internal, financial and operating controls, there is an unavoidable risk that some Misstatements or material non-compliances may not be detected, even though the audit is properly planned and performed in accordance with the Standards.

Format of Report

The report shall be addressed to the Appointing Authority unless otherwise specified in the Audit Engagement Letter or provided in the applicable law. The report shall be detailed enough to serve its intended purpose. Where specific formats are prescribed, those formats shall be followed for reporting. If any information cannot be appropriately placed within the paragraphs of the report, it shall be given in form of annexure(s).

Signature block shall mention the name of the audit firm along with the registration number, if any, the name of the Auditor, certificate of practice number, the membership number of the Auditor, specifying whether associate or fellow member, as applicable. The Auditor shall clearly mention date and place of signing the report, in case report is signed by two different persons on different dates or different places; same shall be mentioned in the report.

CSAS-4

Identification and segregation of applicable laws

The Auditor shall take note of the industry specific laws and other laws as may be applicable to the Auditee based on the identification/segregation by the Management and his own verification.

Verification of corporate conduct and compliance of laws

Identification of Events/Corporate Actions

The Auditor shall identify events/corporate actions that took place during the audit period. The identification shall be made by reviewing the website of the regulators, website of the Auditee, statutory records including books and papers, interaction with the Management and in any other appropriate manner.

Verification of Compliance

The Auditor shall verify all event and calendar based compliances from the Records of the Auditee, database or website of the regulators and other relevant sources.

Board Composition

The Auditor shall verify compliance of the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, agreement with Lenders/Investors, Articles of Association and provisions of other Acts / rules/ regulations, guidelines and policies, board decisions, shareholders decisions, as may be applicable to the Auditee with regard to:

• Overall composition of the Board including the minimum and maximum strength of the Board.
• Optimum combination of the Board including proportion of executive, non-executive, independent, non-independent, retiring, non- retiring, woman and nominee director.
• Eligibility criteria including disqualifications of directors.
• The constitution and composition of Committees of the Board.

Board Processes

The Auditor shall verify that the decisions of the Board and its Committees are taken and recorded in compliance with applicable laws, rules, regulations, guidelines, standards and defined internal processes, if any.

System and Process

System and process broadly refers to the framework of legal and procedural compliances of the Auditee including but not limited to internal regulations, control, guidance and governance. The Auditor shall assess the efficacy and adequacy of the system and processes of the Auditee commensurate with its size and operation for verifying compliance of applicable laws, rules, regulations, standards, guidelines and defined internal processes, if any by:

Reviewing records maintained by the Auditee.

Understanding compliance responsibility centers, control points, matrix, flow of information, escalation of non-compliances to different levels, reporting of any noncompliance.

Assessing compliance mechanism and understanding its extent, coverage and severity mapping. The Auditor shall also assess compliance manual/standard operating procedures, if any, available with the Auditee.

Analysing instances of show cause notices received, prosecution initiated, fine or penalties levied, imprisonment ordered, qualification, adverse remark or observations in the statutory, internal or industry specific audit, orders passed by regulatory bodies or judicial/quasi-judicial authorities.

Detection of Fraud

The Auditor shall exercise professional judgment and maintain professional scepticism throughout the planning and performance of the audit to detect and report the fraud envisaged under the provisions of Section 143(12) of the Companies Act, 2013 read with Companies (Audit and Auditors) Rules, 2014.

During the course of the audit, if the Auditor suspects commission of any fraud, he shall endeavour to collect further evidence for the same. The suspicion may arise on perusal of internal control systems, complaint under whistle blower mechanism and reports of the other auditors, etc.

The Auditor shall ensure to collect sufficient evidence which substantiates his suspicion of the commission of the fraud against the Auditee by its employees and officers.

Reporting of Fraud

If the Auditor has sufficient reason to believe that there is commission of fraud and have justifiable grounds for the same, he shall report to Audit Committee/Board/Central Government as per the process laid down under the Companies Act, 2013 and include the same in Secretarial Audit Report.

The Auditor shall verify whether the Audit Committee/ Board has given any comments on the fraud reported by the auditors in their report in terms of the provisions of the Companies Act, 2013.

The Auditor shall verify if the fraud detected by other Auditor has been reported to the Audit Committee/Central Government and report the same in the Secretarial Audit Report.

Identification and Reporting of the events/actions having major bearing on Auditee’s affairs

It shall be the duty of the Auditor to identify and report in the Secretarial Audit Report all events/actions having major bearing on the Auditee’s affairs in pursuance of the applicable laws, act, rules, regulations, guidelines, standards, etc.

An event/action shall be considered as having major bearing on Auditee’s affairs if it affects its going concern or alters the charter or capital structure or management or business operation or control, etc.

List of Audits under various Statutes

Following is an illustrative list of Audits which may be undertaken by a Company Secretary under various Statutes:

Legal Terms

Noscitur A Sociis

Latin—“it is known from its associates.” A word whose meaning is uncertain, questionable or doubtful can be understood and defined by its association with surrounding words and its context.

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In this edition, we will be seeing about the Bilateral Netting of Qualified Financial Contracts. We will have our usual Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST following the article.

 CS Saranya Deivasigamani,

CEO

Bilateral Netting of QFC

To ensure financial stability and promote competitiveness in Indian financial markets, the Central Government has enacted and Act by providing enforceability of bilateral netting of qualified financial contracts and for matters connected to it. This Act came into effect on 1st October 2020. The SEBI recently specified the following entities as qualified financial market participants, which subject to the provisions as may be specified by the SEBI, may enter into qualified financial contracts notified by any regulatory authority as specified in the First Schedule:

1. Mutual Fund registered with Securities and Exchange Board of India; and
2. Alternative Investment Fund registered with Securities and Exchange Board of India.

Applicability

The provisions of this Act shall apply to a qualified financial contract entered into on a bilateral basis between qualified financial market participants, either under a netting agreement or otherwise, where at least one of such participants shall be an entity regulated by an authority specified in the First Schedule.

The relevant authority may, by notification,

(a) designate any bilateral agreement or contract or transaction, or type of contract regulated by it, as qualified financial contract:

(i) entered into between such parties and on such terms as the Central Government may, by notification, specify; or

(ii) entered into on multilateral basis in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 and the Payment and Settlement Systems Act, 2007;

(b) specify any entity regulated by it, as a qualified financial market participant to deal in qualified financial contracts.

Enforceability

Netting of the qualified financial contract shall be enforceable— (a) where such contract is entered into with a netting agreement, in accordance with the terms of the netting agreement. or (b) where such contract is entered into without a netting agreement, in accordance with the provisions of section 6.

A qualified financial contract shall not be void and shall be deemed never to have been void or unenforceable by reason of any law for the time being in force.

Close-out netting of a qualified financial contract shall be enforceable against an insolvent party, and, wherever applicable, against a guarantor or other person providing collateral or security for a party and shall not be affected or stopped or otherwise limited by:—

(i) the appointment of, or any application for the appointment of, an administration practitioner, or

(ii) applicability of any provision of law relating to administration, or

(iii) any other provision of law that may be applicable to an insolvent party.

The amount payable or other claims to be made in accordance with the close-out netting under this Act shall be final, irrevocable and binding upon the parties to a qualified financial contract and upon the administration practitioner, of the party in administration.

Invocation of Close-out Meeting

Close-out netting may be commenced by a notice given by one party to the other party of a qualified financial contract upon the occurrence of an event of default with respect to the other party or a termination event that may, in certain circumstances, occur automatically as specified in the netting agreement.

Close-out netting shall be applicable to all qualified financial market participants who are parties to a qualified financial contract notwithstanding anything to the contrary contained in any law specified in the Second Schedule or any other law pursuant to which any qualified financial market participant has been incorporated, constituted or is regulated.

Limitations of Power of Administration Practitioner

The administration practitioner shall not render or seek to render ineffective,—

(a) any transfer, substitution or exchange of cash, collateral or any other interests under or in connection with a netting agreement between the insolvent party and the non-insolvent party to a qualified financial contract; or

(b) any payment or delivery obligation incurred by the insolvent party and owing to the non-insolvent party under or in connection with a netting agreement on the grounds of it constituting a preference including a fraudulent preference or a transfer for undervalue, including during a suspect period by the insolvent party to the non-insolvent party.

If the Central Government is satisfied that it is necessary or expedient so to do, it may, by notification, add to or otherwise amend the First Schedule or the Second Schedule and thereupon, the First Schedule or the Second Schedule, as the case may be, shall be deemed to have been amended accordingly.

The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.

If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order, published in the Official Gazette, make such provisions not inconsistent with the provisions of this Act as may appear to it to be necessary or expedient for removing the difficulty.

Legal Terms

Vadium vivum  

A living pledge, which exists where an estate is granted until a debt is paid out of its proceeds.

MCA Updates

• Clarification on spending of CSR funds .
• Gap between two board meetings under section 173 of the Companies Act, 2013 (CA-13) – Clarification – reg.
• Relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013.
• Clarification on spending of CSR funds.

SEBI Updates

• Relaxation from compliance to REITs and InvITs due to the CoVID -19 virus pandemic
• Notification under the Bilateral Netting of Qualified Financial Contract Act, 2020.
• Business responsibility and sustainability reporting by listed entities
• Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2021
• Securities and Exchange Board of India (Alternative Investment Funds) (Second Amendment) Regulations, 2021
• Securities and Exchange Board of India (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2021
• Securities and Exchange Board of India (Intermediaries) (Second Amendment) Regulations, 2021
• Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Second Amendment) Regulations, 2021
• Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2021
• Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations 2018 [Last amended on May 05, 2021]
• Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 [Last amended on May 05, 2021]
• Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 [Last amended on May 05, 2021]
• Securities and Exchange Board of India (Intermediaries) Regulations, 2008 [Last amended on May 05, 2021]
• Securities and Exchange Board of India (Stock Brokers) Regulations, 1992 [Last amended on May 05, 2021]
• Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992 [Last amended on May 05, 2021]

RBI Updates

• Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs).
• Corporate Governance in Banks – Appointment of Directors and Constitution of Committees of the Board.
• Declaration of dividends by banks.

IT Updates

• No Major Updates.

GST Updates

• No Major Updates.

Try Zappy Compliance demo

A free demo can be given for Zappy Compliance, a new way of Compliance Calendar that will help you maintain Statutory Registers, Minutes Books and other Repositories online at ease in a safe and secure way. Request one if you would like to try.

In this edition, we will be seeing about Pre-Packaged Insolvency Resolution Process. We will have our usual Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST following the article.

 CS Saranya Deivasigamani,

CEO

Pre-Packaged Insolvency Resolution Process

The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 promulgated on 4th April, 2021 provides for pre-packaged insolvency resolution process (PPIRP) for corporate debtors classified as micro, small and medium enterprises. The IBBI notified the Insolvency and Bankruptcy Board of India (Pre-packaged Insolvency Resolution Process) Regulations, 2021 (PPIRP Regulations) on 4th April, 2021 to enable operationalisation of PPIRP.

Eligibility

An insolvency professional shall be eligible to be appointed as an interim resolution professional or resolution professional, as the case may on submitting the consent in Form P1, if he/she, and all partners and directors of the insolvency professional entity of which he/she is a partner or director, are independent of the corporate debtor.

A resolution professional, who is a director or a partner of an insolvency professional entity, shall be ineligible to continue as a resolution professional in a process, if the insolvency professional entity or any partner or director of such insolvency professional entity represents any of the stakeholders in the same process.

Appointment of Professional

The resolution professional may appoint a professional on various activities needing specialized concern. However, the following persons shall not be appointed as a professional, namely:-

1. a person who is not registered with the regulator of the profession concerned;
2. a related party of the corporate debtor;
3. an auditor of the corporate debtor at any time during the five years preceding the pre-packaged insolvency commencement date;
4. a partner or director of the insolvency professional entity of which the resolution professional is a partner or director; or (e) a relative of the resolution professional or of a partner or director of the insolvency professional entity of which the resolution professional is a partner or director.

Initiation Process

1. The applicant shall convene meetings of the financial creditors, who are not related parties of the corporate debtor.
2. The notice of the meeting shall be served to the financial creditors, who are not related parties of the corporate debtor, at least five days before the date of the meeting, unless a shorter time is agreed to by all of them in Form P2.
3. The financial creditors who are not related parties of the corporate debtor and have not less than ten per cent. of the value of the total financial debt of such creditors may propose names of insolvency professionals whose terms shall be approved in Form P3.
4. The terms of appointment of the resolution professional shall include – (a) fee payable to the RP for performing duties (b) fee payable to the RP and expenses to be incurred for conducting the process; and (c) fee payable to the RP and expenses to be incurred in case management of the corporate debtor is vested with the RP.
5. The approval for filing of application under sub-section (3) of section 54A shall be in Form P4.
6. These regulations shall mutatis mutandis apply to the corporate debtor who has no financial debt or where all financial creditors are related parties, the applicant shall convene a meeting of operational creditors, who are not related parties of the corporate debtor.

If the RP shall obtain the consent of the insolvency professionals to act as the authorised representative of creditors in the class in Form P5. Select the insolvency professional, who is the choice of the highest number of creditors in the class to act as the authorised representative of the creditors of the respective class. 

Declarations

(1) The declaration under clause (f) of sub-section (2) of section 54A shall be made in Form P6.

(2) The declaration under clause (c) of sub-section (3) of section 54C shall be made in Form P7.

Report by resolution professional.

The report under clause (a) of sub-section (1) of section 54B shall be prepared in Form P8.

Information to be furnished by the applicant

For the purposes of clause (d) of sub-section (3) of section 54C, the applicant shall furnish-

(a) audited financial statements of the corporate debtor for the last two financial years;

(b) provisional financial statements for the current financial year made up to the date of declaration under clause (f) of sub-section (2) of section 54A;

(c) Form P5 submitted by the authorised representatives selected under sub-regulation (5) of regulation 15.

Public Announcement

The resolution professional shall make a public announcement within two days of the commencement of the process in Form P9.

The corporate debtor shall submit a list of claims under sub-section (1) of section 54G in Form P10 to the resolution professional. 

Resolution Plans

, the resolution professional shall publish brief particulars of the invitation for resolution plans in Form P11 not later than 21 days from the pre-packaged insolvency commencement date.

Where a resolution plan is approved by the committee, the resolution professional shall submit an application, along with a compliance certificate in Form P12, to the Adjudicating Authority for approval.

Where no resolution plan is approved by the committee or where the committee has approved the termination of process, the resolution professional shall file an application in Form P13 to the Adjudicating Authority for termination of process.

For the purposes of vesting of the management with resolution professional, the resolution professional shall make an application in Form P14.

Legal Terms

Amortizement 

Paying off an amount owed over time by making planned, incremental payments of principal and interest. To amortise a loan means “to kill it off”.

MCA Updates

• Notification under section 4 of Insolvency and Bankruptcy Code, 2016.
• Corrigenda – Insolvency and Bankruptcy Code (Amendment) Ordinances, 2021.
• Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021-Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021.
• Companies (Audit and Auditors) Second Amendment Rules, 2021.
• Commencement notification dated 24.03.2021.

SEBI Updates

• Securities Contracts (Regulation) Act, 1956 (As amended by the Finance Act, 2021 (13 of 2021) w.e.f. April 1, 2021).
• Securities And Exchange Board Of India (Merchant Bankers) (Amendment) Regulations, 2021.
• Securities And Exchange Board Of India (Stock Brokers) (Amendment) Regulations, 2021.
• Securities And Exchange Board Of India (Underwriters) (Repeal) Regulations, 2021.
• Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Amendment) Regulations, 2021.
• SEBI (Annual Report) Rules, 2021.

RBI Updates

• External Commercial Borrowings (ECB) Policy – Relaxation in the period of parking of unutilised ECB proceeds in term deposits.
• Investment by Foreign Portfolio Investors (FPI): Investment limits.
• Bilateral Netting of Qualified Financial Contracts- Amendments to Prudential Guidelines .

IT Updates

• No Major Updates.

GST Updates

• Relief to taxpayers, regarding late fee, for delay in filing Form GSTR-3B returns.
• Waiver of interest and late fee for normal taxpayers (filing return on monthly or quarterly basis) and composition taxpayers (Part1).
• Waiver of interest and late fee for normal taxpayers (filing return on monthly or quarterly basis) and composition taxpayers (Part2).
• Extension in dates of various GST Compliances for GST Taxpayers.

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In this edition, we will be seeing about Quarterly Return, Monthly Payment of Taxes (QRMP) Scheme at GST. We will have our usual Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST following the article.

 CS Saranya Deivasigamani,

CEO

QRMP Scheme

Quarterly Return, Monthly Payment of Taxes (QRMP) Scheme is a scheme to simplify compliance for small taxpayers. Under this scheme, taxpayers having an aggregate turnover at PAN level up to Rs. 5 crore can opt for quarterly GSTR-1 and GSTR-3B filing. Payment can be made in the first two months by a simple challan in FORM GST PMT-06. For the ease of taxpayers, system has assigned quarterly frequency to small taxpayers automatically.

Eligibility

For the purpose of determining the eligibility for QRMP, the turnover was determined on the basis of the values declared by taxpayers in Table-3.1 of GSTR-3B (except inward supplies attracting reverse charge) for the Financial Year 2019-20. If a component of the turnover, like exempted or non-GST turnover, was not declared by a taxpayer in GSTR-3B or was declared in next financial year, then the turnover computed by the system for such taxpayers could be less than Rs. 5 crore. Such taxpayers may have been assigned to QRMP on the basis of values declared by them in GSTR-3B. Such taxpayers are advised to opt-out of scheme for quarter Apr-Jun’21 by 30 th April 2021.

For the quarter of April to June 2021, taxpayers may change their filing frequency from quarterly to monthly from 1st February, 2021 to 30 th April, 2021. It may be noted that profile selection is not a recurring requirement every quarter. Once a frequency has been opted for, it is applicable for all future periods unless changed further.

IFF

Invoice Furnishing Facility (IFF) is an optional facility made available as per Rule-59(2) of the CGST Rules, 2017. This is provided for those quarterly taxpayers who want to pass on input tax credit (ITC) to their recipients (buyers/customers) in first two months of a quarter. Since IFF is an optional facility, it poses no additional compliance burden. It is a facility for those quarterly filers who intend to pass ITC to their recipients in first two months of the quarter. Since IFF is an optional facility, IFF for a month will expire after the due date of 13th of next month, and cannot be filed after this date.

Invoice Furnishing Facility (IFF) shall be availed by those taxpayers who want to pass on input tax credit (ITC) to their recipients (buyers/customers) in first two months of a quarter. Those taxpayers who do not have to pass credit to their recipients need not file IFF in the first two months of the quarter. They may declare their outward supplies in the quarterly FORM GSTR-1. It may be noted that since IFF is an optional facility, IFF for a month will expire after the due date of 13th of next month, and cannot be filed after this date.

Payment of Liability

In first two months of the quarter, payment of liability can be made by either of the following two methods:

1. Fixed Sum Method: Portal will generate a pre-filled challan in Form GST PMT-06. The system generated pre-filled challan in this case is commonly also known as 35% challan.
2. Self-Assessment Method: The actual tax due is to be paid through challan, in Form GST PMT-06, by considering the tax liability on inward and outward supplies and the input tax credit available for the period as per law.

The due date for making payment by challan is 25th of the next month.

Fixed Sum Method

In fixed sum method, the taxpayer is required to pay a system generated challan in the first two months of a quarter. The system generated pre-filled challan in this case is commonly also known as 35% challan. If fixed sum method is opted for by the taxpayer & there is no ITC to be passed in that month, then except for paying system generated challan, no other compliance requirement is there in the first two months of the quarter.

Supplies made to unregistered persons (also called B2C supplies) are not required to be declared in IFF. These may be declared in FORM GSTR-1 for the quarter.

Reconciliation of IIF and GSTR-1

Taxpayers will be provided with a draft GSTR-3B, which will contain the details of the liability to be paid by taxpayers in the quarterly GSTR-3B. This will be prepared on the basis of the supplies declared in FORM GSTR-1 for the quarter. It will also contain data from the optional IFF, if any is filed in either of the first two months of the quarter. The said system computed values will also be auto-populated in quarterly GSTR-3B.

Claiming ITC

In first two months of the quarter, no declaration pertaining to ITC is required to be made. The available ITC for the entire quarter will be made available by the system in quarterly FORM GSTR-2B.

This quarterly facility will be in addition to the FORM GSTR-2B being made available on monthly basis, which can still be used for doing self-assessment.

Due Dates

The due dates are critical for claiming ITC or changing the frequency of the return which shall be planned accordingly.

Filing frequency either monthly or quarterly can be selected as per timelines mentioned in below table.

Legal Terms

Cestui Que Trust

n. an old-fashioned expression for the beneficiary of a trust.

MCA Updates

• Commencement notification dated 05 March 2021.
• Companies (Incorporation) Third Amendment Rules, 2021.
• Companies (Management and Administration) Amendment Rules, 2021.
• Companies (Specification and definitions details) 2nd Amendment Rules 2021.
• Companies (Incorporation) 2nd Amendment Rules 2021.
• Companies (Specification of Definition details) Amendment Rules 2021.

SEBI Updates

• Review of norms regarding investment in debt instruments with special features, and the valuation of perpetual bonds.
• Rollout of Legal Entity Template.
• Amendments to provisions in SEBI Circular dated September 16, 2016 on Unique Client Code (UCC) and mandatory requirement of Permanent Account Number (PAN).
• Circular on Guidelines for votes cast by Mutual Funds.
• Circular on Mutual Funds.
• Code of Conduct & Institutional mechanism for prevention of Fraud or Market Abuse.
• Master Circular on Surveillance of Securities Market.
• Extension of facility for conducting meeting(s) of unitholders of REITs and InvITs through Video Conferencing (VC) or through other audio-visual means (OAVM).
• Pre-Expiry Margin on commodities under Alternate Risk Management Framework.

RBI Updates

• Extension of Cheque Truncation System (CTS) across all bank branches in the country.
• Data Format for Furnishing of Credit Information to Credit Information Companies and other Regulatory Measures.
• Investment by Foreign Portfolio Investors (FPI) in Defaulted Bonds – Relaxations.
• Master Direction on Digital Payment Security Controls.

IT Updates

• Amendment of Rule 114E of the Income tax Rules, 1962.
• ​Income-tax (3rd Amendment) Rules, 2021.
• Notification No. 14/2021 [F. No. 187/7/2021 (ITA-I)] / SO 1160(E).
• Income-tax (2nd Amendment) Rules, 2021.
• Notification No. 12 /2021 [F. No. 203/13/2019/ITA-II] / SO 1069(E).
• Income-tax (1st Amendment) Rules, 2021.
• Notification No. 10/2021 [F. No. 370142/35/2020-TPL] / S.O. 966(E).
• ​Amendment of notification no. 85 of 2020 for extension of date in Direct Tax Vivad se Vishwas Act, 2020.
• Notification No. 8/2021 [F.No.300196/35/2019-ITA-I] / SO 813(E).
• Notification No. 7/2021 [F. No. 370149/154/2019-TPL] / SO 742(E).
• ​Faceless Assessment (1st Amendment) Scheme, 2021.

GST Updates

• GSTN Webinar on e-invoicing for taxpayers.
• Module wise new functionalities deployed on the GST Portal for taxpayers.
• Advisory on Annual Return (GSTR-9).
• Advisory on Reconciliation Statement (GSTR-9C ).
• Know more about “QRMP scheme and how to furnish details in IFF” and Answers to Frequently Asked Questions.