Zappy Turns 3

A dream becomes a goal when action is taken toward its achievement. Again successfully completed one more year and stepping into the Third Year. Thank you all for supporting and coordinating with us in achieving our goals and chasing our dreams. Zappy’s Team thanks all the clients, stakeholders, family and friends for being with us always. Zappy makes you Happy and we will always try to keep up the same.
This edition, we will be discussing about SARFAESI Act and Highlights on Companies Act Amendments along with our usual Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST.

 Saranya Deivasigamani,
CEO

SARFAESI ACT

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (also known as the SARFAESI Act) is an Indian law. It allows banks and other financial institution to auction residential or commercial properties to recover loans. It allows banks and financial institutions to auction properties (residential and commercial) when borrowers fail to repay their loans. It enables banks to reduce their non-performing assets by adopting measures for recovery or reconstruction. Upon loan default, banks can seize the securities (except agricultural land) without intervention of the court. SARFAESI is effective only for secured loans where bank can enforce the underlying security e.g. hypothecation, pledge and mortgages. In such cases, court intervention is not necessary, unless the security is invalid or fraudulent. However, if the asset in question is an unsecured asset, the bank would have to move the court to file civil case against the defaulters.
The SARFAESI Act, 2002 gives powers of ‘seize’ to banks. Banks can give a notice in writing to the defaulting borrower requiring it to discharge its liabilities within 60 days. If the borrower fails to comply with the notice, the Bank may take recourse to one or more of the following measures:

• Take possession of the security for the loan;
• Sale or lease or assign the right over the security;
• Manage the same or appoint any person to manage the same.

The SARFAESI Act also provides for the establishment of Asset Reconstruction Companies regulated by RBI to acquire assets from banks and financial institutions.
The Central Government has issued the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Central Registry) Rules, 2011 and prescribed the Forms to be used for the purpose of filing information for registration in respect of transactions of securitisation, asset reconstruction of financial assets and security interest over property. The Forms prescribed by the Central Government for registration are as under:

SARFAESI Act Amendments have been made in 2016 because of “Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016. The act added new definitions to SARFAESI, widened the scope of debts and secured creditors and bestowed upon RBI new powers in relation to making of policies.

HIGHLIGHTS OF THE COMPANIES (AMENDMENT) BILL, 2017

The major amendments proposed include simplification of the private placement process, rationalization of provisions related to loan to directors, omission of provisions relating to forward dealing and insider trading, doing away with the requirement of approval of the Central Government for managerial remuneration above prescribed limits, aligning disclosure requirements in the prospectus with the regulations to be made by SEBI, providing for maintenance of register of significant beneficial owners and filing of returns in this regard to the ROC and removal of requirement for annual ratification of appointment or continuance of auditor.
The major official amendments subsequently introduced include continuing with the provisions relating to layers of subsidiaries, continuing with the earlier provisions with respect of memorandum, making offence for contravention of provisions relating to deposits as non-compoundable, requiring attaching of financial statement of associate companies, stringent additional fees of .100 per day in case of delay in filing of annual return and financial statement etc.

1. For incorporation of company declaration will be required instead of affidavits.
2. Name reservation in case of new company shall be valid for 20 days from date of approval instead of 60 days from the date of application.
3. Annual General Meeting of unlisted company can be held anywhere in India.
4. Every company shall have registered office within 30 days of incorporation instead of current requirement to have registered office within 15 days.
5. Notice of every changes of situation of the registered office shall be given to ROC within 30 days instead of 15 days as currently provided.
6. Sweat equity shares can be issued at any time currently it can be issued after 1 year from commencement of business.
7. In addition to Directors & KMP, any employee of the company can also authenticate company documents as authorised.
8. Wholly owned subsidiary (WOS) of a company incorporated outside of India is now allowed to hold EGM outside India.
9. No central govt. approval required for payment of remuneration in excess of 11% of net profit.
10. Money received under the private placement shall not be utilised unless the return of allotment is filled with the ROC.
11. Central govt. Can provide any other number to be treated as DIN like Aadhar or Pan.
12. Where a director incur any of disqualification under section 164(2) due to default of filing of financial statement or annual return or repayment of deposit or pay interest or other mentioned in section, than he shall be vacate office of the director in all the companies other than the company which is in default.
13. Requirement of filing of form DIR 11 (Filing of a copy of resignation to ROC by director itself) made optional.
14. Eligibility for doing CSR to be determined based on preceding “Financial Year” instead of “three preceding Financial year”;
15. The requirement related to annual ratification of appointment of auditor by members is omitted.
16. CG will prescribe an abridged Board Report for One Person Company and small company.
17. Disclosure which have been provided in the financial statement shall not be required to be reproduced in the Board Report again.
18. Disclosure by promotes and top ten shareholder with respect to 2% change in shareholding in a listed company is omitted.
19. In case delay in filing documents, fact or information required to be submitted under section 92 (Annual Return) or 137 (copy of financial statement), after expiry of prescribed period a flat additional fee of .100 per day shall be paid instead of slab wise additional fee.
20.  For calculation of net worth of the company debit or credit balance of profit and loss account shall be include.

Legal Term

Rebus sic stantibus

A qualification in a treaty or contract, that allows for nullification in the event fundamental circumstances change.

MCA Updates

• Companies (cost records and audit) second Amendment Rules, 2017.
• Condonation of Delay Scheme 2018.
• A new name reservation service is being developed and is likely to be deployed on 26th January, 2018.
• MCA is proactively designing a Front Office service (replacing INC-1 eform with Web-Form) for Name Reservation and Change of Name for companies capturing only absolutely essential information from the applicants. The said service is likely to be rolled out on 26th January 2018.
• INC-7 form is discontinued w.e.f 10.01.2018. In case the name reserved using INC-1 is to be used for incorporation through SPICe form, users should file the form latest by 17.01.2018.
• DIR-3 (Application for Director Identification Number) would be applicable for the allotment of DIN to individuals in respect of existing companies only and shall be filed by the existing company in which the proposed Director is to be appointed.
• To facilitate corresponding changes in LLP eforms due to deprecation of DIR-3, it is proposed to temporarily suspend issuance of allotment of new DINs for Designated Partners/Partners of LLPs w.e.f 26th January 2018 till 31st March 2018.
• It is proposed to mandate SPICe (with necessary provision for incorporating Producer Companies) as the only form for incorporation of companies w.e.f. 26th January, 2018.

SEBI Updates

• Margin provisions for intra-day crystallised losses.
• Electronic book mechanism for issuance of securities on private placement basis.
• Benchmarking of Scheme’s performance to Total Return Index.
• Schemes of Arrangement by Listed Entities and (ii) Relaxation under Sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957.
• Transaction Charges by Commodity Derivatives Exchanges.
• Exemption application under Regulation 11 (1) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
• Investments by FPIs in Government Securities.
• Disclosure of holding of specified securities and Holding of specified securities in dematerialized form .

RBI Updates

• Refinancing of External Commercial Borrowings.
• Submission of Financial Information to Information Utilities.

Income Tax Updates

• Electoral Bond Scheme, 2018.
• The SEEPZ Special Economic Zone Authority, an authority constituted under the Special Economic Zone Act, 2005 by the Government of India.
• Income–tax (25th Amendment) Rules, 2017 .

GST Updates

• CGST (Fourteenth Amendment) Rules, 2017.
• Extends the due dates for monthly furnishing of FORM GSTR-1 for taxpayers with aggregate turnover of both upto and more than ₹.1.5 crores.
• Waives the late fee payable for failure to furnish the return in FORM GSTR-4.
• Notifies the date from which E-Way Bill Rules shall come into force. Wherever there is a movement of goods, and the value of the goods is above ₹ 50,000 e-waybills are required in case of supply of goods and for reasons other than supply (job work, movement of material on returnable gate pass. Etc.,) is 1st of February 2018.
• Central Tax so as to prescribe effective rate of tax under composition scheme for manufacturers and other suppliers .