MAJOR RELAXATION FROM SEBI LODR AMENDMENT DATED 12-12-2024

Major Relaxation from SEBI LODR Amendment dated 12-12-2024

 

VIOLATION OF LODR REGULATION BY PREMIER POLYFILM BY ASSERTING THAT IT DID NOT KNOW A PARTICULAR TRANSACTION IT ENTERED IS A RELATED PARTY TRANSACTION

 VIOLATION OF LODR REGULATION BY PREMIER POLYFILM BY ASSERTING THAT IT DID NOT KNOW A PARTICULAR TRANSACTION IT ENTERED IS A RELATED PARTY TRANSACTION

PREMIER POLYFILM’S RELATED PARTY TRANSACTION VIOLATION

Premier Polyfilm was fined by SEBI for Rs 3 lakh in its December 9,2024  order for not taking approvals from its audit committee and shareholders for related-party transactions (RPTs).

The SEBI above order illustrated that being a listed entity since 1994, Premier Polyfilm is reasonably expected to understand the nuances of compliances.

PREMIER POLYFILM CANNOT CLAIM IGNORANCE OF LAW

Premier Polyfilm cannot claim ignorance of law as an excuse for its violation says SEBI .

Premier Polyfilm as a listed entity, did not conduct as per required prudence in carrying out such RPTs and therefore, violated the provisions of LODR (Listing Obligations and Disclosure Req uirements)" SEBI Said.

Premier Polyfilm had entered into RPTs s between April 1, 2022, to March 31, 2023 and April 01, 2023 to May 21, 2023 without taking prior approval its of Audit Committee.

Premier Polyfilm also entered into an RPT, the value of which exceeded 10 percent of its turnover, in FY23  but sought shareholder approval for this transaction only in September 2023 with retrospective effect.

Premier Polyfilm submitted that it was under the belief that RMG Polyvinyl was not a related party and therefore did not make the requisite disclosure in the half yearly statements of RPTs submitted to the exchange.

WHAT WE LEARN FROM THIS CASE STUDY ?

·      Ignorance of law cannot be an excuse by a listed company with the two decades of listing experience.

·      Failure to classify the transactions which are related party transactions and failure to obtain approval from Audit committee is an LODR violation.

·      If related party transactions exceeded 10% of a listed company turnover, it should take prior approval from its members. It cannot take its member’s approval retrospectively.

R V SECKAR , FCS

79047 19295

rvsekar2007@gmail.com

UNDERSTANDING SEBI (LODR) AMENDMENT, DECEMBER 2024: KEY CHANGES UNVEILED

 

MAJOR AMENDMENTS IN LODR-DECEMBER 2024

UNDERSTANDING SEBI (LODR) AMENDMENT, 2024: KEY CHANGES UNVEILED.

Thanks to Mrs Vandana Ahuja

R V SECKAR FCS

79047 19295

rvsekar2007@gmail.com

 

FILING OF GNL-3 WITH THE MCA IS MANDATORY FOR AUTHORISING AN OFFICIAL OR AN ADVOCATE TO REPRESENT THE CASE IN A COURT . NON FILING MAY ATTRACT A FINE OF RS 1 LAKH TO 5 LAKHS.

 

FILING OF GNL-3 WITH THE MCA IS MANDATORY FOR AUTHORISING AN OFFICIAL OR AN ADVOCATE TO REPRESENT THE CASE IN A COURT . NON FILING MAY ATTRACT A FINE OF RS 1 LAKH TO 5 LAKHS.

As per the Companies Act, 2013, a company can appoint an authorized officer to represent the company in court. Here are the relevant provisions:

SECTION 233 OF COMPANIES ACT, 2013

1. Authorization: A company can authorize any person, including an advocate, to represent the company in any legal proceedings.

2. Form of Authorization: The authorization must be in writing, and the authorized person must be specifically empowered to represent the company.

Rule 8 of Companies (Authorised to Register) Rules, 2014

1. Form of Authorization: The authorization must be in Form No. GNL-3.

2. Content of Authorization: The authorization must contain the following details:

    - Name and address of the authorized person

    - Name and address of the company

    - Purpose of authorization

    - Period of authorization

Provisions of Order XXIX of the Code of Civi

l Procedure, 1908

1. Authorization: A company can authorize any person to represent the company in any legal proceedings.

2. Vakalatnama: The authorized person must file a vakalatnama (power of attorney) in the court, authorizing them to represent the company.

KEY POINTS

1. Authorization is Mandatory: A company must authorize a person in writing to represent the company in court.

2. Specific Empowerment: The authorized person must be specifically empowered to represent the company.

3. Form of Authorization: The authorization must be in the prescribed form (GNL-3) and contain the required details.

By following these provisions, a company can ensure that its authorized officer is properly empowered to represent the company in court.

Form GNL-3 is a crucial document for authorizing a person to represent a company in court. Here are more details about Form GNL-3:

FORM GNL-3: AUTHORIZATION FOR REPRESENTATION OF COMPANY IN COURT

1. Purpose: Form GNL-3 is used to authorize a person to represent a company in any court or tribunal.

2. Applicability: This form is applicable to all companies registered under the Companies Act, 2013.

3. Content: The form must contain the following details:

    - Name and address of the authorized person

    - Name and address of the company

    - Purpose of authorization

    - Period of authorization

    - Signature of the authorized person and the company's authorized representative

4. Format: The form must be in the prescribed format, which can be downloaded from the Ministry of Corporate Affairs (MCA) website.

5. Filing: The form must be filed with the Registrar of Companies (ROC) within 30 days of authorization.

6. Fee: The filing fee for Form GNL-3 is ₹200.

IMPORTANT POINTS

1. Authorization is Mandatory: A company must authorize a person in writing to represent the company in court.

2. Specific Empowerment: The authorized person must be specifically empowered to represent the company.

3. Validity: The authorization is valid for the period specified in the form, unless revoked earlier. If a company fails to file Form GNL-3, it may face several implications. Here are some of the consequences:

CONSEQUENCES OF NON-FILING FORM GNL-3

1. Non-Compliance with Companies Act: Failure to file Form GNL-3 is a non-compliance with Section 233 of the Companies Act, 2013.

2. Penalty: The company may be liable to pay a penalty of ₹1 lakh to ₹5 lakh (Section 453 of Companies Act, 2013).

3. Interest on Penalty: In addition to the penalty, the company may also be liable to pay interest on the penalty amount (Section 453 of Companies Act, 2013).

4. Disqualification of Directors: In case of repeated non-compliance, the directors of the company may be disqualified from holding office for a period of 5 years (Section 164 of Companies Act, 2013).

5. Impact on Company's Reputation: Non-compliance with regulatory requirements can damage the company's reputation and credibility.

ADDITIONAL CONSEQUENCES

1. Difficulty in Representing Company in Court: If the company fails to file Form GNL-3, it may face difficulties in representing itself in court.

2. Delays in Legal Proceedings: Non-filing of Form GNL-3 can lead to delays in legal proceedings, which can have a negative impact on the company's business.

3. Increased Risk of Litigation: Failure to comply with regulatory requirements can increase the risk of litigation and disputes.

BEST PRACTICES

1. File Form GNL-3 on Time: Ensure that Form GNL-3 is filed within 30 days of authorization.

2. Maintain Accurate Records: Maintain accurate records of authorization and filing of Form GNL-3.er.

ADVOCATE PRESENCE ON BEHALF OF A COMPANY BEFORE A COURT

In some cases where Judge asked if the company has authorised the advocate to represent.

In such cases ,GNL-3 must be filed for all authorities given either to sign agreements or to represent.

R V Seckar ,FCS

79047 19295

Rvsekar2007@gmail.com

 

WHY WORDING IS IMPORTANT WHILE DRAFTING A CONTRACT ?

 WHY WORDING IS IMPORTANT WHILE

 DRAFTING A CONTRACT ?

DOES INCLUSION OF THE EXPRESSION ‘ASSIGNS/ ASSIGNEE’ IN THE DEFINITION OF THE PARTY INDICATE THAT, SUCH PARTY WOULD HAVE AN UNFETTERED RIGHT TO ASSIGN THE CONTRACT, EVEN IF THE CONTRACT REQUIRES OBTAINING PRIOR APPROVAL OF THE OTHER PARTY FOR ANY ASSIGNMENT?

It is held in the following case :

Neilan International Co Limited v. Powerica Limited [Commercial Arbitration Petition no. 416 of 2019| Bombay High Court]

A typical clause introducing a Party to an agreement reads as follows:

ABC Limited, having CIN and registered office at __________ (hereinafter referred to as Party A, which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and permitted assigns).

Does inclusion of the expression ‘assigns/ assignee’ in the definition of the Party indicate that, such Party would have an unfettered right to assign the contract, even if the contract requires obtaining prior approval of the other Party for any assignment?

In a decision rendered last week, a single bench of Bombay High Court had considered the implication of inclusion of expression ‘assigns/ assignee’ and went on to observe that such inclusion makes it clear that the Parties had agreed they would unreservedly have the right to assign the said Contracts.

Most contracts I have come across have the phrase in the name clause, along with a restriction on assignability later. But in light of evolving jurisprudence, we may need to altogether refrain from using such wording in contracts.

Whilst the decision was silent as to whether the contracts in question had a specific clause limiting assignment of the contracts and if absence of such clause influenced such a decision, it did quote with approval one of its earlier decisions, where the Court had treated an agreement to be assignable (basis the definition of party including assigns), despite contract prescribing prior approval in writing of the other party for assignment to be effective.

Without going into the issue of whether the decision in the instant case was correct, one may need to tread with caution, should one wish to bypass the restriction on assignment purely on the basis of the definition clause.

Why? Because- any definition clause would invariably contain the expressions “unless repugnant to the context or meaning thereof”. Where the contract contains a specific restriction on assignability of a contract, such restrictions would amount to ‘repugnant to the context’ or ‘context to the contrary’, implying that, mere inclusion of ‘permitted assign’ in the introduction clause of a Party, may not confer an unfettered right to bypass the restriction of an assignment clause.

Most contracts I have come across have the phrase in the name clause, along with a restriction on assignability later. But in light of evolving jurisprudence, we may need to altogether refrain from using such wording in contracts.

Courtesy : Shri Arka Majumdar

R V Seckar FCS

79047 19295

 rvsekar2007@gmail.com

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ALL THE EXEMPTIONS AND PRIVILEGES GRANTED TO A PRIVATE COMPANY IS NOT AVAILABLE IF SUCH COMPANY HAS COMMITTED DEFAULT IN FILING ITS FINANCIAL STATEMENTS AND ANNUAL RETURN WITH THE REGISTRAR OF COMPANIES (ROC)

 ALL THE EXEMPTIONS AND PRIVILEGES GRANTED TO A PRIVATE COMPANY IS NOT AVAILABLE  IF SUCH COMPANY HAS  COMMITTED DEFAULT IN FILING ITS

 FINANCIAL STATEMENTS AND ANNUAL

 RETURN WITH THE REGISTRAR OF

 COMPANIES (ROC)

Ministry of Corporate Affairs (MCA) had issued a notification on 5 June 2015 (2015notification) relaxing certain provisions of 2013 Act to private companies.

MCA has now issued a notification dated 13 June 2017 (Amendment notification)amending the 2015 notification.

Key highlights of the changes under the Amendment notification are summarized.

HIGHLIGHTS OF THE AMENDMENT

SR. NO	SUBJECT AND SECTION REFERENCE OF THE 2013 ACT	EXISTING EXEMPTIONS FOR PRIVATE COMPANIES	AMENDED EXEMPTIONS FOR PRIVATE COMPANIES
1	1st proviso to Section 2(40) - Preparation of cash flow statement	Preparation of cash flow statement is not required for one-person companies, small companies and dormant Companies.	Exemption from preparation of cash flow statement has also been extended to start-up companies – i.e. a private company incorporated under the 2013 Act or the Companies Act, 1956 and recognized as start-up in accordance with the notification issued by Ministry of Commerce and Industry.
2	Section 73(2)(a) to (e) - Prohibition on acceptance of deposits	Private company permitted to accept deposits from its members up to 100% of aggregate of its paid-up share capital and free reserves without obtaining deposit insurance, credit rating, depositing 15% of the deposit maturing in separate bank account etc. However, such private company will have to file a return with the Registrar of Companies (ROC).	Exemption is now available to a private company which:- 1. Accepts deposits from its members up to 100% of aggregate of its paid-up share capital, free reserves and securities premium; or 2. Is a start-up company up to 5 years from the date of its incorporation; or 3. fulfils all of the following conditions:- · Is not an associate or a subsidiary company of any other company · Whose borrowings from banks or financial institutions or any body corporate is less than twice its paid up share capital or ` 500 million, whichever is lower, and has not defaulted in repayment of such borrowings subsisting at the time of accepting deposits Such private company will have to file a return with the ROC.
3	Section 92(1)(g) –  Disclosure of remuneration of directors in Annual Return	No exemption	A small company may disclose aggregate remuneration paid to all its directors instead of disclosing directors’ remuneration individually.
4	Proviso to Section 92(1) - Signing of annual return	In case of one-person company and small company, director may sign annual return if it does not have a Company Secretary	Exemption has also been extended to a start-up company
5	Section 143(3)(i) - Reporting by auditor on internal financial controls in Auditor’s Report	No exemption	Auditors of the following private companies need not report on adequacy of internal financial controls:-  One person company, or ·        Small company, or ·        Company having         ‒ Turnover (as per latest audited financial statement) less than ` 500 million; or    ‒ Aggregate borrowings from banks or financial institutions or other body corporate (at any point of time during the financial year) less than ` 250 million
6	Section 173(5) - Board meetings	ne-person company, small company or dormant company may hold one board meeting in each half of the calendar year and the gap between two board meetings is not less than 90 days. Above requirement and requirement of quorum for board meeting shall not apply to one-person	A start-up company may also hold one board meeting in each half of the calendar year and the gap between two board meetings should not be less than 90 days. company in which there is only 1 director on the board.
7	Section 174(3) - Quorum for the board meeting	No exemption	Interested director may also be counted towards the quorum of the meeting after disclosure of his interest under section 184.

ALL THE EXEMPTIONS AND PRIVILEGES GRANTED TO A PRIVATE COMPANY UNDER THE 2015 NOTIFICATION AS WELL AS THE AMENDMENT NOTIFICATION WILL BE AVAILABLE ONLY IF SUCH COMPANY HAS NOT COMMITTED DEFAULT IN FILING ITS FINANCIAL STATEMENTS AND ANNUAL RETURN WITH THE REGISTRAR OF COMPANIES (ROC)

 

ALL THE EXEMPTIONS AND PRIVILEGES GRANTED TO A PRIVATE COMPANY IS NOT AVAILABLE  IF SUCH COMPANY HAS  COMMITTED DEFAULT IN FILING ITS FINANCIAL STATEMENTS AND ANNUAL RETURN WITH THE REGISTRAR OF COMPANIES (ROC)

FCS R V Seckar

79047 19295  rvsekar2007@gmail.com